S3406

An Act establishing procedure by which an association of a planned real estate development may lower reserve fund obligations and amending P.L.2023, c.214.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 7 of P.L.2023, c.214 (C.45:22A-44.3) is amended to read as follows:

7. a. An association of a planned real estate development shall obtain a reserve study including a 30-year funding plan in order to ensure that the association has adequate reserve funds available to repair or replace the capital assets located on the common elements and facilities that the association is obligated to maintain without need to create a special assessment or loan obligation, except as permitted pursuant to subsection e. of this section. These reserve funds shall be used for the repair or replacement of components that have reached the end of their established useful life as set forth in the most recent reserve study undertaken pursuant to section 6 of P.L.2023, c.214 (C.45:22A-44.2).

b. (Deleted by amendment, P.L.2025, c.132)

c. (Deleted by amendment, P.L.2025, c.132)

d. (Deleted by amendment, P.L.2025, c.132)

e. An association existing as of the effective date of P.L.2023, c.214 (C.52:27D-132.2 et al.) shall, to fund the association’s capital reserve fund, either:

(1) fund the capital reserve fund in accordance with one of the funding plans set forth in the most recent capital reserve study prepared on behalf of the association pursuant to paragraph (7) of subsection a. of section 6 of P.L.2023, c.214 (C.45:22A-44.2); or

(2) fund the capital reserve fund in an amount equal to 85 percent of one of the capital reserve funding plans pursuant to paragraph (7) of subsection a. of section 6 of P.L.2023, c.214 (C.45:22A-44.2), and set forth in the most recent capital reserve study prepared on behalf of the association, provided that:

(a) prior to the adoption of an annual budget to fund the capital reserve fund account pursuant to this paragraph, the association shall provide a notice to all unit owners of the association in 20-point bold font, which specifies that the executive board of the association has elected to fund the capital reserve fund at 85 percent of the funding plan recommended by the association’s 30-year capital reserve study and funding plan. The notice shall provide the year in which a special assessment or loan is anticipated as a result of the reduced funding of the capital reserve fund and the anticipated amount of the special assessment or loan that shall be required as a result of the decision by the executive board of the association; and

(b) prior to the execution of a contract for the purchase of a residential unit in the planned real estate development, the seller of the unit shall provide to the buyer a copy of the most recent notice provided to the unit owners of the association pursuant to subparagraph (a) of this paragraph.

(3) The funding method authorized pursuant to paragraph (2) of this subsection shall not be utilized by an association for more than five fiscal years of the association next following the effective date of P.L.2025, c.132.

f. An association created after the effective date of P.L.2023, c.214 (C.52:27D-132.2 et al.) shall fund its capital reserve fund account in accordance with one of the capital reserve funding plans set forth in the association’s most recent capital reserve study.

g. An association of a planned real estate development may file an application with the Department of Community Affairs to lower the development’s reserve fund, as determined by the reserve study, based on risk-mitigating features of the development that limit the possibility that the association may face substantial expenses to repair or replace capital assets.

(cf: P.L.2025, c.132, s.3).

2. (New section) The Commissioner of Community Affairs shall promulgate rules and regulations, pursuant to the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), in order to effectuate the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill), including, but not limited to, what elements or characteristics may be considered a risk-mitigating feature of an association of a planned real estate development sufficient to lower the development’s reserve fund pursuant to subsection g. of section 7 of P.L.2023, c.214 (C.45:22A-44.3). Risk-mitigating features may include, but shall not be limited to, the lack of a high-rise, multifamily housing structure in the development.

3. This act shall take effect on the first day of the third month next following the date of enactment, except that the Commissioner of Community Affairs may take anticipatory action necessary to implement the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).

STATEMENT

This bill permits a planned real estate development to file an application with the Department of Community Affairs (DCA) to lower the development’s reserve fund obligations based on the risk-mitigating features of the development.

Pursuant to P.L.2023, c.214 (C.52:27D-132.2 et seq.), an association of a planned real estate development is required to maintain a reserve fund to ensure that adequate funds are available to repair or replace common elements and facilities of the association. This bill amends P.L.2023, c.214 (C.52:27D-132.2 et seq.) to permit a development to reduce its reserve fund to account for risk-mitigating features that may limit the possibility that the association will face substantial expenses to repair or replace capital assets. The bill directs the Commissioner of Community Affairs to promulgate rules and regulations to provide guidance to effectuate the provisions of this bill, including guidance on the consideration of risk-mitigating development features. Risk-mitigating features, as determined by the commissioner, may include, but are not to be limited to, the lack of a high-rise, multifamily housing structure in the development.

This bill is to take effect on the first day of the third month after enactment, except that the Commissioner of Community Affairs may take anticipatory action to effectuate the provisions of this bill.