Owners of commercial stratas may be forced to deal with a problem traced to poorly managed residential condo buildings.
"The [B.C.] government sees no difference between commercial or residential stratas," said Neil Hamilton, senior property adviser with MacDonald Realty Ltd. in Vancouver, who has been monitoring changes to the B.C. Strata Property Act, which come into effect March 13.
The changes mean that every strata corporation will have to file a "depreciation report" every three years, outlining the current conditions of the strata buillding, and also file and continually update a 30-year budget for repair, maintenance and upgrades. The first depreciation reports must be filed by the end of 2013.
The changes were forced because some B.C. residential strata corporations, the first of which are now 40 years old, have failed to keep contingency funds at levels required under the Strata Property Act.
"The government is trying to clean up the ongoing upgrade, repair, maintenance process in B.C. [residential] stratas," Hamilton said. "It is for consumer protection."
The changes could raise strata fees, he added, as strata corporations pay to prepare and update the reports, which could run as high as $50,000 for a large condominium building.
A strata corporation will be allowed to exempt itself from the regulations by a 75 per cent vote of members, with each exemption good for 18 months. Also, buildings with five or less units - which can be typical in a commercial strata building - are also exempt.
But strata owners who opt for an exemption may wish they hadn't, said Ed Wilson, partner with the Vancouver law firm of Lawson Lundell LLP, who has advised the provincial government on real estate legislation.
Wilson said the depreciation reports will likely be requested by potential strata buyers and mortgage lenders. "If you don't have a report, a buyer may not want to buy and a lender may not want to lend," Wilson said. Even strata owners in buildings with five or less units, which are automatically exempt, may want to file the reports for financing and insurance purposes, he added.
The changes also make it mandatory to attach a depreciation report to the existing disclosure form when a strata unit is being sold, Hamilton noted.
The depreciation reports should also concern commercial strata investors who rent their units to tenants, said Wilson. "The question is, who is responsible for paying for the repairs, the tenant or the landlord investor?" Commercial leases vary, with some saying the tenant is responsible for special levies, while others do not, he explained.
from Western Investor March 2012
