A licensee in BC is involved in a transaction where the buyer is purchasing a 1990s-era strata unit. The building has not had a depreciation report completed and the strata voted to exempt itself. Which of the following best describes the licensee's obligations?

Q: What is the correct answer to: A licensee in BC is involved in a transaction where the buyer is purchasing a 1990s-era strata unit. The building has not had a depreciation report completed and the strata voted to exempt itself. Which of the following best describes the licensee's obligations?

The correct answer is The licensee should advise the buyer about the absence of a depreciation report, the implications for understanding future repair costs, and recommend the buyer review the CRF balance, financial statements, and building condition as part of due diligence. Option B is correct because even though the strata legally exempted itself from the depreciation report by 3/4 vote, the licensee has a duty to act in the buyer's best interest. This includes: advising the buyer about the absence of a depreciation report, explaining the implications (less information about future repair costs), and recommending thorough alternative due diligence — reviewing the CRF balance, financial statements, meeting minutes for maintenance discussions, and potentially obtaining an independent building assessment, especially for a 1990s-era building that may have building envelope issues.

Q: What background knowledge is needed for this Residential Trading question?

When a strata corporation has waived the depreciation report requirement, buyers face an information gap about future repair and replacement costs. A prudent licensee advising a buyer should: explain what a depreciation report provides and why its absence matters; recommend reviewing available alternatives (CRF balance, financial statements, minutes discussing maintenance); suggest an independent building assessment for older buildings; highlight that 1990s buildings may have envelope issues requiring costly remediation; and ensure the buyer understands they are proceeding with less information about financial risk than they would normally have.

Q: What is a good way to remember the answer to this Residential Trading question?

Remember 'No Report = More Due Diligence' — when the depreciation report is missing, the licensee should recommend more alternative investigation, not less caution. When the exam asks about missing depreciation reports, recall 'More Due Diligence' — the absence of the report increases, not decreases, the need for the licensee to advise thorough investigation.

Q: What exam tip applies to this Residential Trading question?

The correct answer in duty-to-advise questions always involves proactive guidance to the client. The licensee should neither ignore the issue nor refuse to act — they should advise, explain risks, and recommend alternatives.

Q: How does this Residential Trading concept apply in real world practice?

A buyer's agent in Surrey is helping a client purchase a unit in a 1993 condo building where the strata voted to waive the depreciation report. The agent advises the buyer: 'Without a depreciation report, we cannot assess projected repair costs. Given this building's age, there may be significant upcoming expenses. I recommend we review the CRF balance and financial statements carefully, look at minutes for maintenance discussions, and consider hiring a building inspector to assess the common areas.' The buyer proceeds with enhanced due diligence and discovers the building may need $40,000 per unit in plumbing upgrades.

Question

Residential TradingBCHARD

A licensee in BC is involved in a transaction where the buyer is purchasing a 1990s-era strata unit. The building has not had a depreciation report completed and the strata voted to exempt itself. Which of the following best describes the licensee's obligations?

Answer Options

A

The licensee has no obligation to discuss the depreciation report since the strata voted to exempt itself

B

The licensee should advise the buyer about the absence of a depreciation report, the implications for understanding future repair costs, and recommend the buyer review the CRF balance, financial statements, and building condition as part of due diligence

C

The licensee should refuse to act in the transaction

D

The licensee should order a depreciation report on behalf of the strata corporation