condition in which the owners,
particularly of residential condo buildings, experience a number of
fears and concerns related to the procurement of a depreciation report
(more commonly referred to as a reserve
concerns are generally grouped into two classes:
External Ethical Concerns
B. Internal Ethical Concerns
- The report will not be prepared by qualified
- The preparers of the report
will be overzealous and will turn the report into a
will create problems that do not exist.
- The report will be overly conservative
in its outlook.
- The report will indicate that there are large capital costs
to be paid by the owners.
- The report will recommend unnecessary over-
maintenance of the building assets.
report will reveal that the owners have not been doing their due
in terms of ongoing maintenance of the assets and, therefore, the
report will embarrass the owners and/or the property
report will show that the owners have not historically been setting
aside sufficient funds for capital renewal projects and therefore the
owners are now heavily underfunded.
- The report will negatively impact the resale
value of the suites and therefore the marketability
and saleability of the suites.
easily be self diagnosed and does not require the help of any
specialists. The process of determining whether
the disorder exists is usually
characterized by the following:
- Delays in obtaining proposals for a
- Attempts to seek an exemption to avoid
having to procure a depreciation report.
- Dismissal of all consultants as being
biased and ultra conservative.
- denial is “an
assertion that something said, believed, alleged, etc., is false”.
- cognitive dissonance
is “A condition of conflict or anxiety resulting from inconsistency
between one’s beliefs and one’s actions”.
- confirmation bias
is “a tendency for people to prefer information that confirms their
preconceptions or hypotheses, independently of whether they are true”.
The likely outcome of the
disorder is as follows:
The disorder can be treated
with a three-month program of education and consulting
Most owners to not succumb to the disorder and it
passes after a few
meetings and discussions that help the owners make an informed decision
about the responsible stewardship of their assets.
- Education of the owners on the purpose
and objectives of a depreciation report
- Tendering of competitive bids from
multiple companies so as to evaluate and find a qualified person.
- Hiring of a professional team that is
impartial and provides services with a view to the best interests of
- Prepare a defensible
report that is based on
realistic forecasts of probability