Learn how to read BC strata depreciation reports and identify red flags that could cost you thousands. A practical checklist for condo buyers covering contingency funds, special levies, and building envelope issues.
The depreciation report might be the most important document you review when buying a condo in BC—yet most buyers barely skim it. This 50-100 page technical document reveals whether you’re buying into a well-maintained building or inheriting someone else’s deferred maintenance problems.
A building with an underfunded contingency reserve or looming major repairs can cost you tens of thousands in special levies shortly after purchase. Knowing what to look for separates informed buyers from those blindsided by unexpected assessments.
What Is a Depreciation Report?
A depreciation report (also called a reserve fund study) is a planning document that:
- Inventories building components: Roof, elevators, parkade, windows, common areas, mechanical systems
- Estimates remaining useful life: How many years until replacement
- Projects replacement costs: What repairs will cost when needed
- Assesses funding adequacy: Whether the contingency reserve fund is sufficient
- Recommends contribution levels: How much owners should contribute annually
BC Requirements
BC’s Strata Property Act requires most stratas to:
- Obtain a depreciation report prepared by a qualified professional
- Update the report at least every 3 years
- Make the report available to buyers
Exemptions: Small stratas (4 units or fewer) and some bare land stratas can vote to exempt themselves from the requirement.
Who Prepares Them
Qualified professionals include:
- Engineers (structural, mechanical, building envelope)
- Architects
- Certified reserve planners
- Appraisers with appropriate training
The quality varies significantly. Some reports are thorough with detailed component analysis; others are superficial checklists.
Key Sections to Review
1. Physical Component Inventory
This section lists every major building component with:
- Current condition assessment
- Estimated useful life remaining
- Replacement cost estimate
What to look for:
| Component | Concern Level | Why It Matters |
|---|---|---|
| Roof | High | $50,000-$500,000+ to replace |
| Building envelope | Critical | $1M+ for major repairs |
| Elevators | High | $100,000-$300,000 per elevator |
| Parkade/membrane | High | $500,000-$2M for repairs |
| Plumbing risers | High | $200,000-$500,000 to replace |
| Windows | Medium | $100,000-$500,000 building-wide |
| HVAC systems | Medium | $50,000-$200,000 |
Red flag: Multiple major components showing “poor” condition or 1-5 years remaining life.
2. Contingency Reserve Fund Analysis
The heart of the report: Is there enough money saved?
Key metrics:
Current fund balance: How much is in the reserve account today?
Percent funded: The fund balance divided by the total projected liability. Industry standards suggest:
- 70-100%+ funded: Well prepared
- 50-70% funded: Adequate but watch closely
- 30-50% funded: Underfunded—expect increases or levies
- Below 30%: Seriously underfunded—high risk
Funding plan adequacy: Does the recommended contribution schedule actually achieve adequate funding, or does it assume optimistic scenarios?
3. 30-Year Cash Flow Projection
The report projects expenses and contributions over 30 years:
- Annual contribution amounts: What owners pay into the fund
- Major expense timing: When big-ticket repairs occur
- Fund balance over time: Does the fund stay positive or go negative?
Red flag: Projected fund balance goes negative at any point, indicating likely special levies.
4. Scenarios and Recommendations
Good reports provide multiple scenarios:
- Current funding (status quo)
- Recommended funding (what’s needed to stay adequately funded)
- Deferred funding (kick the can down the road—risky)
Compare current strata contributions to the recommended level. A large gap means future increases or levies.
Red Flags That Should Concern You
1. Underfunded Contingency Reserve
The math that matters:
If the building has $200,000 in the reserve fund but the depreciation report shows $800,000 in repairs needed over the next 10 years, the fund is only 25% of where it needs to be.
Questions to ask:
- What’s the current fund balance?
- What’s the percent funded ratio?
- How does current contribution compare to recommended level?
2. Major Repairs Scheduled in Next 5 Years
Imminent large expenses create immediate financial pressure:
- Roof replacement within 3 years
- Building envelope work scheduled
- Elevator modernization required
- Parkade membrane replacement pending
Impact: Even if the fund is adequate, cash flow timing matters. A $500,000 repair in year 2 with only $300,000 in the fund means a special levy.
3. Building Envelope History
Vancouver’s “leaky condo” crisis taught painful lessons. Check for:
- Previous envelope remediation work
- Rainscreen installation status
- Warranty information and expiry dates
- Any ongoing moisture monitoring
Red flag: Building from 1985-2000 without documented envelope remediation.
4. Special Levy History
Review meeting minutes for past special levies:
- How many in the last 10 years?
- For what purposes?
- How much per unit?
Pattern concern: Multiple special levies suggest chronic underfunding or unexpected problems.
5. Deferred Maintenance
Signs the strata has been deferring work:
- Components past their expected life still in service
- “Fair” or “poor” condition ratings across multiple systems
- Discrepancy between report recommendations and actual work done
6. Insurance Issues
Recent changes affecting many stratas:
- Dramatic premium increases
- Higher deductibles (now often $100,000-$500,000)
- Coverage limitations or exclusions
Check: What’s the current deductible? Who pays if there’s a claim? Some bylaws assign the deductible to the unit owner whose unit is involved.
Questions to Ask the Strata Council
Before removing your subject on a strata purchase, get answers to:
Financial Questions
- What is the current contingency reserve fund balance?
- What are the monthly strata fees, and when did they last increase?
- Are any special levies planned or being discussed?
