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Policy Regarding Use of Another Firms Depreciation Reports

 

We are constantly asked to quote on Renewals (new reports to us) based on another firms report, who did the in initial report.

Doing a renewal based on another firm’s report is complicated as we do not know what the other firm has included in the report.

Some firms provided condensed data which does not allow a new firm to benefit from the prior report, and the development must be measured again. We do not believe this is in your interest, but cannot give a quote with a discount without reviewing that report.

The removal of the following basic renewal friendly information from a report is important for Strata Councils to understand, so the Strata Corporation is not bound to reuse the same provider based on economic reasons. If this data is not available, we and any other provider should start from the beginning.

The following list is the most important issues to Strata Reserve Planning to complete a renewal report based on another providers’ initial report. Reliance is permitted on the data collected by a person who formerly measured the components, as long there is an inspection to confirm this information. Discounts off a new report are usually applicable in situations where the component data is available, reliable and complete. We require a copy of the former depreciation report for review, and quotes are available only after the review.

In order for Strata Reserve Planning, or any alternate provider, to use a Depreciation Report by another provider, we require the following basic requirements. It is best to let Strata Reserve Planning determine if this meets the requirements below.

  1. A tabular listing of the components in the Reserve Study.
  2. A tabular listing of the component quantities or identifying descriptions. This is critical for Owners and Management to review. How many doors, how much siding, or how much covering is there over the roof?  Some providers fail to include this to force you to come back to them for economic reasons – no matter how the customer service was
  3. A tabular listing showing each component’s Useful Life, Remaining Useful Life and Current Replacement Cost.
  4. Indicate the inspection date of the report, and the name of the person who inspected and signed the property. A report signed by a firm is against the standards of all organizations.
  5. Completeness: Hypothetical conditions (including proposed improvements). The report is based on the concept of “like for like”. Changes for improvements or changes must be noted in that component, and the rational for that change. Typical reasons are the current item is obsolete (i.e.: single glazed windows) or building code or bylaw changes (i.e.: rain screening walls).
  6. Completeness: Assumptions about assets and resulting impact on cash flow. A Strata Corporation may not remove an essential component that will need replacement from the report to be covered by the Operating Fund. An essential component is one that the complex needs to operate (i.e.: doors, roofs or paving). 
    A Strata Corporation may remove a component does not need to be replace for the complex to operate (i.e.: pool table) if they believe they will not replace it. However, a note is required in the report, in case a change in the decision of the owners comes at a later date.
  7. Completeness: Reciprocal Cost Agreements. A Reciprocal Cost Agreement (RCA) cover the operating cost of a shared amenity, such as a pool or clubhouse. If they are participating, it must be disclosed. A Reciprocal Cost Agreement (RCA) usually receives a report independent of one of the participating Strata Corporation, for privacy regulations.
  8. Completeness: Threshold amount statements. Replacements of items with low costs are usually part of the Operating Fund. If an amount is below the threshold in the contract (usually under $1,000 – $2500), this amount refers to the total amount of all the similar type of components in a building, rather than the cost of an individual component. If the thresehold is too high or the aggregate of a component is not used as the thresehold marker, this may be an issue.
  9. Completeness: Multiple Report requirements based on Types; Phases or Sections.

Strata Corporations with multiple Types (townhomes and apartments) usually are in a single report in developed at the same time.  Strata Corporations with multiple Types may have different CRF accounts for each type. If so, it may be prudent to treat the types of structures, in the same manner as sections, with their own inspection and details in the report, and then a Summary table for the entire complex. Strata Corporations with multiple Phases (portions built at different periods) are in a single report. If a group of phases are similar and built within 3 years, the ages can be blended together. If more than 3 years apart, the phases are usually separated for determining remaining lifespan.Privacy regulation state that a vote from every Sections (portions with separate Council, Bylaws, Budget and bank accounts) is required to create a report with all the Sections in a single document. Otherwise, it is not permitted. Each Section would have their own inspection and details in the report, and then in the case of multiple Sections, a Summary table for the entire complex.

Accurate Physical Inspections, combined with Informative Analysis, leads to Realistic Funding Solutions.
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