Quantity Surveying plays a vital role in construction, offering a range of cost estimating services to any person or company who owns property, constructs buildings and infrastructure, or works within the wide parameters of the building and construction industry.
As the only profession qualified to accurately estimate, control and monitor construction costs for all classes of buildings and types of construction, Quantity Surveyors are experts in interpreting architectural and engineering drawings and plans and applying their knowledge of methods to accurately estimate construction costs.
Engaging a Quantity Surveyor throughout the planning and construction phases of a building project ensures the reduction of capital and on-going costs and maximises value for money for the client.
Owners of Strata property can benefit greatly from the skills and knowledge of Quantity Surveyors. From Reserve Fund Forecasts (Sinking Fund Forecasts) to Insurance Replacement Valuations and Tax Depreciation Schedules,these ancillary services safe guard Strata and ensure any investments are fully remunerated.
Reserve Fund Forecast (Sinking Funds Forecast)
Thanks to the new and improved Strata Reform, every Strata company with 10 or more lots (or a high insurance replacement value)must establish a 10 year plan that sets out;
- The common property and the personal property of the strata company that is anticipated to require maintenance, repair, renewal or replacement
- The estimated costs for maintenance,repairs, renewal or replacement
- That the 10 year plan is updated at least once every 5 years
- A strata company must prepare a forecasted budget for each financial year to its annual general meeting
Otherwise known as a Sinking Funds Forecast, these reports are a detailed cost schedule ensuring the body corporate allows for sufficient financial reserves to maintain the property. Most importantly, these clear financial reports minimise the future risk of insufficient funds,creating a safety net for both the body corporate and the building itself.
A Rawlinson’s (W.A.)'s Sinking Fund Forecast covers forecasted expenditure of a capital or non-recurrent nature including periodic replacement of major capital items including plant and equipment and other spending that may reasonably be required for the safe operation and upkeep of the buildings. It does not include expenditure on capital improvements. The reports will include an escalated cash flow forecast for the 10 year plan.
Insurance Replacement Valuation
Strata Schemes and Community Corporations are required to hold adequate building insurance as set out by the respective legislation W.A Strata Titles Act 1985 Division 4, section 53 and the WA Communities Titles Act 2018 Part 8, Section 83 Required Insurance.
How much a property should be insured for is often a grey area, unless you have an Insurance Replacement Valuation carried out by an experienced Quantity Surveyor.
An accurate replacement insurance valuation gives all property owners the peace of mind that in the unfortunate event of loss or damage, the property will be fully covered. Hidden costs are often forgotten, such as demolition works, professional fees and escalation, which can lead to being under insured and result in replacement cost liabilities.
Rawlinsons (W.A.) Insurance Replacement Valuations cover;
Building Construction Costs
Development application and other statutory costs
Demolition and removal of debris
Cost escalation during the demolition, design and construction phase
Cost escalation during the insured period
Cost escalation during the construction phase
It is not necessary to prepare a full initial cost of replacement every year, it is sufficient to apply a percentage for escalation,however a full review should be undertaken at least every 2-3 years and no more than 5 years. This will ensure changes in demolition and construction costs,alterations and additions to the insured property, or any change in the properties classification will be insured to the correct value.
Common exclusions from a Quantity Surveyors insurance replacement valuation report are:
Loose furniture and equipment
Loss of revenue
Tax Depreciation Schedule
For investors who own Strata properties, a Tax Depreciation Schedule is necessary to ensure a maximum cash return at tax time.
There are two components of a Depreciation Schedule;
Division 43: Capital Works Allowance
Capital Works Allowance is calculated on the building construction cost at the time twas built, not the purchase price paid.
This includes immovable structural elements of a building,such as the roof, ceiling, walls and foundations, as well as fixed assets like toilets and tiles.
Division 40: Depreciating Assets, Plant and Equipment
As set out by the Australian Taxation Office, each asset has its own diminishing life. Some examples of plant and equipment are carpets, blinds,ovens and dishwashers. There are two ways to depreciate Division 40 assets which are the Diminishing Value Method and the Prime Cost Method.
Following the 2017 Australian Rental Property Bill,there is a strict legislation in regards to what can and cannot be claimed, which is dependent on the date of purchase; one of the many reasons a schedule should be compiled by a qualified Quantity Surveyor.
Strata Reform and Quantity Surveyors
With the aim to improve strata schemes and provide strata owners, developers, investors and managers with sustainable and flexible housing options, Landgates biggest reform for strata title law in Western Australia in over 20 years marks both an exciting and challenging time for all involved in Strata.
Quantity Surveyors are key in compiling accurate Sinking Funds Forecasts and Rawlinsons (W.A.) are delighted to be part of the Strata reform which promises to boost the Western Australian economy by delivering new land development options, in turn driving economic growth and, in perfect timing with the states Metronet infrastructure.
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