To or Not To Get a Depreciation Report
Disclaimer: This is not a legal opinion and should not be relied upon as such. Although we are experts in strata property management in British Columbia, members of the public are encouraged to seek legal opinions on their specific circumstances before acting.
I was asked this week for my opinion on how important a depreciation report is for a strata. Thus, here it is, in brief, in my blog:
- Stratas and Strata Councils need to comply with the law, especially the Strata Property Act of BC.:
As of December 13, 2013 all stratas, with more than 4 units, have to prepare a depreciation report as per section 94 of the strata property act. However, the law grants stratas the ability to waive the requirement for eighteen months by ¾ vote at a general meeting. The waiving vote will have to be passed every eighteen months or the strata will have to comply with the new requirement.
- The law was created for a reason:
Historically, and despite the delusion of most well intentioned strata councils, strata owners (in general) are awful at properly maintaining the complex systems within the strata. They are prone to rationalizing, pushing off projects, prescribing to reactive maintenance, agreeing to “band-aid” solutions to save a dime, and are not trained to know what and when building components need maintenance and replacement. A few lucky stratas are fortunate to have qualified professionals living/owning in the community, but very few. Having a plan created by a professional is a giant leap forward for any community to help prioritize repairs and provide a consistent direction towards improvement.
- Strata Managers are not Building Technicians or Engineers:
We have many talents and wear many "hats" as Strata Property Managers, but we cannot claim to be an expert in building construction, maintenance, or life span of building components. Those claims lie with Engineers, Building Technicians, Certified Home Inspectors, and so on. We may be able to advise on these matters, but a good Strata Manager knows when to call in a professional specialized in that specific area. What this means is: relying on your Strata Manager to help you prioritize maintenance, repair, and replacement of building systems is an unreasonable expectation. However, relying on them to help implement a formulated plan in the depreciation report is completely within our realm of talents and expertise.
- Outsiders are now looking for these reports:
Realtors, Mortgage Brokers, Lenders, Insurance Brokers, etc. are just a few of the professionals that may be looking for these depreciation reports. Not having the report may impact your ability to sell your home for full value, refinance your mortgage, buyers to get a mortgage, and possibly affect your insurance premiums or eligibility. Seeing as every unit in the community may see a reduction in market value… Do I have to ask: how important is this report?
TIP: If you haven’t already signed on with a qualified professional to produce your Depreciation Report, I recommend considering the following: At your General Meeting waive the requirement, and pass a second resolution to approve expending funds to get a Depreciation Report done. This will give you an additional eighteen months to acquire a report at this point.
In short, my opinion is that getting a Depreciation Report done is extremely important. I would highly recommend seeking out an engineering services firm immediately, and start preparing to have one done.