Deadline for submitting strata depreciation reports in B.C. comes in six weeks
The first target day for submitting strata depreciation reports is coming up in six weeks.
Although provincial legislation provided a two-year window for compliance by December 13, 2013, many strata corporations procrastinated. This has created what property consultant and home inspector Glenn Duxbury describes as “a little bit of a stampede”.
He recalled sending out 40 to 50 proposals to prepare reports for various strata corporations since the new requirement of the Strata Property Amendment Act took effect on December 14, 2011.
In a phone interview with the Georgia Straight, Duxbury explained: “Some of them have been just either not able to make a decision because of too little information out there or they thought, ‘Ah, let’s just park this for now on the side. We’ll table it for now and maybe we’ll take a look at it next year or in a few months.’ ”
Although he has had only three completed orders, the New Westminster–based property specialist has four more in the pipeline as some strata corporations scramble to meet the deadline.
“It’s just rolling along nicely,” Duxbury said.
Depreciation reports, also known as reserve-fund studies, basically involve an inventory of common property such as building exterior and utilities, a financial forecast and funding options for repair and replacement, and a summary of maintenance work needed for the next 30 years.
The December 13, 2013, report deadline covers strata corporations formed on or before December 14, 2011. After this, they have to get a new one every three years. Corporations constituted after December 14, 2011, should acquire depreciation reports within six months of their second annual general meeting.
However, stratas can opt out of the requirement annually with a 75-percent vote. Those with fewer than five units are exempt.
According to the government’s count, there are half a million residential strata lots or condominiums in B.C. These are in addition to commercial
and mixed-used stratas also covered by the legislation. The Office of Housing and Construction Standards estimates that there are about 29,000 strata corporations in the province.
Although depreciation reports are now mandatory, the legislation doesn’t provide a public reporting system, making it difficult to monitor compliance. It also doesn’t specify penalties for failure to comply, or have a pricing mechanism. For evaluating a 50-unit strata complex in Abbotsford, Duxbury charged at least $5,000.
According to Tony Gioventu, executive director of the Condominium Home Owners’ Association of B.C., a 25-percent compliance rate this year would be “quite decent”.
He also noted that there are two main reasons why a number of strata corporations are opting out. “They’re either small and realize they don’t have many common assets to deal with,” Gioventu said in a phone interview with the Straight, “or in some cases they’re quite mature, so they’re 40 or 50 years old and they’re going through a lot of upgrades right now and they’re planning on waiting to do the report once the upgrades are done.”
Deryk Norton, a director of the Vancouver Island Strata Owners Association, considers the requirement of depreciation reports a good measure. “It provides a tool for better financial planning for strata corporations,” Norton told the Straight by phone.
Derwyn Owen has extensive experience working and teaching in the areas of real-estate appraisal, property management, and urban land economics. He’s a former director of purchasing and property services for the City of North Vancouver, and in 2012 Owen and a business partner established Vancouver Strata Depreciation Consultants Ltd.
Owen explained that depreciation reports provide a more equitable system. “So somebody can’t buy into a new strata and [say] ‘We’re going to wait for 10 or 12 years, and as the major costs start coming up, we’ll sell and buy into another new one,’ ” he said by phone. “They’re paying for that depreciation before it gets to the time that it needs a major repair or replacement.”