Kai Mallari's Notes'

Read the Depreciation Report Before the AGM and Before Buying (Home Systems)

5 min read

Read the Depreciation Report Before the AGM and Before Buying

Claim: The strata depreciation report is a 30-year financial forecast for your building’s major capital expenses. It tells you whether the contingency reserve fund is on track to pay for them — or whether special levies are coming. It is the single most information-dense document in strata governance, and most owners never read it.

Mechanism

Every BC strata with 5 or more lots must obtain a depreciation report on a 5-year cycle.1 A qualified professional (professional engineer, architect, applied science technologist, or three other licensed categories as of July 2025) conducts an on-site visual inspection and produces:

  • Component inventory: every piece of common property with an estimated remaining service life (roof, building envelope, windows, elevator, parking structure, plumbing risers, fire suppression, etc.)
  • 30-year cost projection: estimated replacement or major repair cost for each component, in today’s dollars escalated for inflation
  • Three cash-flow funding models: showing how much the CRF needs to accumulate each year to be ready when each component needs replacement

The most conservative funding model (highest annual contributions) means the building rarely needs special levies. A building that consistently follows the aggressive (lowest) model is building up a levy risk over time.

How to read it — the three numbers that matter

You don’t need to read the full report. Focus on:

  1. Current CRF balance vs. the conservative funding model’s recommended balance. If the current balance is below the conservative model, the gap must be closed by higher annual contributions, special levies, or both.

  2. Imminent major expenses (next 5–10 years). Roof replacements, building envelope repairs, elevator overhauls, and parking deck restorations are the big-ticket items. A roof replacement might run 2,000,000+ on a mid-size concrete building. If the CRF won’t cover it, a levy is coming.

  3. The recommended annual CRF contribution. Compare this to what the strata is actually budgeting. If the budget is below the depreciation report’s recommendation, the shortfall is accumulating.

Conditions (when the report is less reliable)

  • Reports are updated every 5 years, so the last report may be up to 4 years old. Costs and component conditions change — treat the figures as directional, not precise.
  • The report is based on a visual inspection, not destructive testing. Hidden deficiencies (building envelope moisture, underground parking corrosion) may not be captured until they become visible failures.
  • As of July 2025, eligible preparer categories expanded — confirm the preparer is in one of the six qualified categories.1

Scope

  • Required for strata corporations with 5+ lots. Stratas with 4 or fewer lots are exempt.
  • Strata-specific: detached homeowners have no equivalent external document, though the same forward-looking capital replacement planning logic applies.
  • The depreciation report covers common property only — in-unit components (hot water tanks, appliances) are owner-responsibility and are not in scope.

When to use it

Before an AGM: the depreciation report should be attached to the AGM package (or referenced as available). Before you vote on the budget (especially the CRF contribution line) or any special levy, look at the report’s recommended contribution and the current CRF balance. Voting for a budget that under-funds the CRF is voting to defer a special levy to a later year.

Before buying a strata unit: Form B must attach the most recent depreciation report.2 Read the executive summary (usually 1–2 pages). If the CRF balance is significantly below the conservative funding model and major components (roof, envelope, elevator) are in the 1–10 year replacement window, factor a levy into your purchase price — or ask the vendor to close the gap before you remove subjects.

So what

The depreciation report is a probabilistic forward view of what this building will cost you beyond your monthly strata fee. A well-run building with a healthy CRF has already built up the capital for the next roof, elevator, and envelope cycle — your strata fees reflect prudent long-term management. An underfunded building with near-term replacement expenses is a levy waiting to happen. The report tells you which one you’re buying into.

Sources

Idea Compass

North: Where this comes from

East: Tensions / failure

South: Where this leads

West: What’s similar

  • a home inspection — both are forward-looking risk documents; the depreciation report covers common property, the inspection covers the specific unit
  • actuarial reserve studies — HOA reserve studies in the US follow the same 30-year forward projection logic

Footnotes

  1. Province of BC, depreciation report requirements — 5+ lot threshold, 5-year cycle, 30-year projection, 3 funding models, eligible preparers (July 2025 update), SPA ss.35, 91–96 — https://www2.gov.bc.ca/gov/content/housing-tenancy/strata-housing/operating-a-strata/repairs-and-maintenance/depreciation-reports/depreciation-report-requirements ↩ ↩2

  2. Province of BC, Form B: Information Certificate — must attach the most recent depreciation report — https://www2.gov.bc.ca/gov/content/housing-tenancy/strata-housing/renting-buying-selling/buying-and-selling-strata/paperwork-for-buyers-and-sellers/form-b-information-certificate ↩

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