THE British Columbia government is requiring all strata properties with more than five units to have a property depreciation report completed by December 2013.
A depreciation report outlines the current status of the building and what problems are occurring in the strata. Reports provide estimates on what it would cost to fix the problems. It outlines what long-term projects need to be completed and the costs associated with them. They also suggest possible problems that could occur in the future and what it might cost to fix them.
According to engineer Jeff Besant, of Besant & Associates, the cost for a depreciation study by an engineering firm is typically around $1 to $1.50 per square metre.
While individual owners would see their strata fees increase because of the overall cost of a report, Besant said it's important for them to know the status of their building.
"In reality the costs aren't that much if you think about making decisions for the building," he said. "You want the best information you can possibly get so that you can make a good decision about your future in the place and you can also find out what your property is worth."
Depending on the findings, the property value of strata lots could change dramatically. Throughout the lifetime of a building many of its elements such as the roof, pipes, heating and air condition and windows will eventually need replacing.
"The requirement now is that (strata corporations) have to maintain these assets and they need to spend whatever money they need to keep it in good working order," Besant said. "The reactive cost is usually two to five times higher than the proactive decision. Replacing the pipes in the building can cost millions of dollars; it's something you need to save for."
Depreciation reports are not required to be completed by an engineering firm, but Besant believes it makes more sense for property managers to have them completed by a firm instead of getting hit with massive repair costs down the road.
"Property managers are spending a few thousand dollars about getting advice on a multimillion dollar project," he said. "It should retain an engineering firm to do a depreciation study and use that information in your financial planning."
Bamtec Engineering engineer Jeff Renwick said if a condo owner were to sell their place with a false or inaccurate report, the future owner could sue if damage or problems occurred on the condo.
"The person buying in - if they are not given that information and then a year later they get a $50,000 assessment - they can sue," Renwick said.
Provincial regulation requires that property managers have a depreciation report completed every three years. Alberta, Manitoba, New Brunswick and Ontario also require depreciation reports.
