FREE MEEB SEMINAR

FREE MEEB SEMINAR
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UNDERSTANDING CONDOMINIUM MASTER INSURANCE POLICIES: YOUR ASSETS MAY BE ON THE LINE

Condominium Insurance is the least understood issue about condominiums for all but the one with the greatest chance of a catastrophic loss.  Managers and boards must learn how to effectively use the insurance professionals and condominium attorneys to participate in the selection of a superior policy both in terms of types of insurance and amounts of insurance.

Not all condominium master insurance programs or agents are created equal.  Learn the key components of a professional master insurance program and how to coordinate the master policy with the unit owner policy.

This free seminar will be conducted by MEEB’s Stephen Marcus and Robert Masse of WTPhelan Insurance Agency.

This 90-minute Free Seminar is being held on
Wednesday, June 14, 2017, at 9:30 AM
(Registration at 9:00 AM)

 50 Braintree Hill Office Park
2nd Floor Conference Room
Braintree, MA  02184

Refreshments will be served.
Space is limited.  To reserve your seat for the Seminar
[click here].

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CALL TO ACTION: RI LEGISLATION

CALL TO ACTION:  RHODE ISLAND LEGISLATION

Dear CAI members:

The Rhode Island House will consider a bill next week that may lead to significant increases in your assessments, weaken your association’s ability to enforce its rules, all while possibly gratifying those in your community that fail to abide by your governing documents. HB 5097 will have no positive effect on Rhode Island condominium associations. The CAI Rhode Island LAC and New England Chapter respectfully ask that you contact your Representative and ask them to VOTE NO on HB 5097.

CAI supports of effective, efficient and economical ways of resolving disputes within condominiums. Unfortunately, HB 5097 will force ALL associations and unit owners to use arbitration to decide disputes. Further, as drafted the legislation allows the losing party to opt out of the arbitration following a decision by filing a jury claim with the court.

While many associations chose to adopt arbitration provisions. This legislation will unconstitutionally (state and possibly U.S.) deny owners and associations the fundamental right to the Court system and force your association to rewrite private contracts.

The bottom line is:

  • HB 5097 may increase your assessments: Arbitrators in the states range between $200-400 an hour per party, and involve several stages taking at least 15 hours. That means even the garden-variety dispute may cost upwards of $5,000, not including legal expenses, for an arbitrator to render a non-binding decision. Fees in your association’s budget will increase and the cost will be borne by all assessment-paying owners. Mandatory non-binding arbitration will only impose another (costly) step in the process of resolving a dispute.
  • HB 5097 will weaken your association’s ability to enforce its governing documents: The bill restricts the term “dispute” to include, among other provisions, the authority of the board to require any owner to act or not act involving the owner’s unit. The potentially lengthy and costly proceedings will deter your board from enforcing the association’s rules.
  • HB 5097 provides the opportunity for disgruntled owners to engage the association in a “gotcha” game: The bill could be used as a delay tactic by parties to stall judicial resolution of disputes. The mandatory non-binding process in this bill would force associations that currently require binding arbitration to go through the non-binding process. The additional process will not only delay enforcement, but cause additional legal fees and drain association funds.

Please email or call your local Representative and tell them you are opposed to HB 5097.

Sincerely,

CAI Rhode Island Legislation Action Committee

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Condominium Insider –

– TIP OF THE MONTH –

The common areas and facilities, including land, buildings and recreational facilities,  of a condominium are not taxable parcels of property, so Condominium Associations should not be receiving  or paying real estate tax bills for  common areas and facilities of a condominium.  If for some reason a bill is received, you should contact the municipality and your lawyer immediately so you can proceed with an abatement application.

MEEB’S ED ALLCOCK ARGUES CONDOMINIUM CASE AT NEW HAMPSHIRE SUPREME COURT

On March 30, 2017, MEEB’s Ed Allcock argued a case involving development rights and how they are interpreted under the New Hampshire Condominium Act at the New Hampshire Supreme Court.  The case involves the time to complete phased property in New Hampshire as well as the meaning of the term “substantial completion” under the Act.  The Community Association Institute of New England decided the case presented such significant legal issues that it submitted an Amicus (friend of court) Brief which was prepared by Rob Anctil and Scott Eriksen of Perkins & Anctil.  We expect a decision sometime in the next 90 days and we will keep you updated.

