One of the requirements set out in the Strata Property Regulations is that, in order to be compliant, depreciation reports must include:
At least three cash-flow funding models for the contingency reserve fund, relating to the maintenance, repair and replacement of capital expenditures over the next 30 years.
1. So, are strata corporations required to follow any of these cash-flow funding models in their depreciation report?
The answer is no. Strata corporations are not bound by any of the models or recommendations made in their deprecation report, and, from our experience, the vast majority of strata corporations do not adopt a specific model. In fact, we rarely see that happen.
2. So, how can I tell if a strata is saving enough for the future?
The only way to tell if a strata is saving enough for the future (to pay for all its anticipated capital expenditures) is to analyze the depreciation report and compare that with:
The strata’s current financials, as well as
Review the capital work the strata has completed since obtaining its depreciation report.
3. So, how do I actually do this?
Unfortunately there is no quick or easy way to do this, which is why, in our reviews, we create a custom funding model based on:
The estimates provided in the strata’s depreciation report, and
How much the strata is currently saving for the future.