What should strata pay for depreciation report?

Dear Condo Smarts: We are asking for your help regarding the engineers’ depreciation report required by each strata corporation.

Notice of our AGM for 2012 has just been delivered. We are being asked to approve a special resolution to authorize the expense of $20,000 from our contingency fund to pay for a depreciation report. Is there some way of assessing the cost for this service and what is a reasonable expectation for a 108-unit townhouse complex in Richmond? Perhaps there is some way of better analyzing what we are getting to understand the cost.

Glen Pines Strata Council

Dear council: This is not an easy question to answer because there are so many variables in each strata corporation.

The depreciation planners – many of whom are engineers, licensed appraisers, quantity surveyors and reserve-fund planners – are providing quotes at no cost, so the best place to start is when you request quotes.

Set up a “request for proposals” that includes a profile of your strata corporation. Contact at least three to five candidates who do this type of work, and request a quote be submitted that is valid for at least 60 days from the time of receipt.

It is important that your RFP stipulate exactly what you want done and that you issue the idential RFP to all of the candidates for the job. These requests are worse than useless if they are not consistent.

Stipulate that the quote be a complete or total price that would include all services. You want to avoid a quote that is showing services for sub contractors such as elevators, structural or specialized heating systems as additional costs. You might not be able to control these additional costs.

Your strata can save time and money if you have complete drawings of your building structure, areas, mechanical, electrical and historic documents such as minutes of meetings, warranty histories, repair schedules and all of your governance documents.

Individual strata complexes have significant differences between them, which makes it impossible to predict what the costs are going to be, even if you know what the costs were for a similar-sized complex.

It is safe, though, to estimate that for the first report on a large strata, there could be at least 60 and possibly more than 100 hours of work for the report creator to set up the inventories and plans, conduct site visits, review and interpret documents, bylaws and user agreements, perform the inspections, estimate life remaining in the components, calculate the next 30 years in the life of your property and provide you with funding models.

It should also be noted that many smaller strata corporations of 10-50 units can expect to pay for at least 35-50 hours of the engineering firm’s time for the first report, if the report has any reasonable merit.

A typical example of the complications that arise in the different strata plans is Glen Pines strata, which was constructed in five phases, and not all phases were built by the same contractor. The result is that the depreciation planner is going to have to closely review all five phases for construction differences and the implications of those differences. This adds more time, more documents and more cost.

Another complication is strata corporations that have created sections where the costs of maintenance and renewals are exclusive to those sections. The strata corporation depreciation report needs to address those items. It will also address those items as obligations of the section and not necessarily of the strata corporation, so another layer of work and time is entailed.

We have posted a sample RFP on the CHOA web site, www.choa.bc.ca, in word format. Strata corporations are invited to use it as a working document. It is also helpful if you include an inventory of the records that are available for your strata corporation.

Source: The Victoria Times Colonist