How far should an MCST go to recover unpaid maintenance contributions?
When managing arrears, too little enforcement risks normalising non-payment, whereas too much enforcement may result in unnecessary cost, conflict and reputational damage. (Photo: Unsplash)
Arrears in maintenance payments are not merely an accounting issue — they are one of the biggest threats to the financial health of any strata development.
For most management corporations, commonly referred to as MCSTs, maintenance contributions are the primary, and often sole, source of revenue.
When subsidiary proprietors — unit owners in a strata-titled property — fail to pay, the consequences are immediate and far-reaching: cash flow tightens, operations are compromised and the burden is unfairly shifted to compliant owners.
In our decades of experience managing residential, commercial and industrial strata-titled properties, we have consistently found that arrears management is not just about recovery, but also fairness, discipline and the long-term sustainability of the development.
Enforcement options: clear in law, complex in practice
In Singapore, the Building (Strata Management) Act equips MCSTs with several enforcement tools, including civil action to recover the debt and a forced sale of the unit. MCSTs may also seek criminal prosecution through a private summons.
On paper, these powers are straightforward. In practice, however, the challenge lies not in exercising them, but in deciding how far to go.
Each option carries financial, operational and relational consequences.
MCSTs generally have the capability to act; the bigger issue lies in exercising sound judgment to determine the most appropriate response given the unique circumstances.
Stock image of a mall. MCSTs may turn to forced sales of units to recover money owed. (Photo: Pexels)
When winning still costs money
Legal enforcement is often seen as the default solution, but it comes with a cost that is sometimes overlooked.
Take a straightforward example: an MCST files a claim to recover $8,000 in arrears. Legal fees may be about $2,200. However, under the Rules of Court in Singapore, the recoverable legal costs in a default judgment are fixed at around $1,000.
In other words, even if the MCST succeeds in court, it can still incur a shortfall.
This creates a practical dilemma for many management councils. Should enforcement be initiated early, when arrears are small but the cost impact is disproportionate?
Or is it better to wait and allow arrears to accumulate, so that the debt grows large enough to justify the expense of legal action and enforcement becomes more cost-effective?
There is no uniform answer. What is clear is that enforcement decisions are as much financial as they are legal.
The temptation to wait
Some MCSTs adopt a passive strategy, deferring enforcement until the unit is sold.
At that point, all outstanding contributions must be cleared before the transaction can be completed.
The strategy assumes that a sale will eventually occur. But in reality, ownership can remain unchanged for many years, which means arrears continue accumulating while the MCST bears the cash flow impact.
Others impose high late-payment interest rates, sometimes exceeding 24% per annum, as a deterrent.
While such approaches may yield eventual recovery, they come with several risks.
Prolonged arrears weaken cash flow and strain operations, high interest rates may be challenged as excessive, and a culture of delayed payment may take root among subsidiary proprietors.
Forced sale: Powerful, but not always practical
At the other end of the spectrum is a forced sale of a unit to recover the money owed. This is perhaps the most powerful enforcement tool available to an MCST.
In one development that we took over management of, close to $600,000 in arrears had accumulated across 150 subsidiary proprietors. Four owed more than $30,000 each, and one account had ballooned to over $65,000 over several years.
The reasons were familiar: business difficulties, tenancy disputes, and dissatisfaction with estate management.
While the MCST was legally entitled to pursue a forced sale, doing so indiscriminately would likely have escalated tensions and resistance within the community.
Instead, a more calibrated approach was taken.
Statutory charges were lodged against the units, ensuring that arrears would have to be settled before any future sale or transfer could proceed.
Defaulters were engaged directly and offered structured instalment plans. Payment compliance was closely monitored, and immediate action was taken when defaults recurred.
The outcome was encouraging — more than 75% of arrears were recovered without resorting to widespread forced sales at the development.
Situations like this highlight that while enforcement power is important, how it is exercised matters even more.
When enforcement meets reality
In another case, a subsidiary proprietor with more than $30,000 in arrears became the subject of a forced sale process.
The MCST successfully obtained a High Court order for possession — a significant step.
Yet, just before enforcement, the unit owner secured a buyer and provided evidence that the property would be sold within a defined timeframe.
The MCST thus chose to allow time for the sale to be completed, instead of enforcing the possession order immediately.
Ultimately, all arrears and legal costs in this case were fully recovered through the open market sale, rather than a forced auction. The process, however, took nearly two years.
This illustrates that effective enforcement is not always about speed. Often, success will depend on positioning and timing.
Prosecution: More deterrence than recovery
The Building (Strata Management) Act also provides for prosecution if a subsidiary proprietor fails to pay within the prescribed period after notice has been given. If found guilty of an offence, the subsidiary proprietor may face fines of up to $10,000, with additional daily penalties.
That said, in practice, courts may allow instalment payments instead of imposing fines. And fines, if imposed, are payable to the state, not the MCST.
The MCST also bears costs such as administrative fees to initiate criminal proceedings.
Therefore, while such measures may have deterrent value, they are not always effective as a recovery mechanism.
Stock image of apartments. Prolonged arrears can weaken cash flow, and a culture of delayed payment may take root among unit owners. (Photo: Pexels)
Enforcement is not the same as recovery
It is tempting to view arrears management as a purely legal process — one that escalates from reminders to litigation, and eventually to enforcement.
But in reality, effective arrears management is a discipline.
The most successful MCSTs tend to share common traits:
- Acting early and consistently;
- Maintaining firm but fair engagement with subsidiary proprietors;
- Balancing legal costs against recovery outcomes;
- Escalating measures strategically, not reflexively.
Importantly, they recognise the human dimension.
Many subsidiary proprietors who are in arrears are under genuine financial or emotional strain. While this does not excuse non-payment, it does shape how recovery efforts should be approached.
Striking the right balance
The law provides MCSTs with significant powers. The real challenge lies in deciding how and when to use them.
Too little enforcement risks normalising non-payment.
Too much enforcement may result in unnecessary cost, conflict and reputational damage.
The answer lies in balance — applying firmness with pragmatism and consistency with judgment.
Final thoughts
Unpaid maintenance contributions are an issue that many strata developments will encounter over time.
Recovering money owed is a key part of arrears management.
At the same time, it is also important to safeguard the financial integrity of the development and ensure that the burden of non-payment does not fall unfairly on those who comply.
For MCSTs, the question is not how far they can go — but how far they should go and how wisely they choose to get there.
Teo Poh Siang is founder and managing director of Wisely 98, which manages condos, malls and industrial properties. He is also the author of 'A Practical Guide to Strata Management in Singapore'.
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