About Depreciation Reports in BC
An introduction to the
request for proposal process
Now that the BC regulation with regards to Depreciation Reports is over 2 years old, many strata owners, strata councils, and property managers are going through the process of deciding how to comply with the BC Strata Property Amendment Act. For strata corporations of 5 units or greater, there are two means of compliance – either to self-exempt through a 75% vote of owners at an AGM or SGM (which is valid for 18 months), or to proceed with the report prior to the deadline of December 13, 2013. Strata corporations of four units or less are exempt from the requirement altogether.
If the decision is to self-exempt repeatedly, strata owners need to realize that this vote will need to be held again at the next AGM, and the next, and so on, if the desire of the 75% majority is to continue to self-exempt indefinitely. The 18 month exemption is designed to allow for 6 months to complete a depreciation report - if the owner’s intent to continue to self-exempt were to fail at the next AGM or SGM (18 months less the 12 months having passed from the previous AGM or SGM).
If the decision is to proceed with a depreciation report, the owners will need to take the following steps:
- Research who is qualified to complete these reports, and develop a “short list” of firms to approach for proposal requests. A good start would be to check with CHOA (The Condominium Home Owners Association of B.C.), or simply do a google search for “depreciation reports” along with the city name, eg “depreciation reports vancouver” or “depreciation reports burnaby”, etc.
- Send out RFP’s (requests for proposal) to the chosen firms, requesting not only a firm fee quote, but also a description of the consultants qualifications, experience, E & O insurance, references, and samples of their depreciation report work product. As there are many newcomers to this field since the passing of the legislation in December 2011, be sure to get a good feel for the breadth and depth of knowledge the firm and its consultants have, specifically in completing the “BC legislated depreciation report”.
- Once you have chosen a firm to be your depreciation report consultants, the process of preparing the report begins.
An introduction to the depreciation report timeline
The steps the depreciation report consultants will follow in the preparation of the study will entail the following:
- Client review and acceptance of proposal.
- Gathering of relevant documents – which will include plans, bylaws, AGM minutes, financial statements, and other relevent documents or reports.
- Review of relevant documents and arranging to view the property for the physical inspection of the reserve components.
- Quantifying and costing of the various reserve components of the strata property (eg. roof, windows, balconies, etc. could be typical reserve components).
- Creation of various schedules that will form the basis of the funding models, such as the benchmark, 30 year projections, historical expenditure chart, cash flow tables, etc.
- Meeting or conference with strata council, reserve committee, and/or property manager to review the schedules and confirm all information is correct and complete.
- Prepare final report and deliver to the property manager/strata corporation.
Once the process is complete, the strata owners will have at their disposal a tool to use for the future budgeting of funds towards the reserve requirements of the strata corporation – but this is not the end of the story. The legislation requires the report to be updated with a new inspection every 3 years, which will give the strata owners updated information to act upon, and to correct course if their funding requirements change.
NLD Consulting – Reserve Fund Advisors is British Columbia’s largest and most experienced team of Certified Reserve Planners (CRPs) – Canada’s only designation specific to the preparation of Depreciation Reports. For further information on NLD Consulting go to www.reserveadvisors.ca