What is a Depreciation Report?
Also known as the Reserve Fund Study, this report is used to establish long term planning for common property and common assets to determine the following:
- What assets does the Strata Corporation own?
- The condition of these assets
- The anticipated repair, maintenance or replacement of these assets and the associated costs
- How much money does the Strata Corporation have? (Contingency Reserve Fund)
- How is the Strata Corporation going to pay for the repair, maintenance or replacement of its assets
Why is this important to me as a Buyer or an Owner?
This report is a significant document in assessing the property asset value and may be used by your mortgage broker, insurance provider, mortgage insurers and most of all by you, in making an informed offer to purchase of a property.
Also, as a Buyer or an Owner, you will want to know what is the condition of all common property, as well as all limited common property in your strata, because after all, you along with all the other owners, will be responsible to pay for any costs associated with both, whether or not you are using that part of your strata.
For example, the crawl space or attic in a lot of townhouse complexes are limited common property. You may be aware of your own crawl space, but are you aware of how your neighbour is taking care of theirs?
If anything goes wrong in the crawl space or attic, you will end up paying for it as well.
Who is required to complete a Depreciation Report?
As of December 13, 2011, all Strata Corporations in the Province of British Columbia need to get a report done. Every Strata Corporation is required to get this report completed by December 13, 2013 – unless they are exempt.
Who is exempt from completing a Depreciation Report?
Strata Corporations with fewer than 5 units are exempt from this requirement.
Additionally, those Strata Corporations who decide to not have a report done, by way of a ¾ vote at an Annual General Meeting (AGM) or a Special General Meeting (SGM) are exempt from having to get this report done.
If your Strata Corporation is voting on this issue, you need to consider the consequences of voting this report out before you do so.
How often does the report need to get done?
Strata Corporations are required to get a new report done every 3 years.
If a Strata Corporation passes a ¾ vote to not have the report, they have 18 months following that AGM to complete a report.
For more information about Depreciation Reports or any other information regarding the purchase or sale of your real estate, please feel free to contact me at 604-218-4636