Under the Strata Property Act, a Contingency Reserve Fund (CRF) is established to pay for extraordinary expenses, but under the Act, the amount in the CRF was established by a formula (which had NO relationship to the age of the building!) Furthermore, the amount of contribution to the CRF was CAPPED, unless an ¾ vote was obtained to had additional contributions (hard to plan for the future).
There were amendments to the Strata Property Act in 2009 for stratas to commission Strata Depreciation Reports on the policy basis that long term planning and maintenance will prolong the lifecycle of building systems and reduce premature failure.
Now in British Columbia, Strata Corporations (with 5 or more units) are required to commission a Strata Depreciation Report by DEC 13, 2013 or to pass a s.94(3) resolution (with ¾ vote) for an 18 month exemption to this new legislated requirement. Importantly, this does not create a “separate fund” for repairs, but educates the strata council if their current contingency fund is “in line” with expect future costs. Strata Councils are required to update reports every three years
A Strata Depreciation Report includes:
- Physical Inventory of Assets
- Evaluation based on on-site Inspection
- Repair, Renewal and Maintenance Costs for a 30 year plan
- Three Year Cash Flow Models
Reports Are a MANDATORY attachment to the Strata Form B with Kelowna Home Buyers receive from their Realtor.
This Form B now must also include:
- The rules of the strata corporation;
- The current budget of the strata corporation;
- Any rental disclosure statement;
- Current strata depreciation report
- Parking Stall and Storage Locker information;
When reviewing the Strata Depreciation Report, Kelowna Home Buyers should ask:
- Is the Form B complete (containing current Rules, Budget, Rental Disclosure, and Depreciation Report)
- Does the Buyer understand the Report?
- Has the strata deferred its Report obligations under s.94(3)?
- Does the financial forecast in the Report and the strata budget align?
- Should anything in the Report be reflected in the Purchase Price when analyzing comparators?