ASSEMBLY HOUSING COMMITTEE

STATEMENT TO

ASSEMBLY, No. 5174

STATE OF NEW JERSEY

DATED:  FEBRUARY 10, 2025

      The Assembly Housing Committee reports favorably Assembly Bill No. 5174.

This bill modifies certain requirements concerning the capital reserve study, 30-year funding plan, and capital reserve fund of an association of a planned real estate development (association), required by recently enacted law, P.L.2023, c.214 (C.52:27D-132.2 et al.).

     Specifically, the bill requires a proposed 30-year capital reserve funding plan within a capital reserve study, required pursuant to section 7 of P.L.2023, c.214 (C.45:22A-44.3), to allow a capital reserve fund of an association to reach a dollar balance of zero during the 30-year funding plan projection.  The bill permits a capital reserve study to provide additional funding plans that have a minimum fund balance greater than zero, or funding plans with escalating annual contributions, provided the reserve fund balance is not projected to fall below zero dollars. 

     The bill defines the terms "adequate" and "adequacy" to mean a sum of money, however invested or held by an association of a planned real estate development, that, in accordance with the professional standards applied by the reserve specialist, architect, or engineer performing or overseeing the study, is sufficient so that the balance in the association’s reserve fund will not fall below zero dollars as set forth in the association’s 30-year funding plan, prepared as part of a reserve study.

      Further, the bill requires that certain inadequacies in a reserve fund are to be made adequate within the earlier of: (1) 30 fiscal years, instead of 10 years; or (2) the projected date predicted by the reserve study by which absent increased funding, the balance in the association's reserve account would fall below zero.  This requirement is to apply to inadequacies for which the increase in the association's budget line item for reserve funding to render the fund adequate as set forth in the reserve study would require an increase of more than 10 percent of the previous year's common expense assessment.

      The bill also requires an association of a planned real estate development, instead of a covered building owner, to ensure that a capital reserve study is reviewed by a licensed architect, engineer, or credentialed reserve specialist and that a capital reserve study is conducted and reviewed at least once every five years.