New Jersey P.L.2025, c.132: Reserve Funding Amendments and the 85 Percent Option

Quick Answer

P.L.2025, c.132 (Senate Bill 3992), approved August 21, 2025 and effective immediately, amended New Jersey's 2023 structural integrity law to loosen how associations of planned real estate developments fund capital reserves. It defines "adequate" reserves as a fund that does not fall below zero over the 30-year plan, deletes the 10 percent and equal-increase catch-up rules, and lets existing associations fund at 85 percent of a study plan for a limited period if owners get a prominent notice.

The key point for boards: the 85 percent option is not free. It requires a 20-point bold notice to all owners naming the year and amount of the expected special assessment or loan, and sellers must give that notice to buyers.

At a Glance

What the Law Says

Definition of "adequate"

"Adequate" or "adequacy" means a sum of money that, under the professional standards applied by the reserve specialist, architect or engineer performing or overseeing the study, "is sufficient so that the balance in the association's reserve fund ... will not fall below zero dollars as set forth in the association's 30-year funding plan."

Reserve study changes (N.J.S.A. 45:22A-44.2)

• The duty to ensure the study is reviewed and conducted at least once every five years moves from the "covered building owner" to "an association of a planned real estate development."
• The study must contain a 30-year funding plan or plans, including one that "allows the reserve fund to reach a lowest dollar balance of zero during the 30-year plan projection."
• The study may also include plans with a minimum balance above zero or with escalating annual contributions, as long as the balance is not projected to fall below zero.
• The one-year and two-year study deadlines and the $25,000 exemption are carried forward unchanged in the text.

Funding changes (N.J.S.A. 45:22A-44.3)

The former subsections b, c and d are marked "Deleted by amendment." Those had limited use of reserve money beyond the study allocation, set a 10 percent threshold and required equal annual line-item increases over a set period. Subsection a now says associations should have adequate reserves "without need to create a special assessment or loan obligation, except as permitted pursuant to subsection e."

New subsection e lets an association that existed on the effective date of P.L.2023, c.214 either:

• fund in line with one of the funding plans in its most recent reserve study; or
• fund at "an amount equal to 85 percent" of one of those plans, if both of the following happen.

• Before adopting the annual budget, the association gives all unit owners a notice "in 20-point bold font" stating that the board elected to fund at 85 percent, the year a special assessment or loan is anticipated, and the anticipated amount.
• Before a contract to buy a unit is executed, the seller gives the buyer a copy of the most recent notice.

The 85 percent method "shall not be utilized by an association for more than five fiscal years of the association next following the effective date" of the 2025 act. New subsection f says an association created after the effective date of P.L.2023, c.214 must fund according to one of the plans in its study (the 85 percent option is not offered to those associations).

What This Means in Practice

For boards

The 85 percent path needs a number you can defend. The notice must give a year and a dollar amount for the expected special assessment or loan, so the reserve specialist's projections matter. Consider asking the specialist to model the 85 percent scenario in writing.

Our reading: the five-fiscal-year window is counted from the 2025 act's effective date (August 21, 2025), not from the date the board first uses the option. A pending bill, A5306, would change that to run from adoption of a funding plan; it is not law (see our page on that bill).

For owners and sellers

The notice is tied to resales. A seller must hand the buyer the most recent notice before the purchase contract is executed. The statute does not say what happens if a seller fails to do so.

Open questions (our reading)

• The act deletes the "except that" language that previously acknowledged special assessments when an asset fails early. Whether the new "except as permitted pursuant to subsection e." narrows a board's ability to assess for early failures is unclear. Confirm with counsel.
• The text does not define what counts as the "most recent" notice when a board adopts new budgets annually.
• We have not confirmed whether the Department of Community Affairs has updated its guidance since the amendment.

Timeline

Related New Jersey Law

• P.L.2023, c.214: structural integrity and reserve law
• N.J.S.A. 45:22A-44.3: reserve funding
• A5306 (pending): 35-year funding plan option
• S146 and A318 (pending): narrowing covered buildings
• New Jersey HOA laws and regulations

Board Checklist

• Confirm the association has a current reserve study with a 30-year funding plan that reaches a low of zero, not below.
• Decide whether to fund at 100 percent of a plan or use the 85 percent option, and record the vote.
• If using 85 percent, prepare the 20-point bold notice with the year and anticipated amount of the special assessment or loan.
• Send the notice before adopting the annual budget.
• Tell your closing and resale contacts that sellers must provide the latest notice to buyers.
• Calendar the five-fiscal-year limit with counsel.
• Check whether the study was reviewed within the last five years.

Frequently Asked Questions

What did P.L.2025, c.132 change?

It defined "adequate" reserves, moved the study-review duty to the association, deleted the 10 percent and equal-increase rules, and added the 85 percent funding option.

Can an association fund reserves at less than 100 percent?

An existing association may fund at 85 percent of a study plan if it gives owners the required notice, and only for up to five fiscal years after the 2025 act's effective date.

What must the notice say?

In 20-point bold font: that the board elected 85 percent funding, the year a special assessment or loan is anticipated, and the anticipated amount.

Do new associations get the 85 percent option?

The text offers the option to an association "existing as of the effective date of P.L.2023, c.214." Associations created later must follow a study funding plan.

Does a seller have to give the notice to a buyer?

Yes, before the buyer executes a contract, the seller must provide a copy of the most recent notice.

Is there a penalty in the amendment?

None is stated in the text we read.

Is the 2025 amendment the last word?

No. Bills pending in the 2026 session would change these rules, but we found no evidence any has been enacted.

Where This Comes From

We read the enacted text of P.L.2025, c.132 (S3992, first reprint) and the underlying P.L.2023, c.214 on the New Jersey Legislature's bill site. The session law is at pub.njleg.gov. We did not read the current codified statute database or any Department of Community Affairs guidance updated after August 2025.

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Legal disclaimer: This article is general information, not legal advice. Laws change and associations differ. Confirm the current statute text and how it applies to your governing documents with a licensed New Jersey attorney before acting.