Advertisement
If you have a new account but are having problems posting or verifying your account, please email us on hello@boards.ie for help. Thanks :)
Hello all! Please ensure that you are posting a new thread or question in the appropriate forum. The Feedback forum is overwhelmed with questions that are having to be moved elsewhere. If you need help to verify your account contact hello@boards.ie

Annual sinking fund

Options
  • 22-05-2014 3:13pm
    #1
    Morris_fe1s
    Closed Accounts Posts: 155 ✭✭


    Can a director of a property management company decide to create an annual sinking fund to pay for big expenditure that arised on a mixed use development at the drop of a hat .... and can it be enforced


Comments

  • Options
    #2
    athtrasna
    Closed Accounts Posts: 13,420 ✭✭✭✭athtrasna


    Morris_fe1s wrote: »
    Can a director of a property management company decide to create an annual sinking fund to pay for big expenditure that arised on a mixed use development at the drop of a hat .... and can it be enforced

    By law all multi unit developments must have a sinking fund and the suggested annual contribution is €200 power unit


  • Options
    #3
    Morris_fe1s
    Closed Accounts Posts: 155 ✭✭Morris_fe1s


    so if i take over a new complex as a mgt comp i am obliged to create an asf.
    thanks


  • Options
    #4
    Lantus
    Registered Users Posts: 3,027 ✭✭✭Lantus


    The Sinking fund is a separate bank account held by the OMC into which money is paid on an annual basis to pay for 'future repair and replacement'. This could include things like replacing carpets, bulbs, lifts etc. once they reach the end of their life. Its one off things that occur intermittently but ideally in a planned manner. You cannot jus dip into this for any 'normally recurring' expense once it has been allocated.

    If an urgent cost has arisen and there is no sinking fund currently then the company is in breach of the MUD act and potentially has acted recklessly unless there was good reason why they did not allocate this money (not enough people paying fees and only essentials being covered year to year.)

    Ideally and LEGALLY there should already be a sinking to absorb these costs. Its not clear if that is the case or not from your post.

    If funds are needed for an unexpected expense (and there is no money) then the company should hold an EGM where the matter should be voted for and approved as additional required service fee income for the accounting period to meet the specific need identified.

    Basically the company cannot just send out a mid year bill other than the legally approved budget which would of been voted for at the usual annual AGM. The EGM as outlined above is needed.

    This would not be a sinking fund request as the money is needed ASAP and wont be saved until needed. Its a modification to the annual service fee.

    If the development is mixed use then make sure that (as I am sure you do) only those units that are legally required to do so contribute towards this as per the lease.

    Next job is to make sure you get a proper sinking fund in place to avoid this kind of thing in the future. A good survey of the building and all elements and a cost breakdown of what you need to invest based on typical lifespans


  • Options
    #5
    Henry Ford III
    Moderators, Business & Finance Moderators Posts: 17,712 Mod ✭✭✭✭Henry Ford III


    athtrasna wrote: »
    By law all multi unit developments must have a sinking fund and the suggested annual contribution is €200 power unit

    What law would that be?


  • Options
    #6
    Lantus
    Registered Users Posts: 3,027 ✭✭✭Lantus


    The Multi Unit Development Act 2011. Section 19.


  • Advertisement
  • Options
    #7
    Victor
    Registered Users Posts: 78,420 ✭✭✭✭Victor


    Lantus wrote: »
    The Sinking fund is a separate bank account held by the OMC into which money is paid on an annual basis to pay for 'future repair and replacement'. This could include things like replacing carpets, bulbs[/b], lifts etc. once they reach the end of their life.
    I would consider light bulbs a current expense - some will likely go every year - not a renewal.


  • Options
    #8
    L1011
    Registered Users Posts: 68,898 ✭✭✭✭L1011


    Victor wrote: »
    I would consider light bulbs a current expense - some will likely go every year - not a renewal.

    Particularly if spots are used for any reason, such as outside lift doors as I've often seen them. They have no lifespan worth mentioning and shouldn't be considered permanent.

    Small blocks with lifts are going to want to to have a significantly higher contribution to the sinking fund per year than a larger block with a lower lift to unit ratio and less roof surface would want to I'd imagine.


  • Options
    #9
    Lantus
    Registered Users Posts: 3,027 ✭✭✭Lantus


    MYOB wrote: »
    Particularly if spots are used for any reason, such as outside lift doors as I've often seen them. They have no lifespan worth mentioning and shouldn't be considered permanent.

    Small blocks with lifts are going to want to to have a significantly higher contribution to the sinking fund per year than a larger block with a lower lift to unit ratio and less roof surface would want to I'd imagine.

    Quite correct. A Sinking Fund like a service fee is specific to each development. The MUD act threw in the €200 figure to give some basic starting point as calculating the lifespan and replacement periods can be daunting and complicated and easily screwed up.

    LED lamps could be sinking items due to the long life span but the vast majority of traditional bulbs would be likely recurring items. Emergency battery packs however and control modules would be longer term items. Its a long list.......


Advertisement