NJ S2760 Structural Inspections and Reserve Studies

In a groundbreaking move, New Jersey has recently passed Bill S2760, a landmark legislation in the wake of the tragic collapse of a residential high-rise in Surfside, Florida, that addresses the pressing concerns surrounding the structural integrity for certain residential buildings. This pivotal development marks a significant step towards ensuring the safety and well-being of residents across the state by more clearly defining the responsibilities for community associations and owners of covered buildings, and the procedures to be followed by professional structural engineers and licensed architects.

With the passing of Bill S2760, the government of New Jersey has demonstrated its unwavering commitment to upholding the highest standards when it comes to the construction and maintenance of residential properties. By focusing on the structural integrity of buildings, and long-term funding of repairs and replacements, this legislation aims to mitigate potential risks and safeguard the lives of countless individuals and families.

One of the key aspects of Bill S2760 is its emphasis on certain residential buildings, which are particularly vulnerable to structural issues. The legislation aims to address the unique challenges of high-rise residential communities with tailored solutions that help confirm their immediate stability and soundness, as well as guidelines to ensure long-term reserve funding for future structural repairs.

By establishing stringent regulations, the state seeks to hold property developers and owners accountable for maintaining the structural integrity of their buildings, ensuring that residents can trust in the safety and durability of their homes.

The bill was introduced on June 2, 2022, and passed January 8, 2024.  

There are two major requirements for which to be aware if you are a "covered building" meaning the high-rise residential condominiums and cooperatives in the "Gold Coast", shore regions, and other urban or populated areas of New Jersey:

1. Structural Integrity Inspections

Most existing buildings 15-years old or older, will need to obtain a post-occupancy structural inspection by the end of 2025.  This inspection must be provided by a New Jersey licensed Professional Engineer (PE) experienced in the assessment of structures, such as Payne Engineering PC.

Future Inspections will need to be provided every 10 years or sooner as determined by the professional engineer, or within 60 days of any observed structural decay to the primary load-bearing systems.

2. Reserve Studies

A capital reserve study must be performed by a licensed professional engineer or architect, or reserve specialist by the end of 2024 if a reserve study hasn't been provided or updated in the past 5 years, or the end of 2018, approximately.   Reserve studies must then be performed once every 5-years thereafter.

Communities with less than $25K in common arear capital assets (sum total of common element component inventory) 

The Reserve Study shall provide a 30-year funding plan for repairs and replacements with suitable funding levels that would not require additional special assessments or loan obligations to fund the work.

Associations will be given 2 to 5 years to increase inadequate reserve funds to the levels required by the reserve study, based on whether or not the increased reserve fund increases are less than, or greater than, a 10% increase for annual common expense assessment. 

Conclusion

In conclusion, the passing of Bill S2760 in New Jersey marks a significant milestone in the quest for enhanced structural integrity regulations and reserve funding for residential buildings. This legislation underscores the state's commitment to the safety and well-being of its residents, while also setting a precedent for other regions to prioritize building standards. With these measures in place, residents can rest assured knowing that their homes are built to withstand the test of time and provide a secure haven for their families.

Key Terms / Definitions and new Terms from the Bill:

The bill can be read at the following link:  NJ S2760 Structural Inspections and Reserve Studies

"Covered building" means:  a residential building that is categorized as use group R-1 or use group R-2, as those terms are defined in N.J.A.C.5:70-1.5, having load bearing concrete, masonry, steel, hybrid structure including, but not limited to, heavy timber, and a building with podium decks. 

"Primary load bearing system" means the assemblage of structural components within a building that by contiguous interconnection form a path by which external and internal forces applied to the building are delivered to the ground.

"Structural inspector" means:

1.  A construction official, as that term is used in section 8 of  P.L.1975, c.217 (C.52:27D-126), who is also an engineer licensed by the State;
2.  An employee of the bureau who is also an engineer licensed by the State; or
3. An engineer licensed by the State who has the same qualifications required of an engineer under contract with the enforcing agency with whom the covered building owner, enforcing agency, or bureau contracts to perform inspections of covered buildings under "the law".

Post Occupancy Structural Inspections (Paragraph 4): 

A.  Following the issuance of a certificate of occupancy, an initial structural inspection of the building components forming the primary load bearing system of a covered building shall be undertaken by a post-occupancy structural inspector retained by the covered building owner within the earlier of:

1. 15 years of the date on which the covered building receives a certificate of occupancy pursuant to section 15 of P.L.1975, c.217 (C.52:27D-133); or
2. 60 days after observable damage to the primary load bearing system.  If a covered building has received a certificate of occupancy pursuant to section 15 of P.L.1975, c.217 (C.52:27D-133) prior to the effective date of P.L.    , c.    (C.        ) (pending before the Legislature as this bill), then an initial structural inspection shall be undertaken by a structural inspector within two years of the effective date of January 24, 2024.

