Strata Depreciation Reports

Costs Solid State Home Inspections

We have all heard horror stores about condo buyers who only just take possession of their new condo to find out the strata needs to collect a special assessment to repair or replace a major building system. In some cases, the seller of the condo had prior knowledge these expenses were coming and 'jumped ship' before the special assessments were levied. In other cases, it is just bad timing for the buyer.

In order to provide better information about upcoming costs to both strata councils and potential condo buyers, the Government of BC is requiring stratas produce a new document available for potential buyers called a Depreciation Report.

What is a Depreciation Report?

A Depreciation Report is a strata document that combines an on-site survey of the buildings, equipment, and property of the strata with a schedule of life cycles and expected replacement costs. A good depreciation report will articulate when strata owners can expect to repair or replace common property and how much this will cost in the future. By having these future costs regularly published (they must be updated every 3 years), strata councils can work with owners to prepare for future expenses and buyers of condo's will have additional visibility of upcoming costs.

Do all Stratas Need to Have a Depreciation Report?

Most stratas will need a depreciation report. There are only 3 reasons why a strata may not have a report available:

  1. New Strata - New stratas have until 6 months after their second AGM to have a completed depreciation report. This means the first depreciation of a new strata may not be available before the building is 3 years old.
  2. Small Strata - Stratas of four or fewer lots are exempt from producing these reports for cost savings.
  3. 3/4 Vote Exemption - Stratas can elect NOT to produce a depreciation report by a 3/4 vote of the owners. This vote needs to be renewed annually. Stratas that elect not to produce a report may save a few thousand dollars once every 3 years on the report, however, the lack of this report will make the strata less desirable to purchase for buyers who may question why a report is not produced.

Do I Still Need a Condo Inspection if There is a Depreciation Report?

While depreciation reports provide condo buyers with excellent information previously not reported by stratas, they do not replace a professional condo inspection report.

  • Professional Condo Inspection Report:
    • Client - The condo buyer is the typical client and the report is exclusively for the client.
    • Focus - A Home Inspector is focused on protecting the clients purchase. Safety, defects in materials, age of components, and risks of building designs and materials are covered.
    • Unit Interior - The interior of the strata unit being inspected is a major focus for the inspection (it is not covered at all by the depreciation report)
    • Safety - Home Inspectors are looking for safety concerns for clients which is outside the scope of the depreciation report.
    • Timing - The condo inspection is produced at the time of the client purchase. Depreciation reports may be up to 3-years old.
    • Expertise - Field inspections during professional Condo inspections are done by trained home inspectors licensed by the Province of BC. There is no such requirement for the depreciation report.
  • Depreciation Reports:
    • Client - The Client is the strata. Engineering companies who produce these reports often do them as loss-leaders for the opportunity to quote on additional reports and repairs.
    • Focus - The Depreciation Report is Focused on life cycles and future replacement costs of strata property.
    • Unit Interior - Depreciation Reports do not look at unit interiors.
    • Safety - Deprecation reports look only at installed equipment and do not comment on missing safety features
    • Timing - Reports are produced every three years.
    • Expertise - The only requirement for depreciation report inspectors is they have a 'general knowledge' of building systems. Some companies use number-crunchers to do field inspections.

Final Thoughts

The addition of Depreciation Reports to the Condo market are a big win for condo buyers as they should help eliminate expensive surprises with the building common property. Combined with an independent condo inspection, condo buyers will have more knowledge than ever before that their unit and building are safe and solid.

By James Bell - Owner/Operator of Solid State Inspections Inc.