Condominium Strata Depreciation Report Information BC
What is a depreciation report?
A depreciation report is an established planning requirement for strata corporations in British Columbia. Depreciation reports are used to establish long term planning for common property and common assets to determine:
1) What assets are owned by the Strata (an inventory?)
2) The asset condition
3) When things need to be replaced (the anticipated maintenance, repair and replacement)
4) How much money the Strata currently has (contingency reserve report)
5) What it is likely to cost for future replacement (a description of the factors and assumptions in projecting costs)
6) How you are going to pay for the costs
The regulations have set out requirements for time periods of the reports, qualifications of persons providing reports, schedules for updates, disclosure of reports, conditions of the reports and what information must be contained and financial planning and disclosure.
Who is a “qualified person” that will develop the depreciation report?
Qualified person means any person who has the knowledge and expertise to understand the individual components, scope and complexity of the strata corporation’s common property, common assets and those parts of a strata lot or limited common property, or both, that the strata corporation is responsible to maintain or repair under the Act, the strata corporation’s bylaws or an agreement with an owner and to prepare a depreciation report that complies with the Act.
In addition to providing a legislated planning tool for renewals, maintenance and financial planning for the strata corporations, the depreciation report imposes a significant level of responsibility on the strata corporation. The report will become a significant document in assessing property asset value and must be disclosed in an Information Certificate. The report may be used by insurance providers, mortgage providers, mortgage insurers, and most of all, buyers. This is an official report, and may be used to determine a buyer’s qualifications for a mortgage, to establish risk for insurers, and for buyers to determine their future liabilities before they decide to make an offer for purchase. Throughout all of these transactions third parties are relying upon the information in the depreciation report which could result in potential liability for the strata corporation with respects to the accuracy and reliability of information in the report.
What is the duty of the qualified person preparing the report?
The person preparing the report will have a duty to disclose in the report their qualifications, their relationship with the strata corporation and whether or not they carry errors and omissions insurance, as well as a description of that insurance. Their qualifications will have a direct link to their duties under the regulations. The qualified person will be required to:
- Provide an inventory of the strata corporation’s common property common assets, and any limited common property or part of a strata lot that the Strata Corporation has a duty to maintain, repair and renew.
- Provide an evaluation of the inventory by performing a physical review of the site and the components.
- Provide an evaluation that addresses the following requirements:
- Estimate the service life of the assets over the next 30 years.
- The anticipated maintenance, repair and replacement costs that usually occur less than once per year. Evaluation of the components (the current condition).
- Financial evaluation of the factors and assumptions used in estimating the costs over the 30 year period. A description of how the contingency reserve fund is currently being funded, along with a current balance, minus any expenditure that have been approved but not yet taken from the fund.
- At least three cash flow models for the contingency reserve fund relating to the maintenance, repair and replacement over 30 years.
British Columbia Strata Property Act
Condominium Home Owners Association of B.C.
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