Depreciation Report Reviews
If your strata received a Depreciation Report that's hard to understand, doesn't seem comparable to others you've seen, or leaves you uncertain about your financial position — there may be a reason for that.
The Standards Problem in BC
Depreciation Reports are meant to help strata corporations and owners build a sound financial plan. But in British Columbia, there are no legislated standards governing how those reports are prepared. The result is that reports vary widely in terminology, methodology, and quality — making them difficult to compare and sometimes difficult to trust.
The Appraisal Institute of Canada (AIC) and the Real Estate Institute of Canada (REIC) are the only Canadian organizations with specific Depreciation Report reserve planning standards. The National Reserve Study Standards (NRSS), widely used in the United States, are also recognized as a leading framework — but no Canadian body currently enforces compliance with them.
Most other providers follow only their own internal corporate standards. That means two reports on identical buildings can look completely different and reach very different conclusions.
The Transparency Problem
Some reports are deliberately or inadvertently opaque. If your strata ever wants to switch providers, a non-transparent report means the incoming firm has nothing usable to build on — and must start the full process from scratch at full cost.
This is not an accident in every case. It can create dependency on the original provider, whether your Strata is satisfied with their work or not.
A well written report should help—not lock you into a single provider.
Transparent reports have clear component descriptions with discussion of the replacement history, show the exact year the component was installed or replaced, as well as the year will be replaced, the unit of measurement (i.e.: square feet or number of doors); the number of units (i.e.: 12,000 square feet or 30 suite doors), the current cost per unit of measurement (i.e.: $8.00 per square foot or $1,200 per suite door), as well as understandable the Construction Inflation Rate (CIR) assumptions and the logic for the Investment Inflation Rate (IIR), which details the average rate of income from GIC investments. The CIR is always greater than the IIR.
A well-prepared report should be transparent, which makes it transferable. If yours isn't, that's worth knowing.
Is the Recommended Funding Plan Realistic?
A technically compliant report is not always a practical report.
- Owner affordability
- Repair timing
- Inflation and construction cost escalation
- Risk of special levies
Do You Understand the Financial Health of the Strata?
Reserve Adequacy, or Percent Funded, is the internationally accepted methodology for determining the financial health of a Strata. It is the amount of money in the CRF over the amount of money if the CRF was fully funded, stated as a percentage. It represents the strength of the actual or projected funding plan.
It is easy to recreate from a Depreciation Report that is Standards based and transparent.
Strata Reserve Planning has developed a review checklist based on CARSS (Commonly Accepted Reserve Study Standards) based on all the reserve planning standards listed above.
Our Depreciation Report Review examines whether your current report:
- Meets the statutory requirements of the Strata Property Act.
- Complies with AIC, REIC, and NRSS standards.
- Is prepared in a transparent, transferable manner.
- Reflects a realistic and supportable funding plan, and
- Attempt to determine the Reserve Adequacy ratio.
Whether you've just received a new report, are reviewing a draft before it's finalized, or want an independent second opinion on your current provider's work — we can help.