NJ Reserve Study Law Amendment

IMPORTANT UPDATE: Enacted in January 2024, NJ S2760/A4384 (NJ Reserve Study Law) established new capital reserve study and funding requirements for most New Jersey Community Associations. On August 21, 2025, Governor Phil Murphy signed NJ Bill S3992 which amends New Jersey S2760/A4384 by updating funding requirements and offering additional funding options for Associations which may be underfunded.

NJ Bill S3992 permits Associations to select between two main funding options outlined below.

• Option 1: Follow the Capital Reserve Study and fund their reserve account in accordance with Baseline, Threshold, or Component/Full Funding Scenarios.

• Option 2: An Association may now fund as little as 85% of the required funding for up to 5 years with specific disclosure obligations.

This option for 85% funding is only allowed in the first 5 years after a reserve study is completed. After year 5, the Association must update their report and fund in accordance with either baseline, threshold, or component/full funding as shown in their Capital Reserve Study. Associations that choose the 85% option must also follow strict policies to notify current unit owners of the decision as well as possible future special assessments or loans which may be required to offset funding deficits. Sellers are also required to disclose this information to potential buyers.

Other Important Notes:

• This bill defines "adequate" reserves as funds projected to not fall below zero over the Association's 30-year funding plan as outlined in the reserve study.

• Baseline funding meets the definition of “adequate” though it poses the greatest chance of an assessment or loan to make up for a shortfall.

• This legislation is intended to establish consistent financial planning and disclosure practices for Community Associations.

Timetables to Consider:

• CAI recommends Capital Reserve Study updates every 3 years.

• NJ Law requires updates at least every 5 years at which time Associations must complete a professional reserve study with a site visit which analyzes anticipated maintenance and replacement costs, current fund balances, and current conditions of common elements to provide a 30-year cash-flow and funding projection.

Our CAI Designated Reserve Specialists are available to provide guidance regarding these new amendments and to advise you on the necessary steps to achieve compliance.