DAVID HUTCHINSON 778-839-5442
Iris McEwen and her strata council considered three potential bidders before agreeing to pay a qualified engineer $8,000 to devise a future repair and renewal plan for their Sechelt condo development.
But three-year-old provincial legislation mandating that strata owners prepare depreciation reports on their units does not stipulate who must do the work, leaving open the option to choose much cheaper or even unqualified contractors for the task.
This in turn raises concerns that both owners and buyers could be put at risk of shoddy workmanship, high maintenance costs, inconsistent reporting, and even lawsuits down the road.
Jeremy Bramwell, who holds Real Estate Institute of Canada qualifications to prepare depreciation reports, said the situation has “become kind of like the Wild West.”
“The law is written that anyone can do it, whoever the council thinks is qualified,” he said. “In my mind, it’s a danger.”
He cited one case in which an engineering firm sent a junior employee to prepare such a report.
The engineer failed to recognized a failing brick wall, which ended up costing a significant amount to fix, unbeknownst to the new owner.
“The buyer thought they were buying something safe,” Bramwell said. “This is a very typical case of what can happen when you have someone inexperienced do these sorts of things.”
Provincial legislation enacted in October, 2009, requires all strata of more than four units — townhouse developments and even bare-land developments, as well as condos — to either prepare depreciation reports every three years or annually obtain a three-quarters vote of owners to exempt themselves.
The purpose is to force the strata councils to provide a business plan that takes into account common assets — such as roofs, boilers, air conditioning and elevators — and estimate how soon they will need to be repaired, renewed or replaced.
But with no stipulation on who can do perform this work, Bramwell worries this can lead to inconsistent information in the reports, which can range in cost from $3,500 to $8,000.
“You have a situation where property managers sign up preferred suppliers. ... The problem is you don’t want to tell them anything bad,” he said. “The idea of the depreciation report is (as) an unbiased budgeting tool for the next 30 years. When you get into a situation where you’re aligning interests between providers and property managers, it gets tricky.”
McEwen, the president of her self-managed Sechelt strata council, said their owners believe the money was well spent on the depreciation report.
“If I buy into a strata, I want to see the plan before I buy,” McEwen said. “If someone doesn’t have a plan, I think it will be a negative on the purchase because people will say, ‘What do you have to hide?’”
“The strata that are going to have a problem are the ones that get the report done and then have to ask owners for money to do the maintenance that has to be done.”
Tony Gioventu, executive director of the Condominium Home Owners Association of B.C., which helped develop and promote the new legislation, said the province is working to amend the rules, but doubts there will be any changes soon.
A request to the provincial government about potential amendments was not specifically answered. An email sent to The Vancouver Sun reiterated the regulation does not specify who must prepare a depreciation report.
It also noted that “regulation does require that the report is obtained from a person (or company) that has the knowledge and expertise to understand the strata corporation’s common property and other assets.”
Gioventu urges strata not to hire anyone who doesn’t have professional liability coverage. “Don’t hire somebody who isn’t insured,” he said.
He estimates only about three per cent of strata owners in B.C. have hired someone to do a depreciation report since the legislation was enacted. Bramwell, meanwhile, expects only half the approximately 30,000 strata councils in the province will get a report done, with the other half voting for an exemption.
But both Bramwell and Gioventu argue that the industry will eventually force strata councils to comply.
John Hickey, a director of the Real Estate Institute, agreed, saying the push is coming from banks, lenders and insurers, and it will become difficult to find qualified people once strata councils start to comply.
Bramwell noted one real estate agent also told him his firm will not list strata units without a depreciation report. Those who do try to sell without one, he said, will likely realize less value because people will think there’s something wrong with the property.
“There’s a lot of implications,” Bramwell said. “The next three to five years are going to be chaos because of the depreciation reports.”