To view Ed’s oral argument please [click here]. 

MEEB’S RICHARD BROOKS APPEARS ON NESN’S DINING PLAYBOOK WITH HIS DAUGHTER AND KISS 108’S BILLY COSTA

A serious meal is sometimes better than a serious legal issue.  MEEB attorneys don’t just argue cases at the Supreme Court.  They need to eat too.  Richard Brooks and his beautiful daughter, Samantha Brooks, who is enrolled at Boston University, did just that and were recently featured on a segment with Billy Costa for NESN’s popular Dining Playbook series.  Richard and Samantha are naturals on the camera, as they visit three different restaurants on Boylston Street.  Richard of course promoted his burgeoning social media presence on the show.  You can follow Richard on Instagram @richardbrooks59.

To view the video [click here].

CYBER – EQUIVALENT TO LEAVING A CLAIM FILE ON A BENCH IN A PUBLIC SQUARE

The U.S. District Court Western District of Virginia Abingdon Division recently decided that an insurance company had waived attorney client privilege when an investigation placed materials on a public drop box type of site, that was not password protected.  An excerpt from the case follows:


Excerpt

In an effort to share information electronically, Thomas Cesario, a Senior Investigator for Nationwide Insurance Company, (“Nationwide”), which owns Harleysville, uploaded video surveillance footage of the fire loss scene, (“Video”), onto an internet-based electronic file sharing service operated by Box, Inc. Cesario then sent an email containing a hyperlink to the Box, Inc., internet site, (“Box Site”), by which Wes Rowe of the National Insurance Crime Bureau, (“NICB”), could access the file containing the Video using the internet and download the Video. The Video was placed on the Box Site, and the hyperlink to the Box Site sent by email to Rowe on September 22, 2015. The email to Rowe stated: “Here is the link to access the video” and provided the hyperlink. The email also contained the following statement:

Harleysville concedes that any person who used the hyperlink to access the Box Site had access to the electronic information stored there. The information was not password protected. Harleysville also concedes that any person who had access to the internet could have accessed the Box Site by simply typing in the url address in a web browser.

Based on these facts, I find that Harleysville has waived any claim of attorney-client privilege with regard to the information posted to the Box Site. It has conceded that the Box Site was not password protected and that the information uploaded to this site was available for viewing by anyone, anywhere who was connected to the internet and happened upon the site by use of the hyperlink or otherwise. In essence, Harleysville has conceded that its actions were the cyber world equivalent of leaving its claims file on a bench in the public square and telling its counsel where they could find it. It is hard to image an act that would be more contrary to protecting the confidentiality of information than to post that information to the world wide web.


The moral of this story for Condominiums?  Protect attorney-client communications.  While Boards, managers and attorneys now use Dropbox type sites in connection with large cases and discovery requests, the parties need to ensure that these exchanges and sites are password protected in order to prevent loss of attorney-client privilege.  If a Board loses its attorney-client privilege, it might as well deliver the privileged documents and information to the other side.

To read the Memorandum Opinion on Harleysville Insurance v. Holding Funeral Home, Inc. [click here].

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Condominium Insider – March 2017

CONGRATULATIONS TO OUR NEW PARTNERS

MEEB is pleased to announce that John Shaffer, Matt Gaines, Dean Lennon and Will Thompson have been named partners of the firm.  Each attorney brings with him exceptional skill and impressive professional credentials. They have demonstrated experience, skill and work ethic since coming to the firm, and we fully expect that they will continue to use these traits to achieve the best results for our clients.  The addition to our firm reflects our growth strategy and our intention to add services that will most benefit our clients now and for years to come.  We are fortunate and excited to have them as part of our team!

John Shaffer is a member of the firm’s Condominium Group, focusing his practice on construction law, contracts and environmental law.   John negotiates and drafts construction contracts and commercial agreements, as well as advises clients on contract administration and dispute avoidance as well as environmental matters.  John’s degree in civil engineering has given him additional knowledge which is useful in construction law.

Matt Gaines is a member of the firm’s Condominium Group and Commercial Real Estate Department.  Matt focuses his practice on general condominium representation as well as discrimination and requests for reasonable accommodations.  In addition, Matt handles all aspects of real estate acquisition, development and financing.  Matt also plays an active role in the firm’s Legislative Action Group, working on legislative issues affecting condominiums.

