Written Proof of the Depreciation Report
As a client looking to buy in a strata apartment or townhouse, I want to have for you written proof of the depreciation report; at least being well underway.
No report, then my initial advice is, “Buyer Beware”!
There is few remaining excuses for a strata corporation not to have started the requirements of the legislation. Here are some typical excuses that just don’t hold any credibility, and probably the result of bad advice or a lack of understanding:
“We don’t need one because we already have a new roof (or windows, etc)”!
“The report is too expensive”! (…heard again this week for a Coquitlam townhouse complex; very sad)
“We just had an assessment so any other work isn’t a priority and can wait”!
“We are self-managed and don’t need one”!
If this sounds familiar in your strata corporation then hopefully you can get members of your strata council to attend a seminar on depreciation reporting put on by CHOA, and hopefully your management company is encouraging this.
The requirement for a depreciation report was legislated to help strata corporations plan for the repair, maintenance and replacement of common property, limited common property and common assets.
For strata corporations formed on or before December 14, 2011, a depreciation report was required by December 13, 2013, and every three years unless they hold an annual 3/4 (three quarter) vote to exempt.
Those strata corporations having deferred through the exemption are now being viewed more by buyers, lenders and agents, with skepticism and distrust. It brings to mind the “denial” of owners to the leaky-condo syndrome, and we all know the very expensive consequences of not fixing things promptly and properly; huge assessments, so don’t delay any further folks! The days of huge assessments should soon be a thing of the past.
The depreciation report for a well-run strata corporation will now have the financial plan in place, and ideally and most importantly, the source of funding. I would strongly recommend that the depreciation report be made publicly available on your strata website; what a great message you’d be sending.
Moving forward, the lack of a funded depreciation report is likely to cause difficulties for owners when renewing a mortgage, because the lender wants to minimize any risk, and will want to know, “Why not, and what are they hiding”?
Until a depreciation report shows exactly where the funding is coming from (who pays and when), the unknown factor equates to, Let the Buyer Beware!