NJ Transition Study Vs Reserve Study




Most community association board members in New Jersey understand what a reserve study is and the important role that it plays in managing the financial future of the association. Apart from the reserve study, there is another study that is also very important, and it is called a transition study.
So how does an NJ transition study differ from a reserve study? The latter analyzes the capital items that a community association is responsible for maintaining, including the roofs, concrete and siding. It provides information regarding each item, including the life expectancy as well as the cost of replacing it in future. The reserve study specifically looks to see if and when items will deteriorate because of ordinary wear and tear.

An NJ transition study on the other hand has a much narrower purpose. It identifies and documents potential construction and design deficiencies. In a transition study, the key word is “defect”. For instance, it would reveal such items as water infiltration, roof leaks or concrete settlement resulting from poor craftsmanship or design. As part of the transition study, cost estimate to remedy the defect is usually provided.

Both the reserve study and transition study have their benefits to community associations, but there purposes are different. The reserve study helps the association in future budgeting of the cost for repairing its capital items. Maintenance and repair is an ongoing issue throughout the life of a community association, and the board needs to address it continually. For example, if a roof was just replaced, the community association should immediately start budgeting for future roofing repairs and costs based on the roof’s life expectancy.

A transition study ideally just occurs once during the time when the property transitions over from the control of the developer to the association board. At this point, some developers may order for the transition study in order to turn over the property with a clean bill of health.

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