How to Understand Your Depreciation Report and What to Do Next

A Depreciation Report (DR) is a crucial tool for any strata council, property manager, or condominium owner. It forecasts long-term repair and replacement costs for your building’s key components (roof, HVAC, plumbing, etc.) and helps you plan for necessary funding. By highlighting upcoming expenses, a DR allows you to:

• Avoid Surprise Costs: No more last-minute levies or sudden fee hikes.

• Extend the Life of Building Components: Address small issues early to prevent expensive overhauls later.

• Maintain Property Value: A well-funded and well-maintained property typically attracts higher resale values.

However, after you receive your Depreciation Report, it’s easy to feel overwhelmed by technical data and cost forecasts. Below, we break down how to interpret those details and turn them into a proactive maintenance plan..

What Is a Depreciation Report?

Depreciation Reports can vary in layout, but most include the following components:

1. Component Inventory

   An itemized list of major building elements—like the roof, exterior cladding, elevators, or plumbing systems. This section will often include:

   • Current Conditions: Notes about present wear, damage, or potential problems.

   • Estimated Useful Life: How many years each component has before it requires major repair or replacement.

     
     

2. Projected Costs

   This section outlines future expenses associated with each component. It typically includes:

   • Short-Term Costs (1–5 years): More urgent or imminent repairs.

   • Long-Term Costs (6–30 years): Forecasted expenses to help you plan maintenance schedules well in advance.

     
     

3. Funding Recommendations

   Many Depreciation Reports come with financial scenarios, showing how different funding strategies (like increasing monthly strata fees or reallocating reserve funds) can cover upcoming expenses. Expect to see:

   • Contingency Reserve Fund (CRF) Projections: A breakdown of how much is currently in the CRF vs. how much you’ll need in future years.

   • Fee Increase Scenarios: Examples of how adjusting monthly fees or special levies might impact your strata’s financial health.

     
     

4. Maintenance & Replacement Timeline

   A timeline that aligns your building components with the recommended schedule for repair or replacement. This helps you coordinate and potentially combine projects for cost savings.

   
   

How to Interpret the Findings

Once you’ve identified the core sections, it’s time to make sense of the data:

1. Focus on High-Priority Items

   If the Depreciation Report highlights any component that requires urgent attention or is already past its expected lifespan, prioritize these repairs first. Delaying them could lead to more severe (and costly) damage.

   
   

2. Compare to Your Current Budget

   Cross-reference the projected costs with your existing reserve fund and monthly fees. If there’s a shortfall, you’ll need to strategize how to bridge it—through fee increases, special levies, or cost-saving measures.

   
   

3. Look for Clusters of Upcoming Repairs

   If multiple big-ticket items are due around the same time (e.g., roof replacement and elevator overhaul), consider how to spread out these projects—or potentially bundle them—to make budgeting and scheduling easier.

   
   

4. Check for Missing Items

   Ensure the Depreciation Report includes all major elements of your building. If something significant (like underground parking) is omitted, consider asking the Depreciation Report provider to revise or append the report.

Common Misconceptions About Depreciation Reports

Even a well-prepared Depreciation Report can lead to misunderstandings. Here are a few to watch out for:

“The DR Is an Exact Science”

Cost estimates and lifespans are projections, not guarantees. Market fluctuations, inflation, and unforeseen damage can all alter actual expenses.

“We Only Need to Follow the Minimum Funding Levels”

Underfunding a reserve account might be tempting to keep fees low, but it can lead to expensive special levies later if actual costs exceed estimates.

“We Can Ignore Minor Repairs”

Small issues—like minor leaks—can escalate quickly if not addressed promptly. The DR’s numbers assume regular maintenance.

“Every Repair Requires a Special Levy”

Proactive saving in a CRF (as suggested in the DR) can help avoid frequent levies and maintain smoother, predictable fees.

Next Steps After Receiving Your Depreciation Report

1. Share the Findings

   • Strata Council & Owners: Host a meeting or send a summary that highlights key points. Transparency builds trust and helps everyone understand potential fee adjustments.

   • Property Manager or Board: Ensure all decision-makers have full access to the Depreciation Report for reference during budget planning.

1. Prioritize Repairs & Maintenance

   • Immediate Tasks: Anything flagged as urgent in the Depreciation Report should be handled right away to prevent greater damage.

   • Long-Term Plan: Establish a timeline for major projects, whether it’s roof replacement or elevator modernization, and work it into your annual budgeting cycle.

     
     

2. Reassess Funding Strategy

   • Evaluate Reserve Contributions: If the report indicates a shortfall, consider increasing monthly fees or adopting small, incremental levies to prevent financial shocks.

   • Seek Professional Advice: Consult with financial planners or property management experts to optimize how you fund future repairs.

     
     

3. Communicate with Contractors

   • Obtain Quotes: If the Depreciation Report outlines specific projects (like a window replacement in the next five years), start gathering contractor estimates early. Actual quotes can provide more accurate figures for your planning.

   • Schedule Regular Assessments: Ensure that any new repairs are documented and fed back into your next Depreciation Report update.

     
     

4. Keep Your DR Updated

   • Regular Updates: A Depreciation Report is typically updated every 3 to 5 years, but you may need one sooner if major renovations or unexpected damages occur.

   • Track Changes: Keep records of completed projects and associated costs so they can be factored into the next version of the Depreciation Report.

Moving Forward with Your Depreciation Report

A Depreciation Report is more than a reference—it’s a roadmap for your building’s financial and structural well-being. By thoroughly understanding its contents and acting on its recommendations, you can ensure:

• Stable Monthly Fees: Avoid last-minute crises that require steep levies.

• Long-Lasting Components: Extend the life of critical systems with timely maintenance.

• Enhanced Property Value: Well-maintained properties hold or increase their value better.

• Peace of Mind: Fewer surprises for both owners and managers.

  
  

Need Expert Guidance?

If you’re unsure how to interpret or implement your Depreciation Report’s recommendations, our team is here to help. From budgeting advice to project management, we offer tailored solutions to keep your property in prime condition.

• Get a Depreciation Report Price Estimate with our quick, user-friendly calculator.

• Contact us for a consultation to ensure your property remains financially secure and well-maintained for the long haul.

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External Links:

1. BC Government Strata Housing website - https://www2.gov.bc.ca/gov/content/housing-tenancy/strata-housing

2. Condominium Home Owners Association of BC (CHOA) - https://choa.bc.ca/resources/strata-property-act/