Sinking Fund Misused or Accounts Hidden?
What Owners Can Do (Malaysia 2026)

This guide is for general information only and is not legal advice. For your specific situation, confirm with the Commissioner of Buildings, the Strata Management Tribunal, or a qualified Malaysian lawyer.

What is the sinking fund and who controls it?

Every strata development in Malaysia is required to maintain two separate accounts: a maintenance account (for day-to-day operating expenses) and a sinking fund account (for longer-term capital expenditure). These are legally separate — the management body cannot move money between them without authority.

Under Section 14 of the Strata Management Act 2013 (Act 757), during the developer’s management period, the developer collects and holds both accounts. Once a Joint Management Body (JMB) is formed, control passes to the JMB. When the Management Corporation (MC) is formed, the MC takes over (Source: SMA 2013, ss.14, 21, 35; Low & Partners, “Strata Management Act 2013 — Part 1”).

Proprietors contribute to the sinking fund as part of their monthly charges. The rate is set by the management body and, for an MC, must be approved at the Annual General Meeting (AGM). The minimum contribution is set by the Strata Management (Maintenance & Management) Regulations 2015.

Permitted uses of the sinking fund (s.51 SMA 2013)

Section 51(2) of the Strata Management Act 2013 exhaustively lists the purposes for which the sinking fund may be used. This is a strict, closed list — expenditure outside these categories is unlawful (Source: SMA 2013, s.51(2); BurgieLaw, “The Use of Funds in the Maintenance and Sinking Fund Account”, 2016):

Note: operational expenses (security guard wages, electricity bills, lift maintenance contracts) must come from the maintenance account, not the sinking fund. Blurring this line is one of the most common forms of sinking fund misuse.

What counts as misuse

Misuse of the sinking fund covers any use of the fund outside the Section 51(2) permitted purposes. Common examples identified by Malaysian law practitioners include:

• Using sinking fund money to pay operational expenses such as security wages, cleaning, or utility bills (Source: BurgieLaw, 2016).
• Paying management committee members’ personal expenses or loans from the fund.
• Awarding renovation or maintenance contracts at above-market rates to connected parties (potential breach of fiduciary duty).
• Failing to keep the sinking fund in a separate, dedicated bank account — commingling with the maintenance account.
• Spending sinking fund money on items that benefit only a few parcels (e.g. upgrading only one block’s lifts while collecting contributions from all blocks).
• Refusing to disclose sinking fund balances at the AGM or presenting unaudited accounts without explanation.

Under Section 51(4) SMA 2013, any person who wilfully applies sinking fund money to an unauthorised purpose commits an offence and is liable on conviction to a fine not exceeding RM250,000, or imprisonment not exceeding three years, or both (Source: SMA 2013, s.51(4); Lui & Bhullar, “Strata Management Act 2013: Landmark Case on Sinking Fund”).

Permitted vs prohibited uses: comparison table

Your right to inspect accounts and records

Proprietors have a statutory right to inspect the management body’s accounts, records, and documents. Under Section 35 of the SMA 2013, a proprietor may, during reasonable hours, inspect the JMB’s or MC’s records — including bank statements, invoices, and contracts — and take copies upon payment of the prescribed fee (Source: SMA 2013, s.35; Low & Partners, “Strata Management Act 2013 — Part 2”).

How to exercise your inspection right:

1. Send a formal written request (letter or email) to the management office, citing Section 35 SMA 2013, and specifying the documents you wish to inspect (e.g. sinking fund bank statements for the last 3 years, invoices for the last capital project).
2. Request a specific date and time — within office hours.
3. If management refuses or does not respond within 14 days, this is itself a breach of the SMA 2013 and grounds for a COB complaint.
4. When inspecting, take photographs of records, note down account numbers, and retain copies of all documents provided.

Management cannot charge you an unreasonable fee for inspection. The Regulations set out the prescribed copying charges.

Demanding a proper audit

Under the SMA 2013, management bodies are required to have their accounts audited annually by a licensed auditor. The audited accounts must be presented at the AGM and made available to proprietors on request (Source: SMA 2013, ss.50, 53; Low & Partners, “Strata Management Act 2013 — Part 2”).

