Latest News

Allowance

Typical component inclusion standards have it that a catastrophic event without a repeatable life cycle or a predictable expenditure amount is to be excluded from the benchmark component inventory.

An allowance is the component category that accounts for partial major repair component spending events that may or may not happen over the economic life of a development.

This fourth component category is for historically and geographically documented expenditures that are know to happen to most developments in a jurisdiction, such as foundation or suspended concrete-slab repairs.

An allowance is typically a condo | strata corporation responsibility with: 1) an expected lifespan normally equal to that of the physical life of the development, 2) based on a probability that unforeseen deterioration will occur, thus reducing the remaining lifespan of the component, 3) for a component with a cost above a minimum spending threshold, and/or 4) for a local code requirement leading to a modification of a component or system.

Unlike a contingency, an allowance is computed in a benchmark, does not appear in a 30 year projection, and is factored in all scenarios as part of the current requirement costs.

In a best-practice depreciation report, an allowance amount is based on a percentage of the full replacement cost of the component and this percentage is revised every three to five years, depending on the age of the development, the history of construction and expenditures, and legislative requirements.

 

About Author: Jean-François

With experience gained in construction, project management, field reviews, inspections, report writing and as strata president, J.-F. has cross-industry expertise guaranteeing that you will participate in a process geared to improving the corporation's finances and to setting the condo | strata board | council's planning to stand the test-of-time.