Depreciation Reports - The Aftermath

The Cry for Help from a Strata Resident

Richard Shatto, May 2, 2013

Yesterday, I got a call from the owner of a Vancouver Island condominium who had some questions and concerns over the "next-step" actions his strata council was proposing in the aftermath of his strata building assessment and depreciation report. He was heading that evening into the all-important strata meeting where they would vote regarding decisions about what repairs either did or did not need to be done.

(NOTE: Not the building talked about in this article)

While he didn't know the exact details of the proposal, this was the first meeting he'd been able to attend, word was out that council wanted to assess each resident the full amounts to fix everything the report had suggested, and to do them all immediately. This would mean an estimated cost (it usually goes higher) of roughly $20,000 per unit, or they could opt for $21,400 paid over 2 years, presumably with financing. Obviously, for this call, he was not displaying any distinct gratitude towards the government's mandated depreciation reports. 

His main question was, is the strata obligated to do everything immediately? I first explained that not being a lawyer, what I was about to opine would a legal one too. I went on to suggest I did not believe the depreciation report, in and of itself, obligated the strata to do the work it suggested and certainly not in an immediate or strict timeline. In fact, the strata may not be required to make any repairs if they chose not to, though, I strongly suggested, that was probably not the best strategy. My advice was that he and other concerned owners discuss creating operational and fiscal options for re-mediating the problems, perhaps on an iterative basis, say, doing one building one year, anther the next and so on. 

An interesting take-away on this story is that depreciation reports and their strategic aftermaths can be a mixed bag of good and bad, and much of that depends on the scope of the depreciation report itself. In this case, the strata had opted for doing an intensive building inspection to get a full read on the condition of their building and making the depreciation report itself more expensive (NOTE: as I've pointed out in previous blogs, doing an extensive inspection is not required).  In this case, an inspection was done and it turned up some bad news, envelope issues, that would cost some money to repair. And, while that leaves owners with some work to do and money to be spent, it brings the building up to the condition it should be. 

So, what if the depreciation report had chosen to NOT pay for the the inspection? The strata would have fulfilled its obligation to do the report, but it would not have known (or at least documented) the "gremlin" lurking within its building's walls. Incoming buyers of units would have been unaware of the potential costs and invested in a sub-standard property without knowledge of it.

In a situation where an inspection isn't done, and a problem is subsequently found, a legal question emerges its ugly head, who is liable? Should the authors of the depreciation report be liable for not finding the issues? Not because they investigated and didn't find it, which is always possible, but because they didn't look; chose to turn a blind eye. Or, should the strata be liable because they didn't require (read: pay for) a legitimate inspection that would have/should have found it? 

For this owner, now lamenting the nefarious report and especially the inspection that had found the problem, I advised that it was better for all stakeholders to know what the real condition of the building is. It's now a matter of working together with everyone to create a proper, workable plan and timeline to deal with it. The best possible outcome in my opinion, is a strategic property maintenance plan put together by a reputable property maintenance (not management, maintenance) company to take care of the long term needs of the buildings. 

It is hard to imagine this as a unique situation. There will be literally hundreds or thousands of stories like these over the next few years. Let's hope the government, property managers and strata councils have wisdom and prudence in knowing how to manage them. 

Does your strata need an inspection or a depreciation report? Contact Point Nexus Consulting for a discussion. To learn more visit our website: www.pointnexus.ca

Construction Variables for Renovating vs. New

13 Reasons Your Renovator Has To Think Differently

Richard Shatto May 1, 2013

This post is to help home owners who are considering remodeling think about what your renovations contractor needs to know that even new home builders may not when costing for a remodeling project.  Estimating costs for repair or remodeling is different from new building costs due to these following factors which may be present in any given repair and renovations project.

1. Equipment usage curtailment due to the physical limitations of the project, with only hand-operated equipment being used.

2. Increased requirement for shoring and bracing to hold up the building while structural changes are being made and to allow for temporary storage of construction materials on above-grade floors.

3. Material handling becomes more costly due to having to move within the confines of an enclosed building. For multi-story construction, low capacity elevators and stairwells may be the only access to the upper floors.

4. Large amount of cutting and patching and attempting to match the existing construction is required. It is often more economical to remove entire walls rather than create many new door and window openings. This sort of trade-off has to be carefully analyzed.

5.Cost of protection of completed work is increased since the usual sequence of construction usually cannot be accomplished.

6. Economies of scale usually associated with new construction may not be present. If small quantities of components must be custom fabricated due to job requirements, unit costs will naturally increase. Also, if only small work areas are available at a given time, job scheduling between trades becomes difficult and subcontractor quotations may reflect the excessive start-up and shut-down phases of the job.

7. Work may have to be done on other than normal shifts and may have to be done around an existing production facility which has to stay in production during the course of the repair and remodeling.

8. Dust and noise protection of adjoining non-construction areas can involve substantial special protection and alter usual construction methods.

9. Job may be delayed due to unexpected conditions discovered during demolition or removal. These delays ultimately increase construction costs.

10. Piping and ductwork runs may not be as simple as for new construction. Wiring may have to be snaked through walls and floors.

11. Matching ‘‘existing construction’’ may be impossible because materials may no longer be manufactured. Substitutions may be expensive.

12. Weather protection of existing structure requires additional temporary structures to protect building at openings.

13. On small projects, because of local conditions, it may be necessary to pay a tradesman for a minimum of four hours for a task that is completed in one hour.

All of the above areas can contribute to increased costs for a repair and remodeling project. Each of the above factors should be considered in the planning, bidding and construction stage in order to minimize the increased costs associated with repair and remodeling jobs.

For more information about Point Nexus for Home Building or Renovating go to pointnexus.ca