Blog Archive

Wednesday, October 18, 2017

Issues and Strategies in Dealing with Lease Defaults and Remedies (Video)

Paul White of Sugarman Rogers and Ed Bloom of Sherin and Lodgen will be the featured speakers at the Fall Open Meeting of the Commercial Leasing Section, to take place on Tuesday, October 17th at REBA in Boston.

Paul and Ed will present on the topic of commercial lease disputes: issues and strategies in dealing with lease defaults and remedies in the wake of Cummings Properties, LLC v. National Communication Corp., 449 Mass 490 (2007) and its progeny.

Ed has many years of experience in drafting commercial leases and selecting the best language to include in a lease to address these situations. Paul's practice routinely encompasses the representation of commercial landlords and tenants in situations involving monetary and non-monetary lease defaults and bringing or defending lawsuits that present these claims. These are often fast-developing situations which require not only a careful analysis of lease terms but also an understanding of the pitfalls and opportunities they present depending on the needs of the client and the unique circumstances of any dispute.

Tuesday, October 10, 2017

Condominium Issues in the 21st Century

By Saul J. Feldman & Angel K. Mozina

In this article, we are going to discuss current condominium issues:

Although legal in Massachusetts, marijuana remains illegal under federal law. Some condominium associations have asked for us to
draft language making marijuana illegal except for medical purposes. Other associations have asked us to draft language making marijuana legal for recreational and medical uses. This issue of marijuana can be covered as part of a “no smoking” prohibition. For example, a prohibition against smoking except in an outdoor gazebo may encompass marijuana. These regulations can apply to both common areas as well as within individual units.

On-line Home-Sharing Sites:
The huge increase in Airbnb, HomeAway, and other on-line home-sharing sites has led associations and developers to wonder about whether to modify documents regarding short-term rentals of condominium units. The short-term rental may be for an entire condominium unit or just for a single room within the condominium unit. This practice may violate a town’s zoning by-laws, because a property may not be used for a commercial enterprise in a single-family zoning district. Notwithstanding such a zoning prohibition, in our opinion, the condominium documents should also address this issue as it affects insurance coverage, and taxation of these properties, similar to the taxation of hotels and motels.

Mixed-Use Condominiums:
The common belief is that tensions between unit owners in a mixed-use condominium often lead to total dysfunction in the condominium. We want to demonstrate that it is often possible to resolve the differences between differing uses. We will do this by exploring a common fact pattern.
The tensions are between:
(1)     the condominium association in a mixed-use building with residential units in most of the building, and
(2)     the owner of the restaurant unit.
In this example, there is a restaurant operating on the first floor of the building with the next several floors occupied by residential units.
The restaurant wants to obtain a liquor license and convert the restaurant to a sports bar which will, of course, generate even more noise. Under the condominium documents, a restaurant is allowed, but a sports bar is not allowed.  The zoning allows for both a restaurant and a sports bar.

On the surface, this may seem like an impossible problem between the owner of the restaurant unit and the Condominium Trustees. The Trustees could hold firm and not allow the sports bar. If the restaurant goes ahead and converts the use to a sports bar, the parties will end up in years of litigation. Eventually, the Trustees may win and the restaurant may lose. However, in reality neither party will win.  The costs of litigation in this case could be in excess of $200,000.00. This just happens to be the cost of proper sound-proofing.

The solution is for the two parties to come to an agreement on proper sound-proofing of the ceiling of the restaurant unit. The cost should, of course, be borne solely by the restaurant.

The agreement will also be signed by as many of the Unit Owners as possible. The Condominium Trust must indemnify the Owner of the Restaurant Unit against claims by any of the Unit Owners who fail to sign the settlement agreement. 

This fact pattern is quite common in Boston and other urban areas throughout the United States. Our point is that most tensions in a mixed-use condominium can be settled and need not lead to dysfunction and litigation.

Small Condominiums:
A small condominium (2-4 units) is really a joint venture – a general partnership limited to one project. The “project” is the operation of the condominium.
The condominium documents should be made as simple as possible.

There should also be a mechanism to settle disputes. I would recommend mediation and arbitration. REBA is set up to do both.
Each Unit Owner should be a Trustee. Decisions should require a 100% vote of the Trustees/Unit Owners. Sometimes this can present a challenge.

