Depreciation Reports Now Mandatory in B.C.

Following the lead of other Provinces and many US states, the BC Provincial Government passed legislation on December 13, 2011 that requires all Strata properties greater than 4 units to have a common property depreciation report completed generally by the end of 2013 (December 13, 2013 to be exact).

Although the legislation requires that a depreciation report be completed, unlike other Provinces, the legislation does not require that the funding requirements identified in the report be implemented.

The Strata remains in charge of what the reserve fund contributions will be.

The Strata may also defer a depreciation report by passing a resolution with a 3/4 majority vote to that effect, however the resolution to exempt the Strata from preparing a depreciation report has an 18 month time limit, so the resolution must be re-passed by 3/4 vote on a periodic basis in order to continue to defer the report.

Considering the value that a depreciation report will give the Strata and the individual lot owners, rather than shy away from the depreciation report, we recommend the Strata engage a qualified engineering company that will work with them to produce a feasible and equitable long range plan.

bamtec’s engineered reserve fund plan is flexible and allows for a wide variety of funding scenarios. We discuss with the Strata how they would like to move forward with their reserve plan, whether it be fully funded, partially funded with special levy or partially funded with loan assistance, etc. Our report will reflect the strategy that is acceptable to the Strata.

The legislation also requires that a depreciation report be completed every three years. According to Doug Page, Manager, Housing Policy Branch, Prov. of BC, update of a previous report is acceptable. The legislation requires a site review of the common property be included with a depreciation report, so the 3 year depreciation report update will require a site visit.

The legislation also removes barriers which in the past have hindered the Strata’a ability to build up reserve fund levels adequate to meet the maintenance and renewals requirements of the Strata’s common property.

In the past, an annual 3/4 majority vote was required to increase reserve fund contributions beyond 100% of the operating budget.

As of December 13, 2011, a simple majority vote allows the Strata to set the reserve fund contributions beyond 100% of the operating budget, as they require.

The legislation does not however require a Strata to allocate funds to the reserve fund beyond 25% of the operating budget (unchanged from previous legislation). Generally speaking, in our experience capping a reserve fund at the 25% level will not meet the financial needs of the Strata in the long run.

Further information is available at the BC Government website: http://www.housing.gov.bc.ca/strata/index.htm

Another good resource is the Condominium Home Owners Association (CHOA) website:
http://www.choa.bc.ca/

We expect that the Provincial Government will be issuing information bulletins on the new requirements possibly around February 2012.