The Act does not use the word “Service Charge” directly, but refers to “maintenance charges” (same meaning as service charge in practice).
Interpretation under the Act:
“sinking fund account“
means an account required to be opened and maintained by a developer, joint management
body, management corporation or subsidiary management corporation under section 11, 24,
51, 61 or 67, as the case may be;
“maintenance account“
means an account required to be opened and maintained by a developer, joint management
body, management corporation or subsidiary management corporation under section 10, 23,
50, 60 or 66, as the case may be;
How the maintenance account and sinking fund account shall be used?
(i) Strata Management Before Existence Of Management Corporation
Management by developer before joint management body is established:
✅ Maintenance account under Section 10(4)
✅ Sinking fund account under Section 11(4)
Management by joint management body:
✅ Maintenance account under Section 23(3)
✅ Sinking fund account under Section 24(2)
(ii) Strata Management After Existence Of Management Corporation
Management by developer before first annual general meeting of management corporation:
✅ Maintenance account under Section 50(3)
✅ Sinking fund account under Section 51(2)
Management after first annual general meeting of the management corporation
✅ Maintenance account under Section 60(2)
✅ Sinking fund account under Section 61(2)
Maintenance account under Section 50(3)
The maintenance account shall be used solely for the purpose of meeting the actual or expected general or regular expenditure necessary in respect of the following matters:
(a) maintaining the common property in good condition on a day-to-day basis;
(b) paying for the expenses incurred in providing cleaning services for the common property, security services and amenities for the occupiers of the building;
(c) paying any premiums for the insurance effected under this Act or any other insurance approved by a special resolution in a general meeting;
(d) complying with any notice or order given or made by the local authority in respect of periodical inspection of any building in the development area in the manner as specified in the Street, Drainage and Building Act 1974;
(e) minor painting on the premises of the common property;
(f) carrying out inspection of all electrical wiring systems of the common property and replacing or repairing any faulty wiring system, if any;
(g) carrying out inspection, maintenance and repair of the main water tanks;
(h) paying rent and rates, if any;
(i) paying any fee incurred for the auditing of the accounts required to be maintained by the management corporation under this Act;
(j) paying all charges reasonably incurred for the administration of the accounts required to be maintained by the management corporation under this Act as may be determined by the Commissioner;
(k) paying the remuneration or fees for the managing agent appointed under Part VI;
(l) paying for the allowances and other expenses of the members of the management committee according to such rates as may be approved by the Commissioner;
(m) paying any expenses, costs or expenditure in relation to the procurement of services, including the engagement of consultants, legal fees or costs and other fees and costs, properly incurred or accepted by the management corporation in the performance of its functions and the
exercise of its power under this Act; or
(n) meeting other expenses of a general or regular nature relating to the maintenance and management of the building or land intended for subdivision into parcels and the common property.
Sinking fund account under Section 51(2)
The sinking fund account shall be used solely for the purposes of meeting the actual or expected capital expenditure necessary in respect of the following matters:
(a) the painting or repainting any part of the common property which is a building or other structure;
(b) the acquisition of any movable property for use in relation to the common property;
(c) the renewal or replacement of any fixtures or fittings comprised in any common property and any movable property vested in the management corporation;
(d) the upgrading and refurbishment of the common property; and
(e) any other capital expenditure as the management corporation deems necessary.
Practical Interpretation
Service Charges are meant for day-to-day maintenance and operational expenses (e.g., cleaning, security, minor repairs).
Sinking Fund is explicitly intended for major capital expenditure, typically for large replacements, upgrades, or renewals of common property (e.g., repainting buildings, replacing lifts, roofing works).
Understanding the Proper Use of Maintenance Accounts vs Sinking Fund under the Strata Management Act 2013
Decision tree to determine maintenance account or sinking fund account shall be used
Step 1:
Is the expenditure a recurring, regular or small maintenance activity?
(e.g., minor repairs, cleaning, servicing, small replacements like lights, taps)
- Yes → Charge to Service Charge (Maintenance Expense)
- No → Go to Step 2
Step 2:
Is it a major repair, replacement, renewal or upgrading of the common property?
(e.g., repainting building, replacing water tanks, roof overhaul, lift replacement)
- Yes → Use Sinking Fund
- No → Go to Step 3
Step 3:
Is the purchase creating a new asset or significantly upgrading existing assets?
(e.g., purchasing a new CCTV system, new furniture for common areas)
- Yes → Capitalise as Fixed Asset in books
- Funding from Sinking Fund (depending on AGM resolution)
- No → Treat as Expense under Service Charge
Special Considerations:
- If the amount is immaterial, it can be directly expensed under Service Charge even if technically “capex”.
- Always check whether AGM/EGM approval is required — for large items, the Act requires owners’ approval before using sinking fund.
- Management by-laws can also specify internal thresholds (e.g., RM5,000 limit before using sinking fund).
Conclusion
In managing stratified properties, it is crucial for Joint Management Bodies (JMB) and Management Corporations (MC) to properly distinguish between the use of maintenance accounts and sinking funds. Clear understanding and correct application of these two types of funds ensure the financial health of the property and compliance with the Strata Management Act 2013.
Correctly distinguishing between maintenance account and sinking fund is fundamental for the proper financial management of stratified developments. JMBs and MCs must carefully plan and manage these funds to ensure that daily operational needs are met while also preparing for future major expenditures, in full compliance with the Strata Management Act 2013.