Regarding collections in a two (2) unit condominium, the documents should give one Trustee the ability to sue the delinquent Unit Owner who fails to pay after sixty (60) days’ notice from the Trustee of the other Unit.

Ideally, the Units should be kept as separate as possible. For example, yard areas could be exclusive-use areas if that is what the Unit Owners want.

The rules and regulations which are on exhibit in the condominium trust should be as simple as possible.

The Master Insurance Policy should be an “all in” policy that covers the units as well as the common areas. Each Owner should get his own insurance as well, just for the contents of the unit and for liability within the unit.

Problems such as budgets, tenants, noise, smoking, collections, and pets must be carefully addressed in the Master Deed or Condominium Bylaws.

There are some people who do not belong in a condominium. With a little luck, these people will not be in the condominium. If they are Unit Owners, you should expect trouble and we are not convinced that even the best drafted documents will be of any help.

Thursday, October 5, 2017

The Future of Real Estate Closings - The Pen Will No Longer Be Mightier (Video with Related Article)

Join us for a pre-Halloween trick-or-treat, as we survey chilling topics, including: "CFPB Issues its Final TRID Rule - What does it mean; and (if applicable) what about its Director? Off to Ohio or Not?," presented by Ruth Dillingham; "Cyber Security Vigilance is Key," presented by Kosta Ligris, and "The New ALTA Commitment, "presented by Gene Gurvits.  Joel Stein will close the session with some suggestions as to ways to keep egg off your face.

Related Article

Monday, October 2, 2017

Supreme Judicial Court Denies Developer’s Application for Review of Appeals Court Decision Concluding That Developer’s Partially-Constructed “Units” May Be Taxed

The Supreme Judicial Court recently denied a developer’s application for further appellate review of a decision concerning the taxation of development rights, whereby the Appeals Court had
ruled that a town may tax partially-constructed structures – existing on land that has been submitted to condominium status – which have not yet become lawful condominium units. R.I. Seekonk Holdings, LLC v. Board of Assessors of Seekonk, 91 Mass. App. Ct. 1104 (2017)(Rule 1:28) review denied 476 Mass. 1115 (2017). At first blush, the Appeals Court’s decision appears to run counter to the Massachusetts Condominium Act as well as its own previous decisions. Indeed, for the last seventeen years, it had generally been well accepted that land submitted to condominium status – which was subject to development rights – constituted common area of the condominium, which was exempt under G.L. c. 183A, § 14 from assessment. Spinnaker Island & Yacht Club Holding Trust v. Bd. of Assessors of Hull, 49 Mass.App.Ct. 20 (2000); see also First Main St. Corp. v. Bd. of Assessors of Acton, 49 Mass.App.Ct. 25 (2000). The Appeals Court, however, was able to differentiate the partially-constructed structures at issue in R.I. Seekonk based on (1) certain language in the condominium’s master deed concerning the subject development rights, and (2) the progress of construction performed.

The Massachusetts Condominium Act provides, in pertinent part, as follows:
Each unit and its interest in the common areas and facilities shall be considered an individual parcel of real estate for the assessment and collection of real estate taxes but the common areas and facilities, the building and the condominium shall not be deemed to be a taxable parcel.

G.L. c. 183A, § 14 (emphasis supplied).
In Spinnaker Island, the Appeals Court considered whether municipalities may tax rights retained by the declarant of a condominium to build additional phases of a condominium. Spinnaker Island, 49 Mass.App.Ct. at 20. In that case, the Assessors of Hull assessed real estate taxes on ten parcels of condominium land in which the declarant retained development rights but upon which units had never been “phased in” to the condominium. Id. at 21-22. The Appeals Court specifically held that these development rights, which had been reduced to the ten “expansion parcels,” are not subject to real estate taxation under G.L. c. 183A, § 14. Id. at 24. More specifically, the Appeals Court explicitly provided that “[b]y reason of the unambiguous exclusion in G.L. c. 183A, § 14, of common areas from taxation except to condominium unit owners in proportion to their percentage interests, the expansion parcels are not subject, as separate parcels, to real estate taxation.” Id.

