So the Depreciation Report is Done for a Strata Corporation, Then What?
[UPDATE] [An upcoming related seminar - A PAMA session at BUILDEX VANCOUVER 2014]
[Thursday, February 20, 2014 - 1:00pm – 3:00pm]
[P06 - How To Understand And Administer A Depreciation Report Once It Is Received By A Strata Corporation]
This session will provide property managers with invaluable information for managing depreciation reports including a greater understanding of the Request for Proposal (RFP) process to obtain quotes and a review of the new depreciation legislation. Attendees will also learn how to maintain a corporate history for future owners and council members. A must for any property manager working with strata corporations!
You can register for this session at the website of BUILDEX VANCOUVER: http://www.buildexvancouver.com/register.htm
As you might already know, strata Depreciation Reports are now legally mandatory in British Columbia, and strata properties with five or more than five units are required to complete a common property, limited common property and common assets Depreciation Report by December 14, 2013, or hold a 3/4 vote to waive the requirement.
So what does this legislation mean for strata owners and strata management companies?
There are two strata educational seminars in Fall 2013 regarding depreciation reports. One offered by Canadian Condominium Institute (CCI) - Vancouver Chapter and another one by The Condominium Home Owners Association of BC (CHOA).
To register for the seminars click on the links bellow:
- Depreciation Reports - What having one means; what not having one can mean - Provided by CCI Vancouver - Saturday October 26, 2013
- How to understand and administer your depreciation report once it is received by your strata corporation - Provided by CHOA - Various Dates
Behind the Depreciation Report
In an ideal world, strata owners would have enough useful information about their property and be prepared for future common and limited common property and system deterioration through proactive planning instead of reactive response.
Reactive repairs generally cost two to five times more than corrections and repairs made in a planned and scheduled environment. Like Tony Gioventu from The Condominium Home Owner’s Association (CHOA) has stated, it’s either “pay now, or pay much more later on.”
Say good bye to Special Levies
The new strata depreciation reporting law is also intended to eliminate ongoing and future Special Levies which been known to create problems and stress for various unit owners that are “blindsided” by unexpected expenses. Owners can now plan for and anticipate maintenance and/or repairs accordingly.
The depreciation report or reserve fund study (what it's called in other jurisdictions), provides strata owners with information about the condition of the building they invested in and help them be proactive and plan for future.
In other words, the Depreciation Report is a powerful tool that helps strata councils in self-managed stratas, or strata agents come up with a comprehensive to-do list for long-term maintenance and repair of strata properties. Nobody wants a bad surprise!
The report also helps strata management companies determine the proper contributions needed for the CRF (Contingency Reserve Fund), which is supported by strata fees and used to maintain and renovate strata property.
Transparency for Prospective Buyers
It also helps prospective buyers make more informed decision before they invest their money in a strata property. It might have happened to you or somebody you know, that even before you start enjoying your life in your purchased unit, you get notified by your strata council or management company that something just came up or is broken and you need to pay this large amount of money as your share to fix the issue in the complex. We've been there and it was not fun at all!
What if we’re just not yet ready to commit?
A strata corporation can defer a depreciation report by passing a yearly resolution with a three-quarters majority vote. However, the resolution to exempt the strata from preparing a depreciation report has an 18-month time limit, so the resolution must be re-passed by three-quarters vote on a periodic basis in order to continue to defer the report.
Deferring the preparation of a depreciation report can also negatively affect the marketability of strata units as well as the ability of potential buyers to obtain mortgage funding or current owners to obtain refinancing.
A look into the dark side
While a Depreciation Report can be a powerful planning tool for any strata’s Owners Group, some owners consider it a waste of money and would rather avoid the expenses and recommendations for maintenance and repair associated with the report.
There are also challenges for strata management firms, who may struggle to find an accessible, user-friendly, secure and efficient way to create and follow the long term strata maintenance plan.
Useful Resources Related to Depreciation Reports and Maintenance:
- The Office of Housing and Construction Standards - The Guide on Depreciation Reports
- Condominium Home Owners Association of BC (CHOA) - What a Strata Corporation Needs to Know about Depreciation Reports
- Building Asset Management Bulletins on CHOA's website - Produced in partnership with CHOA, RDH Building Engineering Ltd. and the Real Estate Foundation of BC: