INNOVATION March-April 2012

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Background The form of land and property ownership known as “strata title,” originated in New South Wales, Australia in 1961. Since then many countries around the world have adopted the Australian land ownership system in one form or another. Those countries include Abu Dhabi (legislation pending), Dubai, Fiji, India, Indonesia, Malaysia, Philippines, Singapore, South Africa, and Canada. Other countries have adopted strategies for subdivided land ownership under common title with differing administrative mechanisms. In most parts of Canada and the US for example the legal term is “condomin- ium,” rather than “strata title.” In Canada, only British Columbia uses the term “strata title.”

Strata Depreciation Reports

A Voice for Standardization

Jeff Renwick PEng

Depreciation Reports One building asset management tool used by strata is the facility audit and life cycle analysis study, commonly known as a Depreciation Report or Reserve Fund Study. The deprecia- tion report is a financial and logistical planning tool that provides a timeline for common property renewals and an

educated idea of the associated construction budgets. The report also provides a savings plan that identifies to the strata how much to contribute to their reserve funds in order to be able to pay for the expected common property renewals when they become due. In Canada, reserve fund studies/

depreciation reports are required to be completed in the Northwest Territories, British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia, New Brunswick and Newfoundland/Labrador. The BC Provincial legislature passed an order in council on December 13, 2011 bringing into force sections of the previ- ously tabled Strata Property Amendment Act which in part deals with Section 94 (Depreciation Report) of the Strata Property Act , and amends sections of the Strata Property Regulation. The December 13, 2011 order in coun- cil brings into force a legal requirement that all strata properties greater than 4 units have a depreciation report completed by December 13, 2013. In addition, a report with site visit cov- ering a new 30 year timeline is required to be prepared by the strata every three years. The reports are relatively expensive and the legal requirement to complete a deprecia- tion report every three years would seem to be quite onerous on the strata, especially for the smaller complexes.

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Investment Advisors DWM Securities Inc.

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