If management has not presented audited accounts at the last AGM, or if the accounts provided are unaudited:

• Pass a resolution at a general meeting (ordinary resolution, simple majority) demanding audited accounts be produced within a specified time.
• If the resolution is ignored, file a complaint with the COB — failure to maintain and present audited accounts is a breach of the SMA 2013.
• In severe cases of suspected fraud, a police report (for criminal misappropriation under the Penal Code) may also be appropriate, in addition to the SMA enforcement route.

Also see our guide on strata accounts and audit rights in Malaysia →.

Red flags: signs the sinking fund may be misused

• Sinking fund balance is unusually low given the age and size of the building and the monthly contributions collected.
• Management refuses or delays providing audited accounts at the AGM.
• Large, vaguely described expenditure items in the accounts — e.g. “general works” or “miscellaneous capital” with no supporting invoices.
• Contracts awarded to related parties at prices significantly above market rate (potential breach of fiduciary duty by committee members).
• Frequent emergency levies on top of regular sinking fund contributions, with no clear capital project to justify them.
• Bank account details change without a resolution at a general meeting.
• Management resists inspection requests or claims records have been lost.

Step-by-step: from inspection demand to Tribunal

1. Exercise your inspection right under s.35 SMA 2013. Inspect the sinking fund bank statements, invoices, and contracts for the relevant period.
2. Request the audited accounts if not already provided. If management has not had accounts audited as required, demand this in writing with a 30-day deadline.
3. Raise it at the next general meeting. Put the concern on the agenda formally. Pass a resolution calling on management to explain the expenditure or commission an independent audit.
4. File a COB complaint if management refuses to allow inspection, refuses to provide audited accounts, or if the accounts show expenditure outside s.51(2) purposes.
5. File at the Strata Management Tribunal for an order requiring management to produce accounts, refund misapplied funds, or remove the committee member responsible.
6. If there is evidence of criminal misappropriation (not just incompetent management), consider also lodging a police report under the Penal Code.

The Commissioner of Buildings (COB) route

The COB has investigatory and enforcement powers under the SMA 2013 and can issue directives to management bodies (Source: KPKT, kpkt.gov.my — Commissioner of Buildings portal). A COB complaint is the appropriate first formal step where:

• Management refuses to allow inspection under s.35.
• Management has not presented audited accounts at the AGM.
• The accounts reveal expenditure outside the s.51(2) permitted purposes.

The COB complaint does not attract a fee. Submit in writing with all supporting documents to your local COB office (administered under each local authority). The COB may order management to comply, impose fines, or refer serious matters for prosecution.

The Strata Management Tribunal route

The Strata Management Tribunal (SMT), under KPKT, can hear claims relating to the management body’s failure to comply with the SMA 2013, including sinking fund misuse (Source: MahWengKwai & Associates, “10 Things to Know About the Strata Management Tribunal”; jmbmalaysia.org, “How to Make a Claim at the Tribunal”). The Tribunal can:

• Order management to produce and disclose accounts.
• Order repayment of funds that were misapplied.
• Issue injunctions preventing further misuse.
• Hear claims up to RM250,000 — filing fee RM100 for residential claims.

For the filing procedure, see our Strata Management Tribunal guide →. For the full service-charge and sinking-fund collection process, see service charge defaulters: what management can do →.

Using the AGM to hold management accountable

The Annual General Meeting (AGM) is the most powerful tool available to proprietors for ongoing accountability. Under the SMA 2013, the management body must hold an AGM at least once a year and must present audited accounts. At the AGM, proprietors can:

• Vote against the adoption of accounts if they are not audited or contain unexplained items. A failed accounts adoption puts the committee on notice.
• Pass resolutions requiring management to commission an independent forensic audit of the sinking fund.
• Remove committee members by ordinary resolution if there is evidence of mismanagement or breach of duty.
• Elect new committee members who commit to transparency and proper record-keeping.

If the JMB/MC refuses to call an AGM or improperly postpones it, see how to call an EGM in a strata building →.

Sources & official references

• Strata Management Act 2013 (Act 757), ss.14, 35, 50, 51, 53 — full text via Lee Partners
• BurgieLaw — The Use of Funds in the Maintenance and Sinking Fund Account (2016)
• Low & Partners — Strata Management Act 2013: Part 2
• Lui & Bhullar — Landmark Case on Maintenance Fees and Sinking Fund
• MahWengKwai & Associates — 10 Things to Know About the Strata Management Tribunal
• KPKT — Strata Management Tribunal — kpkt.gov.my | [email protected]
• jmbmalaysia.org — How to Make a Claim at the Strata Management Tribunal