Effective April 9, 2014, strata corporations in British Columbia can fund Depreciation Reports through their annual budgets and withdraw savings from Contingency Reserve Funds to pay for obtaining Depreciation Reports and repairs recommended by Depreciation Reports with a simple majority vote.
Since 2009, the provincial government has taken steps to improve property disclosure in British Columbia through Depreciation Reports. This latest legislative amendment makes it easier for strata corporations to obtain owner approval to fund this disclosure and pay for necessary repairs.
Depreciation Reports Now Included in Operating Fund Expenses
Among other amendments, the Natural Gas Development Statutes Amendment Act, 2014 changed section 92 the Strata Property Act to read: 1
(92) To meet its expenses the strata corporation must establish, and the owners must contribute, by means of strata fees, to
(a) an operating fund for common expenses that
(i) usually occur either once a year or more often than once a year, or
(ii) are necessary to obtain a depreciation report under section 94, and
(b) a contingency reserve fund for common expenses that usually occur less often than once a year or that do not usually occur. 2
By explicitly including Depreciation Report expenses in the definition of Operating Fund, this amendment makes it far easier for strata corporations to plan for and fund Depreciation Reports. Prior to this amendment, many strata corporations had trouble obtaining a 3/4 vote of the owners to approve a special levy or Contingency Reserve Fund expenditure to obtain the report. These expenses can now be included in annual strata corporation budgets.
Voting Threshold for Depreciation Report Repairs Related CRF Expenditures
Perhaps the most significant amendment to the Strata Property Act is the change in voting threshold required to approve Contingency Reserve Funds expenditures and repairs related to Depreciation Reports. Where previously a strata corporation had to obtain approval from 3/4 of the owners before making an expenditure from the Contingency Reserve Fund, this has been reduced to a simple majority through the following change to section 96 of the Strata Property Act: 3
96 The strata corporation must not spend money from the contingency reserve fund unless the expenditure is
(a) consistent with the purposes of the fund as set out in section 92 (b), and
(b) approved or authorized as follows:
(i) the expenditure is first approved by a resolution passed by
(A) a majority vote at an annual or special general meeting if the expenditure is
(I) necessary to obtain a depreciation report under section 94, or
(II) related to the repair, maintenance or replacement, as recommended in the most current depreciation report obtained under section 94, of common property, common assets or the portions of a strata lot for which the strata corporation has taken responsibility under section 72 (3), or
(B) a 3/4 vote at an annual or special general meeting if the expenditure is not described in clause (A) (I) or (II);
(ii) the expenditure is authorized under section 98. 4
Conclusion
These amendments to the Strata Property Act will make it significantly easier for strata corporations to obtain depreciation reports and fund repairs. Prior to these amendments, strata corporations had to obtain 3/4 vote approval to fund depreciation report approval or to waive the requirement to obtain a depreciation report. 5 As the same threshold was needed to pay or to waive Depreciation Reports, many strata corporations opted to waive the report. Even in those buildings that obtained Depreciation Reports it can be a challenge to obtain the previously required 3/4 vote to approve withdrawals from the Contingency Reserve Fund to pay for repairs.
With these new amendments in place, strata corporations can build up savings through monthly Contingency Reserve Fund contributions and pay for Depreciation Reports and recommended repairs by obtaining simple majority votes. This change will ultimately help to ensure that buildings receive timely maintenance and repairs and hopefully reduce tensions within strata corporations over the funding of reports and repairs.
While the impact of these changes will be largely positive, many owners will see their monthly maintenance fees rise over the next few years as strata corporations build up Contingency Reserve Funds, obtain Depreciation Reports and fund repairs through changes through simple majority resolutions.
Notes:
- Bill 12, the Natural Gas Development Statutes Amendment Act, SBC 2014, c.10, s.42 amending section 92(a) of the Strata Property Act, SBC 1998, c.43 ↩
- Bold text reflects modified legislation, underlines added for emphasis. ↩
- Bill 12, the Natural Gas Development Statutes Amendment Act, SBC 2014, c.10, s.43 amending section 96 of the Strata Property Act, SBC 1998, c.43 ↩
- Bold text reflects modified legislation, underlines added for emphasis. ↩
- Strata Property Act, SBC 1998, c.43, s.94(3) ↩
