Frequently Asked Questions
Regarding Depreciation Reports
- In simple language, what is a Depreciation Report?
A Depreciation Report is a plan for the long term funding of the shared components of your Strata Corporation. This may include the roof, windows, exterior paint, etc. The report provides a path for budgeting for those longer term expenditures which do not occur every year, but that the owners collectively are responsible to replace and repair.
- Who needs a Depreciation Report?
All Strata Corporations in BC comprising 5 units or greater must address the Depreciation Report requirement. They can vote to waive the requirement through a 75% vote of owners at an Annual General Meeting or Special General Meeting (which defers the requirement), or complete their report on a 3 year recurring cycle. New Strata Corporations must comply within 6 months of their 2nd AGM by either conducting the report or successfully waiving the requirement. A Strata Corporation which waives the requirement is simply extending their deadline by 18 months. In order to waive the requirement indefinitely, the Strata Corporation would need to vote 75% in favour of waiving at every subsequent AGM or SGM.
- Who may conduct a Depreciation Report?
BC Legislation does not identify who can conduct a Depreciation Report by way of profession or professional designations. Typically consultants providing this service include Certified Reserve Planners (CRPs), Engineers, and Appraisers. Therefore it is necessary for a Strata Corporation which is looking for a qualified firm do their own due diligence. This should include requesting information on the experience of both the firm and whomever (team or individuals) will be conducting the report. Further, references and samples of work product should be available for review. Professional liability insurance is another consideration, and the candidate firms should be able to provide a copy of their E&O policy.
- What will the Depreciation Report tell me?
The Depreciation Report will provide at least 3 different funding models for the Strata Corporation’s consideration. These models will describe different ways of funding the CRF over a period of 30 years, and will also include predicted timing and scale of replacement costs for the various shared building components which will require repair or replacement.
Therefore the Depreciation Report can be a valuable tool for budgeting and planning the repair and replacement schedule for your Strata Corporation.
- Is it true my Strata Fees will go up if my Strata Corporation orders a Depreciation Report?
The Depreciation Report will analyze the current state of your CRF fund relative to the long term financial obligations of the Strata Corporation to repair and replace the various shared building components. This review will provide an indication if your Strata Corporation is already on a proper funding path based on present contributions, or if additional funding may be necessary to adequately cover upcoming costs.
It is highly likely that 1 or more of the funding model scenarios presented in the finished report will recommend increased contributions, and may also reveal if future special assessments may be required. However, the funding recommendations in a Depreciation Report only deal with the contributions to the CRF, not to the operating fund. Traditionally, the CRF portion of an owners strata fees are perhaps in the range of 10% to 20% of the total cost, so we are looking only at the funding related to that small portion of your total fees.
- Does our Strata Corporation have to follow the recommendations or funding models in the Depreciation Report?
No, the Strata Corporation is under no obligation to follow the recommendations or any of the funding models in the report. However as in the past, BC legislation does dictate the minimum contribution levels a Strata Corporation must contribute into the CRF. This contribution level is the lesser of either the equivalent of 10% of their operating budget on an annual basis, or those funds necessary to reach a balance in the CRF that is the equivalent of 25% of the current operating budget.
It is also important to know that following the minimum BC legislated CRF contribution requirements will result in guaranteed special assessments for most types of strata corporations at some point in the future. This level of funding is simply inadequate to provide for relatively stable long term CRF contributions.
- What does a Depreciation Report typically cost?
The fee to conduct a Depreciation Report is affected by primarily:
- a) The size/scale of the Strata Corporation, including total number of strata lots;
- b) The complexity of the Strata Corporation, including number of reserve components, and legal structure of the development (eg. Sectioned Strata, Phased Strata, Air Space Parcels)
- c) The age of the Strata Corporation, if important documents such as Architectural drawings are unavailable.
The typical fees for a Depreciation Report will range from a few thousand dollars for the most basic small Strata Corporation, to well over ten thousand dollars for a large complex Strata Corporation. However, on a cost per owner basis, Depreciation Reports are inevitably the most costly per owner in small Strata Corporations, and the least costly per owner due to economies of scale for large Strata Corporations. For a no-obligation, free Depreciation Report proposal/quotation, please complete our Quick Quote.
- How long does a Depreciation Report typically take to complete?
The time frame for completion of a Depreciation Report from the date ordered to finalized report will take over one month for the most straight forward assignment, to several months for highly complex Strata Corporations. This is due in part to the typical process for document gathering (which may often take weeks to gather), as well as the timing/frequency of Strata Council meetings. Therefore, if the goal is to incorporate recommendations from a Depreciation Report into an upcoming annual budget, a lead time of at least a few months will be necessary.
- Does the Depreciation Report need to be updated?
The BC legislation requires a new Depreciation Report be conducted every 3 years, however through a successful 75% vote to waive the requirement at an Annual General Meeting or Special General Meeting, this “update” report could potentially be deferred. Further, if the “updated” Depreciation Report is being conducted by the same firm whom conducted the original report, the fee will likely be lower on the update than the original report, due to efficiencies gained from the work already completed.
If there are any additional questions you would like answered, feel free to Contact Us at your convenience for further information. We are happy to discuss options particular to your Strata Corporation to either proceed or waive the Depreciation Report Requirement.