Sinking Fund

[aroy]

Buying a condo, new developement with leasing contract in Jomtien. Have received conract and it states that the Lessor may request the Lessee to make an additional payment into the sinking fund of the Condominium from time to time. I presumed that a sinking fund was a one time payment, is this normal?

[Pattaya_Fox]

A sinking fund is a sum of money set up to build up an amount to pay for major work, usually to a block of apartments such as replacing a roof or door-entry system. This means that when major work is carried out, the bill will not be as large because of the money collected over a period of time from different leaseholders. Your lease will say if you have to pay towards this fund. If you do, the amount you have to pay may be shown in your yearly service charge statement or could be charged separately.

You should ask your solicitor to check your lease as you may be required to pay this annually.

[aroy]

A sinking fund is a sum of money set up to build up an amount to pay for major work, usually to a block of apartments such as replacing a roof or door-entry system. This means that when major work is carried out, the bill will not be as large because of the money collected over a period of time from different leaseholders. Your lease will say if you have to pay towards this fund. If you do, the amount you have to pay may be shown in your yearly service charge statement or could be charged separately.

You should ask your solicitor to check your lease as you may be required to pay this annually.

Thanks for the information.

[Irene]

It is unusual for a sinking fund even with additionals to be paid by a lessee since the fund is in respect of capital improvement or maintenance of a common area. Even for monthly maintenance fees, normally they are borne by a lessor unless specifically mentioned in a lease agreement that the lessee has to bear the burden.

So, in short, if your lease is silent on the issues, then I think the sinking funds and maintenace fees should be paid by the lessor.

[chownah]

Buying a condo, new developement with leasing contract in Jomtien. Have received conract and it states that the Lessor may request the Lessee to make an additional payment into the sinking fund of the Condominium from time to time. I presumed that a sinking fund was a one time payment, is this normal?

It sounds like you are leasing the condo and not buying it in that this language seems to be indicating that your relationship with the condo association is a lease agreement and not purchase....you should check this out...it would be a shame if you thought you were buying and in fact you were only leasing....

chownah

Edited December 23, 2007 by chownah

[quiksilva]

He may well have acquired one of these leasehold condos.

In this case we must assume that the project is like any other condo and the individual "co-owners" (who are in fact lessees), will usually be required to make a sinking fund payment when the unit is acquired, and if this is used responsibly (as it should be) then it will be likely that the management may ask for this fund to be topped up.

This fund can only can only be used after receiving approval from the majority of 'co-owners' to carry out major repairs, renovations, or improvements to maintain / enhance asset value, but of course if it is used it also needs to be replaced.

Sinking fund management is often the most misunderstood element of property management by Juristic Condominiums in Thailand.

[chownah]

So is a "lease hold" condo just a fancy name for leasing a condo?....seems like they want you to think you own it but really you are just leasing....is that right?

chownah

[quiksilva]

Yes it means the same thing, but the developers are not really out to con 'buyers' into thinking that they actually own their unit freehold. They are usually quite upfront about this, and indeed often (but not always) have lower prices than their counterparts, as they should.

Developers will always want to develop in the best locations, but really well located sites are hard to come by these days and are not always for sale even if they are vacant. Now by great I mean Rajadamri Road, Lang Suan, Ploenchit, etc (lots of land here is owned by the CBP) anything on a main road like Sathorn, Silom , Wireless Road or even Rama IV (if it overlooks Lumpini).

But developers know they can sell there, so despite the greater risks associated with them, developers will often take a lease on these prime plots of land, build a condo and sell it on a leasehold basis.

What this means is that they let units in the development to parties on a long lease term, eg 20 years up, typically have coterminous expiry dates with the head lease on the land.

I wouldn't buy one myself but some people just have to have the best location.

Edited December 26, 2007 by quiksilva