January192024

New Structural Legislation: A Focus on Changes in Reserve Funding

NJ Senate Bill S2760: An Overview

Signed into law on January 8, 2024 by Governor Phil Murphy
Provides new mandated procedures for inspection evaluation, and maintenance of the structural components (primary load-bearing systems) of residential housing structures.
Mandated inspections for within fifteen (15) years of receiving certificate of occupancy.
- Older communities (greater than 15 years of age) follow specific timelines based on specific age.
Mandated inspections within sixty (60) days of observed areas of structural concern.
Mandated acquisition of Capital Reserve Studies for Associations responsible for greater than $25,000 worth of Capital Assets.

All Associations must have a professional conduct an updated reserve study at least every five (5) years.
CAI recommends an update to the reserve study every three (3) years.

An Overview and Our Services

Existing Associations that do not currently have a reserve study or Associations with a reserve study that is greater than five (5) years old, must have a professional conduct a new reserve study within one (1) year of the signed bill. (January 8, 2025)

New Associations that do not currently have a reserve study or new Associations with a reserve study that is greater than five (5) years old, must have a professional conduct a new reserve study within two (2) years of the Association’s newly elected Board.

Associations responsible for capital assets that total less than $25,000 are excluded from this reserve study mandate.

Disbursements that must be taken from the reserve fund to repair or replace a common element must use only the amount of reserve funds allocated to that individual component that is shown within the reserve study, unless the following is true:
- The use of additional reserve funds does not prevent or interfere with other reserve fund projects during the next five (5) years after the project.
- The Association borrows from the reserve fund and drafts a resolution to repay the borrowed funds within five (5) years.

The goal of proper reserve study practices and the New Jersey law is to yield a scenario in which special assessments and loans are not necessary.
Acquisition of additional funds through the formally mentioned practices (special assessments and loans) are not prohibited by NJ Senate Bill S2760.

Underfunded Associations that will necessitate a reserve contribution increase of more than ten (10%) percent of the Association’s current budget will have to conform to one of the two following scenarios, whichever scenario occurs at the earliest date:
- The projected date at which the Association’s reserve balance falls below $0.
- Within ten (10) years of the reserve study that determines an inadequate funding scenario.
Underfunded Associations that will necessitate a reserve contribution increase of less than ten (10%) percent of the Association’s current budget will be required to meet the proposed adequate level of reserve funding within two (2) years of the reserve study that determines an inadequate funding scenario.

Developers of new associations will be expected to create a preventative maintenance plan that includes an itemized schedule of required preventative maintenance which is to be accounted for in the developer’s budget.
No owner vote will be necessary if the association’s governing board decides to assess unit owners to cover the cost of any building repairs, regardless of any conflicting provisions in the governing papers.