The Importance of Record Keeping

Condo associations and property managers are faced with the challenge of maintaining accurate and detailed records of fees and assessments due from unit owners.  Regular maintenance of records may seem like an obvious task, but when it comes to obtaining delinquent common expenses, keeping the books straight is more than just good business practice, it is necessary to comply with the law.

The Massachusetts Condominium Act sets forth a rigid two-step notice process for associations seeking to collect overdue payments for common expenses.   First, the association must notify the unit owner and the mortgage holder that the unit owner’s common expenses are at least 60 days past due.   Second, the associations must provide 30-days notice to the mortgage holder prior to filing an action to enforce a lien against the property.  In other words, before any other legal action is taken on the matter, condo associations have to provide date-sensitive warnings to unit owners and mortgage holders.

Though a lawyer can and should serve the notices on behalf of the association, his or her legal assistance relies upon on the records provided by the condo association.  So, organized records are vital to complying with the law and protecting the rights of the association.

Who we are and what we do…

As we embark upon a new year and as our law firm celebrates its 11th Anniversary, we have been reflecting on our work and our place in the legal market.  As a boutique law firm, we can and do provide a broad range of legal services, but we also have areas of particular expertise including civil litigation and condominium law.  So, how do we succinctly convey our ability to handle many types of matters while highlighting our areas of specialty?

In other words, what is our elevator pitch?

Law in an elevator…

At this point, you should be humming an Aerosmith song of a similar name.  Seriously though, after much consideration we have narrowed our elevator pitch to one of the following:

“A full service law firm specializing in civil litigation and condominium law.”

or

“A general practice law firm concentrating on civil litigation and condominium law.”

or

“A boutique law firm focusing on civil litigation and condominium law.”

Since we live in the age of crowdsourcing, we are asking you, our friends, clients, and colleagues to help us determine the best one-line summary of our law firm.  We are also open to other ideas and suggestions so feel free to get creative!

Please e-mail your thoughts and ideas to tim@schofieldlg.com.

IMPORTANT LEGAL DECISION

On November 7, 2014, the Massachusetts Appeals Court issued its decision in the case of Drummer Boy Homes Association, Inc. vs. Carolyn P. Britton et.al., which has major implications for condominium associations and property managers.

The relevant issue in the Drummer Boy case was whether condominium associations can file multiple concurrent lawsuits to establish so-called “rolling liens” to take advantage of the limited priority lien provision of the Massachusetts Condominium Act.

The Law and Past Practice

The Massachusetts Condominium Act gives condominium associations a priority lien (also known as a “super-lien”) for up to six months of unpaid condominium fees and the costs of collecting such fees. In other words, if certain statutory notice requirements are followed then up to six months of unpaid condominium fees and the corresponding collection costs take priority over any first mortgage and are paid first in any foreclosure action.

The super-lien has proven to be a very effective method for condominiums associations to collect unpaid fees and collection costs because mortgage holders will often pay the super-lien amount to avoid any impact on their mortgage priority.

However, because the notice and collection process can take longer than the six months covered by the super-lien, it has been the practice of condominium associations to file multiple concurrent lawsuits to cover successive six-month periods (a so-called “rolling lien”). Unfortunately, it is this practice that has been prohibited by the Massachusetts Appeals Court.

The Drummer Boy Decision

In the Drummer Boy case, a unit owner withheld payment of condominium fees in a dispute with the  association over parking rights and fines. The association filed three separate and concurrent lawsuits asserting a super-lien for eighteen months of unpaid fees and collection costs. The lawsuits were consolidated into one case and the association ultimately prevailed, but the trial court ruled that the association only had a super-lien over the first six months before the first lawsuit was filed and not the eighteen months claimed by the association.  In other words, only six months’ worth of fees, and the corresponding collection costs, took priority over any first mortgage and would be paid first in any foreclosure action.  The Appeals Court agreed with the trial court in rejecting the use of concurrent lawsuits to establish a rolling super-lien.

Moving Forward

There is no question that this is a bad decision for condominium associations, but the six month priority lien is still a very powerful tool for obtaining payoffs from mortgage holders. It is essential, however, that associations and property managers not delay in pursuing their rights to avoid any unnecessary loss during the six month priority window.  Condominium associations may also have to seek foreclosure more often and more quickly than has been necessary in the past.  Finally, the Drummer Boy decision appears to be limited to concurrent lawsuits and we do not think that it prohibits associations from filing a new lawsuit after an earlier lawsuit for unpaid fees has been dismissed.

