The Appeals
Court’s recent decision in Rauseo v. Board of
Assessors of Boston, 94 Mass App. Ct.
517 (2018),
is the latest chapter in the body of case law concerning a condominium
Cars are valet
parked at the Folio, a mixed-use, downtown Boston condominium, in a
three-story, below-grade parking garage defined in the Master Deed as the
Condominium Parking Area. The Condominium Parking Area comprises a portion of
the Limited Residential Common Elements of the Condominium. Under the Master
Deed, the Declarant of the Folio Condominium reserved to itself and its
successors and assigns, the exclusive right and easement to sell, convey,
lease, rent, or license easements for each of the 118 Parking Spaces in the
Condominium Parking Area. Parking Easements at the Folio can be conveyed
separate from a Unit in the Condominium. Moreover, any Parking Easements retained
by the Declarant are expressly defined by the Master Deed as easements in
gross.
The Broad /
Franklin Development Trust, the Managing Member of the Declarant (the
“Declarant”), currently owns the three commercial Units at the Condominium in
addition to Parking Easements in the Folio garage. In 2002 the Department of
Revenue issued a letter to the City of Boston authorizing it to separately
assess and tax as present interests in real estate under G.L. c. 59, § 11 parking easements located in
condominium common areas that are easements in gross rather than easements
appurtenant. Thereafter, beginning in FY2017, the City of Boston began
assessing the Declarant separately for each of its 13 Parking Easements. The
Declarant timely paid taxes assessed for FY2017 and FY2018, filed for an
abatement, and then appealed the denial of the abatement to the Appellate Tax
Board. The Appellate Tax Board upheld the abatement denials.
On appeal the
Declarant argued that the Master Deed conferred on the Parking Easement holders
a property interest in the Condominium Parking Area, which, under the Master
Deed, constitutes a portion of the Limited Residential Common Element of the
Condominium. Under G.L. c. 183A, § 14 each individual unit of a condominium,
and its appurtenant beneficial interest in the common areas and facilities of
the condominium, is assessed taxes as an individual parcel of real estate.
Because the value of the common areas is part and parcel of the total assessed
value of all the units of the condominium, the common areas and facilities
themselves are not a separately taxable parcel. Thus, the Declarant argued,
upholding the Appellate Tax Board’s decision, violated the Condominium Act and
would result in double-taxation. In support of its argument the Declarant
relied on two companion cases, Spinnaker Island
& Yacht Club Holding Tr. v. Assessors of Hull, 49 Mass. App. Ct. 20 (2000) and First Main St.
Corp. v. Bd. of Assessors of Acton, 49
Mass App. Ct. 25 (2000), which held that a declarant’s retained interest to
develop future phases of a condominium was part of the common areas and could
not be separately taxed as a present interest in property without running afoul
of G.L. c. 183A, § 14.
The Rauseo Court, however, was guided by a
separate line of cases in which the SJC and Appeals Court repeatedly
acknowledged and upheld a condominium declarant’s right to retain an interest
in land described in the condominium master deed, without impermissibly
dividing the common areas of the condominium in violation of G.L. c. 183A, § 5(c). In particular,
the SJC decision in Commercial Wharf
East Condominium Ass’n. v. Waterfront Parking Corp., 407 Mass. 123 (1990), acknowledged
that nothing in the Condominium Act precluded the coexistence of possessory and
nonpossessory interests in the same land. In that case, by declaration of
covenants and restrictions recorded before
the condominium master deed, the condominium declarant reserved to itself
the right to manage parking on the condominium land. The SJC held that where
the master deed to the condominium made the association’s fee simple ownership
interest in the Commercial Wharf East Condominium parking and driveway area
subject to the interests reserved in the declaration “it follows that the
interests retained by the developer in the Declaration are not ‘common areas.’”
Since then the courts have consistently upheld the declarant’s right to reserve
an interest in portions of the condominium land, separate from the common
areas, whether by the terms of the master deed itself as in Queler v. Skowron, where the SJC upheld
the declarant’s retention in the master deed of an interest in the unphased
portions of condominium land, or by amendment to the master deed prior to the
conveyance of any unit as in C.B.K. Brook
House I Ltd. Partnership v. Berlin, where the Appeals Court upheld the
declarant’s retained interest in parking spaces located within a condominium
parking garage.
As the Rauseo Court explained, “[t]aken
together, Commercial Wharf E. Condominium
Ass’n., Queler, and C.B.K. Brook House
I Ltd. Partnership make plain that an easement in gross for parking,
reserved by a condominium declarant from the interests submitted under a master
deed to the condominium form of ownership pursuant to G.L. c. 183A, is not a part of the condominium common
areas” and therefore could be taxed as a separate interest in real estate.
(emphasis added). Moreover, the Rauseo Court
reasoned that its holding was consistent with the earlier decision in First Main St. Corp. on which the Trust
relied. Whereas, in First Main St. Corp.,
the rights reserved by the declarant were in land expressly defined in the
Master Deed as a part of the
condominium common areas, and therefore, not a separately taxable interest, the
Parking Easement rights reserved under the Folio Master Deed to the Declarant
and its successors and assigns, although physically located in a part of the
limited common areas of the condominium … “are not appurtenant to any
condominium unit, are separately alienable as interests in real property, and are not (and never were) part of the
condominium common areas.” (emphasis added). Having exercised the planning
flexibility afforded by the Condominium Act, to reserve to itself – and thereby
remove from the Common Areas – the right to park in the Condominium Parking
garage, the Declarant created a separately taxable interest, for which the City
was authorized to assess taxes.
What effect, if
any, the Rauseo decision, will have
on the way in which condominium declarants structure and define the way in
which they retain rights, including parking rights, at a condominium, remains
to be seen. However, where demand for downtown housing continues, and the value
realized by a declarant who can freely convey or lease valuable parking spaces
in high-demand areas will vastly outpace the amount of assessed tax in
municipalities authorized to assess taxes on parking easements held as
easements in gross, it is likely that this type of structure will remain a
feature of urban condominiums for the foreseeable future.
Co-chair of the association’s land use and zoning
section, Kate Moran Carter is a
shareholder and director at Dain, Torpy, Le
Ray, Wiest & Garner, P.C. focusing on real
estate and commercial litigation, risk management and dispute resolution. Prior
to joining the firm, she spent six years as an associate at Robinson &
Cole, LLP where she focused her practice on representing title insurers,
insured lenders and owners, condominium associations, and business owners. Kate
can be contacted by email at kcarter@daintorpy.com.
