New Jersey Senate Bill S2760 establishes qualifications for those preparing a professional reserve study. To comply, a reserve study must be prepared by an individual who meets at least one of the following requirements: 1) holds their Reserve Specialist designation, or 2) is a licensed Professional Engineer or Architect in the state of New Jersey.
Reserve components vary by association. Large expenditures are typically funded through reserves whereas smaller and recurrent expenditures are funded through the general operating fund. We recommend you review your governing documents and historical practices to determine which components are maintained through reserves. If the purchase and installation cost or replacement cost is near or below $25,000, Reserve Advisors can help you evaluate the necessity of conducting a reserve study. Contact us today.
A reserve study determines how much a community needs in reserve funds to support the timely repair and replacement of common assets. Community Associations Institute (CAI) defines adequate reserves as “a replacement reserve fund and stable and equitable multiyear funding plan that together provide for the reliable and timely execution of the association’s major repair and replacement projects without reliance on additional supplemental funding.” While different reserve study firms may use different funding strategies, the intent is to provide financial stability while mitigating the risk of a funding shortfall and subsequent deferred maintenance.
The reserve study takes into account, the sufficiency of existing reserve funds and presents a recommended funding plan that complies with state statutes. Funding recommendations are the direct result of near-term project needs and there may be cases where it is difficult, if not impossible, to meet the immediate funding needed to address them. We encourage you to meet with your reserve study consultant to review their recommendations and determine the merits of adjusting their recommendations, which may or may not alleviate the ability to attain appropriate funding levels. In the event your association is still unable to meet its funding obligations set forth by New Jersey Senate Bill S2760, we encourage you to consult with legal counsel to better understand the risk associated with being non-compliant.