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Understanding Depreciation Report Estimates

Depreciation Reports (as they’re known in BC) or Reserve Fund Studies (as they’re known in many other jurisdictions), enable strata corporations to better plan for future maintenance, repair and/or replacement of common property and common assets.


From a buyer’s point of view, depreciation reports are a tool that can help one better understand:

  • The likelihood that they may face additional special levies, because the strata may not be saving enough in its Contingency Reserve Fund (CRF), to pay for all future projects.

 

That being said, when looking at depreciation reports, it’s important to recognize that the cost estimates represent a “best guess”, and are often considered “Class D Estimates (±50%)”. The report writer (often an appraiser or engineer) comes on site, does a visual inspection of the strata’s common property and common assets, and they then do their best to predict:

  • When the strata will have to repair and/or replace certain components.

  • And how much this might cost.

 

What are Class D Estimates?


Many of the depreciation reports we review note that the estimates provided are Class D Estimates (±50%), which are preliminary estimates based on “little or no site information”. These estimates are typically considered to be +/- 50% in accuracy, with many variables influencing the final price. As an example, this means that if a project is estimated to cost $10,000, the actual cost could range from $5,000 - $15,000.


It’s therefore important for buyers to recognize that their future “strata expenses” could be higher (or lower) than what is noted in a depreciation report, and they should plan accordingly.

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