Condo rules to affect investor ROI

Billed as the most significant rule changes in 14 years, amendments to B.C.'s Strata Property Act will force all but the smallest of condo corporations to file depreciation reports every three years.

Those reports must not only outline the current conditions of the condo building, but provide a 30-year budget for repairs, maintenance and upgrades. The amendments take effect next month, athough the first depreciation reports won't need to be filed until late 2013.

The changes effectively duplicate requirements already in place both in Alberta and Ontario and may ultimately bolster the confidence of condo investors now reluctant to adopt buy-and-hold strategies for fear of special assessments and other unexpected maintenance costs.

That extra security, though, may come at a cost to investor cash flow, complain some real estate investors.

It’s likely that a significant number of condo owners, many in Greater Vancouver, will see a spike in condo fees as boards struggle to prepare and update their reports.

Many boards are also expected to levy special assessments in order to make necessary repairs ahead of filing their conditions report -- a way of better positioning the corporation in the eyes of provincial regulators, suggest real estate legal experts.

Preparing the paperwork alone may run as high as $50,000 for a large condominium building, with most boards expected to pass that on to condo investors in the form higher fees.

That won’t just affect buy-and-hold investors, but also those looking to cash out as higher carrying costs for existing units edge above those for new construction.

The challenge of finding buyers for those older units may also get tougher.

There is, however, an out for condo boards opting to defer their initial filing by as much as 18 months. Still, even that grace period could make it more difficult for investors to cash out if buyers object to the lack of transparency.

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