Depreciation Reports contain a significant amount of information. A common challenge is to determine what to do with the information from the Deprecation Report and to determine how to fund maintenance programs and major renewals.
It is ultimately the responsibility
of the owners of a strata corporation to decide how to fund or manage the financial operations or repair programs. A strata corporation may decide to execute a maintenance plan for their building’s systems, which could occur once per year or on a more frequent basis. This kind of a maintenance program would need to be adequately planned for and it would need to be incorporated into the annual budget to ensure that the scheduled services are properly funded and that they follow a dedicated schedule.
Reserve Funds are maintained for major renewals (exterior cladding, doors and windows, roofing, balconies, plumbing, electrical and all other common property and assets). An owner contributes to the funding of maintenance programs by way of their monthly strata fees, which are calculated using unit entitlement and the annual operating budget. An owner contributes to the funding of “reserves” by way of special levies. If 3⁄4 of the owners voting at a general meeting are in favour of raising money for a specific reserve or project, they will either be required to pay a series of installments with specific due dates or they will be required to make one lump sum payment by a particular date.
A Depreciation Report should contain information that will assist a strata corporation to plan ongoing maintenance and to set long term financial goals for major renewals. The report should give a minimum of three financial models to consider. The strata corporation is by no means obligated to adopt any of the suggestions. However, it is in the ownerships’ best interest to review the strata corporation’s upcoming financial requirements and to begin to devise a plan on how they will raise the necessary funding.
As a strata agent who has looked after a number of strata corporations, it is not uncommon to see special levies proposed at general meetings defeated. Individuals may opt to defer costs because they do not want to spend money at the time but delaying repair work can and often does result in much higher costs down the road. Owners living in strata corporations should begin to plan for the future in an effort to reduce the financial impact on any one owner and they should avoid delaying repairs and renewals.