Board governance glossary
Definition
What is Capital improvement?
A capital improvement is a substantial addition, replacement, or upgrade that extends the useful life, value, or function of association property beyond routine maintenance.
What it means in practice
Examples can include elevator modernization, roof replacement, façade restoration, a new access-control system, or a major common-area renovation. Whether work is classified as a capital improvement can affect budgeting, reserve funding, owner approvals, accounting treatment, and tax reporting.
The boundary between repair and improvement is context-specific. Boards should evaluate the project’s scope, expected useful life, governing documents, applicable law, and advice from accounting or legal professionals before relying on the label.
Key points for boards
- Capital improvements are generally durable projects rather than recurring upkeep.
- Approval and funding requirements may differ from ordinary repairs.
- A defined scope and documented rationale help prevent later disputes.
- Large improvements should connect to the building’s long-term capital plan.