Dean Lennon is a member of the firm’s Condominium Practice Group, where he focuses his practice on lien enforcement matters as well as advising condominium boards on rule enforcement and condominium document interpretation.  Dean is active with the New England Chapter of the Community Association Institute as a member of the Programming Committee and ELN Committee.

Will Thompson is a member of the firm’s Condominium Practice Group, where he counsels associations on condominium law.  He represents associations on civil matters in Superior Courts and District Courts throughout Massachusetts.  In addition, Will assists associations on matters brought before the Massachusetts Commission Against Discrimination.

CONTENDING WITH SHORT-TERM RENTALS

With Airbnb rentals on the rise, many condominium associations are faced with growing concerns about short-term rentals and the implications associated with the same, including safety and security issues, noise complaints and damage to the common areas.

As a preliminary matter, condominium associations may only restrict rentals of units if already provided for through the condominium’s governing documents, or through an amendment to the condominium’s constituent documents. To that end, some condominium governing documents prohibit utilizing units for transient purposes, and short-term rentals through Airbnb, clearly fall within that category. Also, some governing documents limit occupancy of units to residential purposes only, and the use of a unit as an Airbnb rental, could arguably be interpreted as a commercial enterprise.

Where there is already a rental restriction within the condominium’s governing documents, associations may demand that unit owners comply with the same, and pursue injunctive relief against unit owners whom fail to comply with the existing provisions within the condominium’s constituent documents. If the condominium association is ultimately forced to pursue injunctive relief against a unit owner to compel compliance with condominium’s governing documents, then the costs and expenses incurred by the condominium association with respect to the same, may be assessed against the offending unit owner, and such assessment shall constitute a lien upon their unit, until paid in full.

A more difficult situation arises however, when the condominium’s master deed and by-laws are silent as to rentals or they do not clearly prohibit short-term rentals and/or using the units for commercial purposes. It is not enough for the condominium’s governing board to simply enact rules and regulations to restrict rentals within a condominium, and in order for the association to properly amend their documents to prohibit short-term transient rentals, such as Airbnb rentals, the association must seek to amend the condominium’s master deed in accordance with the amendment provisions already set forth in the condominium’s governing documents, by obtaining the requisite unit owner and first mortgagee consent.

If an association is not able to secure the requisite unit owner and mortgagee consent to amend its documents, then there are still mechanisms through which the association may respond to issues involving transient tenants/occupants, including assessing fines against unit owners whom allow their tenants/occupants to create disturbances at the condominium which interfere with the peaceful enjoyment of the condominium by the condominium’s other residents and occupants. Also, an association may assess the unit owner for any costs associated with repairing any and all damage to common areas and facilities which is caused by their tenants/occupants. Additionally, if a unit owner habitually allows transient rentals and such rentals pose an immediate and demonstrable threat to the health, safety and well-being of the condominium’s other unit owners, residents and occupants and/or poses a risk of immediate property damage, then the association may seek to enjoin that unit owner from continuing to allow short-term rentals. Again, if such action is necessary, then the condominium association may assess all costs and expenses incurred by the association with respect to the same against the unit owner, and the assessment shall constitute a lien upon their unit, until paid in full.

Please contact Jennifer Barnett at jbarnett@meeb.com if you would like to discuss the adoption of an amendment barring transient/short-term rentals.

THE BOARD MEETING:  A LAWYERS PERSPECTIVE

July in Boston can be stifling, this was one of those days.  It was 9:00 AM and it was already 90⁰.  Temperatures were expected to hit 103⁰.  I was headed to the kind of meeting every lawyer hates….a meeting after a loss.  Trial lawyers hate losing just like athletes and coaches.  Meeting clients after a loss is worse than facing the media after losing the Super Bowl.  You feel bad enough about the loss, litigators are competitors, we hate losing (did I say that already)!  I hate losing…there I said it again.  However it’s part of the legal landscape.  Clients ask all the time what are my chances of winning?  I give odds and then I explain to them that unlike in sports the best team or the team that scores the most points does not always win.  Legal victories and losses often come down to the whims of a single judge or juror.  Prejudice and bias are in play.  You need not look farther then OJ Simpson or Tom Brady to understand that the legal process is not fair and does not always dole out justice.

