Are you buying a condo?
Are you overwhelmed by the volume of strata documents and how to interpret them?
And then there is that Depreciation Report!
What is THAT all about?
Our Vancouver Island house inspectors will help you navigate the documents and learn what they mean and how they can affect the purchase you are hoping to make. Fail to read and understand them, at your peril!
Part of those documents will be a Depreciation Report. This intimidating title refers to a document that stratas are required to have and simply put, it is an analysis of the building(s) and what can be expected to require maintenance and expenditure in the foreseeable future.
It will help to determine if the strata has been competently maintaining the plant and structure of the building and if the anticipated expenditures will be met by the contingency fund and the strata fees currently assessed on each owner. The report should predict the life of major fittings and fixtures in the building – like carpets, balcony railings, elevators, hot water systems, public areas etc. The need for this report arose out of the “leaky condo” era of 1984-1998. Building standards were changed in that time frame and the result was poor design and construction. The building boom that ensued during that time period created a style of construction that basically leaked like a sieve. Brand new town homes and condos did not keep the rain out and many homeowners were faced with such huge remediation costs, some had no choice but to walk away from their purchases and declare bankruptcy. The crisis cost the BC economy billions; you may have seen the buildings around town wrapped in protective materials as contractors worked inside to replace the building envelope.
When buying a strata property, the choice of an inspector is vital. They must be qualified to read and interpret these reports and tell you whether the report is adequate to the profile of the building and whether the strata fees and contingency fund will meet future maintenance and plant replacement costs. This is where experience factors in; inspectors who have years of inspecting local stratas know the building, know their maintenance history and can provide the valuable knowledge and guidance you need to make an informed decision.
Equally, if you live in a house you need to make financial arrangements to cover the cost of future repairs and maintenance. That is a given!
- What condition is the roof in? Will it need replacing soon?
- How old is the hot water heater?
- Are pathways & drive in need of attention / replacement?
- Is landscaping tidy and attractive?
- Are carpets or floors outdated and in need of replacement?
- Are bathrooms and kitchens in need of an update?
It’s called the cost of ownership and the wise house owner sets a little aside regularly to meet those future costs!
With a condo, the list is longer, more comprehensive and consequently more expensive! Things like replacing aging elevators can amount to hundreds of thousands of dollars in a large high-rise with multiple elevators.
We have all seen buildings that look like this……….
Where does the money come from if the contingency fund is inadequate? Right – your pocket! If there is not a healthy fund, and a major expense comes up, the strata council will have to assess an amount to each owner based on their unit entitlement. Those assessments can range from a few thousand dollars to tens of thousands, per unit, and it won’t matter if you are a new owner or have lived in the building for years!
This is where your due diligence becomes important and you need to know how well the strata council has been managing the building.
It has been said that 90% of contingency funds are insufficient.
When you buy a condo – often because of budget constraints and the affordability of a condo over buying a house – it pays to remember that if you don’t pay now, you may pay later. Low condo fees and low contingency funds will lead to costs down the road.
As you contemplate your strata purchase, interviewing an inspector with the right qualifications assumes even greater importance. Interpreting the Depreciation Report is vital.
Our inspectors are qualified to WRITE the reports you are reading. Who better to pass judgement on the property you’re considering purchasing?