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Absence of strata depreciation reports could bring future structural and financial problems for buildings in the province, says the Condominium Home Owners Association of BC.
While such reports are an optional thing for strata owners to approve or not at their discretion, the provincial government is mulling making such reports mandatory.
A depreciation report comes after a thorough examination of a building by an inspector. The report provides councils and owners an idea of the maintenance and repair needs of their property and allows them to plan and prioritize projects accordingly.
“In B.C., strata corporations with five or more strata lots must obtain depreciation reports, but a significant portion of B.C. stratas continue to exploit this loophole as a cost-cutting measure,” the Condominium Home Owners Association of BC said.
said reports tell a strata corporation what common property and assets it has and what are the projected maintenance, repair and replacement costs over a 30-year time span.
“Common property is just not buildings. Common property and assets can also include landscaping, roads, recreation amenities and many other items,” the government information said.
“The depreciation report helps strata lot owners to protect their homes and investments and provides valuable information to prospective purchasers, mortgage and insurance providers,” the information reads.
However, the association is warning that putting off depreciation reports could lead to:
- increased safety risks around such issues as elevators or ventilation that would be preventable if proper maintenance schedules are followed;
- increased insurance premiums for buildings that do not invest in regular updates to heating, wiring, electrical, plumbing, and roofing per the depreciation schedule. With many Metro 91原创 buildings coming up on 25+ years and older, this will become more severe;
- homeowner liability issues if the depreciation report is outdated or absent at the time of purchase as homebuyers cannot accurately evaluate the potential liability of the asset; and,
- ballooning costs as deferred maintenance leads to exponentially more expensive repairs as assets deteriorate.
The warnings come in the wake of a report from CEO Blair Morrison of the BC Financial Services Authority (BCFSA), titled .
Among recommendations in the report was the closing of a provincial legal loophole allowing stratas to defer inspections. While the provincial government has mulled the idea of changes to the Strata Property Act to address that issue, change has yet to come.
Tony Gioventu, executive director of the Condominium Home Owners Association, was unavailable for comment.
Government work
B.C.’s Ministry of Housing said the government is working with the BC Financial Services Authority as well as the insurance industry, to monitor the market and determine what options may be available to mitigate insurance costs.
“The province also committed to updating the requirements for depreciation reports and this work is ongoing,” the statement said.
The ministry further said that, effective Nov. 1, strata corporations must contribute a minimum of 10 per cent of the annual operating fund to the contingency reserve fund (CRF) and developers must also contribute more to the CRF for new strata developments to help have funds to pay for repair and maintenance.
It was in 2020 that the province directed the BCFSA to conduct an in-depth investigation into factors driving strata insurance cost increases. That resulted in a .
The government statement said the Ministry of Housing and Ministry of Finance worked together to make legislative changes to help ease insurance costs and increase transparency for strata lot owners and purchasers.
“Changes included requiring insurers and insurance brokers to provide advance notification to strata corporations if they anticipate a change to a policy or a non鈥憆enewal of a policy, while requiring insurance brokers to disclose the commission they receive on strata property contracts of insurance,” the statement said.
Further, in 2022, BCFSA undertook further investigation to assess the state of the strata insurance market since the legislative and regulatory changes of 2020.
“Based on its analysis of the data, BCFSA found a downward directional trend in the average premium insurers charge,” the government said. “However, many of the structural factors that drove price increases, including rising real estate appraisals, exposure to earthquakes in some areas of British Columbia and other catastrophic risks, still remain.”
Depreciation report data
Data on depreciation reports is scant but a from the 91原创 Island Strata Owners Association found 64 per cent of those surveyed had completed reports — although no time frame was reported.
What it also found was:
- 68 per cent of those with depreciation reports said they would be increasing contributions to their contingency reserve funds;
- 82 per cent were satisfied or very satisfied with the cash funding scenarios in their depreciation reports;
- 80 per cent indicated that the depreciation report made owners more aware of the need for higher CRF contributions; and,
- 69 per cent indicated that the requirement for a depreciation report every three years was too frequent.
Meanwhile, 94 per cent of the 155 stratas surveyed said prospective purchasers had requested a copy of a deprecation report.
