You may have heard some news going around that when purchasing a condo or townhouse to make sure it has a depreciation report. For strata corporations formed on or before December 2011, a depreciation report was required by Dec 2013. For those corporations formed after Dec 2011, the depreciation report is mandatory after the second Annual General Meeting.
What is a Depreciation Report?
A depreciation report (or reserve fund study) helps strata corporations plan for maintenance, repair, and replacement of common property (ex. hallways, laundry, recreation rooms, elevators etc), limited common property (ex. a yard, patio or balcony near your unit, carport or parking stall etc) and common assets over a 30-year period.
How long is a Depreciation Report Valid for?
A depreciation report is required every three years unless an annual ¾ vote is held to waive the requirement, or if there are four or less strata lots.
What is in a Depreciation Report?
- A physical inventory of the common property and assets
- Anticipated maintenance, replacement costs for common expense and repairs predicted over the 30 years.
- A financial forecast section with at least three cash flow funding models.
- Any other important information or analysis
- Identifying which parts are common property/limited common property that individual owners are responsible to maintain. (If any)
Benefits of a Depreciation Report
- Complying with the law
- Create a predictable maintenance schedule
- Reduces long term repair costs
- Sustains or improves resale values
- More predictable owner contributions
- Takes care of current and future owners
Looking at a townhouse with a current deprecation report?
A qualified real estate agent will be able to analyze a depreciation report and guide you in making the best decision on the purchase price.
Looking to Buy a Townhouse without a depreciation report?
A property without a report could be hiding known or predicted potential repairs. There is no way to say why a specific property has not had a report done, or what could be issues lurking in the future.
Contact Vancouver Townhouse, about the property you are interested in to get advice from a qualified Real Estate Agent. Or if you are just starting your search, sign up for Townhouse Watch to be notified of properties that match your search criteria.
Looking to Sell your Townhouse that Does Not Have a Current Depreciation Report?
This could potential have an adverse affect on sales. A depreciation report could identify immediate repairs and maintenance and will identify future repairs and maintenance needed. The cost of the report and repairs could potentially increase strata feeds to ensure the contingency fund to take care of the future deficiency’s as they occur. This may sway the strata corporation votes for an exemption from the report. Buyers will be more wary of purchasing into a strata that does not have a report, or one that continues to vote for exemption to avoid maintenance and repair surprises” in the future.