What is a Depreciation Report?

Also known as a "Reserve Fund Study", the Depreciation Report is a financial document that includes a detailed breakdown of all the common property components that a Strata Corporation will have to repair or replace over the next 30 years. It provides the Strata Corporation with a summary of current deficiencies, future projected capital expenditures and costs for each component. Furthermore the Depreciation Study provides financial plan for the Strata Corporation to prepare for these expenditures. The Study is to be updated every three years, and will be an integral part of the Strata Corporation’s long term planning.

Currently, a strata corporation contributes about 10% of its annual operating budget into the Contingency Reserve Fund (CRF) annually. This is a requirement if the CRF is less than 25% of the annual budget. The problem with this method is that the annual operating budget has absolutely no correlation with the capital costs of replacing components, which was what the CRF was meant to provide for. This system has lead to insufficient funds in the CRF. For example, most strata councils do not know the age of their roof system, the type, or the cost to replace the it. The first indication of that it need replacement is a leak in the strata units. The Depreciation Report will provide a proactive approach to this process and alleviate the uncertainty in timing and costs.

The changes in the Act will be new to BC Strata Corporations, but similar legislation has already been enacted in Ontario, Alberta and numerous other provinces, and have been in place in some cases for 10 years or more.  


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