1.  set forth with specificity any required maintenance or repairs needed by the primary load bearing system;
2.  determine when the next inspection of the primary load bearing system shall be performed, but in no event shall a secondary inspection occur more than the earlier of: (a) 10 years after the initial inspection has taken place; or (b) not more than 60 days after there is observable damage to the primary load bearing system;
3.  be provided to the municipal appointing authority, the construction official and the enforcing agency;
4.  be prepared in accordance with the protocol established by the American Society of Civil Engineers, for the structural condition assessment of a covered building or a similar protocol by another nationally recognized structural engineering organization; and
5.  provide any other information or guidance necessary to maintain the structural integrity of a covered building.

C. If the structural inspector's report created pursuant to subsection b. of this section finds that corrective maintenance of the primary load bearing system is required, the report shall specify with reasonable detail the required corrective maintenance.

D. Notwithstanding the structural inspector's initial inspection and report undertaken pursuant to subsections a. through c. of this section, subsequent structural inspections and reports shall be provided for as set forth by the structural inspector's preceding report as follows:

1. The structural inspector will determine a reasonable period of time within which the next inspection shall take place provided, however, that any subsequent inspection under this paragraph shall not take place:
   1. more than 10 years after a preceding inspection during the first 20 years following issuance of a certificate of occupancy of a covered building; or
   2. more than five years after a preceding inspection if the covered building is more than 20 years old.
2. The structural inspector shall review the preceding inspection report prior to undertaking subsequent inspection of the covered building.  After the structural inspector completes this review and inspection, the structural inspector will then issue a subsequent inspection report which shall:
   1. make note of any new or progressive deterioration;
   2. set forth the covered maintenance required to address any new or progressive deterioration; and
   3.  be provided to the covered building owner, who shall undertake measures necessary to effectuate the covered maintenance, including, but not limited to, engaging the services of an architect or engineer licensed by the State and qualified in structural repairs or maintenance to create plans or specifications to implement the covered maintenance.  The covered building owner shall cause any plans or specifications created pursuant to this subparagraph to be filed with the municipal appointing authority or enforcing agency.
3. If the post-occupancy structural inspector's inspection finds that there is no need for corrective maintenance, the written report shall be filed with the enforcing agency or municipal appointing authority. 
4. Any written reports issued by the post-occupancy structural inspector pursuant to this section shall be provided to the covered building's owner and shall be made available to any resident of a covered building upon request.

E. Inspections conducted pursuant to this section may be conducted in conjunction with other required inspections, including but not limited to inspections required pursuant to the "Hotel and Multiple Dwelling Law," P.L.1967, c.76 (C.55:13A-1 et seq.).

Limitation of Liability of Structural Inspector (Paragraph 5)

A construction or post-occupancy structural inspector who performs the duties set forth in "the law" in good faith and pursuant to the protocols adopted by the American Society of Civil Engineers, or similar protocols by another nationally recognized structural engineering association, shall not incur any civil liability for injury associated with any inspection undertaken by the structural inspector. 

New Reserve Study Requirements (Paragraph 7)

1. Any association created pursuant to P.L.1977, c.419 (C.45:22A-21 et seq.) shall undertake and fund a capital reserve study which shall determine or assess the adequacy of the association's capital reserve funds to meet the anticipated costs of replacement or repair of the capital assets of a common interest community that the association is obligated to maintain.  All capital reserve studies shall be prepared in conformity with the latest edition of the National Reserve Study Standards of the Community Associations Institute or similar standards by another recognized national organization.  A capital reserve study conducted pursuant to this section shall be performed or overseen by a reserve specialist who is credentialed through the Association of Professional Reserve Analysts or an engineer or architect who is licensed by the State and shall include, but be not limited to, the following:
   1.     the association's capital reserve fund balances;
   2.     the association's anticipated income and expenses;
   3.    an analysis of the physical status and of the common area components of the buildings and other common areas that the association is obligated to maintain;
   4.  the anticipated costs associated with the building maintenance, as well as the anticipated costs of repair or replacement of common area building components, which are necessary to maintain the structural integrity of the buildings and other common area components that the association is obligated to maintain;
   5.  a reasonable estimate of the cost of future reserve studies or updates;
   6. a reasonable estimate of the costs associated with implementing any corrective maintenance deemed necessary pursuant to section 4 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill);
   7. a proposed 30-year funding plan, as described in section 8 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill) that establishes the adequate proposed capital reserve funding over a 30-year time period; and
   8.  any other information necessary to perform an analysis of the adequacy of the association's capital reserve funds relative to maintaining the structural integrity of buildings and common areas which the association is obligated to maintain.
2.  Associations which have not undertaken a reserve study within five years of the effective date of January 8, 2024 shall undertake a reserve study within one year of the effective date of P.L.    , c.    (C.        ).  Associations formed after the effective date January 8, 2024 shall undertake a reserve study as soon as practicable after the election of a majority of an executive board pursuant to section 5 of P.L.1983, c.30 (C.45:22A-47), but in no event shall such study be undertaken more than two years following the election of a majority of the executive board under section 5 of P.L.1983, c.30 (C.45:22A-47).
3. A covered building owner shall ensure that a capital reserve study conducted pursuant to this section shall be reviewed by a licensed architect, engineer, or credentialed reserve specialist, and that a capital reserve study be conducted and reviewed at least once every five years.
4. This section shall not apply to an association created pursuant to P.L.1977, c.419 (C.45:22A-21 et seq.) with less than $25,000 in total common area capital assets.

