Understanding Depreciation Reports
What is a depreciation report, and why is it important?
A depreciation report is a detailed document that outlines the common property and assets of a strata corporation, along with the projected costs for maintenance, repairs, and replacements over the next 30 years. It helps strata owners plan for future expenses, protecting their investments and reducing the risk of unexpected special levies. This report is also a valuable tool for potential buyers, mortgage lenders, and insurers to assess the long-term financial stability of a strata corporation.
What is the difference between a depreciation report and an engineering report?
A depreciation report is a comprehensive financial planning tool that forecasts long-term maintenance, repair, and replacement costs over a 30-year period. In contrast, an engineering report typically addresses specific structural, envelope, or building component deficiencies that require repair. Engineering reports are often problem-focused and provide recommended solutions, whereas depreciation reports take a broader view of all common property and assets.
What should prospective buyers know about depreciation reports?
A: Prospective buyers should carefully review the most recent depreciation report when considering a strata property. The report can provide insights into:
- The overall condition of the building and common property.
- Upcoming major repairs and associated costs.
- The financial health of the strata's contingency reserve fund (CRF).
- Whether the strata has a proactive maintenance plan in place.
How can a buyer review a copy of the depreciation report?
Buyers should receive a copy of the depreciation report as part of the "Form B: Information Certificate." This report should be carefully reviewed alongside the strata's financial records and meeting minutes.
Why is it important for buyers to review a depreciation report?
Reviewing the depreciation report helps buyers understand potential future costs, assess the likelihood of special levies, and evaluate how well the strata is managing long-term maintenance. It is a key document for determining the financial stability of a strata corporation.
Who is required to obtain a depreciation report?
Under B.C.'s Strata Property Act, all strata corporations with five or more lots must have a depreciation report every five years. Strata corporations with four or fewer lots are exempt. Previously, strata corporations could defer getting a depreciation report with a 3/4 vote, but this option has now been removed.
What are the new regulations for depreciation reports?
As of July 1, 2024, updated regulations apply:
- Strata corporations must have a depreciation report every five years.
- Strata corporations without a depreciation report (or with one dated before December 31, 2020) have deadlines to comply:
- By July 1, 2026, for strata corporations in Metro Vancouver, the Fraser Valley, or the Capital Regional District (excluding islands only accessible by boat or air).
- By July 1, 2027, for all other B.C. regions, including the Southern Gulf Islands and Bowen Island.
Who can prepare a depreciation report?
Effective July 1, 2025, depreciation reports must be prepared by one of six designated professionals:
- Professional engineers
- Architects
- Applied science technologists
- Accredited appraisers
- Certified reserve planners
- Quantity surveyors
Strata corporations should select a qualified provider familiar with their building type to ensure an accurate report.
What information must be included in a depreciation report?
A comprehensive depreciation report must contain:
- Physical component inventory and evaluation: A detailed list of common property, assets, and components the strata is responsible for maintaining, with estimated lifespans for each item.
- Financial forecasting: A 30-year projection of maintenance and repair costs, including at least three funding models for the strata's contingency reserve fund (CRF).
- Executive summary: An overview of key findings and recommendations.
- Additional required content may include air conditioning and ventilation details, if applicable.
How are depreciation reports accessed and retained?
The most recent depreciation report must be attached to the "Form B: Information Certificate" when provided to prospective buyers. Strata corporations must retain copies of all depreciation reports and related engineering, risk management, and maintenance reports as part of their official records.
Are there new requirements for funding depreciation reports?
Starting July 1, 2027, owner developers must contribute funding toward the first depreciation report for new strata corporations with five or more lots. This includes a minimum of $5,000 plus $200 per strata lot, up to a maximum of $30,000.
What should strata corporations do now to comply with these changes?
Strata corporations should:
- Plan to obtain a depreciation report before the applicable deadline.
- Identify a qualified professional from the designated list to prepare the report.
- Ensure all past reports are retained and accessible for owners and prospective buyers.
For more information about depreciation reports, contact our team.