Here are some of the requirements that a report must address:
- Provide an inventory of the strata corporation’s common property common assets, and any limited common property or part of a strata lot that the strata corporation has a duty to maintain, repair and renew.
- Provide an evaluation of the inventory by performing a physical review of the site and the components.
- Provide an evaluation that addresses the following requirements:
- Estimate the service life of the assets over the next 30 years
- The anticipated maintenance, repair and replacement costs that usually occur less than once per year
- Evaluation of the components ( the current condition )
- Financial evaluation of the factors and assumptions used in estimating the costs over the 30 year period
- A description of how the contingency reserve fund is currently being funded, along with a current balance, minus any expenditures that have been approved but not yettaken from the fund, and
- At least three cash flow models for the contingency reserve fund relating to the maintenance, repair and replacement over 30 years.
One of the greatest benefits of depreciation reports is the effective planning to renew building components before they fail. The strata is in control of when the work is done, who does the work, retains the power to negotiate, and avoids the higher costs of emergencies.
The other purpose of depreciation reports is disclosure. If you are an owner, buyer, mortgage provider or insurer, or an insurance provider, the document becomes a valuable asset in determining future risk.
Even if a strata did not increase its fees, by having the depreciation report, owners at least have an insight to future costs for personal financial planning, buyers feel more secure in their purchase knowing when future major costs and special levies arise, and the banks and insurers have more confidence in the investment.
Understanding Your Strata
The legal term for your home is a “strata lot”. All “strata lots” together form a “strata corporation” and are registered in the Land Titles Office as a “strata plan”.
Your ownership includes the “strata lot” (your unit or home) as well as a portion of the “common property” shared with all other “strata lot” owners within the “strata plan”.
Percentage of Ownership:
Your percentage of ownership of the development is determined by your “unit entitlement” (i.e. typically by size of your unit lot) according to a survey registered in the Land Titles Office after construction is complete. An estimate of the entitlement is listed in your Disclosure Statement.
Common Property consists of most of the area outside the boundaries of individual strata lots (i.e. Storage Rooms, Recreational Facilities, Hallways and Lobbies etc.) These areas belong to all owners, are governed by an elected strata council, and cared for by a property management company, who works closely with the council.
Limited Common Property:
Limited Common Property is a form of common property whereby exclusive use of a specific area is granted to one or more owners such as patios or balconies.
Control of the Strata Corporation:
Like a shareholder of a business corporation, you are a member of the strata corporation. Annually, a strata council is elected by the owners to conduct the strata corporation’s business in accordance to the Strata Property Act and the bylaws of the strata corporation. These documents establish the way in which the business will be conducted with the purpose of achieving a harmonious living environment for the owners.
Strata Bylaws are created through a “special resolution” at a general meeting for all owners. They affect the use of common property and/or individual strata lots.
Strata Rules are created by a majority vote of the council at a council meeting. The affect the use and enjoyment of the common property only and must be ratified by the owners at each Annual General Meeting.
Maintenance Fees are determined at the Annual General Meeting (AGM) with the owners of the Strata Corporation adopting a budget through a majority vote. Strata maintenance fees are used to finance the operation of the strata corporation to help protect the overall investment and enjoyment of the living space. Your specific monthly fee is based on your percentage of ownership or unit entitlement.
Maintenance Fees cover such items as Insurance, Utilities, Garbage Collection, Landscaping, Management Fees, General Repair, Maintenance and to fund the Contingency Reserve for major expenditures as required.
The strata corporation is responsible for placing insurance on the building as a whole. However, you are responsible to purchase homeowner insurance to protect your personal possessions. Most homeowners carry at least the following coverage:
- Contents Insurance
- Liability Insurance
- Improvements Insurance
To purchase homeowner’s insurance, contact the insurer of your choice or the insurance provider for your building.