Calculating sinking fund contributions

While some RP's have improved the way they calculate sinking fund contributions, It's unfortunately the case that many still use very limited information or basic assumptions to work out what contributions should be. Here are just a few of the things I've heard:

"It's a similar size to *insert development name here*, let's base it on that"

"No idea what it's based on, it's always been that"

"We base it on a percentage of service charges"

"We charge a flat rate for sinking funds"

In these situations, neither the organisation nor the resident wins.

The organisation presumably set up the funds initially with the idea of having some assurance that money would be available as items reach the end of their expected life. They can't be confident that these funds are sufficient.

The resident is frustrated at paying for something with little visible short-term benefit, and has no information to reassure them their contributions are fair.

Talk about a lose/lose situation.

Want to talk more about sinking funds? Email us at hello@ad-esse.com.

Customer: How do you calculate my sinking fund contributions?

Housing providers: . . .