Must sinking fund account be kept separate from other accounts?

[thairookie]

I am in a development where developer continues to hold unsold units and are still actively trying to sell them off though the juristic person has been registered.

 

My question is how many accounts does the juristic person hold ?  Can funds belonging to the sinking fund be transferred to the operating capital of the juristic person account ?

 

Is there a difference between sinking fund, in house capital and juristic capital ?

[Delight]

 The number of bank accounts in a condo is optional

The Condo Act has nothing to say on this topic.

Some condos have typically 3 accounts

1) Month to month expenditure. The common fees are paid into this account

2)  A special projects account

3) Sinking fund. This is to cover high cost maintenance issues

 

All three are controlled by the JPM and the committee.

 

The crucial stage in the early days of a condo is to create account No. 1

 

The name of this account will typically be -Name of condo Condominium Juristic Person

 

This account cannot be created until post the registration of the condo

 

When you pay your fees does the money go into this style of account i.e. as  No 1 -or into the developers account?

 

 

[thairookie]

The common facilities were paid to XXX Condo Juristic Person, not the developer.  My concern is the sinking fund account, which I am not sure if the law would require it to be set aside, and if any approval from general meeting is necessary before funds from the sinking fund account can be transferred to the Juristic Person account as day to day operating expenses.

 

 

[Delight]

21 minutes ago, thairookie said:

The common facilities were paid to XXX Condo Juristic Person, not the developer.  My concern is the sinking fund account, which I am not sure if the law would require it to be set aside, and if any approval from general meeting is necessary before funds from the sinking fund account can be transferred to the Juristic Person account as day to day operating expenses.

 

 

 As I said earlier the law has nothing to say on this topic.

 

Certainly in my condo -no money is released from our sinking fund account without approval at the AGM.

 

This is ,however ,not  detailed in the Rules  and Regs. Possibly in your condo it is.

 

Your are reliant on the integrity and good management of the JPM and the committee

[ballbreaker]

As Delight has stated there is nothing in Condo Act concerning bank accounts

 

Since the building has been registered and you have JPM the developer should have transferred the sinking fund to a XXX Juristic Person account.  Any condo's the developer still has and then sells should deposit the sinking fund collected from buyer to XXX JP account.

 

My condo building has three accounts which require two committee member signatures to withdraw funds:

1. Current account (Checking account having zero balance with overdraft protection used to pay monthly bills that cover service contracts and minor maintenance and repair cost)

2. Standard Savings account (Maintenance fees are direct deposited by owners into this account and is source of funds to clear checks drawn on Current account)

3. Fixed Savings account (Sinking fund used for major maintenance or repair only)

 

The sinking fund intent was to provide funds for major maintenance or repair requirement.  Repainting the building is one such item.  You definitely don't want to be using these funds to cover monthly service or maintenance work.

 

Edited April 8, 2017 by ballbreaker

[thairookie]

Do developers have to contribute to the sinking funds for units that are still unsold ?  By the same token, do developers need to pay for common facilities for units unsold ?

[trogers]

44 minutes ago, thairookie said:

Do developers have to contribute to the sinking funds for units that are still unsold ?  By the same token, do developers need to pay for common facilities for units unsold ?

The answer is obvious when you see them holding on to unsold stocks for years without being forced to conduct any fire sales...

[Jeffkp]

1 hour ago, thairookie said:

Do developers have to contribute to the sinking funds for units that are still unsold ?  By the same token, do developers need to pay for common facilities for units unsold ?

Yes. My building has a number of unsold units. The developer is now an owner just like me and must pay the same fees, etc.

 

[thairookie]

4 hours ago, trogers said:

The answer is obvious when you see them holding on to unsold stocks for years without being forced to conduct any fire sales...

Wow...it's res ipsa loquitur.

[thairookie]

17 hours ago, Jeffkp said:

Yes. My building has a number of unsold units. The developer is now an owner just like me and must pay the same fees, etc.

 

What about sinking fund ?  The developer with unsold units have no responsibility with respect to sinking fund ?

[Jeffkp]

1 hour ago, thairookie said:

What about sinking fund ?  The developer with unsold units have no responsibility with respect to sinking fund ?

At this point, the developer is just another owner like me. He has no control of the building and pays his (or hers) fees like us. 

I am chair of the owners committee and we watch this closely.

[pipeflaw]

The sinking fund must be kept separatefrom other accounts. Funds in the sinking account may not be expended without the approval of the Committee and, sometimes, theowners.

 

The developer does not have to pay the sinking fund but any time the developer transfers a unit the developer must collect the sinking fund payment  and hold it in trust until the owners actually take over. As for common area expenses, a developer must pay these from the day the condo is registered on the units and until all are transferred. Many don't do this and thats why many juristic condos don't take in enough money.

[KittenKong]

8 minutes ago, pipeflaw said:

The sinking fund must be kept separatefrom other accounts. Funds in the sinking account may not be expended without the approval of the Committee and, sometimes, theowners.

 

The developer does not have to pay the sinking fund but any time the developer transfers a unit the developer must collect the sinking fund payment  and hold it in trust until the owners actually take over. As for common area expenses, a developer must pay these from the day the condo is registered on the units and until all are transferred. Many don't do this and thats why many juristic condos don't take in enough money.

