Strata FinancesJuly 9, 2026 · 6 min read

Your Depreciation Report Says You're Underfunded — Now What?

Your depreciation report says the reserve is short. Here's a calm BC recovery playbook for small strata councils, plus the hidden costs of ignoring it.

Your depreciation report landed, you turned to the funding section, and the numbers didn't line up. The reserve you have today is a fraction of what the report says you'll need over the coming decades. If you sit on the council of a smaller Metro Vancouver or Fraser Valley building, that gap feels personal — it's your roof, your envelope, your neighbours. Here's the reassuring part: "underfunded" is a starting point, not a verdict. Below is how to read the finding calmly and build a recovery plan your owners will actually support.

What "underfunded" actually means

A depreciation report is more than a repair list. It's a long-range forecast of your building's major components — roof, envelope, elevators, plumbing, parkade, boilers — with estimated replacement timing and cost, paired with one or more funding models. Those models show how much your contingency reserve fund (CRF) needs to grow so that work gets paid for without a nasty surprise.

When the report says you're underfunded, it usually means your current reserve balance plus your planned annual contributions fall short of what at least one model projects. It rarely means the sky is falling tomorrow — it means the trajectory is wrong. Small buildings feel this more sharply because there are fewer owners to spread each big-ticket bill across. Read which model flags the shortfall, over what timeframe, and against which components; that tells you how urgent it really is. For what these reports contain and when yours is due, see the 2026 depreciation-report deadline explainer.

The hidden costs of doing nothing

Filing the report in a drawer feels free, but it's usually the most expensive choice. The costs are just delayed and hidden:

Resale drag. The report is a disclosable document that shows up in the paperwork buyers' agents and lenders review. A known shortfall sitting in your minutes and records makes buyers nervous and can soften offers on every unit in the building.
Bigger repair bills later. Deferred maintenance rarely gets cheaper. A roof or envelope left past its service life tends to let water in, and water damage tends to land on the strata's insurance deductible — which owners ultimately pay.
Emergency levies instead of planned ones. Underfunded buildings are the ones that get hit with sudden, large levies when a component fails. A planned contribution is almost always gentler than a five-figure surprise.
Council exposure. Councils have a duty to act on what they know. Ignoring a documented shortfall is far harder to defend than a modest, honest plan that owners considered.

This article is general information about the BC Strata Property Act framework, not legal, accounting, or engineering advice.

The recovery playbook

Understand the report before you react. Read the whole thing, not just the summary. Which components drive the gap? What's near-term (say, the next 5–10 years) versus distant? Ask the report provider to walk council through the models — most are happy to.
Check the operating budget too. Sometimes what looks like a reserve problem is partly an operating one. Confirm whether your fees are keeping pace with real costs before you decide the CRF is the whole story.
Set a target and a contribution rate. Decide which funding model you're aiming for and what annual CRF contribution gets you there. Our guide on how big a BC contingency fund should be walks through the math.
Right-size fees at the next budget. The most durable fix is often a steady increase in the annual CRF contribution, approved as part of your budget. BC's reserve-contribution rules have shifted in recent years, so confirm the current minimum before you set yours.
Sequence the near-term work. For components due soon, get real quotes and decide how to fund each one — reserve, levy, or loan (below).
Write it down and revisit yearly. A one-page funding plan, revisited every AGM, turns a scary report into a manageable schedule.

Fees, a special levy, or a loan?

There's no single right answer — it depends on how much you need, how soon, and what your owners can absorb.

Higher contributions spread the cost gently over years and suit the slow, predictable build-up. Compare where you sit against typical Metro Vancouver strata fees so you know whether you have room to raise them.
A special levy raises a lump sum for a specific project and is the classic tool for near-term work. It hits owners harder up front, and some may struggle to pay on short notice.
A strata loan lets the corporation borrow and repay over time, easing the cash crunch for owners who can't front a large levy. Our loan vs. levy vs. fees comparison lays out the trade-offs.

Most recovering buildings use a blend: raise contributions for the long game, and levy or borrow for the urgent items.

Getting owners on side

In a small building the math is only half the job — the other half is trust. A special levy typically needs a 3/4 vote, and even a fee increase goes smoother when owners understand the "why." Bring the report provider (or your manager) to the meeting, show the do-nothing cost next to the plan, and frame contributions as protecting each owner's biggest asset. It also helps to get people in the room in the first place; a quorum battle can sink a good plan before it's discussed. Confirm the exact vote thresholds and notice rules with your strata lawyer or manager, because the details matter and the rules change.

Frequently asked questions

Does an underfunded depreciation report mean our strata did something wrong? Usually not. Many BC buildings, especially older ones, were funded to older, looser expectations and are only now seeing a full long-range forecast. The report is a planning tool, not a report card — what matters is what council does next.

Can we be forced to fully fund the reserve right away? No. There's no rule requiring you to top up the reserve to the report's target overnight. You choose a funding path — usually a mix of steadily higher contributions and, where needed, levies or a loan — and owners approve it. Confirm current contribution minimums, since they've changed in recent years.

Do we have to tell buyers our building is underfunded? Effectively, yes. The depreciation report, minutes, and financials are all part of the documents a buyer receives, and the picture shows up in your Form B information certificate and records. Trying to hide a shortfall creates far more risk than addressing it openly.

How often should we update the report? BC requires depreciation reports on a renewal cycle, and updating sooner is wise if you've completed major work or costs have shifted materially. Check the current deadline for your building, as the timing rules were recently tightened.