BC Stratas Now Required to Obtain Depreciation Reports

On April 22, 2024 Order in Council OIC 204-2024 announced changes to the Strata Property Act (SPA) about depreciation reports. These changes to the SPA go into effect on July 1, 2024. Strata corporations of 5 or more strata lots can no longer waive or defer obtaining a depreciation report and must obtain a new report at least once every 5 years. This aligns with 8 other provinces in Canada. New regulations set deadlines, qualifications to write a report, and a new requirement for developers to help pay for a new strata’s first report.

These changes were part of Bill 14-2020 the Municipal Affairs and Housing Statutes Amendment Act (No. 2) which passed in the BC legislature in August 2020. Section 4 of that bill repealed and replaced most of the wording in SPA s. 94 which, as of July 1, 2024 will say:

Depreciation Report

(1) In this section, “qualified person” has the meaning set out in the regulations.
(2) Subject to the regulations, a strata corporation must obtain from a qualified person, on or before the dates determined in accordance with the regulations, a depreciation report estimating the repair and replacement cost for major items in the strata corporation and the expected life of those items.
(3) [Repealed]
(4) A depreciation report referred to in subsection (2) must contain the information set out in the regulations.

Are some stratas exempt?

Certain small stratas are still exempt. While renumbered, the wording is essentially the same. Regulation 6.22 says that SPA s. 94(2) doesn’t apply “in relation to a strata corporation if and for so long as there are fewer than 5 strata lots in the strata plan.” There are no other exemptions. Bare land stratas are not exempt.

What are the new regulations?

Bill 14-2020 also amended SPA s. 292 to allow the Lieutenant Governor in Council to make more regulations about depreciation reports. These regulations were released on April 22, 2024 in OIC 204-2024. Regulation 6.2 about depreciation reports previously had sections 6.2(1) to 6.2(8). Several sections of this regulation have been repealed, reworded, and reorganized. As of July 1, 2024 the regulation will have sections 6.2(0.1) and 6.2(1) to (5), and new regulations numbered 6.21, 6.22, and 6.23. Here’s a summary of the changes and the dates when different sections come into effect.

Are stratas required to update the report?

Under the new regulation 6.21(2) “a strata corporation must obtain a new depreciation report at least once every 5 years”. This is a requirement. There is no ability to waive or defer it. In comparison, Ontario requires updates every 3 years, 6 provinces or territories require updates every 5 years, and 3 provinces require updates every 10 years or earlier if there have been material changes.

From a practical point of view, after 3-5 years, the information in the report is outdated. It’s difficult to manage assets worth millions of dollars without reliable information. The condition of the roof, boiler, or parking areas may have fared better or worse than expected over the last few years. The cost of construction materials may have increased more than the inflation rate in the financial models. The current amount in the CRF may be lower than planned due to unexpected repairs or to pay insurance deductibles.

Who is qualified to write the report?

Previously, the SPA and regulations were vague about qualifications. SPA s. 94 said a strata corporation must obtain a depreciation report from a “qualified person”. The regulation said a qualified person means “any person who has the knowledge and expertise to understand the individual components, scope and complexity of the strata corporation’s common property…that the strata corporation is responsible to maintain or repair…”

The definition of a “qualified person” is now in regulation 6.2(0.1)(a) and (b). The original wording has been expanded to list which professionals are considered “qualified persons”. Authors without any of these qualifications must complete their reports before July 1, 2025. As of July 1, 2025, all reports must be obtained from an accredited and registered:

  • A registered professional engineer
  • A registered architect
  • A registered applied science technologist
  • An accredited appraiser
  • A certified reserve planner, or
  • A professional quantity surveyor

Are there any changes to the content of the report?

Regulation 6.2(1) sets out what must be included in a depreciation report. For example it must include an inventory and evaluation of the physical components, a summary of repairs and maintenance for common expenses, and a financial forecasting section.

What’s new? While most authors already include an executive summary, it is now a requirement. Ventilation and air conditioning have been added to the list of building systems which included electrical, heating, plumbing, fire protection and security systems. All other requirements remain the same. Read regulation 6.2(1) for complete details.

How does a strata pay for the report?

There have been no changes regarding payment. Under SPA s. 92 and 96, the cost to obtain or update a depreciation report can be paid from either the operating fund or the contingency reserve fund (CRF). These decisions require a majority vote approval (greater than 50% of votes cast) of owners at an annual or special general meeting (AGM or SGM).

What’s the deadline for existing stratas?

Stratas established (the date a strata plan is filed at the land title office) before July 1, 2024 that have never obtained a report, or its most recent depreciation report was obtained before December 31, 2020, must obtain a report or a new report by the deadlines in regulation 6.21. The deadline depends on where the strata is located in BC. The deadline is:

What’s the deadline for new stratas?

Stratas established between July 1, 2024 and June 30, 2027 must get their first depreciation report within 2 years after the date of its first AGM.

A strata established on or after July 1, 2027 must get their first depreciation report within 18 months after their first AGM. Previously the deadline was within 6 months of the date of the strata corporation’s second AGM.

How much must the owner developer contribute?

Under SPA s. 12 an owner developer must establish a contingency fund (CRF) and pay an amount into the fund of an amount set out the regulations. This applies to all strata developments with any number of strata lots.

There is now an additional requirement under regulation 6.23 for owner developers to pay money into the CRF to help with the expense of a depreciation report for stratas with 5 or more strata lots established on or after July 1, 2027. The amount the developer must contribute to the CRF is $5,000 plus an additional $200 multiplied by the number of strata lots in the strata corporation or $30,000, whichever is less. For example, if the filed strata plan shows 10 stratas lots, the developer must contribute $7,000. If the filed strata plan shows 125 or more strata lots, the developer must pay $30,000. The amount must be paid no later than the date of the strata’s first AGM.

The actual cost of the report might be higher or lower than the contribution from the developer, however it’s an important measure to ensure that new stratas have money to help pay for their first report.

How does a new strata get their first report?

The cost to obtain the first depreciation report can be paid from either the operating fund or the CRF. The agenda for the first AGM is prepared by the developer. It’s recommended that the developer include a resolution in the notice of the AGM to pay for the first report from the CRF. If the notice does not include this item, the new council could call an SGM to vote on a resolution to approve the expenditure from the CRF. In most cases owners will prefer an expenditure from the CRF so that they can use the funds from the developer.

Alternatively, owners could approve a budget at the first AGM with increased strata fees that allow for an expenditure from the operating fund to obtain a depreciation report. If the budget presented doesn’t include this category, a voter can make a motion from the floor to amend the operating budget. SPA s. 103 requires that the budget be approved by majority vote.

VISOA recommends that the council choose a depreciation report provider that is not associated with the developer so that the report gives an independent assessment of building components and systems.

Resources:

BC Government news release April 22, 2024
Order in Council OIC 204-2024
Bill 14-2020 the Municipal Affairs and Housing Statutes Amendment Act (No. 2)
Strata Property Act convenience copy (effective July 1, 2024) See SPA 92, 94, 96, 292 (a.11).
Strata Property Regulation convenience copy (effective July 1, 2024). See 6.2 and 6.21-6.23.
BC Strata Housing website: Depreciation report requirements

Share this
This entry was posted in Blog, Depreciation Reports, Legislation. Bookmark the permalink.