The Appeals Court has issued a decision indicating that the “pay-to-play” principle associated with a unit owner’s ability to protest
common expenses may not apply to fines and late fees imposed by a condominium board. The ruling appears to have carved out an exception to the holding in the seminal Blood v. Edgar’s decision, where the Appeals Court held that a unit owner taking exception to common expenses must first pay the amount before challenging it.
The Appeals Court has issued a decision
indicating that the “pay-to-play” principle associated with a unit owner’s
ability to protest common expenses may not apply to fines and late fees imposed
by a condominium board.
In Trustees
of the 10 Porter Street Condominium Trust v. Cerda, 2021 WL 28224 (January 5,
2021), the Appeals Court – while affirming the lower Court’s
ruling that unit owners could not challenge special assessments without first
paying same – found that the pay-under-protest principle did not apply to fines
and late fees, and vacated summary judgment decisions insofar as they awarded
the condominium board these sums.
The 10 Porter Street Condominium is a
six-unit residential condominium located in Salem. The two defendants, Carmen
Berges and Elizabeth Cerda, are mother and daughter – each owning their own
respective units at the Condominium. The trustees “are either the owners, or
closely aligned with the owners,” of the four remaining units.
On December 15, 2016, the trustees issued
a special assessment of $140,000 for “immediate deferred maintenance work.” The
defendants were told that their shares – $22,512 and $19,502 respectively –
were due in two weeks. Additionally, in late October 2016, the trustees had
begun fining the defendants $50 per day for installing unauthorized cameras in
the common areas. The defendants asserted that the cameras were necessary to
guard against the harassing and intimidating conduct of the other unit owners
and trustees. Indeed, there was clearly an acrimonious relationship between the
two sides – as there had been at least six separate Superior Court lawsuits
involving the parties since 2007.
The defendants paid neither the assessment
nor the fines and late fees, and the condominium board filed suit against them
to recover the unpaid charges in March of 2017. The Superior Court, relying on
the Blood decision, allowed the condominium board’s summary judgment motions –
finding that “Cerda and Berges are personally liable for common area expenses,
including late charges, fines, penalties, interest, and collection costs…Where
there has been no prior judicial determination that these assessments are
illegal, even if they dispute the amount owed, Cerda and Berges are not
entitled to take the self-help remedy of withholding payment of these
assessments.”
By the time judgment entered in the lower
court, the fines and late fees had mushroomed to more than $60,000 for each of
the two defendants – representing roughly two thirds of the total judgment. The
defendants contended that it would not be possible for them to pay the
challenged fees and assessments under protest without selling their units. (For
context, the defendants had paid $130,000 and $102,945 for their units
respectively). It appeared that the late fees had been sporadically issued in
varying amounts. Furthermore, at one point during the litigation, the trustees
– in successfully thwarting the unit owners’ attempt to obtain an injunction –
had indicated to the Court that they would take no further action against the
defendants until summary judgment motions were decided. However, the fines and
late fees continued, apparently unabated by the representations the board made
to the Court.
The trustees’ conduct smacked of bad
faith. As noted above, the trustees had required that the defendants pay their
substantial shares of the special assessment within two weeks. Yet the trustees
themselves apparently did not pay their shares of the $140,000 assessment until
sixteen months after the January 1, 2017 deadline that had been imposed on the
defendants.
Under G.L. c. 183A, § 6, common expenses
are to be assessed, at least annually, against all unit owners. Unit owners are
responsible for all sums asserted as each unit owner’s share of common
expenses, including “late charges, fines, penalties, and interest assed by the organization
of unit owners and all costs of collection including attorneys’ fees, costs,
and charges.” The statute further provides that the organization of unit owners
may assert a lien on a unit for unpaid common area expenses, which may
ultimately lead to a court order for the sale of the unit.
More than twenty-five years ago, the
Appeals Court had found that “a condominium unit owner may not challenge the
legality of a common expense assessment by refusing to pay it.” Blood v.
Edgar’s, Inc., 36 Mass. App. Ct. 402, 410 (1994). In Blood, a unit owner
asserted that the trustees of the condominium had improperly assessed as a
common expense the cost of operating a unit rental program. The Appeals Court
held that:
[i]n view of the importance placed by the Legislature
on prompt collection of common expenses, we conclude that in the context of the
condominium act, absent a prior judicial determination of illegality, a unit
owner must pay its share of the assessed common expenses. Self-help remedies,
such as withholding condominium common expense assessments are not available.
Id. at 405. This rule is intended to
protect the financial integrity of the condominium association. Trustees of the
Prince Condo. Trust v. Prosser, 412 Mass. 723, 725-726 (1992). In that case,
the Supreme Judicial Court provided that “[w]hatever grievance a unit owner may
have against the condominium trustees must not be permitted to affect the
collection of lawfully assessed common area expense charges.” Id. In announcing
that “a condominium unit owner may not decline to pay lawful assessments”, the
SJC noted that “[a] system that would tolerate a unit owner’s refusal to pay an
assessment because the unit owner asserts a grievance, even a seemingly
meritorious one, would threaten the financial integrity of the entire
condominium operation.” Id. at 726.
The Appeals Court, in 10 Porter Street,
found that “[t]he rationale behind the pay-under-protest principle does not
apply to these charges.” The Appeals Court noted that the subject fines were
not monthly fees based upon the annual operating budget. Further, these fines
were not special assessments imposed to address unanticipated one-time
expenses. As such, the Appeals Court reasoned that the fines and late fees were
not necessary to keep the condominium solvent.
The Appeals Court additionally pointed to the
language of G.L. c. 183A, § 10(b)(5), which requires that fines be
“reasonable.” The Appeals Court determined that “[u]nder the unique
circumstances of this case, the defendants should not have been required to pay
the accruing, unsubstantiated fines in order to challenge them.”
While the Appeals Court’s decision will
certainly lend credence to a unit owner’s contention that he or she is not
required to pay a fine before challenging it, unit owners would still be well
advised to follow the pay-under-protest principle.
As an initial matter, the 10 Porter Street
decision is unpublished and therefore, while it can be cited for its persuasive
value, it does not constitute binding precedent. Furthermore, the Appeals Court
made it clear that the fines were required to be “reasonable” and determined
that there were questions of material fact concerning the reasonableness of the
fines. The Appeals Court also found that it was improper for the condominium
board to continue to levy fines and late fees after it had represented to the
lower court that it would cease imposing these sums on the defendants.
Accordingly,
if a condominium board imposes a reasonable fine – in other words, a fine that
does not appear arbitrary or levied out of spite, acrimony or bad faith – there
is likely a strong chance that a court would abide by Blood and determine that
the “pay-to-play” principle applies. A unit owner, intending to rely upon 10
Porter Street under these circumstances, may not only end up having to pay the
fine, but also would likely have to pay the board’s legal fees incurred in
connection with having to collect it.