Mass. Legislative Activity, 2014

The Massachusetts Legislature has recently taken action on issues related to condominium law. During the past session, which ended this summer, two bills were introduced that sought to clarify or amend M.G.L. c. 183A, the current statute governing condominium law. Neither bill was enacted by both chambers (as is required in order to be signed and executed into law by the governor). Yet, both bills passed the Senate and traveled through multiple committees in the House of Representatives. These two bills therefore signal potential updates to the condo statute, provided they are both reintroduced and passed in the next session (such a possibility would likely not occur until January, after the fall elections). Below is a brief description of each bill and its respective affect on current law.

(1)   S.2316 aims to clarify language in section of M.G.L c. 183A pertaining to condominium priority liens. As the law currently stands, condo associations are entitled to a six-month priority lien on delinquent common expenses, therefore providing associations with an important advantage over mortgage lenders in legal actions to recoup overdue fees and related expenses. In recent years, however, lenders have challenged the notion that the law gives associations the right to multiple six-month priority liens. S.2316, introduced by Senator Brian Joyce, would amend the statute to clarify that the phrase “priority liens” does indeed refer to all six-month priority liens established in accordance with the law. The bill would effectively silence lenders on the subject, ending the argument that associations are limited to one six-month priority lien over delinquent common expenses.

(2)   S.602 , also introduced by Senator Joyce, features two major sections:

The first section attempts to remove contradictory language in the condo statute. M.G.L. c. 183A currently contains a provision that allows condo associations to permit unit owners to modify certain common areas, specifically limited common areas and exclusive use easements. However, the law also has another provision that requires the condo’s master deed to be amended in order to achieve the very same action.  S.602 aims to end the conflicting provisions by eliminating the amendment requirement. If passed, associations will have greater legal clarity to create or authorize certain common area rights.

The second section attempts to streamline consent requirements for amending condominium documents, such as the master deed or the declaration of trust. Currently, some condo documents require mortgagees — typically institutions like Bank of America, N.A. or CitiMortgage, Inc. — to sign off on amending these documents. In this situation, S.602 would place a burden on mortgagees to specifically object within 60 days of receiving notice from an association via first class and certified mail; otherwise, consent by mortgagees will be implied. In other words, if S.602 were to pass, condo associations would have broader ability to advance on amending their own documents, weakening the influence of mortgagees in this regard.

Mass. Legislature Aims to Strengthen Condo Rules for Financial Records

Efforts by Massachusetts lawmakers are underway to change the rules regarding condo financial records, potentially exposing condo associations to legal actions by unit owners.

The Legislature is close to passing a bill that would force condo associations to make a variety of documents easily accessible to unit owners or risk paying the price in court.  The bill, S.621, would amend the current law regulating condominiums to ensure that condo associations are responsible for “all reasonable attorney fees” in actions brought by either unit owners or their mortgagees to attain documents.  The bill has passed in the Senate, but awaits approval in the House of Representatives.

As The Boston Globe has reported, some see the bill as a common-sense measure to facilitate unit owner access to basic condo records. Yet, such a change to the law could enable owners to exploit the provision at the expense of associations.

As the law stands, unit owners are already entitled to access accurate financial records. Condo associations (or property management companies serving as the agent for condo associations in matters related to financial management) must retain financial records for a period no shorter than seven years.  Such records include: receipts and expenditures, audits, reviews, account statements, service agreements and contracts, and insurance policies.  Now, however, the proposed bill introduces a financial penalty for condo associations that don’t meet immediate demands for these documents.

But even if the House can’t muster the votes to pass the bill, condo associations should still get their records in order and provide them to unit owners in a timely manner upon request. Nothing prevents legislators from re-filing the bill in another session with a more favorable set of members.  And, given the recent growth of condo unit sales in Massachusetts, pressure to toughen up laws that benefit owners may continue to mount.

Schofield Law Group Celebrates 10th Anniversary

On January 16, 2014, Schofield Law Group, LLC celebrated its 10th Anniversary.  The firm was originally established as Schofield & Associates by Timothy N. Schofield, who had previously been a trial attorney with the Boston law firms of Sally & Fitch and Goulston & Storrs.  The firm initially focused on civil litigation, but quickly expanded to other practice areas including condominium law, property management law, zoning and permitting, and real estate transactions.

In 2006, Cathleen Campbell joined the firm, which then became known as Schofield & Campbell, LLC.  With the addition of Cathleen Campbell, the firm’s practice areas expanded to include criminal defense and probate law.  In 2007, John Connolly joined the firm, which then changed its name to Schofield Campbell & Connolly, LLC.  John Connolly helped the firm to expand its practice to include business transactions.  During his time with the firm, John Connolly also served on the Boston City Council.

