A CONDO LAWYER WALKS INTO A COURTROOM
By Saul J. Feldman, Esq. and Angel K. Mozina, Esq.
May 2017

In this article we want to comment on a proposed bill in the House of Representatives in the Commonwealth of Massachusetts (House No. 752) which is titled “An Act related to anti-litigation provisions in condominium documents” (the “Proposed Act”).

The Proposed Act would prevent the developer of a condominium and/or its affiliates from having any power to impose upon the Condominium Board any precondition to the institution or maintenance of a lawsuit, an arbitration, a mediation or a similar proceeding unless the Condominium Board adopts such a provision after the date on which the unit owners, other than the Declarant and/or its affiliates, first elect a majority of the members of the Condominium Board.

Background

The Proposed Act seeks to amend Section 10 of Chapter 183A (“Chapter 183A”), the Massachusetts Condominium Statute, by adding the following clause:

“Any provision of a master deed, declaration of trust, or by-laws that imposes upon the organization of unit owners any precondition to the institution or maintenance of a lawsuit, an arbitration, a mediation, or a similar proceeding, including, without limitation, obtaining a vote of unit owners, obtaining the approval of the Declarant, establishing a budget for the litigation, providing a copy of the complaint to unit owners, or which otherwise limits the free exercise of the power conferred in subsection (b)(4) of this Section 10, shall be unenforceable unless the organization of unit owners adopts such a provision after the date on which the unit owners, other than the Declarant and/or its affiliates, first elect a majority of the members of the governing board for the organization of unit owners.”

Proponents argue that litigation limitation provisions in condominium documents, known otherwise as poison pills, directly conflict with Chapter 183A, Section 10(b)(4), because they take away from a condominium board the exclusive power of conducting litigation concerning the common areas of the Condominium.

We will not say the Proposed Act goes too far and attempt to modify it. Instead, we want to attack the entire premise behind the Proposed Act.

The Proposed Act is a full-scale attempt to prohibit any clause in any of the initial condominium documents that would impose upon the Condominium Board any preconditions to the institution or maintenance of a lawsuit, an arbitration, a mediation or a similar proceeding.

The Proposed Act is grossly unfair to condominium developers. Given the enormous risks developers take, including, by way of illustration and not limitation, the lengthy and expensive permitting process as well as the vagaries of the condominium market, especially in multiple phase projects, there must be a limitation on the power of the Condominium Board to conduct freewheeling litigation.

For at least two decades, our firm has included the following limitation on the power of the Condominium Board to conduct litigation:

“The Condominium Board must deliver to all of the Unit Owners a copy of the proposed complaint and no less than eighty percent (80%) of all the Unit Owners shall consent in writing to the bringing of such litigation within sixty (60) days after the copy of the complaint is delivered to the Unit Owners and specify as a part of their written consent a specific monetary limitation to be paid as legal fees, costs and expenses to be incurred in connection therewith, which amount shall be separately assessed as a special assessment effective forthwith at the time of said affirmative consent. This provision must not be amended except by vote of at least eighty percent (80%) of the Unit Owners. The provisions of the foregoing shall not apply to litigation by the Condominium Board with respect to the recovery of overdue Common Expenses, Supplemental Monthly Condominium Fees or Special Assessments or to foreclose the lien provided by Section 6 of Chapter 183A or to enforce any of the provisions of the condominium documents against Unit Owners.”

Conclusion

We believe it is a reasonable limitation. The consent of the majority is not a restriction but a prerequisite similar to the adoption of any amendment to the condominium documents. Moreover, as recently as last November, the Appeals Court in Bettencourt v. Trustees of the Sassaquin Village Condominium Trust, 90 Mass. App. Ct. 1106 (2016) (Rule 1:28), agreed when it ruled that a provision requiring the consent of eighty percent (80%) of the unit owners prior to commencing litigation “does not offend public policy.”

Therefore, the Proposed Act should be rejected!

 

Saul J. Feldman, Esq.
Angel K. Mozina, Esq.
© 2017 Feldman Law Office

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