Mitch Frumkin, RS, PE, David Ramsey, Esq. & Ed San George, PCAM

NEW JERSEY LEGISLATIVE ACTION COMMITTEE

Dear CAI Members:

The New Jersey Legislative Action Committee NJ-LAC) is pleased to announce that Governor Murphy signed Senate Bill No. 3992 into law on August 21, 2025. The legislation was sponsored by Senator Troy Singleton, Assemblywoman Yvonne Lopez, Assemblyman Sterley S. Stanley, and Assemblywoman Tennille R. McCoy.

The bill was introduced earlier this year in response to feedback legislators were receiving from constituents regarding the reserve portion of the Structural Integrity and Reserve Funding legislation, which was signed into law on January 8, 2024 (S2760).

The NJ-LAC assisted Senator Singleton with drafting the original bill as well as this amendment and provided critical testimony to legislators. The amendment passed unanimously in both houses in July and was sent to the governor for signature.

This legislation amends the reserve section of S2760, ONLY. There are seven points of amending language and requirements in S3992, as follows:

1. The word “adequate” when addressing reserve funding obligations is now more clearly defined such that capital reserve funding plans ensure the balance in an association's reserve fund never falls below zero dollars over the required 30-year funding period.
2. The law requires that all reserve studies must include a baseline or zero-threshold funding plan. This means that during the 30-year-projection included in the reserve study the reserve fund balance will reach zero on one or more occasions. While such a plan involves a level or risk since it provides no cushion in the event one or more components do not reach their expected life or they cost more than projected to replace, for associations that have been significantly underfunded it provides a more comfortable approach to complying with the original law.
3. An association existing as of the effective date of this legislation shall either: (1) fund the 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; or (2) fund the reserve fund in an amount equal to 85 percent (85%) of one of the capital reserve funding plans prepared on behalf of the association.
4. If a board chooses to fund at an 85% funding level in their budget, the Association must provide notice to all unit owners in 20-point bold font specifying that the board has elected to fund reserves at an 85% of the funding plan recommended by the association's 30-year capital reserve study and funding plan. As the 85% funding plan will result in a negative balance in the 30-year funding plan, the notice shall provide the year in which a special assessment or loan is anticipated as a result of the reduced funding. The notice shall also present the anticipated amount of the special assessment or loan resulting from the reduced funding.
5. Further to the above, when funding is at 85%, prior to the execution of a contract for the purchase of a residential unit, the SELLER must provide the buyer with a copy of the most recent notice to unit owners in the association regarding reserve funding.
6. The 85% funding method may not be utilized by an association for more than five (5) fiscal years. Thereafter, a zero-dollar funding plan must be the minimum.
7. The legislation again confirms that all associations must update their reserve study every five (5) years and that the reserve study must be prepared by a Reserve Specialist or a licensed engineer or architect.

NJ-LAC is pleased with this resulting amended legislation as it still provides significant mandates for adequate reserve funding while giving some relief to existing associations for a five year period of time.