The deadline for strata corporations to deal with the long awaited depreciation report is fast approaching, with many councils and owners divided over the far reaching legislation.
By Dec. 13, stratas will have to decide whether to complete the reports, or temporarily opt out of the requirement. Stratas with fewer than five lots are excluded.
Depreciation reports are a planning/financing requirement to establish long term capital costs to fund common property repair and maintenance over a 30-year period.
The reports are complex, costly and will require ongoing future funding that will forever change the condominium community.
To ensure that stratas make the right decision that reflects the interests of all owners, a thorough examination of many factors must be considered.
If a strata has yet to deal with the issue, the subject of whether to complete or defer should be placed on the agenda of the next annual general meeting or special general meeting
To prepare for the AGM/SGM, stratas should get comparative bids from “qualified” individuals or companies.
The legislation has spawned a growth industry of depreciation report providers attracting everyone from appraisers to engineers. Costs can range from a few thousand dollars to several thousand.
The bottom line—caveat emptor.
To save money stratas can complete a property profile compiling as much available information listing such things as assets, strata plan, bylaws, budgets, work history for example.
This step will eliminate the need to have the private providers gather and prepare this.
After a council has vetted bids and determined the cost of the report it can be presented at the meeting as a 75 per cent vote resolution as a contingency Reserve Fund expenditure.
It should rightfully be paid out of the CRF rather than the operating fund because it is an expense that occurs less than once a year.
To stream line the process, a separate 75 per cent vote resolution can also be included should the owners wish to opt out before the deadline.
Although stratas can adopt any process they want, the choices should be thoroughly discussed and the outcome made clear in the minutes.
One of the two resolutions must be adopted.
Opting out, however, is only temporary and must be periodically revisited at future general meetings. Whether or not a strata corporation chooses to complete the report, or opt out, will largely be influenced by the financial capabilities, demographics and culture of the condominium.
Some members of senior’s stratas might be less motivated to finance and plan 30 years into the future. Similarly, absentee owners who purchased their unit for rental investment purposes could be less inclined to invest in a property that might be sold in the near future.
On the other side of the debate are owners who are convinced of the merits of completing a depreciation report because they have purchased their condo as a long-term primary residence.
Either way, condo owners are the same as traditional homeowners in that repairs will be needed and someone has to pay.