The number of residential buildings in the Greater Boston area being renovated and converted into condominiums continues to increase by the day. Developers and owners should be aware of theMassachusetts Condominium Conversion Law (Chapter 527 of the Acts of 1983) when planning to convert these occupied rental buildings.
Chapter 527 applies to every municipality in Massachusetts unless a municipality has adopted its own ordinance or by-law covering condominium conversions. A municipality, such as Boston, may adopt a law, which is more stringent or less stringent than Chapter 527. In addition to Boston, the following municipalities are among those that have adopted by-laws or ordinances: Abington, Acton, Amherst, Brookline, Haverhill, Lexington, Malden, Marlborough, New Bedford, Newburyport, Newton (under special circumstances), and Somerville. Many others, such as Cambridge, could join the list soon. A few of these municipalities have statements in the ordinances or by-laws that specifically state that Chapter 527 and the local ordinance or by-law both apply to condominium conversions.
Buildings of less than four (4) residential units are exempt. In determining whether the four (4) units minimum is met, units in two (2) adjacent buildings with common ownership will be added together. Also exempt is any building that has not been used for residential purposes for at least one year prior to an owner’s filing a master deed for a condominium.
Chapter 527 imposes the following conditions precedent to condominium conversions:
1) Notice of Conversion:
A tenant is protected if there is merely an intent to convert. An intent to convert arises when, for example, a Master Deed along with Purchase and Sale Agreements are prepared, or if there are inspections, measurements, surveys, showings, advertising, etc.
The converter must notify tenants by certified or registered mail of the filing of a Master Deed and of the owner’s intent to terminate their tenancy and their rights under Chapter 527. Most tenants have one (1) year before they must leave. Three categories of protected classes have two years or longer (up to two more years) if they cannot find comparable rental housing in the same municipality:
a) Handicapped tenants;
b) Elderly tenants (over 62); and
c) Low or moderate income tenants
Chapter 527 prohibits evictions for the purpose of converting a building to condominiums. However, a tenant may still be evicted for any violation of the lease, including non-payment of rent, provided that this is not merely a pretext for a condominium conversion eviction.
2) A limit on rent increases: CPI or ten percent (10%), whichever is greater.
3) Right of “First Refusal”: a Tenant has a ninety-day period to purchase on the same as or more favorable terms than those that will be extended to the general public. If not interested, Tenants must execute a waiver of their right to purchase a rental unit. Such a waiver should state that a Tenant received a purchase and sale agreement executed by the owner of the apartment building and that the Tenant was notified that the terms and conditions of the agreement were substantially the same as or more favorable than the terms and conditions offered to the general public during the ninety day purchase period.
4) Relocation payments: Seven hundred fifty dollars ($750.00) for the tenant, unless Tenant is a “protected tenant,” in which case it is one thousand dollars ($1,000.00). This is a mandatory payment if the tenant owes no rent or moves out before the conversion date on the notice.
5) Penalties: Fine of not less than one thousand dollars $1,000.00) or imprisonment of not less than sixty (60) days for not complying with the statute.
LOCAL ORDINANCES OR BY-LAWS: As stated above, local ordinances can provide for more stringent conversion requirements instead of or in addition to Chapter 527. For example, the Boston ordinance gives elderly, handicapped and low income tenants five (5) years’ notice but says that the notice period may be extended by future legislation. This could mean that a Tenant in a protected class in Boston could conceivably be protected indefinitely. Consequently, ordinances like Boston’s may lead owners to try not to rent to this protected class if the owner intends at some point in the future to convert the building.
A municipality, such as the City of Newton, may not have a separate ordinance or by-law covering condominium conversions. If a special permit has to be obtained from the Board of Aldermen to build more than 3 units in a dwelling, conversion to condominiums may not occur without obtaining an additional special permit from the Board of Aldermen. Therefore, conversions in Newton are governed by both Chapter 527 and the requirement of an additional special permit!
It is important that developers be mindful of Chapter 527, local ordinances and their timeline restrictions. If and when possible, Units should be vacant before the intent to convert arises in order to be able to convert and sell Units free of statutory and ordinance requirements.
Co-chair of REBA’s Condominium Law and Practice Section, Angel Mozina is a director at Rackemann, Sawyer & Brewster, P.C.,where she represents developers, lenders, borrowers, management companies, condominium associations, owners and tenants in a broad range of real estate and corporate matters. Angel can be contacted by email at firstname.lastname@example.org.