New Jersey's reserve law now lets balances hit zero — and the 85% option expires
New Jersey's reserve law now lets balances hit zero — and the 85% option expires
2026-09-15 · New Jersey · Legislation
New Jersey rewrote the arithmetic of condominium and homeowners association reserves on August 21, 2025, and most boards are still working from the old numbers. P.L.2025, c.132 — Senate Bill 3992, first reprint — amended the 2024 Structural Integrity and reserve-funding law and changed what the word "adequate" means.1
The new definition of "adequate"
The amended statute defines adequacy as "a sum of money … 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."
Every capital reserve study must now carry "a 30-year funding plan that allows the reserve fund to reach a lowest dollar balance of zero during the 30-year plan projection." Richer plans and escalating-contribution plans remain available, "provided the reserve fund balance is not projected to fall below zero dollars."
That is a floor, not a target. A plan that grazes zero in year nineteen and climbs back out satisfies the statute. The previous drafting had been read to require something closer to full funding, and the change is the single largest reason the 2026 assessment arithmetic differs from the 2025 arithmetic in New Jersey communities.
What was deleted
Three subsections of N.J.S.A. 45:22A-44.3 came out of the statute entirely: the rule that an association could spend only what the study allocated to a component absent a five-year recovery resolution, the ten-year cure path for a deficiency that would require a common-expense increase above ten percent, and the two-year cure for a deficiency below that threshold.
Those were safe harbours. A board that had built a compliance narrative around the ten-year path no longer has a statutory one to point to.
The 85% option, and the notice that comes with it
An association that existed as of January 8, 2024 may fund at "85 percent of one of the capital reserve funding plans" rather than at plan. The condition is disclosure, and it is unusually specific.
Before adopting a budget on that basis, the board must give every unit owner a notice "in 20-point bold font" stating that it has elected 85% funding, naming the year in which a special assessment or loan is anticipated as a result, and stating the anticipated dollar amount.
The obligation follows the unit out the door. Before a purchase contract is executed, the seller must hand the buyer a copy of the most recent such notice. That converts an internal budgeting choice into a resale disclosure item, and it is the provision most likely to be missed — a seller's attorney working from a 2024 resale package checklist will not have it.
It expires, and the clock is not a calendar
The 85% method "shall not be utilized by an association for more than five fiscal years of the association next following the effective date." The effective date is August 21, 2025.
Note the drafting: five association fiscal years, not five calendar years. An association on a July–June fiscal year and one on a calendar year will run out at different times, and neither date appears in the statute. Boards electing the option should have their own last usable fiscal year written into the board minutes now, rather than inferred later.
Associations created after January 8, 2024 get no option at all
The 85% election is available only to associations existing as of the 2024 effective date. A community that came into existence afterwards funds in accordance with one of the plans in its most recent reserve study, full stop — which means newly transitioned developments are held to a stricter standard than their established neighbours.
What the statute does not say
There is no stated penalty, no named enforcement agency, and no remedy in the amended text for an association that cannot reach even 85%. The statute describes a duty and stops. Where that leaves a board is the question the next three years of New Jersey community-association practice will answer, and the honest answer today is that it is unresolved.
What to watch
Two pending bills would move these numbers again — one adding a 35-year plan option, one restarting the 85% clock from the date a funding plan is adopted rather than from the statute's effective date. Neither has had a committee vote.
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