on February 13, 2017
Massachusetts Court of Appeals recently affirmed the legal validity of a condo’s bylaws requiring the consent of eighty percent (80%) of unit owners as a prerequisite for owner standing in lawsuits against the trustees of the condominium’s board. The bylaw in question made it functionally impossible for unit owners to sue the trustees as, by virtue of the number of units and number of trustees, it necessitated at least partial trustee-owner consent to reach the eighty percent (80%) threshold. Bettencourt v. Trustees of Sassaquin Village Condo Trust, 59 N.E.3d 455 (Mass. App. 2016).
The Court held that the bylaw was neither unconscionable nor against public policy and thus concluded, “that the consent requirement is valid and the plaintiffs’ failure to comply with it mandates dismissal of their derivative claims.” The Court reasoned that as the plaintiffs, “knowingly and voluntarily agreed to the consent requirement when they purchased their units,” and were not precluded from, “persuading other unit owners and one or more of the trustees to consent to a lawsuit,” that the bylaw was not unconscionable as the, “plaintiffs [had] not identified any aspect of the consent requirement that is substantively or procedurally unfair.” Additionally, the Court noted the bylaw was not “one-sided” as the provision applied to all owners, included potentially aggrieved trustee-owners. The Court also held that condominium trustees do not owe a fiduciary duty to individual condominiums owners, but rather that duty is limited to the board of trustees itself.
Functionally this ruling implies that even the most stringent of condominium bylaws may be read as valid so long as owners were aware of the bylaws at the time of purchase and the bylaws treat all owners the same (including trustee-owners). This ruling should serve as a reminder to current and potential Massachusetts condominium owners that heightened vigilance with regard to the contents of condominium bylaws and other condominium related documents is necessary and advantageous.
on April 27, 2016
Given the growing popularity of the condominium market in Massachusetts and an awareness of not wanting to repeat the mistakes of the past, the Massachusetts Supreme Judicial Court (SJC) recently issued a ruling giving condominium associations the power to more easily collect withheld and overdue monthly condominium fees. Specifically, in Drummer Boy Homes Association, Inc. v. Britton, et al, the SJC held that condominium associations can file for multiple and successive super-priority liens, pursuant to G.L.c. 183A, §6, that take precedence over the first mortgage for up to six months of unpaid fees.
The SJC’s holding largely rests on the Court’s interpretation of the legislative intent behind the statutory scheme encompassing G. L. c. 183A, § 6. The Court held that, “our interpretation of G. L. c. 183A, § 6, is consistent with the Legislature’s long-standing interest in improving the governance of condominiums and strengthening the ability of organizations of unit owners to collect common expenses, thereby avoiding a reemergence of the serious public emergency that developed in the early 1990s.”
This ruling effectively shifts the incentives of the interested parties in a manner to ensure that condominium associations are properly funded. Where previously the first mortgage holder had little to no incentive to get involved in association fee disputes, as their priority was never at risk, now this ruling shifts the incentives of the parties to align with that of the individual condominium community and condominium industry more generally. By allowing a scheme whereby the first mortgage holder’s priority can be jeopardized by a condominium association’s rolling super-priority lien, the SJC’s holding effectively incentivizes the first mortgage holder to take its own action against an owner who is withholding condominium fees in order to produce such fees and protect that first mortgage holder’s priority status. Proponents of this ruling argue that it prioritizes the long-term stability of the condominium industry in Massachusetts by making it easier for condominium associations to collect the fees necessary for the maintenance and upkeep of condominium communities.