Similar to other Canadian provinces, depreciation reports are now mandatory in British Columbia unless a strata corporation exempts themselves by an annual ¾ vote.
Strata Corporations will have until December 13, 2013 to obtain a depreciation report or hold a ¾ vote to exempt. Strata Corporations will have 18 months from the time a ¾ vote expires to get a depreciation report.
Please refer to section 94 of the Strata Property Act:
94 (1) In this section, “qualified person” has the meaning set out in the regulations.
(2) Subject to subsection (3), a strata corporation must obtain from a qualified person, on or before the following dates, a depreciation report estimating the repair and replacement cost for major items in the strata corporation and the expected life of those items:
(a) for the first time, the date that is 2 years after the coming into force of this section;
(b) if the strata corporation has, before or after the coming into force of this section, obtained a depreciation report that complies with the requirements of this section, the date that is the prescribed period after the date on which that report was obtained;
(c) if the strata corporation has, under subsection (3) (a), waived the requirement under this subsection to obtain a depreciation report, the date that is the prescribed period after the date on which the resolution waiving the requirement was passed.
(3) A strata corporation need not comply with the requirement under subsection (2) to obtain a depreciation report on or before a certain date if
(a) the strata corporation, by a resolution passed by a 3/4 vote at an annual or special general meeting within the prescribed period, waives that requirement, or
(b) the strata corporation is a member of a prescribed class of strata corporations.
(4) A depreciation report referred to in subsection (2) must contain the information set out in the regulations.
Depreciation reports must include an onsite visual inspection and are to be updated every three years and must estimate the repair and replacement costs for major items in the strata corporation and the expected life of those items. In other words, a long range financial planning tool that identifies the current status of the capital reserves, integrates operational schedules for property maintenance and planning and provides a funding plan. Therefore, the report should include the following:
- An inventory of your assets;
- The evaluation of the assets;
- Replacement timeline;
- The current status of the Contingency Reserve Fund;
- Cost of future replacement and;
- Funding models; three cash flow models projecting 30 year replacement periods.
Strata Corporation’s are encouraged to obtain a report performed by a qualified individual with proper liability and errors and omissions insurance coverage rather than opting out as planning is required for each Strata Corporation to protect the common assets. Maintenance is the best way to maintain the building systems and reduce costs. Long term planning and maintenance will prolong the life cycle of the building systems, allow Strata Corporation’s to plan renewals without emergencies and reduce premature failures of systems and costly resultant damage.
Permitting Strata Corporation’s to opt out of a depreciation report with a ¾ vote will not ensure that those strata corporation’s who currently do not perform long term planning and maintenance will do so; this will widen the dividing line between maintained and neglected Strata Corporations.
Furthermore, Strata Corporation owners need to keep in mind that this report will be used by mortgage providers and mortgage insurers and therefore buyers. It may be detrimental to a Strata Corporation not to obtain a report as it may affect the ability of potential buyers to obtain mortgage funding or current owners to obtain refinancing
The new regulation is available from the Province of British Columbia – Office of Housing and Construction Standards. Additional information is available at the Strata.
Property Accountability Regulations | Strata Property Act; updated strata property guides are expected in February 2012.
For help with strata property depreciation reports, contact Ascent Real Estate in Burnaby at 604-431-1800 for professional advice.