We are now a year into the effective date of what is colloquially known as the Structural Integrity Act (Act). The law combines two important obligations condominium associations or cooperatives must now adhere to, inspection of the structure of the building (does not apply to all types of community associations) by a licensed engineer versed in structural engineering (structural integrity portion of the law) and the need to maintain adequate reserves (will apply to almost all community associations). A portion of the Act that has not yet been adequately discussed are the potential perils associated with a section of the Act that deals with “Observable Damage”. This writing seeks to give the reader a better perspective of this portion of the Act.

Structural Integrity Inspection

The inspection requirement under the Act will only apply if the building has a primary structural frame and load-bearing exterior and/or interior walls of non-combustible (concrete, masonry, steel, or a hybrid) or heavy timber (wood structures at least 4 inches thick in diameter) or a podium deck (structural slab). Wood framed buildings are excluded unless they sit on top of a podium deck such as construction over commercial space.

If the structure is required to have inspections, the timeframes to complete the initial inspection are: (1) within 15 years from the issuance of the certificate of occupancy (CO) for the building; or (2) within 60 days after observable damage to the building’s primary load bearing system.

If the CO was issued more than 15 years prior to January 8, 2024, then an inspection is required on or before January 8, 2026. If the CO was issued less than 15 years from January 8, 2024, then the inspection must be performed within one year from the date when the building reaches 15 years old (measured from the date of issuance of its certificate of occupancy).

Subsequent inspections are then required no more than 5 years from the date of the previous inspection or not more than 60 days after observable damage.

“Observable Damage to Primary Load Bearing System”

The obvious intent behind the inspection requirements of the Act is to identify and address as early as possible any structural failure to an occupied building that may result in significant damage to persons or property like the tragic event at the Champlain Towers Condominium in Surfside, Florida in June 2021. A laudable goal. However, it is unclear how at least one part of the Act’s inspection provisions will work, to wit, the requirement that an inspection occur “60 days after observable damage to the primary load bearing system.”

Since this language would trigger an inspection by a structural expert, as written the implication is that either the unit owners, board members, or perhaps some employees of the Association such as a property manager would be the one to “observe” the damage. This is the first glaring flaw in the Act because it places the onus on a non-expert to understand and identify structural damage. The second flaw is that the Act does not define what amounts to “observable damage.” In other words, what exactly does observable structural damage look like to the naked eye. Lastly, the Act defines “primary load bearing system” as “the assemblage of structural components within a building comprised of columns, beams, or bracing that by contiguous interconnection form a path by which external and internal forces applied to the building are delivered to the foundation.” N.J. Stat. § 52:27D-132.3. These components are most often concealed within the building making the identification of “observable damage” to these elements unlikely. If they are visible, what then does “observable damage” to these components look like?

So, we are left with lay people being expected to identify damage in some undefined form to the mostly concealed primary load bearing system of the building. Since they most likely will not be able to directly observe the primary load bearing elements, then these lay people are expected to identify how damage to the primary load bearing system will appear in other parts of the building. A basic search on the internet for “signs of structural damage” will return multiple sites, mostly engineering firm websites, that give lists of the following kinds of signs to look for: cracks in walls, ceilings, or around windows and doors; uneven floors; sticking doors and windows; bowing or leaning walls; walls that curve or lean inward; and sagging floors and roofs (not intended to be a complete list). These “signs” are not from the load bearing system itself but would be how a failure in the system would appear to the building finishes, i.e., sheetrock, windows, doors, wood floors, etc. They can obviously be signs of a serious structural problem. However, they may also just be signs of poor craftmanship that fall far short of creating a structural problem. What if there is only one of these “signs” observable to the naked eye? For example, a crack in a sheetrock wall. Such cracks are very common. Should a single crack implicate what may end up being a very expensive inspection process for the Association? If the single crack is ignored, and a structural failure occurs that the crack was evidence of, is the Board liable for ignoring the crack?

These issues will undoubtedly be fleshed out in subsequent litigation where the Courts will have to define exactly what “observable damage” to the “primary load bearing system” is intended to mean and what standard will define the obligation to “observe” the damage. It is not clear what approach the Court’s will take to these questions. There may be some guidance in the case law discussing disclosure of defects in the context of real estate transactions. For example, the obligation to disclose latent defects, defined as “not known or reasonably discoverable,” (Dwyer v. Skyline Apartments, Inc., 123 N.J. Super. 48, 53 (App. Div. 1973), versus a patent defect defined as one that is “clear and obvious” (Szeles v. Vena, 321 N.J. Super. 601, 607 (App. Div. 1999). These definitions are obviously very basic and if applied will end up in a case-by-case analysis turning on the facts.

Capital Reserves

The Act now requires reserves studies be performed at least every 5 years if the community association’s common element assets are valued at $25,000 or more. The intent of the Act is to ensure adequate reserve funds are available, when needed, thus avoiding special assessments or loans to fund capital asset replacement. A reserve study is required immediately if no reserve study has been performed since January 8, 2024. That is, the community association had one year from January 8, 2024, to perform a reserve study.

If the study proves that reserves are underfunded, options are available to achieve compliance depending on the amount of the increase in the assessment to achieve compliance (different vehicles available if an increase is less/more than 10%). Each association should consult with its professional team to determine the best way to achieve compliance.

While the requirements of complying with the Act will be painful, the Structural Integrity Act is intended to address what can only be defined as a long drought in community association boards properly preserving not just the physical plant of the community association, but its financial well-being as well. The law now statutorily imposes that board members act upon their fiduciary obligation to preserve the health and welfare of their members.

Additional Author: Melissa Volet