1. Minimum Costs

• Base Fee: Each owner contributes a minimum of $5,000 towards the preparation of the depreciation report.
• Per Lot Fee: An additional $200 is charged per strata lot. The total cost cannot exceed $30,000.
• Cost Approval: All expenses related to the report must be approved by the owners at a meeting or through a voting process.

2. Reporting Cycle

• Frequency: A depreciation report is required every 5 years to ensure ongoing assessment and planning for maintenance and repairs.
• Applicability: This requirement applies to all strata lots, including those categorized as bare-land strata.

3. Tax Implications

• The costs associated with the preparation of the depreciation report are considered 100% taxable under relevant tax laws. This means strata corporations must account for this expense in their financial planning and tax filings.

4. Funding

• Contingency Reserve Funds: The cost of the depreciation report can be paid from the contingency reserve funds, which are set aside for unexpected expenses related to common property maintenance.

5. Forecasting

• The report must include a 30-year financial forecast to aid in determining reserve contributions needed over the next three years, starting from July 1, 2025. This forecast helps owners anticipate future funding needs for maintenance and repairs.

6. Legislative Requirement

• Strata buildings with 5 units or more are mandated by law to obtain a depreciation report. This is aimed at ensuring that adequate funds are available for future repairs and maintenance.

7. Purpose of the Report

• Financial Planning: The depreciation report serves as a critical tool for planning annual maintenance and repairs, as well as for creating an annual operating budget.
• Asset Assessment: It helps in assessing the property’s asset value, which is essential for resale and financing purposes.

8. Disclosure

• The findings of the depreciation report must be disclosed in conjunction with Form B, which is a standard form used to provide information about the strata property to prospective buyers.

9. Documentation Requirements

• The report must include detailed drawings and assessments from various specialists, including:
  • Architectural: Plans that show the layout and design of the building.
  • Structural: Assessments of the building’s structural integrity.
  • Mechanical and Electrical: Evaluations of mechanical systems (HVAC, plumbing) and electrical systems.
  • Fire Protection: Analysis of fire safety systems and compliance with regulations.
• History of Common Property Replacement: The report should document the history and schedule of replacing common property elements (e.g., roofs, elevators).
• Professional Input: The report must involve certified professionals such as engineers, certified reserve planners, architects, appraisers, and quantity surveyors to ensure accuracy and compliance with legal standards.

Conclusion

Overall, the depreciation report is a vital aspect of strata management, helping ensure that strata corporations maintain their properties effectively and sustainably. The rigorous requirements aim to promote transparency, accountability, and proper financial management within strata communities. If you need any more specifics or a different angle, just let me know!