Posted on May 20, 2013

Q: Do the Regulations permit our strata corporation to conduct our own Depreciation Report? 

A: Technically, the regulations do not prohibit a strata corporation from preparing their own Depreciation Report; however, consider the requirements of the Act & Regulations and the liabilities first. A person (when applied also means the consulting firm or group of certified professionals who make the proposal) is going to have to be identified as providing the report. If it is the strata corporation providing their own report, then it will be disclosed in the report that the information has been provided by the strata corporation and/or specific individuals. You will have to disclose in the report who that is and the liability qualifications and competency of that person.

In addition to providing a planning tool for renewals, maintenance and financial planning for the strata corporation, the report also imposes a level of liability on the strata corporation for accuracy. Remember that the report may be used by insurance providers, mortgage providers, mortgage issuers, and most of all, buyers. This is an official report, and will be used to determine a buyer's qualifications for a mortgage, to establish risk for insurers, and for buyers to determine their future liabilities, before they make a decision or make an offer for purchase. Throughout all of these transactions the strata corporation is exposed to liability. 

At Campbell & Pound, the company along with each professional Reserve Fund Planner/RFP team member all carry $2,000,000.00 in Professional Liability Insurance which protects the Strata Corporation and its owners. 

Posted on May 13, 2013

Q:  Once our Strata Council has decided to go with a Depreciation Report and has also decided to have Campbell & Pound Commercial Ltd. as our Reserve Fund Planners, what do we need to do to begin the processs?

A: To start the process, your Strata Council can contribute greatly to the ease of providing the Depreciation Report and economizing by gathering all of your records and documents that are specific to your type of Strata Corporation. A sample list follows that illustrates the types of records and documents the person preparing the Depreciation Report may need to review.  In the absence of documents, the person preparing the Depreciation Report will need to make some reasonable assumptions.  For smaller Strata Corporations, your document requirements may be limited; however, at the minimum a copy of the registered strata plan, any registered bylaw amendments, and any property conditions will be important for the first stages of the proposals and planning. 

Documents & Records:

  • Operating budget
  • Current balance sheet, including the contingency reserve fund balance and any investments and assets 
  • General ledger
  • Copies of invoices relevant to operations and repairs 
  • Current insurance certificate or insurance appraisal 
  • Any reciprocal easements/service agreements/air parcel agreements
  • Any leases and licenses (enterphone systems, parking garage use)
  • Any agreements granting third party use and access of the strata property 
  • Prints, plans, and drawings - architectural, structural, mechanical, electrical, fire protection, and other systems 
  • Any prior investigation reports: maintenance repair, investigation, etc.
  • Annual fire inspection report
  • Maintenance manuals
  • Maintenance logs
  • Registered strata plan and any amendments
  • Registered bylaws and any amendments 
  • Any bylaws where the Strata Corporation has taken responsibility for the maintenance and repair of part of a strata lot
  • Any registered allocations of Limited Common Property 
  • Any alteration agreements where an owner has taken responsibility for the cost of the maintenance or renewal of the alteration
  • Lawsuits or arbitration decisions that impact property use, maintenance repair, or obligation 

 

To simplify the Depreciation Report process and to assist with accurate long-term archiving of documents, it is recommended documents (including large scale drawings) be scanned into electronic format if possible to use when preparing the Depreciation Report. 

The more information given to the Reserve Fund Planner, the better. It will cost the Strata Council less in professionals fees if the Planners are not the ones fishing out old documents and trying to piece meal the information together themselves. The more organized the Strata Council, the more efficient the Planner can be with their time. 


Posted on April 22, 2013

 

Q: As a Strata Council, we are confused and do not know the difference between a Depreciation Report completed by a Professional Engineer or an AACI designated Professional Appraiser or Canadian Reserve Planner (CRP) designated Professional. Can you clear this up for us? 

 

A: A Depreciation Report or Reserve Fund Study should not be confused with studies or reports by Engineers such as technical audits, condition reports, building restoration reports, facilities assessments, environmental investigations, engineering studies, construction deficiency reports, or construction specifications. 

 

Engineers center more on the site improvements of a strata complex and usually place less focus on property value implications and impacts. AAIC designated Appraisers and CRP professionals utilize a functional financial Uniformat style of Depreciation Reports which provides multiple methods of funding to Strata Councils along with a complete life cycle analysis of all the site improvements.

 

AACI designated Appraisers and CRP professionals are also qualified to advise the Strata Council on property value impacts resulting from the advice given in the Depreciation Report.

 

A Depreciation Report or Reserve Fund Study in the Uniformat style is primarily a financial document which should provide a reliable cost estimate and projection for reserve funding purposes. It is technical only to the extent that reserve components are recognized, qualified, and evaluated. The Depreciation Report is a financial plan which provides conceptual framework, detailed descriptions of reserve fund requirements, cost estimates, inflationary trends, interest rate assumptions, future capital requirements for major repairs and replacements as well as appropriate funding projections.

 

The Uniformat style of Depreciation Reports is used by AACI designated appraisers and CRP Professionals across Canada in all other provinces where Reserve Fund Studies are mandatory. Since BC has been recently legislated (Dec/11) only the NWT, Yukon, and Quebec do not have legislation which governs and makes Depreciation Reports or Reserve Fund Studies mandatory. 

 

Posted on April 13, 2013

Q: What is the value of a Depreciation Report for our Strata? 

A: Many Strata owners ask me the value of obtaining a Depreciation Report. See my summary of reasons below:

  • major replacements and repairs are anticipated and funded on a timely basis, which maximizes the life cycle of building components;
  • avoids excessive wear and tear caused by funding major repairs and replacements when required and the increased cost of funding for remedial work when it is ultimately undertaken;
  • prevents potentially unsafe conditions resulting from deferred maintenance;
  • maintains a stable capital funding plan to avoid or minimize unexpected "cash calls" from owners, which can create financial hardship; 
  • limits on-going conflict between those owners who have the financial resources to fund “cash calls”, and those who do not;
  • avoids a decision by owners to defer necessary capital repairs/replacements;
  • enables owners to assess the adequacy of their existing Contingency Reserve Fund;
  • enhances the personal enjoyment of living in a well-maintained property;
  • protects property values by ensuring that the property is well-maintained;
  • maximizes re-sale values by having a Depreciation Report in place, with a well-funded capital repair/replacement plan;
  • enables owners and buyers to satisfy any mortgage lender requirement for a Depreciation Report.