Massachusetts Court Invalidates Build-to-Suit Lease Under Construction Bid Laws

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Massachusetts' highest court recently ruled that a long-term lease of a build-to-suit dormitory facility to the University of Massachusetts, Lowell (UMass Lowell), violated the Commonwealth's public construction bid laws, limiting the ability of public authorities and private developers to use creative financing and delivery methods to solve budget shortfalls currently limiting many capital development projects. In Brasi Development Corp. v. Attorney General, et al.1, UMass Lowell's attempt to secure residence space for students without engaging in the cumbersome statutory process of procuring and constructing a capital project was rejected due to the degree of supervision and control the university maintained over the design and construction process, the potential length of the lease, and the fact that use of the new building was dependent on access to university property. All of these factors rendered the lease more consistent with a public construction project than a true commercial real-estate transaction, according to the court, whose decision will restrict efforts by public authorities to "privatize" certain capital projects. While the decision signifies a triumph for those interests who benefit from the heavily regulated public-construction procurement process in Massachusetts and stays true to the real concerns that originally drove the complex laws, the decision may end any serious effort in Massachusetts to use public/private partnerships (PPP) or other creative finance and delivery methods to meet increasing—and often increasingly expensive—public infrastructure needs.

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Published In: Business Organization Updates, General Business Updates, Construction Updates, Residential Real Estate Updates, Zoning, Planning & Land Use Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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