New Jersey Administrative Code › Title 5 - COMMUNITY AFFAIRS › Chapter 26 - PLANNED REAL ESTATE DEVELOPMENT FULL DISCLOSURE ACT REGULATIONS › Subchapter 8 - COMMUNITY ASSOCIATIONS › Section 5:26-8.7 - Budgets for developer-controlled boards

Current through Register Vol. 56, No. 14, July 15, 2024
(a) During developer
				control of the association's governing board, the association shall, prior to making
				an annual assessment, prepare and adopt an operating budget, which shall provide,
				for any and all common expenses to be incurred during the fiscal year, as well as
				adequate reserve funds for repair and replacement of the common elements and
				facilities.
1. Replacement of the common elements
				may include repair or replacement of a component of a mechanical system or facility
				necessary for the proper maintenance or operation of such system or
				facility.
2. "Adequate reserve funds"
				are those monies specifically dedicated for repair or replacement of common elements
				and facilities that have reached the end of the established useful life, based on
				the most recent reserve study, of each common element or facility, or one or more
				components of that element or facility, without the need for special assessments or
				loans. Contributions shall be established for common elements and facilities with
				useful lives, or remaining years of use, up to and including 30 years, and for roofs
				regardless of their useful lives.
3. The
				amount to be maintained in the reserve funds account shall be determined by an
				independent licensed engineer or architect as part of the reserve study.
4. During developer control of the association's
				governing board the following requirements shall apply:
i. Reserve funds shall be maintained in a
				segregated account in the name of the association and not comingled with other
				common expenses or capital contribution accounts.
ii. The account shall be located in a bank that is
				FDIC-insured and authorized to do business in the State of New Jersey.
iii. Following the election of the first unit
				owner to the board, and continuing until control of the association governing body
				is transferred to the unit owners, withdrawals from the reserve funds account shall
				require one signatory from the developer and one signatory from the owner-elected
				board members.
5. Reserve
				funds shall only be used for repair and replacement costs for which they are
				collected. A developer-controlled association board may not utilize reserve funds to
				repair or replace any common element unless:
i.
				The item that is sought to be repaired or replaced was included in the reserve
				study;
ii. The common element component
				to be repaired or replaced has exhausted not less than 90 percent of the useful life
				specified in the reserve study. In the event the common element component to be
				repaired or replaced has not exhausted 90 percent or more of its expected life, then
				a majority vote of a quorum of unit owners, other than the developer, as defined by
				the association governing documents, is required to utilize the reserve funds
				dedicated and maintained for the specific common element component's repair or
				replacement; and
iii. The reserve
				account has been fully funded in accordance with the association budget.