New Jersey Adopts Amendments to 2024 Law on Capital Reserve Studies and Funding Reserves for Condominium Associations and Cooperatives

September 8th, 2025 | Blog, Community Association Law Blog, News

By Eric F. Frizzell

In January 2024, New Jersey enacted a statute that imposed new requirements on community associations for conducting periodic capital reserve studies and the funding of their reserves. On August 21, 2025, Governor Phil Murphy signed into law important amendments to that statute. The amendments deleted three major provisions and added new ones. This Bulletin summarizes the amendments.

We look first at the key provisions added to the statute by the amendments.

– A significant deficiency of the 2024 statute was that although it required associations to maintain “adequate” reserves it failed to clearly define what is “adequate”. The amendments rectify this confusion by providing that “adequate” or “adequacy” means sufficient funds to assure that the balance in an association’s reserve fund, as required by the 30-year funding plan(s) in its reserve study, will not fall below zero dollars at any point.

– An association’s capital reserve study must now include a 30-year funding plan that allows the reserve fund to reach a zero balance – but the balance can never go below zero. The reserve study may include additional funding plans that require a minimum balance greater than zero or that has escalating annual contributions, as long as the reserve fund balance is not projected to fall below zero at any point. The inclusion of additional plans give options to boards that want to contribute more money to their reserve fund than the minimum required by the statute.

– An association now has the option to fund its reserves in an amount equal to 85% of any of the funding plans contained in its reserve study, provided, however, that before adopting an annual budget to fund the reserve account in that amount, the association must provide a notice to all unit owners in 20-point bold font that informs them that the association’s board has elected to fund the capital reserve fund at 85% of the amount recommended by the association’s 30-year capital reserve study and funding plan. The notice also must provide the year in which any special assessment or loan is anticipated as a result of the reduced funding, and the expected amount of the special assessment or loan. The association cannot utilize this 85% funding option for more than five fiscal years, after which it must fully fund whichever funding plan the board has chosen from the reserve study.

– If an association decides to fund its reserves at 85%, any unit owner who is selling their unit must provide a prospective buyer, prior to execution of the purchase contract, with a copy of the association’s most recent notice regarding the 85% funding plan. Our law firm recommends that an association that implements an 85% funding plan provide written notice to all unit owners of this action and of the unit owner’s legal obligation, if they are selling their unit, to notify prospective buyers of the board’s action.

We now look at provisions of the 2024 statute that have been deleted by the August 2025 amendments.

– The 2024 statute provided that when “a capital asset reaches the end of its established useful life earlier than predicted by the reserve study, nothing herein is intended to prevent the imposition of a special assessment or obtaining a loan.” The amendments deleted this language.

– The statute provided that if an existing association does not have a reserve fund that is “adequate” under the law, but increasing the association’s budget line item for reserve funding to make it adequate would require the previous year’s common expense assessment to increase by more than 10 percent, the association must “make the deficiency adequate” within either (a) 10 fiscal years or (b) by the date that the reserve study predicts that the balance in the reserve account, absent increased funding, will fall below zero. The amendments deleted this provision.

– The statute provided that If an existing association does not have a reserve fund that is “adequate” under the new law, and increasing the association’s budget for reserve funding to make it adequate under the reserve study would require the previous year’s common expense assessment to increase by less than 10 percent, the association must make the deficiency adequate within the following two fiscal years. The amendments deleted this provision.

– The statute provided that when an association must spend reserve funds to repair or replace a component covered by the reserve study, the association may only use the amount of those funds that the study allocated for that repair or replacement. However, the board can “borrow” additional amounts from the reserve fund if:

a. using additional reserve funds is not reasonably anticipated to prevent or interfere with the association’s ability to undertake additional repairs or replacements in the five years after those funds are spent; and

b. the association’s board adopts a written resolution requiring that those additional spent funds be recovered within the following five fiscal years.

The amendments deleted this provision entirely.

As always, please feel free to reach out to us if you have any questions.

This Bulletin is for informational purposes only and does not constitute legal advice by our law firm. Please contact us if you have any questions about your association complying with these new legal requirements.