We’re sunk

Please be informed that the Sinking Fund (SF) incorporated into the monthly maintenance charge will be discontinued from now on.

Over the last few weeks, GCROA had sought a much needed understanding from GCD that the goal for which the the fund was created will be met when GCD ceases the provision of security and maintenance services from 1st January, 2016. Unfortunately, we could not come to terms culminating in a message that we received from GCD yesterday, citing several factors for the discontinuance of the SF:

With reference to the above subject and following trail, GCD had reviewed the proposed sinking fund by GCROA with GCROA’s interpretation of administering the fund of which GCD are not in favour with. The manner in which it is to be administered, the impact of any shortfalls in collection as voiced out by GCROA below, complaints by residents on the sinking fund initial proposal and its legality issue, there is a misconception in the understanding of the operating of the sinking fund, GCD wishes not to proceed with the sinking fund issue any further. As such, all payments made for the sinking fund by the residents whom had paid through the monthly maintenance fees, as suggested by Johann below, will be refunded.

I cannot find a better representation of our goal than what Santok Singh has dug up for us:

The Guide To Sinking Funds
A sinking fund is the name given to a long term savings account that homeowners contribute to every month through service charges. This builds up every year and should pay for any major works that are required over a period of time, such as the painting and repair of communal areas

Why have a sinking fund?
If a sinking fund is not set up, payment for any required works are due from a homeowner on completion of the works. This can mean that homeowners will receive large bills that they need to pay. A sinking fund should mean that no additional payments are due when major works are required.

The Committee firmly believes that post GCD, property owners must have in hand a reserve for major works that could arise from time to time. For example the access card system could be destroyed somehow and it will cost plenty to replace. Ditto the filtration system in the clubhouse. Without a reserve to pay for major repairs or a new system, what we’ll likely see is owners looking at each other. We do not believe that people with common sense will object and thus far we know of only one person who has written to the authorities to complain about the fund – and a host of other issues.  We are  also unmoved by the question mark over the legality of the SF proposal simply because the Committee believes it to be for a good cause, with full disclosure (it is clearly stated as a specific provision in the budget dispatched by GCD) and proper accountability for the funds. Besides, property owners in Glenmarie Cove must be a coalition of the willing if this community is to survive as a gated and guarded community post GCD.

Having said that, if GCD wants to reverse course after seven (7) months because of complaints and the question of legality, that is their absolute right – of course.

However, in fairness to the Committee, I must address the statements “GCROA’s interpretation of administering the fund of which GCD are not in favour with” ….. the manner in which it is to be administered …… and the misconception in the understanding of the operating of the sinking fund”.

Background:

GCROA had proposed the creation of the SF in a meeting with GCD on January 16, 2014. Minutes of that meeting were circulated by email to GCROA members and the relevant part is reproduced here:

Money paid to GCD by residents for the provision of a Sinking Fund (RM5000 per month included in the budget) should be put into a separate bank account and be made available for the exclusive use of all residents, post handover in December 2015. The amount to be credited to the designated bank account shall be proportionate to the actual level of collections by GCD. KE agreed in principle to this proposal, subject to senior management approval.

The setting up of a separate bank account has not materialized (probably their senior management did not agree). But collections are being made for the first 9 months so we sought GCD’s confirmation that they will agree that the SF may not be used for any purpose in the run up to 31 December 2015. We sought this confirmation so that whomsoever is in office at the relevant time for both GCD and GCROA fully understand the principle behind this fund. By that date, the accumulated fund should be about RM100,000 (RM5000 per month x 24 months = RM120,000 x 80% = RM96,000).

GCD was unable to agree with GCROA. The company felt that they could use it for repairs to the common areas in the meantime. In normal circumstances, this is not unreasonable but the Committee objected to this because our first goal was important, albeit rather plain – straight to bank  for a rainy day, as stated in the above minute of the meeting with GCD, mindful that we have only a short period to accumulate a useful reserve.

GCD’s  penultimate reply to a further prod was more worrisome for the Committee Members working to resolve this (emphasis mine):

GCD in principle has no objection of setting aside the sinking fund as discussed subject that the collections allows as such.

We felt that was a rather nebulous reply and never really got to the real meaning of it. It probably means that if collections fall short either because expenses are over the budgeted amounts or some property owners have refused to pay the maintenance fee, then there will be no monies to set aside. Thus we strenuously objected to GCD’s statement because the SF is a disclosed, specific provision that owners have paid into so we cannot have a situation where the fund dissipates because of a shortage in collections. That is manifestly unfair to the good paymasters. The universal concept of a sinking fund as we know it is totally sunk.

As the sum to be available by 31 December [2015] cannot be predicted with reasonable certainty, the Committee requested GCD to stop the collections for the SF and refund monies paid thus far by owners for the nine months to 30 September, 2014. It will be futile to carry on and have little money to show in December 2015. We get criticized for much less by the resident snipers. This time it can be dynamite, literally.

An amount of credit will be determined and you will be informed in due course.

Meanwhile, property owners would need to bear in mind they must be ready for a call and be willing to contribute to a reserve when GCD hands over maintenance and security services to the property owners’ designate. If this community is to prevail with an  acceptable level of service, common sense must prevail.

 

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3 Responses to We’re sunk

  1. W Yang Ong says:

    best to tender out the management of GC comes 2016

  2. Gary says:

    Why don’t we do a mock of the future where the clulbhouse is closed indefinitely because the
    1) pool pump is spoilt
    2) roof about to collapse
    3) electrical wiring fault
    4) gym equipment broken
    Then see how the community reacts.

    I’m all for paying for the sinking fund monthly than have to face a huge bill in one lump sum when things need to be fixed. If there is no sinking fund, and when things need fixing, I’m 100% sure no one will pay and the facility will be shut down forever (e.g. the clubhouse). This is why I suggest doing a mock of the clubhouse closure and see how the people react to a facility being inaccessible indefinitely due to breakdowns, because we have no money to fix it.

    • Your idea is scary but good!

      A fund can be quickly set up when there is a new management company. For example the first billing can incorporate a sum to be paid, like RM200 (SD) and RM250 (bungalow) to kick start the fund. Thereafter the contribution can be a low figure of say RM10-15 per month. If we are all willing, many things are possible.

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