New Jersey’s New Reserve Fund Law: What HOA & Condominium Boards Need to Know (And What It Means for NY, PA & CT Communities)

What HOA & Condominium Boards Need to Know (And What It Means for NY, PA & CT Communities)

For years, many community associations approached reserve funding with one simple question: “How much money should we keep in reserves?” The answer was often subjective. Some communities contributed what they could afford, while others postponed increasing reserve contributions until a major repair forced their hand. That has changed, especially in New Jersey. With the passage of New Jersey’s Structural Integrity and Reserve Funding legislation and subsequent amendments, reserve planning is no longer simply considered a best practice. It has become a critical component of responsible community governance and long-term financial planning. While New Jersey has taken the lead with comprehensive reserve funding requirements, the legislation also serves as an important reminder for associations that proactive reserve planning protects both homeowners and property values.

Why Reserve Funds Matter

Reserve funds are the association’s savings account for major repairs and replacements. Unlike annual operating budgets, reserve funds are intended to pay for large capital expenses that occur over time, including but limited to:

Roof replacements
Roadways and parking lots
Sidewalks
Clubhouses
Swimming pools
Elevators
HVAC systems
Building exteriors
Stormwater infrastructure
Mechanical equipment
Retaining walls
Other common area assets

Without adequate reserves, communities are often faced with funding choices, which can include:

Special assessments
Loans
Increasing monthly assessments

Proper reserve planning helps boards avoid these situations while protecting the long-term financial health of the community.

New Jersey Raises the Standard

New Jersey has become one of the nation’s leaders in reserve funding requirements for community associations.

The legislation requires qualifying associations to obtain a professional capital reserve study that evaluates the condition of common elements and develops a 30-year funding plan. Reserve studies must be performed by a qualified professional, such as a licensed engineer, architect, or credentialed reserve specialist, and updated at least every three (3) to five (5) years.

The goal isn’t simply to build a large reserve account. The goal is to ensure associations have a realistic financial roadmap that prepares them for future repairs before they become emergencies.

Important 2025 Update: Greater Flexibility for Boards

After hearing concerns from community associations across New Jersey, legislators adopted S3992, which amended portions of the original reserve funding law. The amendment provides boards with additional flexibility while maintaining the overall objective of responsible reserve planning.

Some of the most significant updates include:

Every reserve study must include a Baseline (Zero-Dollar) Funding Plan.
Boards may also review additional funding options that provide stronger reserve positions.
Associations may temporarily fund reserves at 85% of their selected funding plan for up to five fiscal years, provided they meet the law’s disclosure requirements.
Reserve studies must continue projecting reserve balances over a 30-year period without allowing the selected funding plan itself to fall below zero (Baseline Funding).
Reserve studies must continue to be updated at least every five years.

These amendments recognize that many communities are working to strengthen reserves without creating unnecessary financial hardship for homeowners.

What About New York, Pennsylvania & Connecticut?

Although New Jersey currently has the most comprehensive reserve funding requirements, reserve planning should be a priority for every community association.

New York

New York does not currently require reserve studies for every HOA or condominium association. However, reserve studies are increasingly recognized as an industry best practice, and legislative discussions continue regarding stronger reserve planning requirements.

Pennsylvania

Pennsylvania does not currently mandate reserve studies statewide. However, boards have a fiduciary responsibility to properly maintain common elements, making reserve studies an important financial planning tool for avoiding deferred maintenance and unexpected special assessments.

Connecticut

Connecticut likewise does not currently impose reserve funding requirements comparable to New Jersey’s law. Even so, responsible reserve planning remains one of the most effective ways for boards to budget for future repairs while protecting homeowners from financial surprises.

Regardless of state requirements, every association benefits from understanding the long-term cost of maintaining its community.

Warning Signs Your Association May Be Underfunded

Your board should consider reviewing its reserve strategy if:

Your reserve study is more than five years old.
Reserve contributions have remained unchanged despite inflation.
Major repairs continue to be postponed.
Special assessments occur regularly.
The association relies on loans for capital projects.
Reserve balances continue to decline year after year.

These warning signs often indicate that today’s funding may not support tomorrow’s repair needs.

Questions Every Board Should Ask

Every board should periodically ask:

When was our last reserve study completed?
Are we following the recommended funding plan?
Are our reserve contributions keeping pace with increasing construction costs?
Could our community complete a major repair without a special assessment?
Are we planning five years ahead—or thirty?

The answers to these questions can significantly impact your community’s financial future.

How Wilkin Management Group Helps Community Associations Plan for the Future

At Wilkin Management Group, we understand that effective financial planning is one of the foundations of successful community management.

Our experienced team works alongside boards, reserve specialists, engineers, accountants, and legal counsel to help associations understand reserve study recommendations, prepare responsible annual budgets, and make informed financial decisions that support the long-term success of their communities.

If your association has questions about reserve planning, budgeting, or the latest reserve funding requirements, our team is here to help.

Contact Wilkin Management Group to learn how we can help your community build a stronger financial future.