On this particular day I was traveling to explain how the Appeals Court had taken away or “reversed” a victory in the trial court.  There is no Appeals Court in the sports arena.  The closest thing might be instant replay, but that is nearly instantaneous and reverses decisions on plays.  The Appeals Court affirms and reverses wins or losses.  Imagine winning the Super Bowl only to have the outcome changed 9 months later.

This case involved a unit owner who had spent 7 of his last 10 years in maximum security prison for dealing cocaine out of his unit.  When he came back, he got into a series of disputes with his neighbors.  The disputes escalated as they often do.  He purchased his unit through a lottery from the Boston Redevelopment Authority.  His unit was a so-called “affordable unit” sometimes known as a 40B unit.  He purchased his unit before he was caught selling cocaine out of his unit.  The BRA did not take any action to terminate his ownership in his unit after his drug conviction, although they could have.  Anyway, upon his return he contended that the percentage interests in the condominium were unfairly and illegally established.  He filed a lawsuit in the Land Court and he lost.  That lawsuit was expensive and took a couple of years to resolve.  The Land Court found that the percentages in the condominium were properly established and that the developer was not required to provide affordable units with a lower percentage and or lower condominium fees.

The loss of that lawsuit angered the unit owner.  He devised a plan to get his revenge.  He began dumping 50 lb. bags of birdseed on the sidewalk in front of the President of the Board’s unit.  He did this at least daily…sometimes twice a day.  The results were predictable.  The condominium became “pigeon friendly”.  Bird poop adorned the building and the front steps.  Umbrellas were necessary to leave the building, it was literally raining birdsh*t.  The massive birdseed piles also attracted mice and rats.  The President of the Board’s unit became infested with rats.  The condo asked him to stop.  He responded that feeding the birds helped his anxiety disorder.  The condo told him to feed the birds in the public garden or Boston Common but don’t dump a 50 lb. bag of seed on the sidewalk.  He continued and the condominium fined him.  He refused to pay the fines.  The condo took him to court and was awarded substantial fines and legal fees.  He stopped feeding the pigeons.  Victory!

The unit owner was of course represented by a prominent law firm through a college clinic that provided pro bono representation.  On appeal the story became about how this poor individual was prevented from feeding the birdies to help his anxiety disorder.  The condo board was picking on and beating up on the poor unit owner.  He contended 50 lb. bags of birdseed are needed to feed all those poor birdies.  The more birds he reached the better he felt.

The Appeals Court was intrigued.  They were sympathetic.  They focused their attention to the location of the birdseed.  Most of the 50 lb. bags of birdseed were placed on the sidewalk, which was technically outside of the condominium.  So the Appeals Court reversed the decision holding that the condo could not fine a unit owner for doing something on the sidewalk even if it impacted the condo.  I recall the frustration arguing to the Appeals Court “what if he blew up a bomb on the sidewalk and destroyed the building” or if “he lit a fire on the sidewalk”…could we fine him then or charge him for cost of uninsured losses”?  Alas, Judges rarely answer lawyers’ questions or hypotheticals.

So here I was pulling into Boston.  I was a little early and amazingly there was an entire row of metered parking spaces.  So I parked my brand new car (I had picked it up less than a week earlier, it still had that new car smell) pumped the meter with 8 quarters which was more than enough to cover the time of the meeting and walked it two blocks to my meeting.  It was hot, especially wearing a suit.  I was a little sweaty but I made it to the building and met with the condominium board.

The condo board was understandably upset about the loss.  One board member in particular was irritated.  He was looking for a substantial discount on legal fees because of the loss.  He had no issue with the quality of the work performed, which of course he agreed with and directed and wanted carried out, but he was using the loss to his advantage.  The meeting got a little heated for a bit but the issue ultimately resolved.  I reminded the condo board that no guarantees had been made and that settlement efforts had been rejected and that I was just as disappointed by the court’s decision.  I hate to lose!  Did I say that already?  So I agreed to a possible compromise, but the board wanted to speak a little bit more about it and communicate with their property manager and call me later in the day.

An hour later I stepped back into the heat.  Man was it hot.  I was sweating in my suit.  I approached the parking meters and could not see my new car.  Where was my car?  Did I have the street wrong?  No, I recognized the little store I parked next to.  I noticed a tow truck towing a car a block up.  I ran up to him and asked if he had seen my car.  He said yes.  He told me that it was towed 10 minutes ago because Wednesday morning is street cleaning day on this street no metered parking allowed.  This of course explained the 8 open parking spots.  I asked him where was it towed to.  890 Mass. Avenue, the city lot, he said.  I knew where it was.  It was about 4 miles away.

So I thought ok I will call a cab.  It was at that moment that I realized I had left both my phone and my wallet in the car.  I thought about heading back to the board meeting to ask for help but thought better of it.  Now I was pissed at everyone.  So what did I do?  I walked the 4 miles in 100⁰ heat.  By the time I arrived I was covered in sweat.  I cursed that condo board the whole way.  I cursed everyone along the way.  I cursed the pigeons, I cursed the unit owner, I cursed the Appeals Court, I cursed the pro bono legal services organization.  I imagined the call coming to me when I eventually got back to the office, I fantasized about it, “oh you want a discount, do you”?  “I’ll give you a discount”!

It took me about an hour to arrive.  I saw my car there, all scratched up from the tow truck.  Nice, my happy thoughts continued when I walked into the onsite trailer.  I was met by a handsome unpleasant women who sat behind bullet proof glass.  I explained that my car had been towed and gave her the make and model.  She said that will be $328.  I explained that my wallet was in the car.  She laughed at me and said, yeah right.  I assured her I needed my keys to get in the car so I could pay to get my car back.  She said “Do I look stupid to you”?  I did not respond…I just stood there sweating.  Then she asked me with a smile if I was stupid, how did you leave your wallet in a car that got towed?  I explained I left my phone in it too, she smiled and noticed I was sweating through my suit, she quipped, what are you a lawyer or something?  What did you do, “piss off the judge”?  I said, yeah something like that.  She told me to sit in the chair and wait ‘til she was finished with everyone else and she would walk me out to the car, I looked at the 10 people behind me in line and plopped into the chair.  Another hour and I was finally back on my way to Braintree.

I guess I looked like a disaster when I walked in.  I told the story to the first floor staff, they laughed so hard most of them had tears in their eyes.  No sooner had I finished telling the story and the laughter had subsided, the board member was on the phone looking for his discount.  I picked up the phone and he said I called you an hour ago and they said you weren’t back yet, what took you so long?  Did you take the slow road so you could bill more time?  I told him no, I went for a short walk on a beautiful day to clear my head.  We chatted and came to an agreement.  I hung up, leaned back and chuckled.  I looked at my email and saw I had 68 unread messages, unopened mail on my desk and the red light on my phone was blinking meaning I had messages waiting.  I stripped off my jacket tie and shirt and put on my jeans and an extra t-shirt I had lying around and chuckled again.  I settled in and focused on the next task at hand.

I chuckled again as I settled in and thought well at least that was not the worst condo board meeting I ever had, in fact it was not even in my top 5.  I know condo owners and property managers had far worse stories than that.  Stories that impacted their lives and their homes.  So I settled in and focused on my job which is to minimize those catastrophic and real life impacts that board members, unit owners and property managers face every day.  I took solace in the fact that my office laughed at my story.  Whether you are on the board, managing the board or providing legal advice to the board it’s all about perspective.

Written by Ed Allcock eallcock@meeb.com.

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A Message from MEEB

As some of you may have heard, Tom Moriarty and Doug Troyer, two of our litigation partners, colleagues and friends, are leaving MEEB to start their own firm. We are excited for them and wish them and their firm great success.

Ed Allcock, who has been with MEEB for sixteen years will now head MEEB’s Litigation Department.   Ed’s extensive condominium litigation experience includes cases involving condominium development rights, enforcement of condominium covenants and rules, construction defects, land use and zoning issues, and insurance disputes.    Ed is licensed in New Hampshire and Rhode Island as well as Massachusetts and has the unique distinction of having appeared before the Supreme Courts in all three states on condominium issues.   He is a member of the prestigious Community Association College of Community Association Lawyers (“CCAL”), has served several terms as co-chair of the Community Associations Institute of New England’s Rhode Island Legislative Action Committee, and currently serves on the Board of Directors for CAI-NE and the National Board of Directors for CCAL.  He has been named a Massachusetts and New England Superlawyer for five consecutive years.

