for Strata Corporations
As of December 13, 2011, the Strata Property Act in British Columbia requires that every Strata Corporation establishes a Depreciation Report (known as a Reserve Fund Study in other jurisdictions). Stata Corporations with fewer than five units or Strata Corporations that hold an annual three-quarter vote to waive this requirement are exempted from this requirement. Strata Corporations that had not been exempted, should have been completed the Depreciation Report by December 13, 2013.
The purpose of the Depreciation Report is to determine whether the amount of money in the reserve fund and the amount of collected contributions are adequate to provide for the expected costs of major repair and replacement of the common elements and assets of the Strata Corporation. The objective is to forecast future major repair or replacement of common elements of the Strata Corporation, to lower the risk of unexpected repairs, and to ensure that proper funds will be available for those repairs when the time comes, for a period of 30 consecutive years.
Major highlights and steps for preparation of the Depreciation Report include the following:
- • Identifying the common elements of the building that are the Strata Corporation's maintenance responsibility, as described in the legal documents of the Corporation, including the legal documents, warranties, and Schedules of the Strata Corporation
- Review of the financial situation, reported deficiencies and concerns, present maintenance, and any other pertinent information including the review of the following:
- Audited financial statement of the Strata Corporation
- Reciprocal cost sharing agreements of the Strata Corporation
- Review the most recent Depreciation Report of the Strata Corporation (if applicable)
- Review the most recent notice of future funding of the Reserve Fund paid to the owners (if applicable)
- The 30-year period Depreciation Report is based on inventory, quantification and inspection of the building(s)'s common elements components including the following:
- Interview with key building operations personnel regarding known problems, repair history, and future maintenance or replacement plans
- Visual inspection of each of the common components where practical, to identify existing observed problem, general estimation of the current condition, and the general assessment of the remaining life expectancy for each of the common elements
Who prepares the Depreciation Report?
At Ben Engineering, all Depreciation Reports are prepared by a registered Professional Engineer (P. Eng.) with the Association of Professional Engineers and Geoscientists of B.C. (APEGBC).
How often a Depreciation Report should be completed?
The regulation specifies that a new Depreciation Report should be completed every three years or within 18 months after a three-quarter vote to exempt the Depreciation Report has passed. The report should include a site visit for a visual inspection of the inventory items.
Depreciation Reports for Strata Corporation include the following items:
- Comprehensive analysis and visual physical condition survey of common element components such as the roof, exterior walls, windows, structure, common plumbing elements, common HVAC systems, common electrical systems, elevators, interior finishes, and other common site components
- A description of the on-site physical assessment, inspection methods, and equipment (when applicable)
- Review of the present condition and evaluation of life expectancy of components under the Depreciation Report
- Inspect and investigate the need for major repairs to common elements of the Strata Corporation
- Cost estimation for major repairs and/or replacement of Depreciation Report components
- A 30-year plan that outlines future needs to repair or replace major components of the Depreciation Report
- Cost analysis and cash allocation for future required repairs and replacement of the Depreciation Report items
- A minimum of three cash flow scenario models, which show the revenues and expenses over a period of 30 consecutive years.
- The Reserve Fund Study includes a review of the following (where available and applicable):
- All existing warranties, guarantees, and service contracts for each common element component
- The as-built architectural, structural, mechanical, electrical, plumbing drawings of the property
- The as-built specifications for the building
- The as-built plans for underground site services, site grading, drainage, and landscaping as well as television, radio, or other communication services for the property
- The repair and maintenance records and schedules
- The 30-year period Depreciation Report is based on the inventory, quantification and inspection of the building's common elements components including the following:
- Estimation of the current condition
- Estimation of a normal life expectancy
- Estimation of the remaining life
- Estimation of current replacement cost
- Estimation of future replacement cost
- Three different scenarios for a 30-years funding period of maintenance or replacement of the major common elements of the property
- Preparation of a draft Reserve Fund Study report for client review
- Preparation of three hard copies and an electronic version (PDF format) of the final Depreciation Report
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