Reserve Funds

June 17, 2024 Published by British Columbia Chapter - By Roma Santos, Adrian Breitwieser

Key Updates On Depreciation Reports In B.C.

From CCI BC Strata Connection Magazine, Volume 02, Spring/Summer 2024

What is a Depreciation Report?

In British Columbia, a depreciation report is an essential document for property owners in strata corporations. Known as a reserve fund study in other provinces, this report is prepared by qualified professionals. Until now, there hasn’t been a definition for what a qualified professional is, so depreciation reports have varied widely in scope and format, depending on who prepared them.

A depreciation report outlines anticipated future maintenance, repair, and replacement costs for various components of the property and helps owners plan and budget for necessary capital expenditures over the next 30 years. These reports are important for maintaining the value and functionality of properties over time and assist property owners with financial preparedness.

Summary of New Regulations in B.C.

Since depreciation reports first became mandated in 2011, strata corporations have had the option to defer these reports indefinitely. In these cases, the decision to invest in a depreciation report would be voted on by the strata corporation each year.

The B.C. government has now removed the option for deferral. Additional changes have also been announced recently, which are summarized below:

Mandatory depreciation reports (effective July 1, 2024):

• Depreciation reports are mandatory for strata corporations with five or more strata lots every five years. The opt out/deferral for a depreciation report will no longer be permitted. This aligns with other provinces such as Ontario and Alberta.

Compliance timelines for existing strata corporations:

• Strata corporations that don’t have depreciation reports or whose last depreciation report was received before December 31, 2020 must comply within specified timelines:
  • Metro Vancouver, Fraser Valley, and Capital Regional District (excluding certain islands): Report required by July 1, 2026.
  • Other regions, including those accessible only by air or boat: Report required by July 1, 2027.

New strata corporations formed between July 1, 2024 and June 30, 2027:

• New strata corporations formed within this period must obtain a depreciation report within two years of their first AGM and every five years thereafter.

Applicability across strata corporations:

• All types of strata corporations in B.C., registered through Land Titles, are subject to these regulations.

Professional requirements for depreciation reports (effective July 1, 2025):

• Reports must be conducted by one of six qualified professionals:
  • Engineer, registered with Engineers and Geoscientists of B.C. (EGBC)
  • Certified Reserve Planner, registered with Real Estate Institute of Canada (REIC)
  • Applied Science Technologist, registered with Applied Science Technologists and Technicians of B.C. (ASTTBC)
  • Appraiser, registered with Appraisal Institute of Canada – B.C. (AIC-BC)
  • Professional Quantity Surveyor, registered with Canadian Institute of Quantity Surveyors (CIQS)
  • Architect, registered with Architectural Institute of B.C. (AIBC)

Contribution obligations for owner-developers:

• Starting July 1, 2027, owner-developers of new corporations with five or more strata lots must contribute towards the first report.
• The owner-developer's contribution for the first report is a minimum of $5,000, plus $200 per strata lot, capped at $30,000.

These regulations aim to safeguard strata owners by mandating regular acquisition of depreciation reports. Depreciation reports will help provide strata owners with the information and forecasting insights necessary to plan for future capital expenditures. Strata corporations with four or fewer strata lots continue to remain exempt from depreciation report requirements.

Steps to Obtain a Depreciation Report

Before hiring a qualified professional to provide a depreciation report, many strata corporations will obtain multiple quotes.

Once a strata corporation approves a quote, the following next steps will occur:

(1) Document and information collection, (2) Site visit, (3) Draft report, (4) Final Report

On average, the duration for the above steps can take anywhere from 2 to 6 months. This duration may vary depending on the size and complexity of the strata corporation, document availability, and time for the draft report to be reviewed.

There are approximately 34,000 strata corporations in BC, although many would have four or fewer units making them exempt from depreciation report regulations. That said, we expect depreciation report providers will have an influx in demand over the next few years, as many existing strata corporations without depreciation reports will be seeking out their first reports. To ensure obligations are met before the applicable deadlines, we recommend starting the steps to obtain depreciation reports immediately.

What Information to Provide When Requesting a Depreciation Report

When requesting a depreciation report, it's important to provide consultants with key details to ensure accuracy.

Here is a simplified checklist:

• Property Basics:
  • Address
  • Property type
  • Property age
• Strata Details:
  • Strata corporation name and strata number
  • Number of units
  • Governance (air space parcels, sections, types)
  • Amenities
  • Number of elevators
• Past Reports and Records:
  • Drawings
  • Previous reports and maintenance records
• Financials:
  • Current financial statements
  • Budget for future maintenance
• Regulations:
  • Strata plans
  • Relevant bylaws and regulations
  • Disclosure statements
• Additional Notes:
  • Any extra information or concern

Providing these details ensures the report accurately reflects the property's condition and aids in forecasting future maintenance, repair, and replacement work. For the most recent updates and further details regarding depreciation reports, refer to this link. 

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Roma Santos,
Senior Facility Assessment Consultant, Entuitive

Roma has over 12 years’ experience working on residential, commercial, and institutional buildings, including a l types of strata corporations (e.g., mixed-use residential and commercial, air space parcels, sectioned stratas). Her technical background includes a broad knowledge of structural, building envelope, mechanical, and electrical systems. Her project delivery experience covers depreciation reports, warranty reviews (15month, 2-5-10 year), building condition assessments, building envelope condition assessments (BECA), design briefs, and maintenance manuals. 

Adrian Breitwieser, CRP®
Capital Planning Specialist, Entuitive

Adrian has over 28 years of industry experience including 13 years as a property manager and over 9 years in consulting with Entuitive. Adrian has an intimate knowledge of a l aspects related to residential and commercial stratas, including building systems, governance, operating and reserve fund budgeting, and insurance. His project delivery experience covers depreciation reports, building condition assessments and investigations, capital replacement studies, technical audits, buildings envelope consulting, and project administration tasks. Adrian is also a Board Member with CCI-South Alberta, CCI-North Saskatchewan, and CCI National Committees.