Massachusetts Condominium Developers Have Increased Exposure

Saul Ewing Arnstein & Lehr LLP

A recent Massachusetts Supreme Judicial Court decision held that condominium developers cannot create a condominium that “makes it extraordinarily difficult or even impossible for the trustees to initiate any litigation against the developers regarding the common areas and facilities of a condominium.”  See Trustees of Cambridge Point Condominium Trust v. Cambridge Point, LLC 478 Mass. 697, 709 (2018).

In Cambridge Point, the developer created by-laws requiring an 80% vote of all condominium unit owners before condominium trustees may file a lawsuit concerning the common areas and facilities.  Prior to the vote, the by-laws also required the presentation of a draft litigation complaint and an estimate of legal fees for the entire cost of the lawsuit.  A vote was then required within 60 days and, if a lawsuit was approved, there was a requirement for an immediate special assessment of the entire estimated cost of litigation. 

Shortly after construction was completed and units were sold, design and construction defects were discovered, with an estimated cost of repair exceeding $2 million.  Because the developer, however, retained control of more than 20% of the units, it was impossible for unit owners to approve a lawsuit against the developer. 

Public policy reasons guided the Court’s decision to invalidate the by-law requirements.  The Court found that unit owners were effectively precluded from filing a lawsuit, which resulted in an effective waiver of gross negligence, the implied warranty of habitability, and claims under the Massachusetts Consumer Protection Statute, Chapter 93A, which allows up-to treble damages and attorney’s fees for building code violations relating to safety.  The Court determined that it would be against public policy to allow a developer to draft by-laws that would effectively waive these claims.

Other states have similar laws protecting unit owners.

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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