In First Main Street, the Assessors of Acton – instead of assessing development rights as “real estate” under G.L. c. 59, § 2A, like the Assessors of Hull in Spinnaker Island – assessed development rights as “present interests” in real estate under G.L. c. 59, § 11. First Main St., 49 Mass.App.Ct. at 25. The Assessors of Acton contended that the development rights were severable from the underlying fee – that while the underlying fee was common area, the retained right to build on that land is not common area (and, therefore, was subject to taxation). Id. The Appeals Court rejected the Assessor’s argument and held that a declarant’s development rights are not taxable as “present interests” in real estate under G.L. c. 59, § 11. Id. at 28-30.

The R.I. Seekonk case involved the Greenbrier Village Condominium located in Seekonk, Massachusetts. When the Condominium was initially created in 2008, it consisted of eight units. Thirteen phases were subsequently added by phasing amendments – eventually creating thirty-one units at the Condominium. The Town of Seekonk assessed taxes against the declarant on structures that were under construction and prior to their addition to the Condominium as “units” – via master deed phasing amendment.

The Appeals Court held that these partially-constructed structures – unlike the development rights at issue in Spinnaker Island and First Main Street – were properly assessed by Seekonk. The Appeals Court seized upon the fact that language in the condominium’s master deed clearly defined the developer’s intent to exclude the structures from the condominium’s common area. R.I. Seekonk, 2017 WL 465322, *2. Indeed, the condominium’s master deed specifically provided as follows:
The Common Areas and Facilities of the Condominium (sometimes herein also referred to as the “Common Elements”) consist of the entire Land exclusive of the Units, all as hereinafter described and defined (and exclusive of any and all rights, interests and/or easements reserved by the Declarant), and any other property which is herein expressly included in the Common Areas and Facilities…Until such time as additional Phases are added to the Condominium by the recording of “Phasing Amendments” as described below, any buildings or portions thereof existing on the Land described in Schedule A (other than Phase 1), any other portions of the building(s) shown on the Site Plan, and any land not described in Schedule A shall not be part of the Condominium or subject to the Act, and shall be exclusively owned by, and shall be the exclusive responsibility of the Declarant or other owner thereof.

The Appeals Court in Spinnaker Island had specifically provided that “[o]nce it is recognized that the expansion parcels constitute common area of the condominium, it follows that they are not subject to real estate taxation because G.L. c. 183A, § 14…provides that ‘common areas and facilities…shall not be deemed to be a taxable parcel.’” Spinnaker Island, 49 Mass.App.Ct. at 23. The Appeals Court in R.I. Seekonk reasoned that – where this developer had gone to such lengths to specifically exclude the structures from the common area – the developer is not entitled to the tax exemption for common areas provided by G.L. c. 183A, § 14.

Unfortunately for many developers holding development rights, master deeds – for whatever reason – are commonly drafted with the exclusionary language seized upon by the Appeals Court in R.I. Seekonk. As a practical matter, developers should seek to avoid the inclusion of such language in their condominium documents and, instead, employ simple language concerning the land that has been submitted to condominium status (e.g., “The Common Elements are all portions of the Condominium other than the Units.”).

Perhaps more unfortunate for developers holding phasing rights is the fact that the Appeals Court in R.I. Seekonk went beyond distinguishing the case from Spinnaker Island based on the language in the master deed. The Appeals Court also held that the partially-constructed structures could be taxed as present interests in real estate, under G.L. c. 59, § 11. R.I. Seekonk, 2017 WL 465322, *2. The Court distinguished this case from First Main Street based on the fact that the structures “were in fact mostly completed” – whereas First Main Street involved assessed development rights where no construction had commenced. The Court provided that “as the First Main St. court reasoned, an unexercised development right could be converted into a present interest by initiating affirmative actions, such as ‘build[ing] the additional buildings and facilities.’”

