Validity under the Condominium Statute of the Developers’ Reservation in the Master Deed of a Right to Remove Property
This case related to the enforceability of a developer’s rights to withdraw land from a phased condominium development in the event that the developer does not complete the development in the anticipated time frame. The Massachusetts Condominium Act provides that, once dedicated, common areas may not be divided. Mass. Gen. L. c. 183A, §5(c). This ensures that unit owners’ percentage shares in the common areas (and consequently their proportionate share of condominium fees) are not altered without amending the condominium documents after the master deed is recorded. For similar reasons, the Act further provides that property may not be removed from the condominium without the approval of 75% of the unit owners. These provisions are intended to prevent a developer from changing the condominium’s basic allocation of rights after the developer has sold some of the units to entice later purchasers to buy. Despite these specific provisions, the Massachusetts Supreme Judicial Court has acknowledged the legitimacy of phased condominium developments as a matter of statutory interpretation. The SJC recognized that c. 183A does not explicitly provide for phased developments, while a number of other states and the Uniform Condominium Act do include explicit phasing provisions in their condominium statutes. However, an Appeals Court decision, Levy v. Reardon, raised a question as to the ability of developers to remove subsequent phases of a condominium even if the terms of the removal are explicitly included in the master deed.
In this case the developer provided for a phased condominium in the master deed, reserved a right to withdraw subsequent phases from the condominium and, in fact, withdrew land from the condominium when the developer was unable timely to complete the project. The developer’s successor subsequently created a second condominium on the withdrawn land. Disputes later arose over the respective rights of the unit owners of the two condominiums, and this suit resulted. The first condominium argued that the provisions of the master deed permitting the developer to withdraw the unbuilt phases were void as contrary to c. 183A and that the entire original area of the first condominium, including the land on which the second condominium was built, was owned as common area by the unit owners of the first condominium. The Land Court ruled that the language used by the original developer was legitimate and allowed the developer to withdraw unbuilt phases of the condominium. The first condominium owners appealed and the SJC took direct appellate review. NELF supported the owners of the second condominium, arguing that the removal right was legitimately created. NELF also argued that, as a matter of public policy, developers should be able to manage the risks of large scale condominium development by reserving a right to withdraw unbuilt phases, so long as the master deed clearly puts the unit owners on notice of that right. The SJC agreed with NELF, confirming the validity of “contractable condominiums” as a form of phased condominium development and the flexible intent of the Massachusetts condominium statute.
This case related to the enforceability of a developer’s rights to withdraw land from a phased condominium development in the event that the developer does not complete the development in the anticipated time frame. The Massachusetts Condominium Act provides that, once dedicated, common areas may not be divided. Mass. Gen. L. c. 183A, §5(c). This ensures that unit owners’ percentage shares in the common areas (and consequently their proportionate share of condominium fees) are not altered without amending the condominium documents after the master deed is recorded. For similar reasons, the Act further provides that property may not be removed from the condominium without the approval of 75% of the unit owners. These provisions are intended to prevent a developer from changing the condominium’s basic allocation of rights after the developer has sold some of the units to entice later purchasers to buy. Despite these specific provisions, the Massachusetts Supreme Judicial Court has acknowledged the legitimacy of phased condominium developments as a matter of statutory interpretation. The SJC recognized that c. 183A does not explicitly provide for phased developments, while a number of other states and the Uniform Condominium Act do include explicit phasing provisions in their condominium statutes. However, an Appeals Court decision, Levy v. Reardon, raised a question as to the ability of developers to remove subsequent phases of a condominium even if the terms of the removal are explicitly included in the master deed.
In this case the developer provided for a phased condominium in the master deed, reserved a right to withdraw subsequent phases from the condominium and, in fact, withdrew land from the condominium when the developer was unable timely to complete the project. The developer’s successor subsequently created a second condominium on the withdrawn land. Disputes later arose over the respective rights of the unit owners of the two condominiums, and this suit resulted. The first condominium argued that the provisions of the master deed permitting the developer to withdraw the unbuilt phases were void as contrary to c. 183A and that the entire original area of the first condominium, including the land on which the second condominium was built, was owned as common area by the unit owners of the first condominium. The Land Court ruled that the language used by the original developer was legitimate and allowed the developer to withdraw unbuilt phases of the condominium. The first condominium owners appealed and the SJC took direct appellate review. NELF supported the owners of the second condominium, arguing that the removal right was legitimately created. NELF also argued that, as a matter of public policy, developers should be able to manage the risks of large scale condominium development by reserving a right to withdraw unbuilt phases, so long as the master deed clearly puts the unit owners on notice of that right. The SJC agreed with NELF, confirming the validity of “contractable condominiums” as a form of phased condominium development and the flexible intent of the Massachusetts condominium statute.
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