Reserve / Transition Studies

Lockatong Engineering delivers consistent, knowledgeable service to the owners and community association from the earliest planning stages to maintenance and future improvements. We bring the value of personal contact and local knowledge to our interactions—whether we’re answering questions or asking our own on clients’ behalf. Our reserve studies help confirm that an association’s ongoing funding is sufficient for its future capital needs. Our transition studies give an association a healthy start on its way to fulfilling its initial responsibilities.

We’ve found that new associations benefit greatly when both transition and reserve studies are completed before they accept ownership of the community. In new construction, a reserve study done alongside a transition study gives community associations a more secure financial footing, a clearer idea of what to expect in capital costs over the next 30 years and the basis for a capital reserve funding schedule to pay for major repairs or replacement down the road.

Reserve Studies

In this type of study, we analyze the common element components of the property and assess whether the capital reserve fund is sufficient to pay for planned or anticipated major capital improvements, system repairs, and replacements.

Our analysis gives a homeowner/condominium association boards and owners a budget tool to plan what and when major expenditures are anticipated as well as how much and when to fund the community’s reserve account to pay for them. It is a valuable instrument that helps ensure the viability and strength of the community. Lockatong’s reserve studies are conducted in accordance with the Community Associations Institute Reserve Study Standards and meets the requirements of New Jersey Legislation S2760/A4384.

Lockatong’s reserve studies are conducted by Licensed Professional Engineers who meet all the important qualifications for performing reserve studies. With that skill set and knowledge of how systems age with use, we are prepared to provide a comprehensive inspection of the common elements of the property. We prepare a narrative description of the common element and describe its current condition—not just the standard “useful life.” Using this robust data, we prepare the capital cost reserve analysis to determine what the association must contribute to the reserve fund on an annual basis to cover the capital expenditures over the 30-year reserve period.

Should we find that your reserve is underfunded for anticipated expenses, we can help you develop practical alternatives that combine sound engineering and financial practices. If you have known issues or if we locate issues, we can also provide a range of services that will assist you in rectifying problems.

For those who have never commissioned a reserve study, this can be a first step in building a healthy financial future for your association. A standard reserve study incorporates four steps:

Conducting a component inventory of common or limited common elements
Assessing the condition of each component and assigning a value (life/cost)
Assessing the fund’s status in light of timing of anticipated expenses
Developing a plan for building the reserve fund so it will cover such anticipated expenses as

- preventative maintenance costs
- reasonable estimate for future reserve studies
- reasonable estimate of the cost for periodic structural inspections if required
- estimated costs associated with implementing any corrective maintenance deemed necessary as a result of periodic structural inspections, if required

The reserve fund worksheet that we prepare as part of our reserve study provides an association with key information in a set of charts and graphs:

Items that will need repair/replacement, estimated remaining life of each, projected repair/replacement cost of each, and how often each item should require repair/replacement
Anticipated annual repair/replacement expenses charted for the length of the reserve period, adjusted through the years for inflation
End-of-year fund balance vs. capital expenditures for the currently funded program with three alternatives for reserve account funding, each customized to the needs and resources available to the association
A comparison snapshot of the three alternatives that includes the annual fund balance anticipated for each across the 30 years

We recommend that the reserve study be updated on a regular basis: normally every three years to follow the CAI recommendations and a maximum of every five years to be in accordance with the NJ Legislation S2760/A4384. These updates are opportunities to reevaluate expenditures and inspect the common elements to evaluate their aging and its impact on estimated useful life.

Building inspection legislation in New Jersey and across our region has been growing more stringent. In essence, New Jersey bill S2760/A4384: Structural Building Inspections & Reserve Studies requires that multifamily and condominium residences adhere to a schedule of comprehensive structural building evaluations. These in turn provide information about anticipated repairs and capital projects to fulfill the requirements of the reserve study portion of the bill. Lockatong’s robust PE staff is fully qualified to unravel the complexities of the bill’s language and to carry out the steps called for in the legislation.

Fannie Mae and Freddie Mac are asking lenders to answer questions regarding the building’s structural condition and status of any inspections. They are also scrutinizing reserves for adequate funding. If there is not a current reserve study on file, homeowners may have a problem buying or selling their condo.

Click here to download our most recent Reserve Studies brochure.
Click here for our Reserve Study Requirements of NJ S2760/A4384 Legislation handout.

Transition Studies

The process of passing control from the property developer to the owners’ association marks a crucial step for a community association. Our transition studies are designed to get an association off to a good start by helping fulfill the association’s key initial responsibilities before the condominium property ownership is transferred. This includes determining if the developer has met all of its obligations with regard to the construction of the common elements of the property and building in accordance with the construction documents and reasonable construction standards.

Specifically, we complete these tasks:

Review all engineering and architectural drawings and the public offering statement, as provided.
Contact municipal offices to review public documents and resolutions concerning the development.
Perform on-site visual observations to identify any areas that fail to meet general conformance with the design documents or acceptable standards of workmanship.
Inspect interiors of a representative percentage of the units. This often allows us to identify systemic defects in private spaces that should receive the attention of the developer prior to transition to association ownership.
Create a narrative report of transition based on our observations. This details each deficiency and its possible cause(s), recommends corrective action and references any performance standard, if applicable.
Create a transition defect budget for correction that gives the association a cost estimate to correct any issues and by how much association obligations could potentially exceed normal reserve funding.
With board approval, we also prepare a resident questionnaire asking them to report concerns with their own unit’s interior and for help identifying general building issues.

Click here to download our most recent Transition Studies brochure.