Opinion ID: 203038
Heading Depth: 3
Heading Rank: 2

Heading: The Condominium Statute

Text: Condominiums are governed in Massachusetts by chapter 183A of the Massachusetts General Laws. Chapter 183A is essentially an enabling statute, setting out a framework for the development of condominiums in the Commonwealth, while providing developers and unit owners with planning flexibility. Such flexibility is particularly important with respect to phased condominium developments where long-term financial and market conditions may be uncertain. Queler v. Skowron, 438 Mass. 304, 780 N.E.2d 71, 77 (Mass.2002) (citation omitted); see also Tosney v. Chelmsford Vill. Condo. Ass'n, 397 Mass. 683, 493 N.E.2d 488, 490 (1986); Barclay v. DeVeau, 384 Mass. 676, 429 N.E.2d 323, 326 (1981). Phasing allows developers to sell units as they are built, which in turn eases construction costs and financing arrangements. The flexibility to revise plans as market and financing conditions change also greatly assists condominium development. The state legislature significantly revised the condominium statute in 1998, adding the key provision in question here and increasing the powers of unit owners' associations vis-à-vis individual unit owners. It did so in recognition of a shortage of affordable housing stock based upon the expiration of the right to add additional condominium units and land in numerous condominiums created pursuant to chapter 183A. 1998 Mass. Adv. Legis. Serv. 242 (LexisNexis). We turn to section 5 of chapter 183A with these policy concerns in mind. Because neither the Supreme Judicial Court nor the Massachusetts Appeals Court has interpreted the relevant provisions of section 5 since it was last amended in 1998, we address the question ab initio. As with all statutory interpretation questions, we focus on the language of the statute itself. Section 5(b)(2) describes the authority and powers of a condominium's unit owners' association, which includes the power to [e]xtend, revive or grant rights to develop the condominium, including the right to add additional units or land to the condominium. Mass. Gen. Laws ch. 183A, § 5(b)(2)(iii). It is not disputable that the Association's extension of Northwood's development rights met the requirements of section 5(b)(2)(iii). As required by that provision, the master deed authorized additional units, and the eighty-three percent approval rate by the Association's members of the extension surpassed the seventy-five percent set by the statute as a default percentage. See id. The extension of the time to exercise development rights, however, is distinct from the ability to exercise those rights under the statute. The addition of units reduces the percentage interest each unit owner holds in the condominium's common areas. State law provides some protection for unit owners in this context. Under section 5(b)(1), a unit owner's percentage interest in the common areas cannot be materially affected without his or her consent. Northwood broadly argues that section 5(b)(2)(iii) operates independently from section 5(b)(1) and that unit owners have necessarily waived their rights under section 5(b)(1) through their acceptance of any master deed. We disagree in light of the language in section 5(b) that [i]n the event of any conflict between the provisions of this subsection and of the master deed, . . . this subsection shall control. Nonetheless, state law also provides that the requisite consent can be inferred from the unit owner's acceptance of the master deed if, at the time the unit deed was recorded, the master deed (1) provided for the additional units and (2) made possible an accurate determination of the alteration of each unit's [percentage] interest that would result from the construction of the additional units. Id. § 5(b)(1). The master deed in this case clearly provided for additional units. The ability of Northwood to exercise its development rights thus hinges on the interpretation of this second clause, particularly the phrase an accurate determination of the alteration of each unit's [percentage] interest. The district court interpreted this phrase too narrowly. On its reading, an accurate determination is the same as precise calculations. In re Northwood Properties, 356 B.R. at 87. Because the master deed did not make it possible for Bourne and Delise to calculate precisely what their new percentage interests would be following the completion of any additional phases, the court concluded, Northwood must obtain their express consent before constructing any further units. Id. at 89 (emphasis added). To impose a requirement of precise calculations of what the new percentage interests would be upon development, however, runs counter to the statute's underlying policies of flexibility and pragmatism as well as the language of related provisions. It is also inconsistent with the approach taken by the state courts in interpreting this statute. As a matter of statutory construction, section 5(a) is closely related to the provision in dispute here, and that section states that a unit owner's percentage interest shall be in the approximate relation that the fair value of the unit . . . bears to the . . . aggregate fair value of all the units at the time the unit deed is recorded. Mass. Gen. Laws ch. 183A, § 5(a). Terms like approximate and fair value reflect a statutory approach of allowing developers flexibility within a reasonably limited range, not an approach requiring absolute precision. We see no reason why greater requirements for precision would be imposed under section 5(b)(1). Further, in practice, the district court's reading would tie the hands of developers, making it impossible for them to respond to changing market conditions. This would seriously jeopardize developers' ability to secure financing to complete projects. This in turn could have an adverse impact on present owners of units. And it implicates the legislature's concern about removing impediments to developing more housing in the Commonwealth. Thus we read the key phrase, made possible an accurate determination, as not requiring the degree of precision the district court posited. Our reading is more consistent than that of the district court with the approach taken by state courts in interpreting Chapter 183A. That statute as a whole is an enabling statute. Tosney, 493 N.E.2d at 490. It sets forth minimum requirements but also provides for flexibility. Included in that flexibility, and meant for the benefit of both unit owners and developers, is the ability to adapt the size and scope of a project in response to market conditions by phasing the development over some years. See Queler, 780 N.E.2d at 77; Podell, 651 N.E.2d at 860 n. 3. We need not determine here the bare minimum a master deed need include to satisfy the constructive consent provision of section 5(b)(1). And it is better for the state courts to themselves articulate the correct standard to apply. What was in the master deed in this case, in our view, was enough. The master deed stated how the percentage interests would be calculated. It explained that the original schedule of percentage interests had been calculated in conformance with Chapter 183A, upon the approximate relation which the fair market value of each Unit . . . bears to the aggregate fair market value of all the Units; that is, the deed treats conformance with Chapter 183A as equivalent to the standard set by section 5(a). In the same paragraph, the master deed states that such percentage interests [shall be] modified in conformance with Chapter 183A following the construction of additional phases. Thus Bourne and Delise knew that their percentage interest would continue to track the approximate ratio of the value of their units to the value of all the units. The master deed also provided enough information about future phases to allow a reasoned and reasonable approximation of what the aggregate fair value might be. There would be at most sixty-six units, the construction of which would be of equal quality to the existing units. The blueprint of the proposed full development, included with the master deed, showed that two additional buildings would have the same footprint as the two existing buildings and that the remaining building would be slightly larger; this implies that the future units would not be grossly disproportional in size to the existing units. The master deed, by definition, cannot precisely predict the future at the time of its execution. It can, however, set forth reliable and accepted methodologies and provide an accurate description of planned development. This amount of information is sufficient to allow both the Association and Bourne and Delise to accurately determine how their percentage interests would be affected. They were not caught by surprise or unfairly treated. Bourne and Delise argue that the fact that Northwood and the Association offered two different predictions of their future percentage interests in itself proves that no accurate determination was possible, but the very small range between Northwood's prediction of 1.52% and the Association's prediction of 1.43%  a 0.09% difference  does not mean that no accurate determination was possible. The master deed made possible an accurate determination of the alteration of each unit's [percentage] interest that would result from the completion of further phases. As such, Bourne and Delise consented to the future alteration of their percentage interests when they recorded their unit deeds. Northwood may thus exercise the development rights legitimately extended by the Association under section 5(b)(2)(iii).