Following the introduction of new Provincial legislation, Depreciation Reports are now required to be prepared by condominium strata corporations, to help plan for future repair and maintenance costs. The report will help owners (and potential owners) determine how repairs will be funded. In short, the Depreciation Report must contain:
a) A physical inventory of the common property including building systems;
b) Anticipated maintenance, repair and replacement costs for common expenses projected over 30 years;
c) A financial forecasting section that contains at least three cash flow funding models for the contingency reserve fund (CRF).
Like other provinces, depreciation reports are now mandatory unless the strata corporation exempts themselves through an annual ¾ majority vote. It is important to note that Strata corporations with less than five units are also exempt. In addition, updates to the Depreciation Report will be required every three years and must include an onsite inspection.
What does this mean for buyers of strata properties (i.e. condo units, etc.) in British Columbia? The underlying rationale for the legislative amendments that brought about the Depreciation Report requirement, was to improve the transparency for buyers of strata property. Prior to this obligation, many strata corporations were not effectively planning for capital maintenance expenditures. Their focus was on keeping maintenance fees low, which often resulted in much needed capital expenditures being deferred. The Depreciation Report will prove very advantageous for both current condo owners and prospective buyers, who will now have a much clearer picture of what state the building is currently in and what kinds of costs they can anticipate in the future.
Prospective buyers should review this document very thoroughly, in anticipation of any condominium located within the Province, and utilize the report as a way of determining the condition and value of the subject property. The reports should also be used prior to purchase, to compare similar properties, to determine if the they have been maintained to the same standard and whether the same or similar future maintenance issues are foreseen and adequately provided for.
Follow this link, for the regulations relating to depreciation reports, as provided for in the Strata Property Regulations: