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 the
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 amozina@rackemann.com.
