More than 1.5 million British Columbians currently live in strata housing. There are commercial, industrial and mixed-use stratas in BC. It’s important to understand a tool in assessing the condition of a strata property: the depreciation report.
What is a Strata Depreciation Report?
A strata depreciation report is a 30-year projection. It consists of thorough written and illustrated physical assessments of the condition of all components of a strata property. Sometimes called a Reserve Fund Study, it identifies current and future issues that need to be addressed and their associated cost estimates. Even though it is improbable to accurately assess costs in the future, it provides a road map for strata corporations to follow.
According to provincial regulations, a depreciation report must include an inventory and evaluation of the building:
● exterior (such as roofs, roof decks, doors, windows and
● systems (such as electrical, heating, plumbing, fire
protection and security),
● common amenities (such as fitness room, pool, bike lockers
Collectively, the items listed above are known as common property. They are parts of the strata that are shared by all owners of individual units.
Why is a Strata Depreciation Report important?
A strata depreciation report helps strata corporations plan for repair, replacement and renewal of common property and assets. It is especially important for those that require a considerable outlay of
money, such as roofs, windows, elevators, roads or utilities.
They are also an important part of a buyer’s due diligence. They provide insight into future repair and maintenance needs and associated costs. Buyers should thoroughly review strata depreciation reports. If warranted, they could seek legal or other expert advice before making a buying decision.
Buyers should also understand that the depreciation report covers common property. It does not cover the owners’ individual units. Buyers should still have an inspection for the specific unit being considered.
What isn’t covered in a Strata Depreciation Report?
Depreciation reports don’t normally cover every item in/on the common property or routine repairs and maintenance. Buyers should still do their own due diligence. This can be done by having the property inspected. Other strata documents to request for additional information: bylaws, rules, regulations, meeting minutes, strata plans, and summary of insurance coverages. These are in addition to the depreciation report.
Are Strata Depreciation Reports mandatory in BC?
Under British Columbia’s Strata Property Act and Regulations, strata corporations must obtain a depreciation report unless the strata consists of fewer than five strata lots. The Regulations also require the report to be updated every three years.
Can Strata Corporations opt out?
Strata corporations in BC can waive the requirement to obtain one or defer the renewal of one. To do this, three-quarters of the owners must pass an annual vote in favour. Voting to waive a depreciation report could be a mistake over time. Long-term costs of unanticipated repairs and maintenance needs can serve to outweigh short-term savings gained from opting out. In addition, prospective buyers may be reluctant to invest in stratas that don’t have a long-range maintenance plan in place. Another possibility is that lenders and insurers may consider stratas without depreciation reports greater risks.