Engineering Reports vs. Depreciation Reports

Real estate professionals should be aware that the terms “engineering report” and “depreciation report” reference two entirely different documents.

Over the years, many strata corporations have obtained engineering reports to identify structural, envelope or other building components deficiencies requiring repair. The report was specific to the problem areas and usually provided options for repair. The means by which a real estate professional can access an engineering report is discussed below under “Additional Strata Corporation Documents.”

In 2011 the Strata Property Act was amended to require strata corporations to obtain a depreciation report no later than December 13, 2013 unless the strata corporation has fewer than 5 strata lots, or the owners by 3/4 vote, agreed to waive the report. The Strata Property Act requires that a depreciation report contain an inventory of the physical components of the development, a summary of the repairs and maintenance work that occurs less often than annually, and a financial forecast that sets out the anticipated maintenance, repair and replacement costs projected over 30 years. The report must include a description of how the contingency reserve fund is currently being funded and it must contain at least three cash flow funding models to pay for the repairs. The report must include the name of the person preparing the report, a description of the person’s qualifications, whether the person carries errors and omissions insurance and it must set out the relationship between the person and the strata corporation.

The Real Estate Services Rules require real estate professionals to advise their client to seek independent professional advice on matters that are outside the expertise of the real estate professional. Real estate professionals should therefore refrain from expressing an opinion on either an engineer’s report or a deprecation report. Buyer’s agents should recommend that their buyer obtain professional advice if the buyer has questions or concerns relating to the report.