One of the considerations when purchasing a condominium development is the amount of maintenance fees the homeowner has to pay. It may not be a significant amount but it may increase your monthly commitments considerably. In this article, we will understand how maintenance fees are determined by the amount of share value a condo unit owner has.
Share value is a figure that shows the allocation of the proportionate share allocated to the owner in each strata unit in the development. Share value helps to determine how much share an owner has as compared to the rest of the owners. A unit with a bigger square unit does not necessary mean that the owner has a bigger share value. Share value represents the corresponding usage of the common facilities of the development. The lesser use of the common facilities, the lesser the share values will be.
Share value is useful for:
1. Determining how much maintenance fees to be contributed by each homeowner for maintaining the common areas in the development
2. The voting right for the strata lot, in which the higher the share value is, the more voting right the owner have.
3. Determining the share that each owner has in the common property, which is jointly owned by all the purchasers in the development.
Professional surveyors hired by the developers first determine the share value of a development project. After which the developers will send the proposal to the commissioner of buildings for acceptance and approval. Usually, units with more usage of the common facilities are allotted with a higher share value. This is applicable to units or blocks with a build-up with a larger floor area of the development. A common methodology in calculating share value is as follows:
|Floor area (sqm)||Share Value|
|50 and below||5|
|50 to 100||6|
|101 to 150||7|
|151 to 200||8|
The share value increases by one for every 50sqm of floor area.
The share value of a strata lot cannot be change once the strata application is registered with the COB. However, upon request to the Registrar of Titles, they may allow changes:
1. When there is error in the initial entry
2. When the value has fraudulently assigned to a lot
3. When there is a subdivision of a lot
The maintenance fees are for the purpose of controlling and managing the usage and enjoyment of the common facilities in the development. Should there be any lapse in the maintenance fees, the management corporation has every right to recover the unpaid contributions in form of debts from the owner or even register it as a charge against your strata lot.
The management corporation may give special rebates to owners who pay their contribution before the due date or in full. For those units that are unsold, the developers are given 3 months grace period upon TOP, thereafter; the developers have to contribute the maintenance fees for the vacant units to the management corporation. The developer is required to maintain proper book of the accounts and they have to appoint an auditor to audit the accounts annually. An audited and certified true copy of the books will be sent to the COB.
Maintenance Funds vs. Sinking Funds
1. Management funds is used for day to day recurring expenses of maintaining the facilities which includes;
a. Cost of looking after the common property
b. Payment of insurance premiums
c. Other recurrent expenses besides amounts covered by the sinking fund
2. Sinking funds is collected in case of future needs which includes;
a. Painting of the common property
b. Acquiring movable property
c. Renewing or replacing any fixtures on the common property and other property belonging to the MC
d. Replacing, repairing or making good the common property
e. Any debts other than amounts covered by the management fund
f. Other capital expenses
Contribution of maintenance fees is determined by the share value that the owner holds. The bigger share value, the higher the maintenance fees are, the lower the share value, the lower the maintenance fees are. When the maintenance fees are collected, the management corporation will determine the ratio that will be going to management funds or sinking funds based on a set formula, or if not, it will be based on common consensus from the members in the management corporation.
Share Value & En Bloc Sale
A higher share value gives you more voting power than the rest of the owners. The amount of management fees that you pay represents that you own more of the common property as compare to the others. When an en bloc opportunity comes, it gives you more voting rights to determine if the en-bloc sale is approved. When it’s time for the distribution of the sales proceeds, the distribution is also based on the share value owned by each individual homeowner.
It is important that every purchaser of the unit pays the maintenance cost to the management corporation. It helps the management corporation meet the cost of periodic and regular maintenance of the facilities in the project to avoid any accidents when using facilities which could results in penalties (interests), fine and in some cases, jail terms.
Landy is a founding member of Redbrick Mortgage Advisory. Together with the current management team, she has a pivotal role in the success of Redbrick, especially in building and maintaining a highly qualified sales team that continuously delivers optimal performance.