Strata Audit

It is an independent audit of the money collected from and spent on behalf of the owners in a shared building or community — service charges for security, cleaning, maintenance, utilities for common areas, and the reserve fund for future major repairs. It confirms the Owners' Association or its management company spent what was budgeted and approved, on what it was supposed to be spent on, and that the reserve fund is properly funded and kept separate.

Yes, in practice. Jointly-owned properties in Dubai are governed under Law No. 6 of 2019 and the associated RERA/Dubai Land Department framework, and the Mollak system requires an audited service charge statement as part of the annual budget approval and reconciliation cycle for the community. Without a properly filed audit, the OA management company generally cannot get the following year's service charge budget approved on Mollak.

No. Dubai's framework is administered through RERA and the Mollak platform under Law No. 6 of 2019. Other emirates — Abu Dhabi, Sharjah, Ajman, Ras Al Khaimah — have their own jointly-owned property or community title regulations, generally built on similar principles (service charge transparency, reserve fund requirements, independent audit) but administered by different authorities with different filing mechanisms and timelines.

It depends on the community's stage. Before handover, while the developer manages common areas, the developer is generally responsible for the audit of that period's common-area accounts. Once the Owners' Association is fully constituted, the OA (through its appointed OA management company) commissions the annual audit going forward.

Mollak is the Dubai Land Department's centralised online platform for managing jointly-owned property service charges — budget submission, owner billing, collection tracking, and financial reporting for OAs and their management companies. RERA requires audited financial statements to be reconciled and reported through Mollak as part of the annual budget approval workflow, before the following year's service charges can be levied on owners.

OA / jointly-owned property audits in Dubai generally require the auditor to be recognised on RERA's approved auditors panel for this specific type of engagement — separate from the Ministry of Economy's general audit firm registration that covers standard company audits. Firms not on the relevant panel may not be accepted for Mollak filing purposes.

The reserve fund is a ring-fenced pool of money set aside from service charges to cover future major capital replacement of building systems — lifts, façade, roofing, major mechanical and electrical equipment — rather than routine annual maintenance. The applicable contribution rate is set by RERA guidance (commonly referenced in practice around a percentage of the operating service charge budget) or by a community-specific reserve fund study, and can change from time to time. Always confirm the current applicable rate against the latest RERA circular or the community's own reserve fund study rather than relying on a fixed figure.

This is one of the most common and most serious findings in a strata audit. The reserve fund is meant exclusively for major capital replacement, not routine operating costs like monthly cleaning or security wages. If it has been drawn down for operating expenditure without proper Board of Owners approval and reclassification, this is flagged as a significant audit finding, and the OA Board typically needs to arrange restitution or a corrective plan.

Cost allocation generally follows the unit entitlement (undivided share) schedule set out in the jointly-owned property declaration — each unit's proportional share of the total common-area cost, based on its size or a similar prescribed metric. In master communities with multiple sub-associations, an additional allocation key splits shared master-community costs (main gate security, master landscaping) between the sub-communities, separate from each building's own internal costs.

Owners can raise concerns with the OA Board or management company first. If unresolved, in Dubai, disputes over jointly-owned property matters — including service charge disputes — can be escalated through the relevant DLD/RERA dispute resolution mechanism established for this purpose. An independent, properly conducted audit provides the factual basis that supports (or resolves) such disputes, whichever direction the facts point.

Generally, the core strata audit focuses on service charge income and expenditure verification rather than the OA's Corporate Tax or VAT position specifically. However, if the OA or its management company is a registered taxable person for VAT (Federal Tax Authority, standard rate of 5%) on billable services, or has Corporate Tax obligations under the Federal Tax Authority's Corporate Tax regime (9% on taxable income above AED 375,000, where applicable), those obligations should be separately confirmed and are not automatically covered by the strata audit scope unless specifically agreed.

The Owners' Association (OA) is the legal body comprising all unit owners in a jointly-owned property, typically represented by an elected Board of Owners. The OA management company is a separate commercial entity appointed by the OA (or by the developer before OA constitution) to carry out day-to-day management — collecting service charges, contracting suppliers, and maintaining the accounts — on the OA's behalf. The audit examines the accounts as maintained and reported by the management company on behalf of the OA.

For a single building community with straightforward records, realistically 3–5 weeks from full document receipt to a final signed report. Larger master communities with multiple sub-associations and shared-cost allocation keys take longer, depending on the number of cost centres and sub-community reconciliations required.

The RERA/Mollak-approved annual budget, the full general ledger and trial balance for the year, all bank statements including the segregated reserve fund account, owner billing and collection records, supplier contracts and invoices for major cost categories, and the prior year's audited statement for comparatives.

Most of the audit — ledger testing, bank reconciliation, budget-to-actual comparison — can be conducted from records provided electronically. A site visit is often still valuable to physically verify major common-area assets, ongoing capital works funded by the reserve fund, and to meet the OA Board or management company in person, particularly for larger or more complex communities.

Yes, though the first audit under a new auditor for a community with no prior audit history requires more foundational work — establishing opening balances, confirming the reserve fund's historical funding position, and often reconstructing cost allocation history if records are incomplete. We scope this explicitly and price it as a distinct first-year engagement rather than assuming it will run like a routine annual audit.