Notably, the R.I. Seekonk Court failed to complete the quote from the First Main Street decision, which provided that the condominium developer must “build the additional buildings and facilities and amend the master deed, before the expansion phase land is the holder’s to deal with.” First Main St., 49 Mass.App.Ct. at 28 (emphasis supplied). It appeared that the Appeals Court, in First Main Street, recognized that in order to tax a development right as a present interest, the subject unit actually had to be phased into the condominium by recording an amendment to the master deed. The R.I. Seekonk Court, however, eschewed the necessity of having a legally-existing unit to tax – providing that a development right may be taxed once a structure is constructed on the property.
The Appeals Court’s decision is problematic, to say the least.
Essentially, towns may now tax condominium “units” that do not legally exist. If such a tax goes unpaid, what property interest will the town place a lien on? What property interest would be foreclosed upon? Will the town take common area land away from the unit owners of the condominium?

Additionally, the Appeals Court’s term “mostly completed” would seem to be open to broad interpretation. Can a structure be assessed once a developer has poured a foundation? Framed walls? Nailed roof shingles? It is unfortunate that the Court did not provide a stricter threshold than “mostly completed” (e.g., taxable as a present interest upon the issuance of a certificate of occupancy).
Also, towns typically tax common area proportionately to the unit owners of the condominium as “value added” to the condominium – in accordance with their percentage interest in the common area. Under the R.I. Seekonk decision, towns will essentially be able to (1) tax the unit owners in accordance with their percentage interest in the common areas, and (2) tax partially-constructed structures existing on the common areas. This would appear to be double taxation. The Appeals Court, in First Main Street, recognized this issue, providing “[a]s the unit owners have already been taxed for their interest in the common area land, the assessors may not tax another slice of the same real property to others.” First Main St., 49 Mass.App.Ct. at 29.

It is worth noting that, effective January 1, 2017, G.L. c. 59, § 11 was amended to provide local assessors with the discretion regarding whether to tax present interests in real estate. Previously, the statute authorized the imposition of a tax on a present interest upon written authorization from the Commissioner of Revenue. Accordingly, local assessors will now be able to tax structures on condominium property that – in their opinion – are “mostly completed”. A particularly aggressive town may now be emboldened to assess any partially-constructed structure on condominium property – whether it is ultimately to become a unit or some common area facility (e.g., a clubhouse).

The independent value of development rights, and the notion that a declarant of a condominium should be subject to taxation for same, has been acknowledged in the industry for more than three decades. Both the Uniform Condominium Act (“UCA”), which was most recently amended in 1980, and its successor act, the Uniform Common Interest Ownership Act (“UCIOA”) provide: “Any portion of the common elements for which the declarant has reserved any development right must be separately taxed and assessed against the declarant, and the declarant alone is liable for payment of those taxes.” UCA § 1-105(c) (1980); UCIOA § 1-105(c) (2014). As explained in Comment 2 to the UCA provision, “[e]ven if real estate subject to development rights is a part of the condominium and lawfully ‘owned’ by the unit owners in common, it is in fact an asset of the declarant… .’” UCA § 1-105(c), cmt. 2 (1980).

However, Massachusetts has its own unique condominium act codified at G.L. c. 183A, § 1 et seq., which has no comparable provision to that contained in the UCA and UCIOA. “Massachusetts has not adopted either the UCA or its successor, the Uniform Common Interest Ownership Act.” Drummer Boy Homes Ass’n, Inc. v. Britton, SJC-11969, 2016 WL 1191578, at *6 n.17 (2016). And while “the UCA may serve as a guide to the reasonableness of developer control of the structure, management and marketing of a condominium, it cannot override the existing tax law of Massachusetts. That is a task for the Legislature.” First Main St., 49 Mass.App.Ct. at 29-30 (citing Barclay v. DeVeau, 384 Mass. 676, 685 n.17 (1981)).

Until such time as the Legislature has determined whether it is appropriate to assess a condominium’s declarant for the value of its retained development rights, or partially constructed buildings on common area, this issue will likely find its way back to the appellate courts of the Commonwealth.

For nearly 15 years, Dave has been specializing in complex civil litigation at both the trial and appellate levels. He has extensive experience in the area of construction litigation. Dave’s practice is focused on construction, real estate, and condominium matters. His clients include condominium associations, real estate developers, general contractors, subcontractors, and individuals.

Dave is also certified as a player agent by the Major League Baseball Players Association and has negotiated more than $56 million in professional baseball contracts.

