Choosing a Depreciation Report Provider for a Strata
There are many different kinds of strata corporations. The knowledge and expertise required to prepare a depreciation report for a six-plex will be considerably different than those required for a high rise condo tower with its own power generating plant, sections and underground parkade.
This is why choosing a depreciation report provider is an important decision for strata corporations.
There are legal requirements for depreciation reports including who can prepare the report. The Strata Property Regulation requires that the “person” (this means the individual, firm or company) preparing the depreciation report must have the knowledge and expertise to:
- understand the scope and complexity of the common property, limited common property, and common assets including individual components and their condition and life expectancy;
- provide the financial forecasting required.
The depreciation report provider will also need to understand the strata corporation’s bylaws and any agreements entered into with owners respecting the repair and maintenance of common property, limited common property and strata lots.
This may require a team of people with expertise in different areas.
The Strata Property Act does not limit which professions can prepare depreciation reports given the wide range of strata properties. Professionals who work on depreciation reports can include: applied science technologists, appraisers, architects, certified reserve planners, certified home inspectors, engineering technicians and technologists, professional engineers, quantity surveyors, general contractors and architectural or building technologists.
For example, a high rise strata could hire a structural engineering firm that specializes in building science and building envelopes.
Bare land (“strata subdivisions,” for example) could hire an engineering firm that specializes in subdivisions and understands the repair and renewal of bare land strata corporation common property components which can include roads, water and sewage utilities and other infrastructure.
It is possible that in some strata corporations, the expertise and knowledge may exist among the strata lot owners to prepare the depreciation report or to assist the qualified person or team in preparing the report. Carefully consider the responsibilities and risks involved in having a strata lot owner(s) prepare a depreciation report.
When the strata corporation is ready to hire a depreciation report provider, the strata council, or delegate, should prepare a “call for bids (CFB)” or a “request for proposals (RFP)”.
The Request for Proposals (RFP) or Call for Bids (CFB) is a document that describes the work that needs to be done, the standards that must be met including any time limits, the qualifications expected, how the winning bid will be chosen, and the deadline for bids. Strata associations like CHOA and VISOA have examples of Request for Proposals or Call for Bids on their websites.
As well some strata corporations may have bylaws outlining the process to be used when awarding contracts.
Developing a RFP or CFB is the best way to ensure that the report will meet the strata corporation’s needs and that the bidders understand the strata corporation’s assets and the scope of work. This also allows the strata corporation to compare proposals more easily.
When setting a timeline for the work, allow firms enough time to get it done properly. Sometimes the best firms won’t bid if they don’t think there is enough time to do a good job.
Next, the strata council (or delegate) should collect a list of qualified report providers. The strata council can ask other stratas, check with the strata property manager for the names of consultants who have done good work for similar strata corporations. Double-check that any recommendations are impartial i.e., that there aren’t any monetary or other incentives for recommendations.
Then the strata council (or delegate) can send a RFP or CFB to the companies or people on the list. Allow at least four to six weeks for a response. Invite bidders to visit the strata and take a tour before giving a quote. That way, there is less chance for disagreements later about the scope of work that’s involved.
Bidders should be treated equally. Bidders should talk only to the contact person listed in the RFP document and any information given to one bidder should be given to all bidders.
The strata council, or delegate, should receive and rank the proposals. The cheapest bid may not be the best. Look for the proposal that meets all requirements and asks a fair price for the job.
It is also important to consider which product is the most user-friendly and best suited to the strata corporation’s needs. Council members need a study, and provider, that they are comfortable working with when budgeting and reporting to strata lot owners.
Strata corporations should consider the following questions when choosing a depreciation report provider:
1. What are the qualifications of the personnel involved in the study? What is the range of expertise offered with respect to a strata corporation’s particular infrastructure?
2. What experience do the personnel have in providing depreciation reports for similar strata corporations?
3. To what degree is the provider going to customize the report?
- phasing of major expenditures;
- cash flow models which reflect the strata corporation’s circumstances.
4. What is the scope of work including:
- a clear outline of service to be provided;
- details of inspections included.
5. Are there related services offered by the provider that may result in an opportunity for cost savings? For example, what about providing or revising a maintenance plan? Would there be any cost savings if the provider also completed the next depreciation report?
6. What are the post-presentation services? Can requests for changes in replacement scheduling be made following the initial presentation; if so, is there a fee involved?
7. What is the method and format of presentation and what style is best suited to the strata corporation’s needs? Short and concise is sometimes more easily understood than long and verbose.
8. Is it all electronically available for easy access and updating?
Ask for examples of reports prepared for other clients!
Checking references is important, don’t skip this step. Ask the company for names of clients with buildings and assets similar to yours. Check in your community. Ask the references about the quality of the job and the usefulness of the report. Also ask about time or budget overruns, any failures to complete tasks, and whether clients would hire this company again.
Check for insurance: confirm whether the company or professional has liability and errors and omissions insurance and what coverage is provided by this insurance.
It is best to have a written, fixed-price contract or letter of agreement. In the contract, the depreciation report provider agrees to carry out the work the strata corporation asks for, at the quoted price, by a certain date; and the strata agrees to pay the quoted price when the depreciation report is presented.
If the company is also agreeing to update the depreciation report in the future for a set price, make sure this is included in the agreement.
If signing a standard contract, a best practice is to have the strata corporation’s lawyer review it before signing.
Depreciation reports are required every three years. Getting an update from the same provider may offer cost-savings for the strata corporation.
Choosing the right depreciation report provider will make it easier for strata corporations to maintain and repair their common property with a helpful depreciation report and cost effective updates.
The information is provided for the reader’s convenience as a basic starting point; it is not a substitute for professional advice including legal advice.This content is periodically reviewed and updated by the Province of British Columbia as per the date noted: December 12, 2016. Please note: a strata corporation's bylaws and rules can be amended.
Sections of the Act: 1, 35, 59, 91-96, 98-101, 103, 105, 108, 109, 111, 158, 194, 195
Sections of the Regulations: 6.1-6.6, 6.11, 11.1-11.3
The information on this website about strata housing is provided for the user’s convenience as a basic starting point; it is not a substitute for getting legal advice. Learn more about the site’s purpose and limits. The content on this website is periodically reviewed and updated by the Province of British Columbia as per the date noted on each page: December 12, 2016.