Reserve Fund Study
A Reserve Fund Study, described in the BC legislation as a "Depreciation Report", is an analysis and recommendations for reserve funding, as a plan for the "provision of resources for major repairs and replacements of building components and improvements, or common elements, over time to ensure adequate funding of all future capital expenditures when required."1
The Reserve Fund Study will:
- Identify reserve components and their life span cycles and condition;
- Provide current replacement cost estimates;
- Provide observed condition estimates for the reserve components, including an estimate of effective age and accrued reserve costs;
- Provide estimates of the remaining years of useful life of reserve components in terms of physical deterioration and functional obsolescence;
- Project current replacement cost estimates at applicable long term inflation rates to estimate expected future replacement cost estimates;
- Project the value of the current reserve fund requirements compounded at long term interest rates; and
- Calculate the reserve funding requirements which if invested in qualified securities will be sufficient to fund all future reserve expenditures.
1 Definition from the Institute of Real Estate Studies
