Strata Tip of the Week - Not All Depreciation Reports Are Created Equal

When buying a strata-titled property, reviewing the depreciation report isn’t just a good idea, it’s essential. This document provides critical insights into the condition of the strata corporation's common property and assets, as well as projected maintenance, repair, and replacement costs over the next 30 years.

However, not all depreciation reports are created equal. Evaluating the quality of a report is key to identifying shortcomings and avoiding potential pitfalls.

1. New Depreciation Report Requirements

As of July 1, 2024, strata corporations with five or more strata lots must obtain a depreciation report every five years. The option to waive this with a 3/4 vote has been removed. Transitional deadlines mean many strata corporations are still catching up or in the process of implementing these requirements. From a buyer’s perspective, it’s important to obtain and review the latest depreciation report available.

Starting July 1, 2025, these reports must also be prepared by qualified professionals from one of six designated professions, which include engineers, architects, applied science technologists, accredited appraisers, certified reserve planners or quantity surveyors.

2. Why Quality Matters

Even with updated standards, report quality can vary.

Some common issues we’ve seen include:

• Underestimated Costs: Reports may downplay future repair or replacement expenses, leaving buyers unprepared for actual costs.

• Overestimated Lifespans: Unrealistic projections about component durability can result in unexpected costs sooner than anticipated.

• Omitted Components: Reports that exclude components create gaps in understanding total future capital costs.

• Non-Compliance: Older reports might not meet the new legislative standards, making them less reliable for decision-making.

3. What This Means for Buyers and Realtors

Realtors play a vital role in helping their clients navigate depreciation reports. It’s not enough to simply confirm that a report exists, its quality must also be assessed.

A well-prepared report allows buyers to accurately assess the strata’s financial health, while a poorly prepared one can give a false sense of security and could mask serious financial risks.

4. Tips for Evaluating a Depreciation Report

Here are some questions to guide your evaluation:

• Does the report cover all major building components?

• Do cost estimates and timelines seem realistic?

• Was the report prepared by a qualified professional?

• Is the report current and compliant with the latest legislation?

A well-prepared depreciation report is more than a formality; it’s a roadmap to understanding a strata’s financial health and planning for future expenses.

Realtors and buyers who ensure these reports are comprehensive, accurate, and prepared by qualified professionals can make informed decisions with greater confidence, safeguarding their investments and avoiding costly surprises. If a report appears incomplete or raises concerns, consulting a qualified professional is recommended.

Disclaimer: The information provided is for general purposes only. It is not intended to provide legal advice or opinions of any kind. No one should act, or refrain from acting, based solely upon the materials provided, any hypertext links or other general information without first seeking appropriate legal or other professional advice.

A little about Condo Clear:

They are a fully licensed brokerage under the BCFSA, and carry Errors and Omissions (E&O) insurance.

They have been in business since 2017 and have completed over 3,000 strata reviews to date province-wide.

Their Review Advisors have firsthand knowledge and experience. They’ve all been practicing strata managers.

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