Which type of depreciation is often referred to as deferred maintenance?

Physical deterioration is often referred to as deferred maintenance because it relates to the wear and tear that occurs on a property due to age, weather, and lack of maintenance over time. This type of depreciation stems from the physical condition of the property and indicates that there are repair needs that have not yet been addressed.

When a property has deferred maintenance, it signifies that the necessary upkeep has been postponed, leading to a decrease in the property’s overall condition and, consequently, its value. This can include issues such as peeling paint, leaky roofs, or broken fixtures that, if repaired, would help maintain or enhance the property’s value.

In contrast, functional obsolescence typically deals with design flaws or outdated features that make the property less desirable in today's market, while economic obsolescence involves external factors that negatively impact the property—such as changes in the neighborhood or adverse zoning regulations. Accounting depreciation refers more to the systematic allocation of the cost of an asset over its useful life and is not directly linked to physical condition or maintenance issues. This distinction helps clarify the focus of physical deterioration as it relates explicitly to the physical state of a property and the impact of deferred maintenance.