Bill Text: NJ A2558 | 2024-2025 | Regular Session | Introduced
Bill Title: Requires developer under "The Planned Real Estate Full Disclosure Act" to post bond with DCA and provides for more accountability to owners in common interest community.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced) 2024-01-09 - Introduced, Referred to Assembly Housing Committee [A2558 Detail]
Download: New_Jersey-2024-A2558-Introduced.html
STATE OF NEW JERSEY
221st LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2024 SESSION
Sponsored by:
Assemblyman ERIK PETERSON
District 23 (Hunterdon, Somerset and Warren)
SYNOPSIS
Requires developer under "The Planned Real Estate Full Disclosure Act" to post bond with DCA and provides for more accountability to owners in common interest community.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act concerning planned real estate developments and supplementing P.L.1977, c.419 (C.45:22A-21 et seq.) and P.L.1977, c.467 (C.46:3B-1 et seq.).
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. a. An association required to be formed pursuant to section 1 of P.L.1993, c.30 (C.45:222A-43), or an association which collects fees from owners for the repair and maintenance of common elements, prior to making an annual assessment, shall prepare and adopt an operating budget which shall provide for any and all common expenses to be incurred during the year, as well as adequate reserves for repair and replacement of the common elements and facilities.
For the purposes of this section, items for which adequate reserves are required shall include, but not be limited to, roof replacement, building painting, and pavement resurfacing, regardless of the amount of deferred maintenance expense or replacement cost, and any other item for which the deferred maintenance expense or replacement cost exceeds $10,000. The amount to be reserved shall be computed by means of a formula which is based upon the estimated remaining useful life and estimated replacement cost or deferred maintenance expense of each reserve item. The association may adjust replacement reserve assessments annually to take into account any changes in estimates or extension of the useful life of a reserve item caused by deferred maintenance. This subsection shall not apply to an adopted budget, other than a budget prepared by a developer, in which the members of an association have determined, by a majority vote at a duly called meeting of the association, to provide no reserves or less reserves than required by this subsection.
b. No budget prepared by the developer or by the executive board while under the control of the developer shall contain any payment or subsidy by the developer that artificially influences the monthly assessment, unless the details are fully disclosed in the public offering statement to the satisfaction of the agency.
c. While the developer maintains a majority of the executive board, the executive board shall have an annual audit of association funds prepared by an independent public accountant, a copy of which shall be delivered to each unit owner within 90 days of the expiration of the fiscal year of the association. The audit shall cover the operating budget and reserve accounts. After control of the association has transitioned to the owners as required pursuant to P.L.1977, c.419 (C.45:22A-21 et seq.), the executive board shall continue to maintain reserve accounts and have audits of association funds, but shall be permitted to reduce the frequency to once every three years, if such reduction is approved by a majority vote of all of the members of the association.
d. Until the expiration of any management contracts entered into while the developer maintains a majority of the executive board, the developer shall ensure that a bond, or other guarantee acceptable to the agency, is posted. For the first year of operation, the bond or other guarantee shall be in an amount equal to the annual budget. For the second year and for succeeding years, the bond or other guarantee shall be in an amount equal to the annual budget plus accumulated reserves. The developer shall provide the agency with such proof of the bond or other guarantee as may be necessary at the time of registration and annually thereafter. The bond shall not be released by the agency until all requirements of section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill) have been met.
2. Upon the transition of control of the executive board by the developer to the owners pursuant to section 5 of P.L.1993, c.30 (C.45:22A-47), the developer shall:
a. Cause to be prepared by an engineer chosen by the owners an engineering report on the common elements;
b. Provide documentation that all municipal and other required governmental approvals and certifications have been granted for all common elements; and
c. Make a full accounting of all association activities during the period of developer control.
3. During the period of developer control of an association, two or more owners, other than the developer, shall be permitted to file warranty claims derivatively on behalf of the association concerning warranties applicable to the common elements of the planned community. As used in this section, "developer" and "association" shall have the meaning as those terms as defined under section 3 of "The Planned Real Estate Development Full Disclosure Act," P.L.1977, c.419 (C.45:22A-23).
4. This act shall take effect immediately.
STATEMENT
This bill is part of a package of bills implementing the recommendations of the State Commission of Investigation in its report of March, 2005 entitled "The Good, the Bad and the Ugly: New-Home Construction in New Jersey."
The bill requires a developer to post a bond with the Department of Community Affairs to secure the completion of the common elements of a planned community and also requires the developer to maintain adequate reserve accounts for maintenance and replacement of the common elements.
The bill establishes specific requirements to turn over documents and assets for a developer upon the transition of control of the association board to the owners in the community. The developer at this time must: cause to be prepared by an engineer chosen by the owners an engineering report on the common elements; provide documentation that all municipal and other required governmental approvals and certifications have been granted for all common elements; and make a full accounting of all association activities during the period of developer control. In addition, the bill provides that, during the period of developer control of an association, two or more owners shall be permitted to file warranty claims derivatively on behalf of the association concerning warranties applicable to the common elements of the planned community.
