C.I. from New Jersey writes:
Dear Mister Condo,
Mister Condo replies:
C.I., thank you for writing. The subject of Reserve Funds is near and dear to my heart because I get so many questions from condo and HOA dwellers who deal with the first-hand consequences of underfunded Reserve Funds when major capital improvements are required in their associations. The Community Associations Institute (CAI) released a report in September of 2013 that took a look at the state of the industry with regards to state laws and Reserve Funds. You can find the full report here: http://www.caionline.org/govt/news/Political%20HeadsUp%20Public%20Document%20Library/Summary%20of%20State%20Reserve%20Fund%20Laws%20-%20Sept2013.pdf
Here are the highlights and what they had to say about New Jersey:
“Many states have enacted legislation dealing with community association reserve and operating funds to protect owners from fiscal problems and financial hardship. More states may enact similar legislation as community associations continue to gain popularity. The following is a summary of each state reserve fund law.
Reserve Studies are required in the following states: California, Delaware, Hawaii, Nevada, Oregon, Utah and Virginia. Washington statutorily encourages associations to have a reserve study performed every three years unless doing so would impose an unreasonable hardship.
Please remember that community associations are governed by state law, which can vary widely from state to state. This information is intended for general educational and informational purposes only; it may not reflect the most recent developments, and it may contain errors or omissions. The publisher does not warrant or guarantee that the information contained here complies with applicable law of any given state. It is not intended to be a substitute for advice from a lawyer, community manager, accountant, insurance agent, reserve professional, lender, or any other professional.
The association may levy and collect assessments duly made by the association for a share of common expenses or otherwise, including any other moneys duly owed the association, upon proper notice to the appropriate unit owner, together with interest thereon, late fees and reasonable attorneys’ fees, if authorized by the master deed or bylaws. All funds collected by an association shall be maintained separately in the association’s name. For investment purposes only, reserve funds may be commingled with operating funds of the association. Commingled operating and reserve funds shall be accounted for separately, and a commingled account shall not, at any time, be less than the amount identified as reserve funds. Section 46:8B-15.
There is no statutory requirement to conduct a reserve study and no statutory requirement to fund reserves.”
I hope that helps. All the best!