Below are a few important points that you should know regarding the Reserve Study portion of the law.
If your reserve study > 5 years old or if you don’t have one, you must get one within 1 Year (by 1/8/25)
-Associations formed after 1/8/24
If your reserve study > 5 years old or if you don’t have one, you must get one within 2 years of your newly elected Board.
-All Associations must have reserve study updates at least every 5 years. CAI recommends every 3 years.
-Associations with capital assets < $25,000 do not need a reserve study
– “When an expenditure of the reserve funds is required to repair or replace a component…., the Association shall use ONLY THE AMOUNT OF RESERVE FUNDS ALLOCATED BY THE STUDY FOR SUCH REPAIR, UNLESS”:
1. UNLESS the use of additional reserve funds does not prevent or interfere with other reserve fund projects during the next 5 years after the project, or
2. UNLESS the Board borrows from the Reserve Fund and drafts a resolution to repay the borrowed funds within 5 years.
-While the NJ law (and good Reserve Funding practice) has the goal of trying to avoid special assessments and loans, nothing in this law prohibits either.
-If the Association is not adequately funded and the increase to the reserve contributions alone increases your budget by more than 10%, then you have the earlier of the following to become adequate.
1. Within 10 years or
2. The projected date that your reserve balance runs below $0
-If the Association is not adequately funded and the increase to the reserve contributions alone increases your budget by less than 10%, then you have to become adequate within 2 years.