Thursday, September 28, 2017

Construction Law & Commercial Real Estate Finance Sections: Lender Requirements in Construction Contracts

September 26, 2017
Jonathan Hausner of Robinson + Cole will lead a discussion of typical lender requirements in construction contracts and construction oversight by lenders from the perspective of the owner and the construction team. He will be joined by Tom Guidi of Hemenway & Barnes LLP to give the lender's perspective. Jonathan and Tom will discuss borrower negotiations with architects and general contractors with an eye toward lender contract requirements and compliance with the lender requisition process. The discussion will also address issues from the perspective of the lender and the borrower.  

REBA Litigation Section September 27, 2017: Conducting Effective Witness Examinations with Judge Maynard Kirpalani

We are pleased to have the Honorable Maynard M. Kirpalani lead the discussion on conducting effective witness examinations at trial.  Judge Kirpalani was a civil trial attorney from 1978 until he was appointed to the Superior Court in 2010.  He has a wealth of knowledge, experience, and tips on effective trial strategies.  The focus of his discussion will be direct and cross-examination as well as the use of exhibits and demonstrative aids.  The meeting will be a fantastic opportunity to hear from an experienced former civil trial attorney and current sitting judge.

Wednesday, September 20, 2017

Vinnie Appreciates the Finer Point of Title Exams

My cousin Vinnie, the suburban real estate attorney, joined the gang in the Man Cave for a recent Patriots’ game. He brought some
terrible beer, suitable for his own personal consumption; which was fine because nobody else wanted to drink it. I am sure the smoked brisket made the beer taste better, because smoked meat makes everything better. After the victory, Vinnie hung around with the die-hard football fans to watch “Red Zone” and eat cookies. Only then did he start regaling us with stories from his small town practice.

“Paulie, I don’t know if you have noticed, but it seems to me that our brothers and sisters of the bar have upped their standards when it comes to reviewing title exams. I have been very pleased to see more requests that sellers need to obtain confirmatory discharges, or need to record missing trusts and cure deed descriptions. Until a few years ago, it was as if we were expected to accept anything, including discharges from the first cousin of a mortgage holder, but now that things have settled down, it seems that there is more attention to detail and a greater expectation of precision.”

I told Vinnie that I had notice the same trend, and I told him about a deed that came across my desk last week from the assignee of an assignee of a foreclosing entity, with one of those crazy long names with a “certificate series number” signed via POA, and the POA may have provided authority to execute and deliver deeds, but for some reason the drafter of the POA did not know how to type the words “and execute and deliver deeds”.

Vinnie declined an offer for a taste of some Eagle Rare bourbon and held on to his crappy beer. “It’s a conundrum.” Vinnie continued. “If three owners ago a trustee’s certificate was not perfect, and all the trustees died, but the title was buttressed with attorney’s affidavits, certificates of appointments and acceptance, a new certificate plus the passage of ten years, I suppose you can complain that the title is not perfect, but somewhere you have to apply a reasonableness standard. On the other hand, if the parties are alive and available to sign corrective documents, I will usually insist that we obtain and record corrective documents; and I usually end up drafting all the corrective documents and confirmatory deeds.”

Vinnie continued: “And, the other thing that is happening is that subdivisions that sat dormant since the Great Recession are coming back to life. But unfortunately the land owners are attempting to sell expensive lots only to discover that the septic regulations have changed, or the wetlands have migrated, or Orders of Conditions have lapsed. On more than one occasion I have seen land owners attempt to sell pricey lots, but in the course of my title exam I found conditions of approval that were long forgotten by the seller/developer, including lapsed special permits, and missing easements or restrictions that still require review by learned town counsel. Talk about delays to the closing!”

My buddy Chip told us to stop talking shop, and pay attention to the games. He had a point. There would be plenty of time to contemplate the fine details of a 2” thick title exam on Monday morning.

A former REBA president, Paul Alphen currently serves on the association’s executive committee and co-chairs the long-range planning committee.  He is a partner in the Westford firm of Alphen & Santos, P.C. and concentrates in residential and commercial real estate development, land use regulation, administrative law, real estate transnational practice and title examination .As entertaining as he finds the practice of law, Paul enjoys numerous hobbies, including messing around with his power boats and fulfilling his bucket list of visiting every Major League ballpark.  Paul can be contacted at