New Reserve Study Requirements (Paragraphs 8):

1. An association created pursuant to P.L.1977, c.419 (C.45:22A-21 et seq.) shall obtain a reserve study including a 30-year funding plan in order to ensure that the association has adequate reserve funds available to repair or replace the capital assets located on the common elements and facilities that the association is obligated to maintain without need to create a special assessment or loan obligation, except that in those cases in which a capital asset reaches the end of its established useful life earlier than predicted by the reserve study, nothing herein is intended to prevent the imposition of a special assessment or obtaining a loan.  These reserve funds shall be used for the repair or replacement of components that have reached the end of their established useful life as set forth in the most recent reserve study undertaken pursuant to section 7 of P.L.    , c.    (C.       ) (pending before the Legislature as this bill). 
2. When an expenditure of the reserve funds is required to repair or replace a component pursuant to subsection a. of this section, the association shall use only the amount of reserve funds allocated by the reserve study to make such repair or replacement, unless:
   1.  the use of such additional funds from the reserve fund is not reasonably anticipated to prevent or interfere with the ability of the association to undertake additional repairs or replacements in the five years subsequent to the additional expenditure; and
   2.  the association's executive board adopts a written resolution requiring that the expenditure of these additional funds shall be recovered within the following three fiscal years.
3. If an association existing as of the effective date of P.L.    , c.    (C.        ) (pending before the Legislature as this bill) does not have an adequate reserve fund as described in subsection a. of this section, and the increase in the association's budget line item for reserve funding to render it adequate as set forth in the reserve study would, without reference to any other budget line item adjustments, require an increase of more than 10 percent of the previous year's common expense assessment, the deficiency shall be made adequate within the following five fiscal years, provided that each annual increase in reserve funding during the following five fiscal years shall be an equal annual line item increase in the reserve fund until the reserve fund is made adequate, notwithstanding causing an increase of more than 10 percent in the annual common expense assessment.
4. If an association existing as of the effective date of January 9, 2024, does not have an adequate reserve fund as described in subsection a. of this section, and the increase in the association's budget line item for reserve funding to render it in conformity with the reserve study would, without reference to any other item adjustments, require an increase of less than 10 percent of the previous year's common expense assessment, the deficiency shall be made adequate within the following two fiscal years.

New Reserve Study Requirements (Paragraphs 9)

1. Notwithstanding the terms of a declaration, master deed, bylaws, or other governing document of an association, the executive board may, without the consent of the owners or approval of a developer selling units in the planned real estate development, adopt an assessment payable by the owners over one or more fiscal years or obtain a loan on such terms as the board determines are reasonable, whenever necessary to fund the cost of corrective maintenance of the primary load bearing system of the planned real estate development pursuant to section 4 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill).  Prior to adopting an assessment or obtaining a loan under this section, the executive board shall make a determination that the assessment or loan are necessary to maintain structural integrity of a building and shall obtain a written report from an engineer or architect licensed by the State that states that the failure to undertake corrective maintenance of the primary load bearing system will:
   1.   constitute an imminent or reasonably foreseeable hazard to health or safety;
   2.  constitute a violation of sections 3 and 4 of P.L.    , c.    (C.         and C.        ) (pending before the Legislature as this bill), or
   3.  will result in a material increase in the cost of such corrective maintenance if delayed. 
2. Nothing in this section shall prevent or interfere with the right of an association to pursue a lawsuit concerning claims for construction defects related to any common element of the planned real estate development.