Ed is part of an experienced MEEB team that includes 19 attorneys and 18 support staff, who specialize in all aspects of condominium law, representing condominium and homeowner associations, condominium developers and condominium lenders.  MEEB’s practice also includes commercial and residential real estate development, commercial lending, zoning, insurance and affordable housing.

Although many of our attorneys have developed specialized practices, all consider themselves condominium attorneys first — a key factor in the growth of our firm, which now represents 4,000 condominium communities in Massachusetts, New Hampshire and Rhode Island.

Our partners continue to play an active role in the condominium industry. Stephen Marcus and Richard Brooks, two founding partners, are past presidents of CAI-New England. Richard, who is probably best known for his role in securing municipal services for condominiums in many New England communities, continues to dole out advice on all aspects of condominium law and lectures frequently on condominium lien enforcement issues.

Stephen, who played a key role in developing the Massachusetts Superlien Law, has been active in CAI nationally as well.  He recently chaired  CAI’s National Amicus Team, which participates in litigation affecting condominiums all over the county  and is a long-time member and past president of CAI’s College of Community Association Lawyers, which recently presented him with  the Gurdon “Don” Buck lifetime achievement award – an honor the College has bestowed on only four other attorneys in the United States.  In addition to handling specialized transactional work for condominiums (including document interpretation, drafting of amendments and enforcement of document requirements), Stephen represents condominium developers and lenders, advising both on a range of condominium legal issues.

Janet Aronson, co-chair of MEEB’s Lien Enforcement Department, is also a past president of  CAI-New England and has served on the its Board and on various committees.  Her work on CAI-NE’s Rhode Island and New Hampshire Legislative Action Committees helped to win approval of Superlien statutes in both states.  Licensed in Massachusetts, New Hampshire and her home state of Rhode Island, Janet advises condominium associations in these three states on lien enforcement and a variety of complex, nitty-gritty legal issues.

Mark Einhorn, a member of the firm’s Transactional and Condominium Practice, serves on the Legislative Action Committees of both CAI-New England and the Boston Chapter of the Institute of Real Estate Management.   He is also currently serving as co-chair of CAI-NE’s Seminar and Conference Committee, which is responsible for developing and presenting educational programs for community association board members and managers throughout New England.  Mark spends his days advising condominium boards, drafting condominium documents and amendments and putting together complex deals for condominium associations and developers alike.

All of MEEB’s attorneys participate actively in CAI-NE, lecturing, contribute articles, and serve on various committees.  Their involvement in CAI-NE underscores the commitment to the condominium community that has been a hallmark of MEEB since its founding, 24 years ago.  Our commitment to condominium law and to providing the highest quality services to our clients has guided the firm throughout its history, and will continue to guide it in the future.

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PRESERVING DEVELOPER RIGHTS AND PROTECTING ASSOCIATION INTERESTS

Relations between the developers who produce condominiums and the owners who purchase them are not always harmonious, to say the least. They clash over many issues, but disputes over retained developers’ rights and construction defects are among the most common. These disputes are also complex and often result in litigation.

One condominium community – Commercial Wharf in Cambridge – has actually spurred two seemingly contradictory court decisions on the retained rights issue.

In the first (Commercial Wharf East Condominium Association v. Waterfront Parking Corp.) the developer had retained the right to control and manage the association’s parking garage. The declaration specified that the developer had the right “to control and collect” parking fees, and that the association was responsible for “maintaining and managing” the facility. The association argued that this was unfair – the developer got all the revenue and the association incurred all the costs while receiving none of the income. But the Supreme Judicial Court (SJC) agreed with the Land Court: Fair or not, the details of the arrangement were fully disclosed in the Master Deed; owners who objected could have negotiated different terms or refused to buy.

In the more recent case, Commercial Wharf East Condominium Assoc. v. CDK Realty Trust, our firm represented an association that objected when the developer transferred to others the right he had retained to use common area in the basement.

No Right to Transfer

Relevant provisions in the Master Deed reserved the developer’s rights to use those areas ‘for storage, shop use and other purposes related thereto.” The association argued that the developer could not transfer the rights because he had not specifically reserved that right. The Land Court agreed. The developer had retained the right to use the areas, the court said, but had not reserved the right to transfer the use.