 

This is all correct, except that there is no requirement for sinking fund money to be kept separately from current account money. Obviously any sensible committee and management would ensure that they are accounted for entirely separately, but sense is a rare commodity here.

[Delight]

1 hour ago, pipeflaw said:

 

The developer does not have to pay the sinking fund .

 

Given that the Condo Act never refers to sinking funds-how are you so certain?

[scubascuba3]

Is proper accounting software generally used to record transactions or just Excel or other?

[thairookie]

Is proper accounting software generally used to record transactions or just Excel or other?

That is a matter of administrative practice, not law. Let's not get into that.

[thairookie]

At this point, the developer is just another owner like me. He has no control of the building and pays his (or hers) fees like us. 
I am chair of the owners committee and we watch this closely.

If the developer decides to play hard ball and not pay common facilities fees, what do you have in your arsenal to make them comply? It's not a criminal offence after all.

[Jeffkp]

1 minute ago, thairookie said:

 

If the developer decides to play hard ball and not pay common facilities fees, what do you have in your arsenal to make them comply? It's not a criminal offence after all.

 

When a condo is sold and you go the land office to transfer, a document must be presented by the Jurisistic person that the seller has paid all fees, etc. without it, the property cannot be transferred. A lien, if you will.

[trogers]

4 hours ago, Jeffkp said:

At this point, the developer is just another owner like me. He has no control of the building and pays his (or hers) fees like us. 

I am chair of the owners committee and we watch this closely.

The developer controls the JPM during the first two years after the development is registered as a condominium ...

 

When does he pay sinking funds and common fees like any other co-owners for the unsold stocks?

[smutcakes]

40 minutes ago, trogers said:

The developer controls the JPM during the first two years after the development is registered as a condominium ...

 

When does he pay sinking funds and common fees like any other co-owners for the unsold stocks?

That is entirely dependent on the developer, how many units they have sold, how quickly they transfer them. If a developer has sold out, i am sure they would be more than happy for the Co-onwers to select their own JPM in the first General Meeting.

 

The developer should pay common fees on unsold units as per the condo regulations like any other Co-owner, whether that be monthly, quarterly or yearly in advance. Sinking Fund monies are transferred as they transfer units to the new owners. 

[thairookie]

Sinking Fund monies are transferred as they transfer units to the new owners. 

So you are saying the developer pays for sinking funds or that he need not as buyer will pay sinking fund upon transfer?

[trogers]

34 minutes ago, smutcakes said:

That is entirely dependent on the developer, how many units they have sold, how quickly they transfer them. If a developer has sold out, i am sure they would be more than happy for the Co-onwers to select their own JPM in the first General Meeting.

 

The developer should pay common fees on unsold units as per the condo regulations like any other Co-owner, whether that be monthly, quarterly or yearly in advance. Sinking Fund monies are transferred as they transfer units to the new owners. 

Should pay is different from have paid. Has anyone gone through the accounts after the first two years?

 

So, stock that remains unsold for 5 years or much longer would never see their sinking funds even though the building would start to see major maintenance issues...

[smutcakes]

Just now, trogers said:

Should pay is different from have paid. Has anyone gone through the accounts after the first two years?

 

So, stock that remains unsold for 5 years or much longer would never see their sinking funds even though the building would start to see major maintenance issues...

 

Well you can always find exceptions. In my experience Condo's very rarely resort to using Sinking fund anyway. If it is unsold then the Sinking Fund will not be there, they will at some point be sold though. You would hope developers with unsold inventory would have a vested interest in maintaining the quality of the building if they are solvent. 

[smutcakes]

6 minutes ago, thairookie said:

 

So you are saying the developer pays for sinking funds or that he need not as buyer will pay sinking fund upon transfer?

 

As the units are transferred, the buyers would pay an amount of sinking fund. The developers will normally periodically transfer these sinking fund amounts to the Juristic account.

[KittenKong]

4 hours ago, scubascuba3 said:

Is proper accounting software generally used to record transactions or just Excel or other?

 

Most large buildings use condo management software like Softbiz. www.softbizplus.com for fee billing etc.    It's entirely optional though and some buildings probably just do it by hand.

 

[thairookie]

As the units are transferred, the buyers would pay an amount of sinking fund. The developers will normally periodically transfer these sinking fund amounts to the Juristic account.

That part we are all aware. It's the part about developer with unsold units. Does the developer need to pay?

[trogers]

23 minutes ago, smutcakes said:

As the units are transferred, the buyers would pay an amount of sinking fund. The developers will normally periodically transfer these sinking fund amounts to the Juristic account.

So, one would have to hope the developer does not go bust in the meantime...

[smutcakes]

14 minutes ago, thairookie said:

 

That part we are all aware. It's the part about developer with unsold units. Does the developer need to pay?

 

No, there is nothing in the law which says they have to. Obviously if they start to rent out units you can make a good argument that they are now acting like an investor and should pay the sinking fund on those units. Otherwise you are going to struggle to enforce them to pay.

 

there should be something in the Act which stipulates if they have not transferred in x amount of time they should pay.

[smutcakes]

13 minutes ago, trogers said:

So, one would have to hope the developer does not go bust in the meantime...

Yes although you would hopefully still get your money. One of the reasons to also buy from reputable developers.

[scubascuba3]

That is a matter of administrative practice, not law. Let's not get into that.

It was a simple question that just needed a simple answer