Ladies of LAC Discussion

While the developer maintains control of the association it shall not be used for: - budget line items - to minimize assessments - to lower the amount due for developer’s obligation

Assessments for Common Expenses shall be due from: - unit owners (who purchased units conveyed)

- developer units (units for which a building permit was issued) - developer registered units (unsold units that are registered with NJDCA for sale)

The developer shall also be assessed for the portion of the common expense assessment associated with completed common amenities that are in service, ie pool, clubhouse, tennis court, etc. Here is where the developer will pay for their share of the amenities in place for unsold but registered units = benefits derived. Assessments shall be based on either an Annual Budget or the Full Occupancy Budget as stated in the governing documents. The developer’s assessments shall be paid on the same schedule as the unit owner’s assessments. 5:26-8.7 Budgets Prior to making an annual assessment, the Association shall prepare and adopt an operating budget to include common expenses including adequate reserve funds for repair and replacement of the common elements and facilities, specifically: - May include repair or replacement of a component of a mechanical system or facility - Monies dedicated for repair or replacement of common elements at the end of useful life without special assessment - Must be determined by an independent licensed engineer or architect as a part of the reserve study - Must be maintained in a segregated account in the name of the association, not commingled with other accounts - Must be in a bank FDIC insured and licensed to do business in NJ - Must be used for the items for which they are collected - May not be used by a developer-controlled association board unless: a. the common element is included in the reserve study b. at the end of its useful life c. and has been fully funded in accordance with the association budget.

We also made recommendations on: - how the reserve study could be amended as a community expands - require a new reserve study when facilities and common elements constructed differ from the original plan - require a letter of adequacy from the preparer of the reserve study - require the developer to pay for the reserve study while the developer is in control of the association

In conclusion, the importance of adequate reserve funding cannot be overstated. Essential to that goal, is to update the reserve study every 3 to 5 years and to set aside the amount recommended in the study, so that the common elements can be replaced when necessary without a financial burden to the members of the association.