A Depreciation Report (Reserve Fund Study) is first and foremost a financial planning process that is intended to analyze, assess and plan the funding for Contingency Reserves. The purpose of this analysis is to identify the funding needs within the Contingency Reserve Fund, in order to make recommendations to ensure that sufficient funding is available for future repairs and replacement of the common building elements or assets of a Strata Corporation.

The Depreciation Report, being a detailed financial document, necessitates more data from the Strata Corporation compared to insurance appraisals. We typically request multiple years of financial statements, current/historical operating budgets, and expense records. The more information we gather, including building plans, maintenance history, strata minutes, and insights from long-term Strata members, the more comprehensive and informed our report can be.

The site visit(s) will involve a more in-depth visual assessment of all common assets and elements of the subject building and property, numerous photographs and more detailed measurements. If there are any areas of particular interest or concern (i.e. recent or planned repairs/replacements) we will discuss them with Strata representatives. Generally we will require access to a sample of units for the purpose of making a visual inspection of balconies, decks and windows.

Every Phung Horwood Depreciation Report contains recommendations regarding the current and future contributions to the Contingency Reserve Fund (CRF). Through discussion with the Strata Council (and Property Manager if applicable) we make every effort to come up with a plan that is suited uniquely to your Strata. In some cases this can include a recommendation for increased contributions to the CRF. It is important to understand that your overall Strata Fees are dependent on several factors, only one of which is the CRF contribution. Each Strata Council will create their budgets based upon all factors and set Strata Fees accordingly. We do not make recommendations regarding your overall Strata Fees.

The Depreciation Report's purpose is to ensure ample funding for the Contingency Reserve Fund to facilitate future asset replacements and enhancements when needed. Funds should continuously accumulate over an asset's lifespan to prepare for its eventual replacement. The report recommends a replacement budget, subject to adjustments based on future maintenance. When the asset needs replacement, contributions made in the past should cover the costs; otherwise, a special levy may be necessary. Planning for a well-funded reserve helps mitigate unexpected expenses, providing partial coverage in such cases.

Phung Horwood cost estimates are derived from the following:

-Quotes from construction professionals involved with the Subject improvements;

-Conversations with numerous local experts and sub-contractors;

-Historical costing information contained within our office files; and

-Industry recognized costing manuals and services.

We make a concerted effort to ensure that our data is reliable and accurate; however there are always certain variables involved. Any replacement or repair costs are subject to change over time and should be reviewed periodically to ensure that they remain relevant.

Identify and analyze all common reserve components, including:

-Description

-Expected lifespan

-Current physical condition

-Effective age (physical and functional)

-Repair history and costs

-Estimated remaining useful life

Provide a financial analysis for each component, including:

-Current replacement cost estimate

-Future replacement cost projection with inflation rates

-Future reserve requirements projection with long-term interest rates

In compliance with the British Columbia Strata Property Act, any Strata corporation with 5 or more units must have a Depreciation Report completed. A Strata corporation may waive the requirement for a depreciation report by a 75% (¾ ) vote, which is valid for a period of 18 months.

A Depreciation Report must be obtained every 3 years.

Absolutely. Phung Horwood makes a point of fostering and maintaining strong client relationships. If you have any questions or concerns regarding your report we are available via phone, email or in person to discuss them with you. In the case of a Depreciation Report, all Strata members will have the opportunity to provide some input as part of the process.