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Professional Standards Manual

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Strata Management Services

2. Practice Standards

(r) Depreciation Reports

Under BC’s Strata Property Act (SPA), strata corporations are required to have a depreciation report completed by a “qualified person.” But who is qualified?

According to Section 6.2 of the Strata Property Regulation, a “qualified person” means “any person who has the knowledge and expertise to understand the individual components, scope and complexity of the strata corporation’s common property, common assets and those parts of a strata lot or limited common property, or both, that the strata corporation is responsible to maintain or repair.”

Some licensees, who may either have experience in this area or a relevant professional designation, consider themselves qualified, and have prepared, or are planning to prepare depreciation reports.

However, licensees should take note: neither the Council nor the Office of the Superintendent of Real Estate considers that the preparation of a depreciation report falls under the definition of strata management services found in section 1 of the Real Estate Services Act (RESA). This means that a person who is licensed to provide strata management services is not qualified to prepare depreciation reports solely by virtue of being licensed under RESA.

Issues to Consider

Licensees who are considering preparing depreciation reports need to consider a number of factors before they make the decision to provide a strata corporation with this service:

  1. Am I insured?
    In the May 2012 issue of the “Risk Report,” the Real Estate Errors and Omissions Insurance Corporation advised licensees that:
    “Licensees preparing the Depreciation Reports required by SPA will not have coverage under the Indemnity Plan for this service. The Insurance Corporation’s view is that the preparation of such reports is not the provision of Real Estate Services and thus falls outside of coverage provided in the Indemnity Plan. Preparing Depreciation Reports is a highly specialized service and does not require a real estate licence. Licensees offering this service to clients should purchase separate coverage from an appropriate insurer. It is good practice for strata managers to expressly advise strata corporations to hire only service providers who are properly insured.”
  2. Have I made the required disclosures?
    Licensees preparing depreciation reports should disclose to their clients in writing that although they are licensed, they are not acting as a licensee in this case, so they are not regulated under RESA in relation to this service. This means the client is not entitled to the protections applicable under RESA they would normally expect when dealing with a licensee.
    As well, section 5-12 of the Rules requires licensees who anticipate receiving a benefit (remuneration) from an expenditure made by or on behalf of the principal to disclose this to the client and to their brokerage before the benefit is accepted.
  3. Has my remuneration been kept separate from Brokerage Trust Accounts?
    Brokerages must be aware that as the preparation of depreciation reports is not a real estate service, remuneration received for preparing the depreciation report should not be deposited in a brokerage trust account with any other money received in relation to the provision of real estate services.
  4. Do I need a contract?
    While the provision of a depreciation report is not a real estate service, so there is no requirement for a written service agreement, it may still be advisable to ensure that there is a contract in place that outlines the services provided for the provision of the depreciation report. This will help ensure that both parties have a clear understanding of the services provided and the contractual relationship.

Learn More About Depreciation Reports

SPA requires strata corporations to obtain a depreciation report every three years, unless a strata corporation holds an annual ¾ vote to waive the requirement, or has four or fewer strata lots. Strata corporations that existed on December 14, 2011 were required to obtain a depreciation report by December 14, 2013. Newer strata corporations must obtain a depreciation report within 6 months following the date of their second Annual General Meeting (or the last date that they would have been required to hold their second AGM if there was a waiver of the meeting).

Find complete information about requirements for Depreciation Reports at the BC Office of Housing and Construction Standards.