Curable or Incurable Depreciation
Regardless of the type of depreciation, it can be classified as either curable or incurable.
Loss in value due to physical causes can usually be controlled by proper care, usage, or maintenance.
Losses due to functional obsolescence are less likely to be curable.
Losses in value due to economic obsolescence are rarely curable.
For depreciation that can be cured, the cost to cure may be so high that it prohibits the restoration of the property. All of these factors must be taken into consideration when arriving at replacement cost new less depreciation (RCNLD).
In the tables in the Department's Construction Cost Manual, depreciation rates reflect only physical factors affecting the value of structures. These tables are developed by market analysis, and assume that normal maintenance will be performed.
The rate of physical depreciation is calculated based on the age of the structure and the quality of the construction. When the overall quality of an improvement is low, normal physical deterioration is more rapid than for fair or good construction.
Normal physical deterioration is calculated according to actual age. Other factors are computed as they arise in individual structures. If a structure has a serious physical defect, the appraiser will first estimate the RCN, and then compute the cost to cure the physical defect (if curable) and then deduct that amount from the RCN to arrive at RCNLD.
In ad valorem appraisal, deferred maintenance is not normally included in a valuation consideration. This would have the effect of punishing property owners who kept a property in good condition and rewarding those who let properties rundown. Special obsolescence factors may be noted and taken into consideration, but the aim is to achieve equity, so that owners of similar properties bear an equal share of the tax burden, regardless of whether they perform regular maintenance.
Maintenance should not be confused with remodeling or rebuilding. In some cases special obsolescence due to economic factors will affect an entire group of properties such as a town or a market area. This loss should be documented and applied equally to all properties in the community affected by the obsolescence.