By FCA, Rajkumar Adukia
Introduction
Sinking Fund and Car Parking Charges are two major components amongst the list of charges levied by a Cooperative Society.
The contribution collected from the members of a society is known as ‘charges’ and may include – property taxes, Water Charges, Common Electricity Charges, charges for running the lift, Contribution to the Sinking Fund, Service Charges, Car Parking Charges, Non-occupancy Charges, Insurance Charges, Election Fund etc.
What is a Sinking Fund?
Sinking fund means a fund constituted under the bye-laws of a society for the purpose of reconstruction of its building/buildings or for carrying out any structural additions or alterations to the building/buildings, as in the opinion of the Society’s Architect, would be necessary to strengthen it/ or for carrying out heavy repairs as may be certified by the Architect.
In short, the sinking fund is a fund constituted for repair or reconstruction in the future, wherein the members of a society contribute a certain amount on a regular basis to this fund of the society. In fact, the contribution towards the Sinking fund is a statutory obligation.
Benefits of sinking fund
In recent years, many old buildings have collapsed due to lack of repairs and negligence. If repairs are not done on a regular basis, the serious risk will be posed to the structure of the building. In such situations, the sinking fund becomes useful. Instead of shelling out a lump sum amount of money in case of major repairs, the contribution of a small amount on regular basis to the sinking fund will be a great boon when major repairs or reconstruction is required. This fund will ensure that the society has sufficient funds to carry out the work in times of need.
For example – A complex needs to undergo renovation and the estimated expenditure is around Rupees Fifty lakhs and the sinking fund has already Rupees forty lakhs, then only the balance amount of Rupees Ten lakhs will be required. Otherwise, it will become a huge burden for the members of the society.
Contribution by each member
The amount to be contributed by each member to the Sinking fund will be decided at the meeting of the general body, wherein the minimum amount should not be less than 0.25 per cent per annum of the construction cost of each flat incurred during the construction of the building of the society and certified by the Architect. This will not include the cost of the land. Usually, the contribution is done on a monthly basis. If the apartment is on rent, it will be the landlord’s duty to contribute to the sinking fund.
Investment of Sinking Fund
The amount in the sinking fund is required to be utilized when the reconstruction or repair of the building is due. As this is a very long period, the contribution received from members of the society should be invested on a long-term basis so that, the investment can fetch substantial returns to the society. This is covered under Section 70 of the Maharashtra Co-operative Societies Act, 1960 and the Bye-laws of the society.
A Co-operative Housing Society can invest its fund in the State Co-operative Bank i.e. the Maharashtra State Co-operative Bank or The Mumbai District Central Co-operative Bank Ltd. or the securities specified under Section 20 of the Indian Trust Act. Although the Registrar cam permit Co-operative housing societies to invest their funds in the Nationalized banks or other Commercial banks, or the Urban Commercial Banks, this facility is given only for facilitating day to day banking transactions. Hence, a long-term investment should be made by Co-operative housing societies only with either of the two banks named above.
If the society fails to invest the fund as prescribed above, then it would be considered as an offence under Section 146(c) of the Maharashtra Co-operative Societies Act, 1960 and the society, officer or past officer, member or past member, employee or past employee of the society, or any other person, who commits the offence will be liable to fine that may extend to five hundred rupees.
Procedure for utilizing the Sinking Fund
As per the model bye-laws, the Sinking fund can be utilized only after obtaining the approval of the General Body of the society. Before embarking on structural repairs, an Architect should be appointed at a general body meeting. Upon inspection, the Architect should prepare plans and estimates with specifications of the structural changed required to be carried out. Thereafter a contractor should be appointed by the Managing Committee of the society on the terms and conditions set out by the general body.
The amount lying in the Sinking fund can be used for the requisite structural repairs after obtaining the permission of the General body of the society.
Sinking fund falls short of requirements
If the Sinking fund investment is less than the estimated cost of major repairs/ reconstruction, in such case each member will have to contribute as per the estimated cost of repair and the shortfall may be collected on the basis of the area of each flat. But then the repair costs of common amenities such as a compound wall, pump room, society office among others will be distributed equally among all the flats irrespective of the flat size.
Sinking fund register
A Sinking fund register should be maintained by every society. It should contain the following details –
- Name and address of the society
- Number of flats
- Details of owners
- Amount of contribution received
- Details of bank where amount is deposited
- Details of amount withdrawn, if any
- Reasons for withdrawal
- Any other requisite details
What is Car Parking Charges?
‘Parking Space’ means open space within the premises of the society earmarked by it for parking of vehicles and includes a stilt. Car parking charges are the charges levied by the society on the member who has been allotted space for parking.
Amount to be paid as car parking charges
The bye-laws of the society will have a clause for payment of charges for parking of vehicles. Every member, who has been allotted the parking space will be required to pay the parking charges at such rate as may be decided at the general body meeting of the society, irrespective of the fact whether he actually parks his vehicle or not. Where a member has been allotted more than one parking space, he should pay parking charges in respect of every such parking space, as decided by the General Body Meeting.
The General Body of the Society can also fix car parking charges for the second, third car etc.
In case of other vehicles like a scooter, motorcycle, or an auto rickshaw, the member should obtain prior permission of the Committee for parking his vehicle in the compound of the society and pay the charges fixed by the General Body of the Society at its meeting. In fact, the society can recover different rates for different types of vehicles.
Conclusion
Sinking fund or the future fund, as we can term it is a very vital component among the charges paid by the members of the society. In these days of rising costs, this fund comes as a boon in times of major structural repairs, without pinching the pockets of the members. Of course, last but not the least, the car parking charge, which is another charge levied by the society may vary depending on the number of cars and type of vehicle!