WI Featured Real Estate
|Depreciation reports will “shock” some condo owners||| Print ||
|Thursday, 04 October 2012 19:39|
Some B.C. condo owners and business people who bought their working space may be "shocked" as changes stream into the strata market, observers say.
“The [B.C] government sees no difference between commercial or residential stratas,” said Neil Hamilton, senior property advisor with MacDonald Realty Ltd. in Vancouver, who has been monitoring changes to the B.C. Strata Property Act, which came into effect March 13.
The Act revisions are considered the most significant rule changes since the Strata Property Act superseded the B.C. Condominium Act 14 years ago.
The changes means that every strata corporation will have to file a “depreciation report” every three years, outlining the current conditions and of the strata building, and also file and continually update a 30-year budget for repair, maintenance and upgrades. The first depreciation reports must be filed by the end of 2013.
“The government is trying to clean up the on-going upgrade, repair, maintenance process in B.C. [residential] stratas,” Hamilton said, “it is for consumer protection.”
The changes could raise strata fees, he added, as strata corporations pay to prepare and update the reports, which could run as high as $50,000 for a large condominium building.
A strata corporation will be allowed to exempt itself from the regulations by a 75 per cent vote of members, with each exemption good for 18 months. Also, buildings with five or less units – which can be typical in a commercial strata building – are also exempt.
But strata owners who opt for an exemption may wish they hadn’t, advises Ed Wilson, partner with the Vancouver law firm of Lawson Lundell LLP, who has advised the provincial government on real estate legislation. Wilson said the depreciation reports will be likely be requested by potential strata buyers and mortgage lenders.
“If you don’t have a report, a buyer may not want to buy and a lender may not want to lend,” Wilson said. Even strata owners in buildings with five or less units, which are automatically exempt, may want to file the reports for financing and insurance purposes, he added.
The changes also make it mandatory to attach a depreciation report to the existing disclosure form when a strata unit is being sold. Hamilton added.
“Many strata corporations try to postpone maintenance, repairs and upgrades in order to keep their owners happy and strata fees low. This is short-term thinking,” Hamilton said, “In rainy Vancouver, a building can deteriorate fairly quickly.”
Wilson said the changes could effect first-time buyers of older residential condos, some of which were built in the 1970s. “Buyers may have bought them cheap with high-ratio financing, and with the depreciation reports find they have to pay $50,000 to repair their unit,” he explained. “Now they are underwater.”
And, unlike commercial strata owners, condo owners won’t be able to deduct the costs of repairs from their taxable income.
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