What Is a Depreciation Report?

The Document That Tells You the Truth About a Building

When you buy a condo or townhouse in Victoria, you receive a strata disclosure package that can easily run 100 to 300 pages. Inside that package, one document stands above the rest in importance: the depreciation report. If you only have time to read one thing carefully before making one of the biggest financial decisions of your life, this is it.

What a Depreciation Report Actually Is

A depreciation report is a professional engineering study of a strata corporation's common property and assets. It is prepared by a qualified building inspector or engineer and provides two things: a detailed inventory of the building's physical components along with their current condition, estimated remaining useful life, and projected replacement cost; and a 30-year financial forecast modelling how the strata should fund those future repairs and replacements through the contingency reserve fund (CRF).

In British Columbia, the Strata Property Act requires most strata corporations with five or more units to obtain a depreciation report every three years. The requirement is relatively recent, dating from 2012, so the age and quality of reports varies across Victoria's building stock.

What It Covers

A thorough depreciation report will assess:

• The building envelope, including the roof, exterior cladding, windows, and waterproofing
• Mechanical systems, including heating, ventilation, plumbing, and elevators
• Electrical systems and common lighting
• Parkade structure and waterproofing (a major cost item in many older Victoria buildings)
• Common amenity areas such as lobbies, fitness rooms, and patios
• Site components like landscaping, paving, and fencing

For each component, the report provides an estimate of the remaining useful life and the projected cost to repair or replace it. These costs are then modelled against the current CRF balance and projected future contributions to determine whether the fund is adequately capitalized.

The Three Funding Models

Most depreciation reports present three CRF funding scenarios:

• Baseline funding: The minimum contributions needed to keep the fund from going negative at any point over 30 years, assuming no special levies.
• Threshold funding: A more conservative model that maintains a minimum balance buffer throughout the projection period.
• Full funding: The model that most closely aligns the fund balance with the depreciated value of the building's components at any given point in time.

Many strata corporations operate on or near the baseline model, which can mean the fund is adequate but has little margin for error. Buildings funded on the threshold or full-funding model are in a stronger financial position and less likely to require special levies.

Red Flags to Watch For

When reviewing a depreciation report, these are the warning signs that should prompt deeper investigation before proceeding with a purchase:

• A CRF balance that is significantly below the baseline funding recommendation
• Major capital work identified in the near term (one to five years) with no clear funding plan
• Evidence of envelope deficiencies, moisture intrusion, or deferred parkade maintenance
• A report that is more than three years old and has not been renewed
• Meeting minutes that reference ongoing debates about whether to fund the CRF to the required level

What a Good Report Looks Like

A healthy depreciation report is not necessarily one with no upcoming work. Every building has a lifecycle, and older buildings will always have more items on the horizon. What you want to see is: major items identified, costs estimated realistically, and the CRF funded at a level that can absorb them. A building in Fairfield or James Bay that is 30 years old, has an up-to-date report, a well-funded CRF, and a history of proactive maintenance is a much safer purchase than a newer building that has been deferring contributions and ignoring small problems.

Depreciation Reports and Strata Age in Victoria

Victoria has a significant stock of strata buildings built in the 1970s, 1980s, and 1990s. Many of these buildings are now facing major capital expenditures for envelope work, elevator modernization, and parkade restoration. Some have been well-managed and have the reserves to handle it. Others have not. The depreciation report is the document that tells you which situation you are buying into.

Buildings on Yates Street, Fort Street, and throughout the Cook Street Village area are popular with buyers and often well-maintained, but age matters. Always review the report. For newer buildings in Langford and the Westshore, reports are often more optimistic given the shorter lifecycle of newer components, but it is still important to review the builder's disclosure and early strata meeting minutes for any known deficiencies.

Getting Help Reading It

Depreciation reports are technical documents, and not every buyer is comfortable interpreting engineering terminology or financial projections. That is part of what a knowledgeable REALTOR is for. William Johnson at BuySellVictoria.ca reviews strata documents with buyers as a standard part of the purchase process. If you have questions about a specific building or a report you are trying to interpret, reach out through BuySellVictoria.ca.