A depreciation report is basically a planning tool used by property owners (the strata corporation) to clearly understand what the strata is responsible for maintaining and repairing as part of its building system (a physical component inventory); the age of the building system; the projected life expectancy; when it should be planned for renewal; what it will cost when the time comes to renew the component; and how the strata will pay for it.
The new regulations provide a two-year window for strata corporations to comply with the mandatory requirement – by Dec. 13, 2013.
So how does this affect our strata corporations? Every non-exempted strata corporation will be required to commission a depreciation report by Dec. 13, 2013. They will also be required – by March 1, 2012 – to disclose on the amended Form B information certificate, whether they have a depreciation report, and they must attach a copy of the report if one exists.
Unless your strata corporation is exempt, you will be required to retain the services of a person who is qualified to create the report. So for many strata corporations, the first step is to send out requests for proposals. The requests should stipulate that the report must meet the requirements of the regulations and establish the total cost for all services, including third-party inspections and surveys.
The regulations require that the person who is providing the report include his or her qualifications and indicate whether he or she is covered by errors and omissions insurance, and describe any relationship between the individual and the strata corporation. (A 'person' also implies a consultant or company providing the report, such as an engineering firm.)
Creating an inventory of what your strata has to include will require an on-site inspection and an inventory list of the components that are common property, limited common property or items included in the strata bylawsthat the strata corporation has to maintain and repair. This includes the building's structure, exteriors including roofs, roof decks, doors, windows, skylights, electrical, heating, plumbing, common amenities and facilities, parking and roadways, utilities including water and sewage, landscaping, interior finishing, green building components.
The period of service over 30 years will include both items that have to be replaced, such as roofs, and those maintenance obligations that are not part of the annual operating budget, such as the repainting of the siding every five to 10 years. The final report will also have to include a financial forecasting sector – essentially, how the strata is going to pay for this work. Is it going to increase fees to build up the contingency reserve fund, loans or planning on special levies as necessary, or will it consider a combination of funding options?