A firm that primarily audits trading companies applies a profit-and-loss, balance-sheet mindset to an engagement that has neither profit nor a balance sheet in the conventional sense. Strata audits require understanding unit entitlement allocation, reserve fund segregation rules, Mollak's specific reporting requirements, and the practical governance dynamics between developers, OA Boards, and management companies. We approach this as a distinct specialism, not a generic audit template applied to a different client type.

We report the finding factually and quantify its impact in the audited statement and management letter, and discuss it directly with the OA Board and management company before finalisation wherever possible, so that any corrective action, restitution, or disclosure to owners can be planned rather than sprung on stakeholders in the final report.

Our core engagement is the independent audit itself. However, we do provide following-year advisory based on audit findings — flagging under- or over-provisioned cost categories, reserve fund top-up recommendations, and recurring supplier cost trends — which the OA Board or management company can use as an input when preparing the next year's budget for Mollak submission.

We audit the full financial year regardless of a management company change during the period, working with both the outgoing and incoming manager's records to build a complete year's picture. We specifically test the handover reconciliation between the two managers as part of the audit, since this transition point is a common source of unreconciled balances.

Fees depend on the size of the community (number of units and cost centres), whether it is a single building or a multi-sub-association master community, the completeness of records provided, and whether it is a routine annual audit or a first-time / handover reconciliation audit requiring more foundational work. We provide a written scope and fixed fee before starting any engagement.

Yes. We work across the UAE and confirm the applicable regulatory framework — RERA/Mollak for Dubai communities, or the relevant emirate authority's equivalent requirements elsewhere — for each community individually, rather than assuming one framework applies uniformly across a multi-emirate portfolio.

The audited service charge statement generally follows a format tailored to jointly-owned property reporting — an income and expenditure statement for the service charge fund, a separate reserve fund statement, and notes disclosing the budget-to-actual comparison and reserve fund position — rather than the standard company financial statement format (balance sheet, profit and loss, cash flow) used for a trading entity.

Any surplus is typically carried forward and applied to reduce the following year's service charge budget, or allocated to the reserve fund, depending on the OA's approved policy and the applicable regulatory guidance — it is not distributed to owners as a dividend or refund in the way a company profit might be, because the OA is a cost-recovery, not-for-profit structure.

Restricted access to records is itself reportable — an auditor cannot issue an unqualified opinion on a service charge statement where material records are withheld. We would qualify the audit opinion, or in serious cases decline to issue an opinion at all, and communicate this restriction to the OA Board and, where appropriate, to RERA/the relevant authority.

Any jointly-owned property with shared common facilities and a service charge structure — including freehole villa communities and gated compounds — generally falls within the jointly-owned property audit framework, not just high-rise apartment towers. The specific requirements depend on the community's registration and the applicable emirate framework.

A reserve fund study is a forward-looking engineering and financial assessment of future capital replacement needs for major building systems, typically commissioned periodically (not annually). The strata audit is a backward-looking verification of what was actually collected and spent in the year just ended. We cross-check the audited reserve fund contribution against the study's recommended funding level where a study exists, and flag any material gap.

PNPC has supported real estate, hospitality, and community-title clients across India and the UAE since 1986, with a dedicated specialised audit practice covering strata/OA audits, stock audits, and other special-purpose engagements distinct from routine statutory company audits. Our Dubai-based team works directly with OA Boards, management companies, and developers on these engagements.

A generalist firm may complete a technically compliant audit but miss the practical issues specific to community management — unit entitlement allocation errors, reserve fund segregation gaps, master community cost-sharing disputes, and Mollak-specific reporting format requirements. PNPC treats strata auditing as a specialism within our broader audit and assurance practice, bringing pattern recognition from multiple community engagements rather than treating each OA audit as a one-off generic exercise.

We remain available through the following budget cycle to advise on issues the audit raised, and we are typically re-engaged for the following year's audit to maintain continuity of accounting policy and comparability of figures year over year — which matters both for regulatory filing consistency and for owners tracking service charge trends over time.

Delays in submitting the audited statement can hold up RERA's approval of the following year's service charge budget, which in turn can delay the OA's ability to legitimately bill owners for the new period. The exact administrative consequences and any applicable fees are set by RERA/DLD and can change, so the OA management company should confirm current requirements directly with RERA rather than relying on a fixed penalty figure.

We can quantify the shortfall and its likely causes as part of the audit findings, and advise on remediation options — a corrective special levy, a phased reserve fund top-up plan, or, where relevant, pursuing a developer contribution for a handover-period shortfall — though the actual decision and implementation sits with the OA Board, often in consultation with legal counsel where a developer dispute is involved.

Yes — the management company's fee, as a cost to the service charge budget, is tested like any other budgeted cost line: whether it matches the approved contract rate, whether it was properly authorised, and whether any related-party facilities income (where the management company also profits from ancillary services to the community) has been appropriately disclosed and, where required, netted against the service charge burden.

Contact our Dubai office with the community's basic details — number of units, whether it is Mollak-registered (or the equivalent for another emirate), current OA management company, and the financial year end. We will confirm our panel eligibility for the specific community's jurisdiction, provide a scoped engagement letter and fixed fee, and send the initial document checklist to begin the audit.