Somewhere around late 2009, the BC government decided to implement a directive which ordered the Strata Corporations to keep reserve funds for all depreciating elements of their buildings. This directive went into effect in December 2013. Called a Depreciation Report or Reserve Fund Study, the aim of this report was to provide in-depth detail to prospective buyers about the future expenses that they might encounter.
The report contains detailed overview of the anticipated expenses in the form of repairs or replacement over a period of 30 years.
Here are the top 3 things that you need to know about depreciation reports in BC
Some Strata Corporations are Exempt from Depreciation Reports
Strata corporations in which three quarter of the members vote for exemption and continue to re-vote every 18 months are exempt from this requirement, along with corporations with less than five strata lots.
A Depreciation Report Comprises of Two Parts
Physical and financial analysis is what makes up a depreciation report. Physical analysis includes an account of all the assets of the building, whereas financial analysis comprises of forecasting and making cash flow models for the report.
Who Can Prepare a Depreciation Report?
Under the rules of the Strata Property Act, any individual who possesses required knowledge and the technical know-how about the intricacies of the property as well as a deep understanding of the building process can prepare a depreciation report but has to maintain the standards prescribed by the Appraisal Institute of Canada.
