DEPRECIATION REPORTS IN BC

WHAT IS A DEPRECIATION REPORT?

A Depreciation Report, commonly known as a "Reserve Fund Study", is an analysis and recommendations for reserve funding, as a plan for the "provision of resources for major repairs and replacements of building components and improvements, or common elements, over time to ensure adequate funding of all future capital expenditures when required."1

1 Definition from the Institute of Real Estate Studies

The depreciation report will include a description and estimated life expectancy over 30 years of items that are part of common property, common assets, limited common property or parts of the strata lot that the corporation is responsible for. This may include, but is not limited to:

• the building's structure;
• the exterior of the building, including the roof, doors, windows and skylights;
• the systems of the building, including the plumbing, heating, electrical, fire protection and security;
• common facilities and amenities of the property;
• the building's parking facilities and roads;
• the building's utilities;
• landscaping;
• the building's interior finishes, including furnishings and floor coverings;
• green building components, and
• balconies and patios

On December 13, 2011, new legislation requires that all strata corporations in British Columbia which comprise of five or more strata lots are required to perform a depreciation report by December 13, 2013.

WHY A DEPRECIATION REPORT?

Our Team of Certified Reserve Fund Planners and Accredited Appraisers are ready and qualified to provide your strata corporation with a Depreciation Report (Functional Reserve Fund Study) to the BC legislated standard. The main reasons for having a Depreciation Report conducted are as follows:

• to be in compliance with the BC Strata Property Amendment Act;
• to fulfill the fiduciary duty of the Strata Council;
• to provide the owners with a plan for the establishment and maintenance of adequate funding for current and future repairs and replacements;
• to equitably distribute the proportionate share of component costs to each owner, regardless of their period of ownership;
• if implemented appropriately, this plan should reduce the risk of requirements for future special assessments;
• should prolong the life of building components through planned maintenance;
• should result in improved overall condition and maintenance of the building components, which will help to sustain re‐sale values and should reduce overall long‐term repair and replacement costs.

Contact us today to discuss a Depreciation Report for your Strata Corporation.

WHO SHOULD HAVE A DEPRECIATION REPORT DONE?

• Strata Corporations ‐ may be conducted at the request of the Strata Council or the Property Manager;
• Institutional and Government Property owners or tenants ‐ provides a framework for stable anticipated repair and maintenance costs; and
• Residential, Commercial, and Industrial Investment Property Owners ‐ as above, provides a framework for stable anticipated repair and maintenance costs, which in turn may be passed on in part to the tenant under additional rent.

Download our Letter of Introduction for Property Manager/Strata Council/Owners

WHO CAN DO DEPRECIATION REPORTS?

At this time, the only groups of professionals generally considered to be qualified are either professional engineers (providing engineered reserve fund studies), or other professionals which includes Appraisal Institute of Canada Accredited Appraisers (AACI's), whom have completed the Real Estate Institute of Canada Reserve Fund Planning education, which provides the professional designation of CRP (Certified Reserve Planner). CRP designated professionals conduct Depreciation Reports (Functional Reserve Fund Studies). A Functional Depreciation Report is described as a financial document, and incorporates both a physical analysis and a financial analysis of the strata corporation.

Contact us today to discuss a Depreciation Report for your Strata Corporation.