Buying a Condo in BC? Why the Depreciation Report Matters

If you're considering buying a condo or townhome in Victoria, one of the documents I want you to pay close attention to is the strata's depreciation report.

It's not exactly exciting reading, but it can tell you a great deal about the building you're considering buying into—and potentially about expenses that may be coming down the road.

What Is a Depreciation Report?

A depreciation report is essentially a long-term planning document for a strata corporation. It looks at the major components of the property, estimates their remaining useful life, considers what repairs or replacement may eventually cost, and provides financial forecasting to help the strata plan for those expenses.

Depending on the property, the report may examine items such as the roof, building exterior, windows, plumbing, electrical systems, heating systems, elevators, parking areas, common amenities, landscaping and other common property.

In other words, it helps answer an important question: What major expenses could this building face over the coming years, and how might the strata prepare to pay for them?

Why Should a Buyer Care?

When you buy a strata property, you're not just buying the space inside your unit. You're also becoming part of a strata corporation that is responsible for maintaining shared property and common assets.

Imagine you're looking at a beautiful condo. The suite has been renovated, the kitchen is gorgeous and everything inside looks immaculate.

But what if the building's roof is approaching the end of its expected life? Or the plumbing needs significant work? Or the building envelope is expected to require major repairs?

Those expenses don't disappear simply because the individual condo looks great.

The Depreciation Report and the Contingency Reserve Fund

This is where I start connecting the depreciation report to another very important number: the strata's Contingency Reserve Fund (CRF).

The CRF is money the strata sets aside for expenses that don't normally occur every year. A depreciation report helps the strata understand what major repairs and replacements may be ahead and provides financial models for planning for those costs.

As a buyer, I don't look at the size of the reserve fund in isolation. A dollar amount that looks substantial may or may not be adequate depending on the age, size and condition of the building and the work anticipated in the depreciation report.

What Do I Look for When Helping a Buyer?

I don't want my clients simply checking a box that says, “Yes, there's a depreciation report.” I want to understand what the report is actually telling us.

Some of the questions I consider include:

• How old is the depreciation report?
• What major projects are anticipated?
• When are those projects expected?
• What are the estimated costs?
• How much money is currently in the contingency reserve fund?
• How much is the strata contributing to the reserve fund?
• Have projects identified in earlier reports actually been completed?
• Do recent strata minutes mention repairs or concerns that deserve further investigation?

That's why I like to look at the depreciation report alongside the strata minutes, financial statements, Form B, insurance information and other relevant strata documents. One document rarely tells the entire story.

Depreciation Reports and BC Strata Law

Depreciation reports are governed by British Columbia's Strata Property Act and Strata Property Regulation. Current requirements apply to most strata corporations with five or more strata lots, with specific timing requirements for obtaining and updating reports.

Because legislation can change, I recommend going directly to the provincial legislation if you want to review the current rules.

Read the BC Strata Property Act