Few people want to pay for something now that will not benefit them, but rather others whom they don’t know, 25 years from now. But that is essentially what a depreciation report recommends. Specialized building engineers or appraisers review a condominium building and its components and assess virtually everything that will potentially need to be replaced or repaired, at some specific point in time, well into the future. This can often be 20 or 25 years into the future. Many of the identified replacements are based on estimated lifespans. And in many cases items could be considered “nice to have” or may just be subjectively worn out. For example, a depreciation report would detail the cost of replacing every suite door, fire door and door handle at some specific time. Odds are that these will never be replaced.
Depreciation reports were mandated by the BC government last year to help condominium owners better plan and budget for future repairs, ensuring that their building will remain well-maintained over the long term. The owners/strata councils of most BC buildings have yet to obtain a depreciation report, and/or have voted to postpone obtaining one. These reports are definitely a catch-22 from an owner’s perspective.
A depreciation report lays out several long-term funding plans to cover hundreds of building components, from the roof to light switches. The report estimates whether current contingency reserve fund contributions are sufficient to meet future repair / replacement funding requirements. In most cases, they’re not. After all, it’s often human nature to think ‘why pay for something now that will be required 25 years from now? – it won’t be my problem’. Your unit may have sold and re-sold three or four times by then. And you’ll be long gone on to your next home. The result? Everyone reading the report will be frightened. You as the owner, all of your neighbour owners, and potential purchasers. On the flip side, it’s difficult to convince someone to buy a condominium unit if a potentially huge funding shortfall is presented to them by a professional building engineer.
Buyers may be spooked by the reports, but many are looking for them now when considering a purchase. As are insurers and lenders. And the reports do help owners to plan for repairs, rather than being hit with unforeseen special levies which can be in the thousands and thousands of dollars. Thus, depending on your perspective, depreciation reports have definite pluses and minuses.
Please feel free to contact me anytime for more information about depreciation reports or other queries.