On October 5, 2017, the Supreme Judicial Court heard oral argument in the matter of Trustees of the Cambridge Point Condominium Trust v. Cambridge Point, LLC, et al. (SJC-12327). The Court’s decision will impact Massachusetts condominium association’s ability to pursue litigation against developers for, among other things, faulty construction. The case concerns the enforceability of provisions in condominium documents routinely inserted by developers that are designed to impede or prevent condominium boards from pursuing litigation against them.
The Cambridge Point trustees initiated a construction defect lawsuit against the project developer for an estimated $2 million in damages due to defective construction of the development resulting in water intrusion through the building envelope and exterior components/decks. The lawsuit was dismissed by the Trial Court on the basis that the trustees failed to comply with the ‘anti-litigation’ provision in the operative developer drafted bylaws for the condominium association.
The applicable bylaw provision provided in pertinent part:
Notwithstanding any provision of the Master Deed, or the Declaration of Trust of the Condominium Trust, or of these Bylaws or the Rules and Regulations to the contrary, neither the Trustees acting in their capacity as such Trustees, or acting as representatives of the Unit Owners, nor any class of the Unit Owners shall bring any litigation whatsoever unless a copy of the proposed complaint in such litigation has been delivered to all of the Unit Owners, and not less than eighty percent (80%) of all Unit Owners consent in writing to the bringing of such litigation within sixty (60) days after a copy of such complaint has been delivered to the Unit Owners and specifying as part of the written consent a specific monetary limitation to be paid as legal fees and costs and expenses to be incurred in connection therewith which amount shall be separately assessed as a special assessment effective forthwith at the time of said affirmative consent…
The developer, in drafting this onerous provision, clearly intended to make it nearly impossible for the trustees to pursue such claims. Not only does the provision require approval by eighty percent (80%) of the owners (most association’s would be lucky to have 80% of owners participate in a vote on anything) but the consent must be obtained in writing within 60 days of the owners being provided with a copy of the proposed complaint (which would necessarily require incurring significant legal fees up front) and as part of the approval, consenting to a special assessment to cover all legal fees and costs anticipated to pursue the claim.
Adding insult to injury, at the time the lawsuit was filed, the developer and affiliated entities/individuals owned and controlled thirty percent (30%) of the units. The trustees contend that the Condominium Act vests them with the authority to pursue such claims without member approval and that the anti-litigation provisions should be deemed void and unenforceable as against public policy.