In September 2012, Cathleen Campbell left the firm to become an Associate Justice of the Cambridge District Court.  She was nominated for the position by Governor Deval Patrick on August 7, 2012 and was confirmed by the Governor’s Council on August 29, 2012.  That same month, John Connolly left the firm to focus on his service as a Boston City Councilor.  Shortly thereafter, he announced his candidacy for Mayor of Boston.  In September 2013, John Connolly advanced to the final election for Mayor and lost in a very close election on November 5, 2013.

As the firm enters its second decade, it continues its commitment to providing high quality legal counsel and services and to helping clients achieve their goals by designing and implementing unique and innovative strategies for every case and every transaction.

We have moved to the Back Bay!

A New Perspective

After nearly ten years downtown, we have moved to the Back Bay (we are not cool enough for the Innovation District!).  We love our beautiful new offices, our amazing views (the picture is the view from my office), and our central location.  Our new address is:

29 Commonwealth Avenue, Suite 700, Boston, Massachusetts 02116

 

Extension of FHA “Flipper” Rule Good News For Buyers & Sellers Alike

While the FHA declared its waiver on insuring mortgages on properties owned by the seller for less than 90 days a temporary measure to help the foreclosure-plagued U.S. housing market, it has continually extended this waiver since 2010.  This indicates the strategy has been successful in promoting quick turnovers of such properties from small-time “flippers” who renovate and sell them.  While restrictions are in place to prevent predatory flipping practices, this extension gives many home-buyers more options and the short-term sellers the security of knowing that their properties will not be vacant for longer than the duration of the renovation process.  The waiver has been extended through the year 2013, at which point the FHA will have to reconsider the decision.

Condo Association’s Negligent Construction Claim Not Barred By Economic Loss Rule

A recent Appeals Court ruling held that the economic loss doctrine had been misapplied to a condominium association’s negligent construction claim, improperly reducing its recovery for defective window frames and a leaking roof.  The ruling was significant because the Court recognized that the common areas and privately owned units of the condominium were separate properties, such that defective construction in the common areas could result in consequential loss to a private unit, damages for which would not be barred by the economic loss doctrine.

In Wyman, et. al v. Ayer Properties, the Appeals Court held that as damage had occurred to the privately owned units and interior window sashes, “consequential physical damages to separate property satisfied the requirement of the rule for a concomitant harm beyond the damage to the original product or structure furnished by the defendant.”

The Court additionally found that the economic loss doctrine may have been applicable to allegedly deteriorating masonry that had not resulted in any damage to a separate property interest and thus lacked the requisite consequential loss.  However, the Court found that leaving condo trustees without a remedy for the negligent design or construction of the masonry was contrary to the purpose of the economic loss doctrine, the application of which normally leaves the claimant with contract or warranty claims. Since these alternative theories would be inapplicable to condo trustees, the Court concluded that the trustees should have been awarded damages for the deteriorating masonry as well.

New Medical Marijuana Law Leads to a Struggle to Comply with Existing Ones

While Massachusetts voters recently legalized medical marijuana, the debate is far from over.  Towns and landlords are left struggling to protect themselves while also complying with existing laws.

Several Massachusetts towns and cities have discussed banning dispensaries altogether through the use of zoning bylaws and ordinances.  Others want to move them to adult or medical-zoned areas, which would be less subject to legal challenge than an outright ban.  However, as dispensaries can open as of January 1, 2013, there is not a lot of time to make such changes.  Additionally, the Department of Health has up to 4 months to finalize all of the related regulations, so cities and towns are not sure exactly what to anticipate and plan their zoning around.

However, while towns and cities are exploring their options, local landlords are already taking action.  Local landlords have gone to the media with their concerns regarding the new law. It is still against federal law to sell, use, or buy marijuana, even medical marijuana.  While the Obama administration has not made going after medical marijuana users a top priority, the risk of prosecution remains.  And that risk includes the possibility that a landlord’s property could be seized for being used for a tenant’s marijuana-related activity under civil asset forfeiture laws.  Landlords fear that renting to a dispensary or a person growing marijuana legally for medical use could open them up to such federal actions.

One part of the law that has gotten little coverage is that it allows people who lack reasonable access to a dispensary to grow up to a 60-day supply of marijuana for their own use in a closed, locked facility – presumably their homes.  Many of these homes are owned by landlords, who worry about the impact that the process of growing marijuana could have on their properties, and who fear violating federal law and facing those repercussions.  However, as what constitutes a “60-day supply” is one of many issues yet to be resolved through the propagation of DHA regulations, it appears landlords will have to wait and see what problems implementation may bring, and what they can do to counteract them.

While the DHA and local officials play a waiting game, the Boston Redevelopment Authority has also joined in on the issue, backing a zoning amendment to impose strict limits on the ability of dispensaries to open up.  It remains to be seen whether other regulations will follow suit, or if those who are concerned will have to defer to majority approval of the new law.