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Condominium Developer Cannot Unilaterally Expand Time to Complete Phased Development and Add Incomplete Units to Condominium

The Massachusetts Appeals Court recently held in the case of Kettle Brook Lofts, LLC v. Stacy Specht, that a condominium’s master deed and the Massachusetts condominium statute, G.L. c. 183A, invalidated a developer’s attempts to unilaterally extend its time to complete phased development of the project and add fifty-six additional units.

On July 22, 2008, the condominium developer, Kettle Brook Lofts, LLC, recorded a master deed establishing its rights and obligations, as well as those of unit holders in the first phase of the condominium development. Under the master deed, the developer had seven years from the date the deed was recorded to complete construction of all of the condominium project’s phased units. The fully complete condominium was to have 109 units. By 2015, the developer had completed fifty-three units and sold forty-eight units. In 2014, two unit owners were appointed trustees of the condominium trust.

On July 21, 2015, the day before the developer’s right to complete construction of the condominium project was to expire pursuant to the master deed, the developer unilaterally recorded a series of amendments to the master deed expanding its ownership rights and powers over the development and governance of the condominium. The developer unilaterally gave itself an additional seven years to complete the last fifty-six units in the development, despite the fact that in another simultaneous amendment the developer claimed the fifty-six units were “substantially complete.” In the amendment recording the fifty-six new units, the developer allocated over sixty percent of the ownership interest in the common areas to these new units, thereby diluting the ownership interest of the existing unit owners. Litigation commenced.

The Land Court judge granted summary judgment for the Unit Owner Trustees holding the developer’s phasing rights expired on July 22, 2015 and its attempt to unilaterally extend those rights was invalid. Additionally, the Land Court judge held that the amendment adding fifty-six new units was also invalid and had no effect. The developer appealed. The Appeals Court affirmed the Land Court’s judgment. The Appeals Court held that, pursuant G.L. c. 183A § 5(b)(1), the terms of the master deed at the time of the recording of the unit deed govern whether a unit owner’s consent is required to reduce their percentage of undivided interest in the common areas. The master deed gave the developer 7 years to complete construction, and Massachusetts case law established that all the unit owners’ consent would be required to change the master deed. The unit owners had a right to rely on that duration of phasing rights outlined in the master deed. The developer’s unilateral extension of the phasing rights violated the G.L. c. 183A § 5(b)(1) and was therefore invalid.

Additionally, the Appeals Court affirmed the Land Court’s invalidation of the developer’s attempt to add fifty-six units as “substantially complete.” All of the units lacked doors, completed wiring and plumbing systems, sheetrock and finishes. By any definition they were not “substantially complete” and, therefore, the Court found that the purported addition of those units to the condominium was also invalid.

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