The two Commercial Wharf decisions convey two clear messages:

  • Developers must describe clearly, specifically, and comprehensively the rights they intend to reserve.
  • Purchasers must review the condominium documents before they buy. In Commercial Wharf I, the court said the parking arrangement – allocating revenue to the developer and maintenance obligations to the association – may not have seemed fair, but it was disclosed.

While buyers should certainly review the documents before they buy, in this case, I think, the SJC focused too much on the disclosure of the parking arrangement and not enough on its equity.

The Developer’s View

There are at least two sides to every issue, however. And our firm, which represents both developers and condominium associations (though, obviously, not in the same disputes) has a good understanding of both perspectives. There is no question that buyers sometimes have good reason to complain about what developers do and don’t do.

But developers incur sizable risks – financial and otherwise – and so have good reason to maintain control over a project as long as necessary to ensure its completion. They also have good reason to reserve future development and other rights – again to protect their investment. And when it comes to litigation risks, developers should use all the reasonable measures available to them to protect themselves, just as condominium associations and buyers should use all reasonable measures to protect their interests. The obvious problem: Developers and associations with which they are at odds will not necessarily define “reasonable” in the same way.

The first Commercial Wharf decision restated a principle the Supreme Judicial Court articulated clearly in a 2011 decision (Scully v. Tilley) – developers and boards have great flexibility to create requirements and restrictions in condominium communities, and those terms are enforceable as long as owners are aware of them.

In Commercial Wharf, the court noted correctly, owners could have discovered the parking arrangement and objected to it had they read the condominium documents before buying. There is no question that most buyers fail to perform that basic due diligence and that is certainly cause for concern. But it shouldn’t undermine the ability of developers to protect their interests by reserving rights, maintaining control, or creating financial arrangements that benefit them.

Dealing with Defects

When it comes to construction defects ― a common source of friction between developers and associations ─ it is obviously in the interests of both to avoid litigation. Toward that end, we advise developers to retain, possibly at their expense, an engineer acceptable to the board to evaluate the defects the association has identified and assess whether the developer’s proposed fixes are adequate.

We also suggest that developers include a mandatory arbitration requirement in the governing documents ― arbitration, in our view, providing a faster and far less expensive resolution than litigation. To ensure fairness, our provision specifies that:

  • Both parties select an arbitrator and those arbitrators select a third;
  • Each side pays its own arbitration costs;
  • The arbitrator can’t impose punitive damages (law suits alleging consumer protection act violations can bring treble damages); and
  • The arbitrator’s decision is final.

The most effective anti-litigation strategy for developers, of course, is to avoid the construction defects that might trigger litigation. Most developers do not intentionally create defective buildings; defects typically result from errors, oversights, or shoddy construction work of which the developer is unaware.

To avoid these problems, or at least to discover them before they are baked into a finished structure, we advise developer clients to hire one of the engineering firms condo associations typically hire to produce a transition conditions report to oversee the construction.

The engineer doesn’t have to be on site every day, but can review the ongoing work often enough and closely enough to ensure that it is consistent with the project’s plans and specifications, and to spot problems when they can be corrected easily and inexpensively, without tearing apart a completed structure.

We also advise developers to bring in a professional condominium manager to prepare the initial budget for the condominium association. This will demonstrate a good faith effort to prepare a realistic budget based on projected operating costs. It may not avoid allegations that the developer has intentionally low-balled the condominium fees to facilitate sales, but it will provide a good defense against them.

For any questions regarding this article, please contact Stephen Marcus at smarcus@meeb.com.

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UPDATE ON MARIJUANA LAW: WHAT IS THE 6 MONTH DELAY? SHOULD CONDOMINIUMS AT LEAST BAN GROWING? DOES GROWING MARIJUANA POSE AN INSURANCE RISK?

Last month, I advised all Massachusetts condominiums to adopt master deed amendments banning the smoking, growing and/or distribution (if your condominium contains commercial units) of marijuana.  Since, then you may have heard that the Massachusetts Legislature voted to delay the “marijuana bill” an additional 6 months.  What does this mean?

