Tuesday, December 20, 2011

New Regulations for BC Strata Property Act

By: Ted Denniston and Sally Thompson

Depreciation Reports will facilitate building upkeep
The new regulations for the BC Strata Property Act have been introduced. The summary of the changes was published by the Office of Housing and Construction Standards. These changes include new requirements for Depreciation Reports, which are the reports used to determine the appropriate amount for the annual contribution to the contingency reserve fund. Depreciation reports are important to the long-term stability of a Strata, allowing them to save the money that will be needed to maintain and renew the common property

Highlights include:
  • Depreciation reports are now mandatory for complexes with 5 or more strata lots unless the strata corporation exempts themselves by an annual ¾ vote. Strata corporations have until December 13, 2013 to obtain a depreciation report or hold a ¾ vote to exempt.
  • Depreciation reports are to be carried out by a qualified person, who has knowledge and expertise to understand the individual components, scope and complexity of the strata’s common property.
  • The Regulation requires that the Strata identify their depreciation report provider’s qualifications, error and omission insurance (if any), and the relationship between the person and the Strata. 
  • Depreciation reports are required to be based on an on-site visual inspection of the site and all common (and limited common) property components, e.g., the building structure, exterior walls, roofs, windows, doors, balconies parking facilities, mechanical and electrical systems, landscaping, etc.
  • The Depreciation Report must include a component inventory and evaluation of the property components.
  • For each component, the report must provide an estimated service life related to any repairs or maintenance work (which usually occurs less often than once per year or that do not usually occur) over a 30 year period.
  • The report must provide a financial forecasting section, including forecasting projects over 30 years, interest and inflation rates, and must provide three cash-flow funding models.  
  • Updates must be completed, including a site review, every three years.
The regulations also define minimum and maximum contribution limits based on percentages of the annual operating budget.
  • If the balance in the fund is less than 25% of the budgeted operating expenses, then a minimum of 10% of the operating budget must be contributed. 
  • If the fund balance is higher than 25% of the operating budget, then additional contributions can be made if approved as part of the annual budget approval process  (which requires a simple majority rather than 75% as it used to).
Halsall has been providing Contingency Reserve Fund Studies in BC for ten years. The existing reports are compliant with the new regulations in all material respects. 

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