When the previous owner replaced the panel, he didn't bother to take down the balcony but simply sawed off the old paneling and put new ones in place.

Thus, there are scrap pieces lying loosely behind the balcony. I was planning to take down the balcony this summer and fix this, but how do I do it?

Do I just put a strip in place and then put the balcony back up again?
 
Much more information than that is needed.
 
Ok. I'll come back with pictures tonight.
 
Close-up of a wooden balcony floor with visible gap next to the green wall where rainwater has seeped in during a storm.

This is how it looks......

The balcony is "built-in" in the house so it doesn't rain that far into the balcony very often, but after last night's storm it did.:|
 
What do you actually mean by "taking down the balcony"? If it's just the wooden decking that needs to be removed so you can replace the panel behind it, that should be fine, but if the entire balcony has to be removed and then put back, it becomes a much more difficult project! We still don't know how the balcony is supported (posts? extended floor joists from the house? something else?) so we can't advise you.
 
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