Myths Surrounding the Dreaded Strata Depreciation Report

Exposing the Myths Surrounding Depreciation Reports

  Are you a Council member or a strata owner who has fallen prey to the dreaded... Depreciation Report Myths?

There seems to be a dark cloud surrounding Depreciation Reports. Many councils are doing their level best to avoid broaching the issue... putting their collective heads in the sand as it were by voting to not get a depreciation report done.  

What's worse, many property management companies are agreeing with the owner's vote to postpone the inevitable, without educating the owners on the potential repercussions coming from such a vote. 

 The reason for this avoidance is because many people have been misled as to the purpose and the cost of getting a depreciation report done. Let's first understand why depreciation reports came into being and the reason for them.

According to Guide 12 in the Strata Property Act, a depreciation report needs to be done every 3 years unless a 3/4 vote to waive the requirement is obtained by the strata corporation. 

The purpose for a depreciation report, also known as a reserve fund study, is a standard report required in most Canadian provinces to help strata/condo corporations create a 30 year repair, maintenance and replacement plan, and budget for their property. 

The report must contain an inventory of common property, 30 year expense projections and 3 cash flow models of financial forecasting. Now, that doesn't seem so bad, does it?

Completing a depreciation report is also good for a strata corporation as it provides useful information to owners, prospective buyers, mortgage lenders and insurance companies. When a strata corporation has created their 30 year plan and has set their monthly fees accordingly, it only stands to reason that the complex becomes more desirable to prospective buyers, lenders and insurance companies. 

One of the myths promoting Council's decisions to defer the depreciation report by some stratas is the notion that engineers are the only ones qualified to perform the depreciation report and consequently charge alot for their service. This is simply not true.

The fact is, according to Guide 12, 

"The person (or team) preparing the depreciation report must have the expertise to:
▪ understand the scope and complexity of the common property, limited common property,
and common assets including individual components and their condition and life expectancy;
▪ provide the financial forecasting required; and
▪ understand the strata corporation’s bylaws and any agreements entered into with owners
respecting common property and strata lots".

So clearly there are other options. 

Related Article:

Strata Governance and Compliance. Do you know the difference?

More Related Strata Governance Pages & Articles:
 

• Strata Governance & How We Can Help
   
• The Truth About Strata Depreciation Reports
• Are There People in Your Strata Complex Getting a Free Ride?
• Myths Surrounding the Dreaded Strata Depreciation Report
• Strata Governance and Compliance. Do you know the difference?
• Your Strata could be NON COMPLIANT. How do you know for sure?
• Is Your Strata properly insured? Many are not and don't know it!
• How to avoid Personal Liability as a Strata Council Member
• One of the most neglected & misunderstood areas of the Strata Property Act
• Have strata councils expenditures been approved? How do you know?