Opinion ID: 2319221
Heading Depth: 2
Heading Rank: 3

Heading: Strict Fulfillment of the Condition Precedent

Text: The Circuit Court held, in the alternative, that the Amended Declaration strictly fulfilled the condition precedent of Section 14(d) in the Purchase Agreement. The condition precedent read as follows: ... [ATC] shall be solely responsible for... recording a declaration (the Declaration) for the maintenance of the common areas of the Development[.] ... The Declaration ... shall provide annual assessments against the office and retail portions of the Development for the purpose of providing funds for the maintenance of the office and retail buildings and associated common areas[.] ... The Declaration ... shall also provide that each owner of a condominium unit shall pay an annual fee of [$1,200], which annual fee shall increase at the rate of three percent (3%) annum to be calculated on a per diem basis. (Emphasis added). ATC drafted the provision for Common Area Maintenance in Section 10.2.4 of the Declaration, which read as follows: ... [S]ome or all Parcel Owners, Tier 2 Councils, Tier 2 Owners and/or other Persons shall periodically pay to [ATC] respective shares of the Common Area Maintenance Costs ... pursuant to one or more Recorded Supplemental Agreements[.]... [ATC] shall be responsible for payment of the rest of the Common Area Maintenance Costs, which [ATC] shall allocate among the parts of the Retail Component (except for the Target Parcel 11 Unit). The Circuit Court held that Section 10.2.4 of the Declaration strictly fulfilled Section 14(d) of the Purchase Agreement. Section 14(d) requires ATC to provide annual assessments in the Declaration. The Circuit Court interpreted this passage to merely require a mechanism for CAM funding, and held that the Supplemental Agreements were part of the recorded Declaration by way of incorporation. The Circuit Court declared that this interpretation was the only reasonable reading of [§ 14(d).] To uphold the summary judgment, we must conclude that the Circuit Court's interpretation of Section 14(d) was the only reasonable one. We cannot do so. Hovnanian strongly disputes that the condition could be satisfied with a promise of future agreements, and claims that ATC's mechanism deprives it of protections that a more detailed provision in the Declaration was supposed to have provided. In the context of this mixed-use development, a fact-finder could find Hovnanian's view the most reasonable. The funding for upkeep of common areas is an important, and heavily negotiated, issue in mixed-use and commercial developments. The specific funding provisions may be especially important to a tenant in a project which is dominated by a major tenant: ... Although most landlords agree to credit cost contributions of major tenants before determining a tenant's pro rata share, if that major tenant is not paying its full share, the rest of the tenants end up making up the deficiency. Major tenants often do not pay their full pro rata share, primarily because of the strength of their leverage in lease negotiations. Marc E. Betesh & Nancy M. Davids, Negotiating Common Area Maintenance Costs, 23 Probate & Property 40, 42 (2009). Moreover, due to the common area scheme in this project, wherein the ATC entity would be responsible for Common Area Maintenance, rather than a jointly-managed condominium association, Hovnanian had no direct recourse against any other tenant that failed to pay its CAM obligations. Given these concerns, and the factual dispute about how the Section 14(d) condition precedent could be satisfied, we hold that the grant of summary judgment was inappropriate. Although a court may often be able to determine, as a matter of law, that a condition precedent was strictly fulfilled, that is not so in this case. The trier of fact should determine this issue on remand.