Love them or hate them, depreciation reports are critical documents essential to strata corporations and properties. They outline the current condition and long-term maintenance needs of a building’s joint assets, such as the roof, plumbing and elevators. The report assesses the building’s condition, estimates the remaining lifespan of its components and projects future repair and replacement costs over 30 years.

 

B.C.’s mandated change

 

In April 2024, British Columbia’s provincial government enacted additional regulations regarding obtaining these reports, forcing strata councils and owners to stop burying their heads in the sand and ignoring the need for future planning.

Effective July 1 this year, depreciation reports have become mandatory for any building larger than five strata lots. These reports will also need to be updated on a five-year cycle. Strata corporations can no longer opt-out via a three-quarter vote at an annual or special general meeting. There will be a grace period for allowing the completion of these reports, depending on where the building is located within the province.

 

Impact of the changes — a surprise for some

 

What does this mean for owners, buyers and sellers? Some might see the changes as bad news, but the pros outweigh the cons.

“These reports are a great tool in a strata corporation’s toolbox for planning their budget and repairs for the next several years,” comments Pam Zak, vice president of management services at Tribe Management.

For many, these new regulations may have come as a surprise. But those working directly with strata corporations saw the changes coming.

“The recent changes weren’t a surprise for our clients,” Zak adds. “We announced it well in advance, so our portfolio of properties has been well prepared for the new requirements. We received very little negative feedback from clients regarding the changes.”

 

Two reports go hand in hand, creating some cost savings

 

With the growing demand for electric vehicles (EVs) and the move away from gas-fired appliances in B.C., the new legislation now requires strata corporations to conduct electrical planning reports to assess their building’s electric infrastructure capacity and the depreciation report.

The electrical planning report intends to provide the strata with an overview of its current electrical capacity and what changes might be needed to upgrade that capacity, including items such as heat pumps and EV charging.

Mack Grigg, project manager with Sense Engineering, notes that these two reports go hand in hand. He says there’s a crossover between the electrical and HVAC equipment that needs to be captured in both a depreciation report and an electrical planning report, so it makes sense for buildings to do both reports simultaneously, which results in some cost savings.

“A depreciation report can be overwhelming for the average homeowner. They’re long and complex,” adds Mack.” That said, an executive summary of a high-level snapshot of the report should be provided, which we find quite helpful for owners. It makes for an easy entry into reading these lengthy reports.”

Cost increases can occur for those who budget according to report recommendations

Although change can be difficult for owners, buyers and sellers, these stricter requirements can be beneficial in the long run. While these changes have perceived downsides, such as potential for increased fees, Zak meets with her team and has not heard of significant increases overall — but that could be different for those who choose to budget according to the report’s recommendations.

 

Key advantages

 

The three key advantages of these reports for owners and sellers are financial preparedness, property valuation and sustainability.

When it comes to strata corporations themselves, the reports bring many advantages by helping them plan long-term repairs and upgrades, which can help prevent unexpected expenses for capital projects. They also provide various funding models so owners and buyers know what to expect for expenses down the road. Unlike in other provinces, British Columbian strata corporation owners still have the option of how they want to fund these projects.

Well-maintained buildings with updated reports attract potential buyers by offering transparency on the state of the building and what repairs should be expected in the future, barring unforeseen events. As many buyers look for well-run complexes, future maintenance costs and the building’s financial health can help maintain or increase property value.

Sustainability is at the forefront of real estate. Electrical planning reports ensure building managers know the electrical systems and their capacity. Owners and buyers will know if the building is ready for EV charging infrastructure or what changes need to be made to support the increased demand for more sustainable environmental solutions.

 

The recent changes to depreciation reports in B.C. represent a significant step forward for property owners and buyers. These updated regulations promote proactive and long-term planning in the real estate market by ensuring that buildings are better maintained and financially prepared for future repairs. In the long run, the enhanced focus on proactive maintenance and informed decision-making will benefit everyone involved.