There are many compelling reasons as to why a strata should renew its depreciation report every three years. In addition to being the renewal time frame legislated by the province, it makes good sense for owners, buyers and sellers. Three years is a realistic time frame to see changes in the building assets’ condition and the financial status.
1) OUTDATED INFORMATION
A depreciation report provides a snapshot of a property and its condition at a given point in time. If the report is three years old, its information becomes outdated. Only an updated report can accurately reflect the property in its current state. Should a sale transaction be pending, the Form B requires the most recent depreciation report to be shared with the buyer. Even if the report is outdated, it is still required to be given to the potential buyers. Sellers and owners will be better served by having a recent report with the most current information to share with prospective buyers.
2) BUILDING UPDATES/IMPROVEMENTS
Once a depreciation report is completed, a strata may use the recommendations and maintenance tips within the report to perform remediation work, if necessary, or make best efforts to prolong the useful life of building components. These building improvements are to the benefit of strata owners and could assist in attracting more potential buyers and therefore positively impacting market value. As such, it is important that the depreciation report being shared reflects the updates and improvements made since the initial report.
To quote Tony Gioventu from CHOA, “If you were interested in purchasing a unit in your building, would you not be looking for a recent, updated copy of a report that accurately estimates the current building conditions, financial status of the building and any recent upgrades, all of which are a significant value to the buyer?”
3) CURRENT COSTING & FINANCIAL INFORMATION
Additionally, funding models are created with market costs and building codes in mind at the time of writing. That being said, within a three year time period, costs of construction can vary significantly and building codes can be altered. Moreover, new technology can result in changes of standard practices or the common use of more effective materials. Renewals, funding, spending and maintenance efforts have also taken place. Such changes could have a considerable impact on the funding models and projections in the depreciation report.
For most people, property is one of their most valuable assets. It is important that its current condition and funding models are accurately reflected in the depreciation report. As buyers become increasingly educated and familiar with depreciation reports, they will seek recent reports that provide an accurate and comprehensive overview of the building. Three years is a reasonable time to see changes and renewing the depreciation report makes good sense.