Financial Fundamentals for Home Buyers
What is a Strata Depreciation Report?
A strata depreciation report is a thorough written, and sometimes illustrated, physical assessment of the condition of a strata property that identifies current and future issues that need to be addressed with associated cost estimates. According to provincial regulations, a depreciation report must include an inventory and evaluation of a building’s:
* Exterior (such as roofs, roof decks, doors, windows and skylights),
* Systems (such as electrical, heating, plumbing, fire protection and security); and
* Common amenities (such as fitness room, pool, bike lockers etc).
* Collectively, the items listed above are known as "common property" as they are elements that are shared by all owners of individual units within the building.
Why is a Strata Depreciation Report important?
It helps strata corporations plan for the repair, replacement and renewal of common property and assets, especially those that require considerable outlay of money, such as roofs, windows, elevators, roads or utilities.
They are also an important part of a Buyer’s due diligence as they provide insight into future repair and maintenance needs and their associated costs. It is in your best interest as a Buyer to thoroughly review strata depreciation reports and seek legal or other expert advice before making a buying decision.
Buyers should also understand that a depreciation report covers common property as part of a strata building and not individual units within that building. As such, be sure to get an independent inspection for the specific unit you are considering purchasing.
What isn’t covered in a Strata Depreciation Report?
Depreciation reports don’t normally cover every item in the common property or routine repairs and maintenance. Buyers should still do their own due diligence in having the property inspected as well as obtaining other strata documents, including but not limited to bylaws, rules, regulations, meeting minutes, strata plans, summary of insurance coverages etc. To obtain additional information, Realtors will typically request other strata documents in addition to the depreciation report.
Are Strata Depreciation Reports mandatory in BC?
In most cases, yes.
Under B.C.’s Strata Property Act and Regulations, strata corporations must obtain a depreciation report unless the strata consists of fewer than 5 strata lots. The Regulations also require the report to be updated every three years.
Yet - Strata Corporations can opt out …
Strata corporations in BC can waive their requirement to obtain a depreciation report, or defer the renewal of one, if 75% of the owners pass an annual vote in favour. Voting to waive a depreciation report can backfire however, with the long-term costs of unanticipated repairs and maintenance needs often far outweighing any short-term savings gained from opting out. In addition, prospective buyers are sometimes reluctant to invest in stratas that don’t have a long-range maintenance plan in place and as important - lenders and insurers may consider stratas without depreciation reports greater risks.
Information above - Courtesy of BCREA
Reasons to Hire a Real Estate Professional
Choosing the right real estate professional to work with is one of the most important decisions you can make in your homebuying or selling process.
The right agent can explain current market conditions and break down exactly what they mean for you.
If you’re considering buying or selling a home this year, make sure to work with someone who has the experience to answer all of your questions about pricing, contracts, negotiations, and more.
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