The legislative delay only impacts the licensure of recreational marijuana dispensaries.  Basically, the legislature decided that it needed more time to propose and implement regulations for how these recreational marijuana dispensaries will be licensed.  The new regulations will address issues for “pot shops”, including security, insurance and criminal background checks, among other things.  Some towns, including the City of Boston are scrambling to amend their zoning ordinances to limit where the licensed “pot shops” can be located.  This delay is favorable to condominiums containing commercial units as it gives them more time to consider adopting amendments prohibiting the operation of recreational “pot shops” in their condominium buildings.

While, there will be a 6 month delay on the licensing and approval of recreational pot shops, the delay has no impact on the use and growing of marijuana in the home and/or condominium units.  Since, my last article, I have heard from some managers and condominium trustees that they really do not want to get involved in the banning of smoking marijuana in units.  Smoking is certainly a personal choice (whether its cigarettes, cigars or marijuana) and its regulation or prohibition in units has always been a hot topic.  However, smoking is just one aspect of the new law.  I think people do not realize the potential impact that legalized growing of marijuana can have inside of units.

Growing 6-12 marijuana plants is an undertaking.  It requires substantial amounts of water and electricity and the use of heat lamps.  It often involves placement of plastic and/or foil heat retaining insulation (to generate heat and humidity in the unit) to encourage the plant growth.  Heat lamps and humidity create additional concerns (i.e. fire, mold, insurance).  Furthermore, what many people do not understand is that the actual growing of the plants puts off a larger more powerful odor than occasional smoking.  I know of a couple of condominiums that have dealt with the issue in the medical context and they thought that there was a dead skunk in a unit or in the walls.

It is not the equivalent of a lilac plant in a unit.  Below are photos of two different rooms in units that were converted to “grow areas”.  A picture tells a thousand words.  In the photos you can clearly see what appears to be a hanging garden hose, numerous mature plants, heat lamps and heat retaining insulation on the walls.

While some condominiums might be hesitant to ban smoking of marijuana in units, these photographs evidence why every condominium should seriously consider banning the growing of marijuana in units.

Some condominium trustees and managers have reached out and indicated that they are unlikely to be able to obtain passage of a marijuana amendment, whether its growing or retail use, so why bother? My advice is put the vote to the people, just like question 4 was passed, let the community decide.  I suspect that marijuana growing and use in condominiums is going to generate a substantial amount of nuisance (second hand smoke, smells) type litigation going forward and the target of those lawsuits will be the condominium associations.  While it might not be a perfect defense, it goes a long way in a court of law to say that the condominium association proposed the amendment and it failed.  Furthermore, I suspect that unit owners that might like to indulge once in a while, are more likely to vote for bans on growing or “pot shops” in their buildings because of the security, insurance, fire and environmental hazards posed thereby.  Most homeowners want to preserve the value of their homes.  Marijuana users are not just hippies anymore.

Lastly and perhaps most importantly, condominiums may want to ban growing because fire and/or property damage caused thereby may not be covered claims under the Associations insurance policy.  Most insurance policies pay for claims that are accidental in nature.  Many policies exclude claims based on “illegal acts”.  While marijuana is now legal in Massachusetts, it is still a Schedule 1 substance under Federal Controlled Substances Act.  However, the McCarren-Ferguson Act of 1945, puts the regulation of insurance under the states and supersedes federal law for insurance purposes.  Accordingly, the Federal Controlled Substances Act would not support an “Illegal Act” exclusion under a Massachusetts Insurance policy.  However Associations still need to be careful.  If a unit owner has more than the permissible number of marijuana plants under state law, the “Illegal Acts” exclusion would apply to a marijuana related claim.  Also, many insurance policies upon renewal or during the policy period require them to update the insurer about any “increased hazards” under policy.  Growing operations depending on their size and extent could be a new risk that if not disclosed could account for claim denials.  This exact scenario recently played out in the Michigan courts, where the Michigan Appeals Court held that a homeowner’s failure to inform insurer of a basement growing operation voided the insurance policy.  The case is Nationwide Mutual Fire Insurance Company v. McDermott, 603 Fed. Appx 374 6th Cir (2015). [click here for Decision]

If Condominiums are not going to amend their documents to ban marijuana growing, they might want to consult with their insurance professionals to understand insurance risks and obligations.

If you or your condominium wants to ban (1) smoking or marijuana, (2) “pot shops” in commercial units or (3) growing of marijuana in units (or all of the above) please contact Ed Allcock at eallcock@meeb.com.

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