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Summary of Legislative Amendments

As of April 9, 2014, Section 92 of the Strata Property Act was amended to clarify that the cost of a depreciation report can be an operating expense. This means the cost to obtain depreciation report may be included in the annual budget, which is approved by a majority vote.

Also effective April 9, 2014, the cost to obtain a depreciation report can be paid out of the contingency reserve fund (CRF) by a majority vote.

This creates an exception to the general rule that a three-quarter vote resolution is required to approve expenditures from the CRF. Owners are now permitted to approve funding for repairs, maintenance or replacement recommended in the most recent depreciation report by a majority vote.

To summarize: a strata corporation can now use a majority vote to fund both a depreciation report and the work recommended in the depreciation report from the Contingency Reserve Fund Account.

(This information is included in the CHOA Fall Journal, 2014)

Member of CHOA

















 

Edmond Schweitzer
Qualified Reserve Fund Planner

More About the Depreciation Report

What is the Information Certificate?

Within one week of a request by an owner or potential purchaser or person authorized by an owner or purchaser, the strata corporation must give to that person an Information Certificate, along with the following attachments: a) the current Rules of the strata corporation; b) the current Bylaws of the corporation; c) the owner developer's Rental Disclosure Statement; and d) the most recent Depreciation Report.

What is a Depreciation Report?

(1) While there is nothing especially new about "reserve fund planning", the term "depreciation report' is unique to British Columbia. Other provinces use "reserve fund study" or "reserve fund plan" in referring to the same or similar document. The same is true in most U.S. jurisdictions. This site intends to routinely use "Depreciation Report".

(2) Our reports shall typically provide an assessment of the conditions of the various common property elements and equipment, including an inventory of the apparently depreciated elements that may need repairs or replacement during the next 30 years or within the mandated "analysis period". We shall provide an estimate of the service life expectancy of the elements and equipment, based on the proven CMHC Life Expectancy Guidelines. We shall also estimate when the elements will need to be repaired or replaced and what it will cost in current Canadian dollars to do the work.

(3) The Report shall be prepared by a qualified Depreciaton & Reserve Fund Planner, experienced in financial planning, construction, building maintenance and strata management. It shall list the common property, common assets and those parts of the strata lots or limited common property, or both, that the strata corporation is responsible to repair or replace.

(4) These will include but are not limited to the following items:

(i) the building's structure;
(ii) the building's exterior, including the roofs, roof decks, doors, windows and skylights;
(iii) the building's systems, including the electrical, heating, plumbing, fire protection and security;
(iv) common amenities and facilities;
(v) parking facilities and roadways;
(vi) utilities, including water and sewage;
(vii) landscaping, including paths, sidewalks, fencing and irrigation;
(viii) interior finishes, including floor covering and furnishings;
(ix) green building components; and
(x) balconies and patios.

(5) We understand that owners or tenants may be responsible for the routine maintenance of limited common property that is being used exclusively by them, but the items that require repair or replacement, less often than once a year, or do not usually occur, are the strata corporation's responsibility.

(6) The Depreciation Report shall include an integrated spreadsheet showing the anticipated Service Life of the building elements, their Replacement Cost (by today's values), the current Construction Cost Inflation Rate, the Bank Discount Rate, the beginning Reserve Fund Balance, the proposed Contribution to the Reserve Fund at the beginning of the year (2013) and the strata corporation's desired balance at the end of the 30 year Analysis Period.

(7) The Strata Corporation will be asked to consider no less than three (3) cash-flow funding models. These are intended to assist Council and the consultant in identifying realistic options for funding the repair or replacement of the depreciating elements.

(8) We anticipate that the strata council will provide the consultant with copies of its current annual Operating and Contingency Reserve Fund budgets and that a committee of council or the Strata Manager will assist in identifying and compiling the inventory of the elements and equipment.

(9) We assume that the Report will be approved by the strata council and circulated to the owners as the corporation's official Depreciation Report and used by the owners and others, who may have the right to the information as permitted by the Strata Property Act and Strata Property Act Regulations.