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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.

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