There are specific requirements regarding what the depreciation report must contain, and by whom it should be prepared. In short, the report must be prepared by a qualified person, (typically an engineer or architect) with proper insurance coverage, and it has to include:
- An inventory of the common property, including building systems;
- Expected maintenance, repair and replacement costs for common expenses projected over 30 years; and
- A financial forecast containing no less than three cash flow funding models for the contingency reserve fund.
For prospective buyers of a strata property, the depreciation report allows you to see and judge the long-term maintenance requirements of the common property and the expected costs to which you will be contributing. If the strata corporation has voted to defer the depreciation report (as it may) it could be an indication of a major problem, a dysfunctional strata corporation or nothing at all, but it would be wise to investigate further before you buy!
The Strata Property Disclosure Statement for the property that you are considering purchasing will include a specific inquiry about the depreciation report and you can expect your mortgage provider to request a copy of the depreciation report as part of their financial risk assessment process.
If you are considering buying a strata property, you can expect that a strata corporation competent enough to incorporate long-term planning and integrated maintenance in accordance with a depreciation report will likely be able to maintain its building systems and protect its common property assets, which will reduce long-term costs to you as a strata property owner.