The BC government has announced new legislative changes aimed at strengthening depreciation reports for strata corporations, effective July 1, 2024.
Impact on Strata Owners and Council Members
Depreciation reports provide estimates of the long-term repair and replacement costs of a strata corporation’s shared property and assets. Previously, obtaining these reports could be deferred repeatedly as long as three-quarters of a strata corporation’s owners voted annually in favor of deferral.
Updated regulations, taking effect on July 1, 2024, have now removed the option for deferral. All existing strata corporations with five or more strata lots are now required to obtain depreciation reports on a five-year cycle, instead of a three-year cycle. (Those who don’t have depreciation reports, or whose last depreciation report was received before December 31, 2020, will need to obtain reports within specified timelines, depending on where in BC they are located). New strata corporations established between July 1, 2024, and July 1, 2027, must obtain a depreciation report within two years of their first annual general meeting, and new strata corporations established on or after July 1, 2027 must obtain one within 18 months of their first annual general meeting. Additional specific content requirements have also been included, in order to help standardize the information which these reports contain.
Furthermore, effective July 1, 2025, all depreciation reports must be prepared by one of six specified types of professionals (i.e. engineer, architect, applied science technologist, certified appraiser, certified reserve planner or quantity surveyor).
Impact on Developers
The new regulations also impact the development of stratified projects. For strata corporations established on or after July 1, 2027, owner developers must fund the first depreciation report with at least $5,000 plus $200 per strata lot (up to $30,000). We note that this may affect internal developer budgeting for future projects – and if this new requirement materially conflicts with language in an existing disclosure statement, an amendment to disclosure statement may be required (particularly for those projects that currently have a projected completion date on or after July 1, 2027).
If you have any further questions regarding depreciation reports, or whether a disclosure statement amendment may be required, please contact a member of our Real Estate Group.