depreciation reports- what are they good for?

Residential and commercial strata lots represent the largest investment most people will make in their lifetime. Depreciation Reports help Owners plan for the future, so unexpected expenses are minimized.  Strata Corporations want Accurate Physical Inspections, Informative Analysis, leading to Realistic Funding Solutions in a Depreciation Reports that they can Understand.

Effective November 1, 2023, when approving budgets at the AGM, strata corporations and sections will be legally required to contribute a minimum of 10 per cent of the annual operating fund to the contingency reserve fund. Strata cannot operate without depreciation report that let owners know what are expected expenses in years to come. 

Many financial, insurance institutions also require a good depreciation report for financing therefore many buyers cannot finance, and Owners will not be able to sell. 

Preventing the Financial Failure of Your Strata

a. Increase CRF contributions annually to reduce the amount of Special Levies
b. Ensure your Provider produces a plan for increasing the Reserve Adequacy (Percent Funded) over the 30-projection period.
c. Do not plan to use the “Pay As You Go” with Special Levies Model, as there may be consequences if you cannot get the Strata Lot Owners to agree to pay the Special Levies when due or if they are too high

Simply put, the British Columbia reserve fund industry is a mess. Owners, Strata Councils, and Property Managers do not  understand the types of reports or the strength of each type of provider. Standards are minimal, and terminology is used no one could understand. Financial modelling is not based on realistic scenarios, leading to unexpected financial hardships. Benchmark of the financial health of buildings is not understood in many cases. 

The same problems occurred decades before reserve planners established professional organizations in the USA. These groups created standards for content and disclosure, shared terminology, and standardized financial modelling. Reserve Adequacy (or Percent Funded) became the accepted method to measure the financial health of condominium developments.

This situation in BC will continue until Canadian professional providers form their own organizations with standards.