The lift in our apartment complex is broken. The board of directors says that we do not have adequate funds to pay for this. We pay every year into a sinking fund - how can we not have enough?
The sinking fund is a fund established by the owners’ management company (OMC) in accordance with section 19 of the Multi-Unit Developments Act 2011. It should be a separate bank account which is ring-fenced to provide for capital expenditure of a non-recurring nature.
This savings fund is for long-term planned maintenance and refurbishment projects such as installation and/or replacement of lifts, fire safety systems, floor coverings, roof replacement, internal and external redecoration, or other such essential works.
The most likely reason there is not enough money in the sinking fund to repair the lift is because sufficient funds were not set aside. If the money is not set aside, it simply cannot be available.
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The sinking fund contributions in your OMC have probably been set far too low for years. The reality, however, is that fixing broken lifts is expensive.
You should find out whether your development has ever had a Building Investment Fund report carried out on it. This report, prepared by a surveyor, will inform the OMC of expected expenditure over the long term. The directors can then calculate the correct amount to be set aside each year in the sinking fund.
Previous boards may have used sinking fund money for ordinary running costs, which ideally should not happen. There may be high arrears from owners not paying service charges and you should query this with your OMC.
As a member of the OMC, you are entitled to be provided with information including the current sinking fund balance, annual accounts, details of what the sinking fund has been spent on, and whether the aforementioned Building Investment Fund report has ever been carried out.
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The OMC should ensure that the correct amount is set aside each year to replenish the sinking fund. This is important, as one of the main purposes of the sinking fund is to provide for major renewal and repair and unplanned expenditure, or to deal with emergencies.
The replenishing of the sinking fund reserves is a fiscally prudent measure taken by the OMC in order to have funds available should they be required at short notice, and also for planned projects.
Aisling Keenan is a property managing agent and consultant, and an associate member of the Society of Chartered Surveyors Ireland
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