Thom
Aylesworth
Prior articles from this office
have addressed the importance of the preparation and organization needed for a
condominium trust or association to amend its condominium documents—i.e., the
master
Under Massachusetts law, it is not
enough that the condominium board strictly follow the amendment procedures set
forth in the condominium documents. To survive a court challenge, the amendment
must also satisfy the standard imposed by the courts when an amendment is
challenged. That standard is “equitable reasonableness.”
What does the term “equitable
reasonableness” mean? The explanation from the courts does not give much
guidance. According to the Massachusetts Supreme Judicial Court (borrowing the
definition used by Florida courts), it means “[i]f a rule is reasonable the
association can adopt it; if not, it cannot.” Noble v. Murphy, 34 Mass. App.
Ct. 452, 457 (1993) (citation omitted). The Court further explained, again
borrowing from Florida law, that amendments imposing restrictions on unit
owners are reasonable only when they are “reasonably related to the promotion
of the health, happiness and peace of mind of the unit owners.” Id. (citation
omitted). Furthermore, the amendment is invalid if it “violate[s] a right
guaranteed by any fundamental public policy or constitutional provision.” Board
of Managers of Old Colony Village Condo v. Preu, 80 Mass. App. Ct. 728, 730
(2011). Presumably, a condominium board that proposes a bylaw or other
amendment believes it to be reasonable. The key point, however, is that in a
court challenge, the person who decides whether an amendment is reasonable is
the judge.
An interesting decision about a
condominium bylaw amendment was recently issued by the Massachusetts Superior
Court in the matter of JAH Realty, LLC v. Trustees of The 25 Channel Center
Condominium Trust. At issue was a bylaw amendment that applied only to the
condominium’s sole commercial use unit. After purchasing the commercial unit,
the owner leased it to a child daycare business. Upon learning of this new
commercial use, the insurance carrier for the condominium trust indicated it
would not renew the condominium’s insurance policy without an indemnification
agreement from the commercial unit owner. The condominium board was unable to
reach an agreement with the commercial unit owner and instead proposed an
amendment to the condominium bylaws that, among other things, required the
commercial unit owner to indemnify the condominium trust against liability
arising from the use of the commercial unit. The amendment was properly
ratified by the unit owners.
The commercial unit owner filed a
lawsuit, seeking to annul the bylaws amendment. The judge ruled in the board’s
favor, finding that such an amendment satisfied the reasonableness test. The
judge reasoned that commercial businesses, and particularly daycare operations,
create legitimate liability concerns that do not exist with residential units,
and therefore the indemnification amendment was valid. The judge was not swayed
by the commercial unit owner’s argument that the indemnification obligation was
imposed only after it had invested hundreds of thousands of dollars to remodel
the unit to accommodate the daycare business. The judge concluded that the new
daycare business use created the need for indemnification, and therefore it was
not unreasonable for the condominium to adopt the amendment imposing the new
obligation. Likewise, the judge was not persuaded by the fact that the
commercial unit owner carried substantial insurance for the benefit of the
condominium and board of trustees. The judge determined that, absent the
indemnification amendment, the condominium would be at risk of losing its own
insurance, and that consideration outweighed the large insurance benefits
offered by the commercial unit owner. Last, the judge agreed with the board
that the commercial unit owner’s concern as to a negative impact on the market
value of its unit was outweighed by that owner’s knowledge, when purchasing its
unit, that the board was obligated to maintain insurance for the condominium,
and that it was reasonable for the board to “fulfill its mandate and protect
the residential unit owners” by obtaining the amendment to avoid losing the
condominium’s insurance policy.
But it was not a complete victory
for the condominium board. The judge ruled in favor of the commercial unit
owner and struck down certain provisions of the bylaws amendment, including a
provision that gave the trustees sole discretion to charge the commercial unit
owner for any increase in insurance premiums incurred by the trust in providing
adequate insurance for the condominium. The judge suggested, however, it would
be reasonable to adopt an amendment limiting such obligation to increased costs
incurred by the trust as a direct consequence of the daycare facility use in
the commercial unit.
When faced with the task of
amending any of the governing documents of a condominium, it is critically
important to follow the procedures as laid out in the documents. It is equally
important to consider whether the proposed amendment will pass the
reasonableness test if it is challenged in court. The analysis involves a broad
spectrum of factors, and condominium boards considering an amendment are well
advised to seek the advice of an attorney to learn more about whether the
proposed amendment might survive such a challenge.
A copy of the court decision in JAH
Realty LLC v. Trustees of The 25 Channel Center Condominium Trust may be found
here at this link.
Originally posted August 17, 2019on
tlawmtm.com.
Associated with the Braintree firm of Moriarty,
Troyer & Malloy, Thom Aylesworth has over twenty years of practice
experience in Massachusetts and New Hampshire. He represents condominiums,
corporations, and individuals in a wide range of matters with a primary focus on
complex real estate litigation. His specific areas of practice include
construction defects, condominium enforcement, zoning and land use litigation,
beach rights, and other property disputes.
His email address is taylesworth@lawmtm.com
