Depreciation Reports for Strata Properties:
Over the last year I have had many clients ask about the upcoming depreciation reports and how they are going to effect the Real Estate Market.
On December 14, 2011 new requirements came into effect for Depreciation Reports.
The most common questions I get:
What is a Depreciation Report?
A depreciation report helps Strata Corporations plan for repair, maintenance and replacement of common property, limited common property and common assets. The report you will receive will give you:
- An inventory of all common property including building systems
- An anticipated maintenance, repair and replacement costs estimated over a 30 year time frame
- A financial forecast that contains at minimum three cash flow funding modles for the contingency reserve fund
Do all Strata Corporations need to complete a Depreciation Report? All Strata Corporations are required to obtain a Depreciation Report by December 14, 2013 unless:
- A Strata Corporation contains 4 units or less
- A Strata Corporation exempts themselves by passing an annual ¾ majority vote. If a strata fails to pass another vote the following year they will have 18 months from the previously passed waiver to obtain the report
How often does the report need to be updated?
The report must be reviewed every three years. If a strata corporation has already obtained a report that meets the new requirements they will have three years to obtain another report.
For more information on Depreciation Reports please click here
What is my opinion on Depreciation Reports?
I strongly believe that depreciation reports are critical for all Strata especially ones that have aged beyond their warranties. As a buyer looking at one of these reports it can be very overwhelming. In most cases you will be looking at a time line that spans 30 years and millions and millions of dollars in estimated expenses. As overwhelming as it may seem this will give you a very clear picture of all of the buildings components and their expected lifespan.
When purchasing in a strata this is information you want to know so you can budget for their repair or replacement. These costs are going to be there whether the report is there or not. Wouldn’t you rather know for certain the life expectancy of each and every building component rather than having an inspector or property manager guess the ages of the building components? This report will also allow you to examine the strata’s financial position and see how they are budgeting for future repairs.
Don’t let these reports scare you away. Strata’s that are completing these reports are being pro active in keeping the buildings and it’s components in proper working order. Always ask your home inspectors opinion on the report as well.
If you have any other questions on Depreciation Reports or the Vancouver Real Estate Market contact me anytime!