- How does the current contribution compare to the depreciation report recommendation?
- What major repairs have been completed in the past 5 years?
- What major repairs are planned for the next 5 years?
Building Condition Questions
- Has the building had any envelope issues or remediation?
- When was the roof last replaced? Any leaks?
- What’s the status of the elevators?
- Are there any ongoing litigation or disputes?
- What’s the insurance deductible, and who pays it?
- Have insurance premiums increased significantly recently?
Governance Questions
- Are there any units in arrears on strata fees?
- What’s the rental restriction policy?
- Are there any pending bylaw changes?
- How engaged is the strata council?
How to Factor Findings Into Your Offer
Scenario 1: Well-Funded, Well-Maintained Building
- Contingency fund is 70%+ funded
- No major repairs imminent
- Strata fees are reasonable
- Clean special levy history
Strategy: Proceed with confidence. This building is less likely to surprise you.
Scenario 2: Underfunded But Manageable
- Fund is 40-60% funded
- Some repairs needed in 3-5 years
- Strata fees below recommended level
Strategy:
- Factor likely fee increases into your budget
- Consider negotiating price to offset future levies
- Verify strata is taking steps to improve funding
Scenario 3: Red Flags Identified
- Fund is below 40% funded
- Major repairs imminent
- History of special levies
- Building envelope concerns
Strategy:
- Negotiate significant price reduction
- Request seller credit for anticipated levies
- Consider walking away if risks are too high
- Get independent engineering opinion if envelope is a concern
Price Adjustment Calculation
If the depreciation report indicates a $300,000 repair needed within 3 years, and the building has 50 units:
- Per-unit share: $6,000
- Factor in uncertainty: $6,000-$10,000 price adjustment might be reasonable
This is negotiation, not science—but having numbers from the depreciation report strengthens your position.
Beyond the Depreciation Report
The depreciation report is essential but not sufficient. Also review:
Strata Meeting Minutes (2-3 Years)
- Discussions about repairs, levies, problems
- Owner complaints and council responses
- Voting patterns and engagement
- Insurance discussions
Financial Statements
- Actual fund balance (verify against report)
- Operating budget adequacy
- Arrears from other units
- Recent fee increases
Engineering Reports
- Building envelope assessments
- Parkade condition reports
- Elevator inspection reports
- Any specialist assessments
Form B Information Certificate
Required disclosure including:
- Monthly strata fees
- Special levies (current and anticipated)
- Lawsuits involving the strata
- Parking and storage allocation
Key Takeaways
- Depreciation reports project repair costs and assess whether the contingency fund is adequate
- “Percent funded” below 50% is a warning sign; below 30% is serious
- Major repairs scheduled within 5 years require cash flow analysis
- Building envelope history is critical for Vancouver-area condos
- Past special levies often predict future special levies
- Ask the strata council direct questions before removing subjects
- Factor depreciation report findings into your offer price and negotiation
Depreciation Report Review Checklist
Use this when reviewing a strata purchase:
- Report is current (within 3 years)
- Percent funded ratio is above 50%
- No major repairs scheduled within 3 years without adequate funding
- Current contributions match or exceed recommended levels
- No building envelope concerns or documented remediation
- Special levy history is clean (none or small amounts)
- Insurance deductible and responsibility are clear
- Strata council answered questions satisfactorily
- Meeting minutes show no concerning patterns
- Financial statements match report data
Frequently Asked Questions
What’s a good percent funded ratio for a strata?
A ratio of 70-100% is considered well-funded and indicates the strata is adequately preparing for future repairs. Between 50-70% is acceptable but warrants attention. Below 50% suggests underfunding that will likely result in fee increases or special levies. Below 30% is a significant red flag.
Can I still buy a condo with an underfunded contingency reserve?
Yes, but factor the risk into your decision and offer price. Calculate the per-unit cost of anticipated repairs, expect fee increases, and negotiate accordingly. Some buyers get good deals on units in underfunded buildings, accepting the risk for a lower price. Others prefer to avoid the uncertainty entirely.
How much do special levies typically cost?
Special levies vary enormously depending on the repair. Minor items might be $1,000-$5,000 per unit. Major building envelope remediation can run $20,000-$100,000+ per unit. Elevator replacements, parkade repairs, and re-piping are often in the $5,000-$20,000 range per unit. Review the depreciation report to estimate potential exposure.
What if the strata doesn’t have a depreciation report?
Small stratas (4 units or fewer) can exempt themselves, but larger stratas are required to have one. If a strata required to have a report doesn’t, that itself is a red flag about governance. You can request the strata obtain one, but this takes time. Consider the risk of buying without this crucial information.
Should I hire an engineer to review the depreciation report?
For older buildings (20+ years), buildings with envelope concerns, or reports showing significant issues, an independent engineering review can be worthwhile. The cost ($500-$2,000) is minor compared to potential surprises. Your realtor can recommend qualified professionals who specialize in strata building assessments.
Work with Rain City Properties
Understanding strata documents is part of due diligence that protects you from costly surprises. A depreciation report that looks fine to an untrained eye might reveal serious concerns to someone who knows what to look for.
Greyden Douglas has reviewed hundreds of depreciation reports across Vancouver’s strata buildings and knows which findings matter and which are routine. From negotiating price adjustments based on funding gaps to walking away from buildings with insurmountable issues, experienced guidance makes the difference.
Contact Greyden Douglas directly at (604) 218-2289 or book a call to discuss your Vancouver condo search.
