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Appeals Court Ends Worcester Developer’s Phasing Rights

November 12, 2021 admin Leave a comment

Decides Battle of Control for Worcester Condos
By Christopher R. Vaccaro
Special to Banker & Tradesman

The Massachusetts Appeals Court ruled last month in Kettle Brook Lofts LLC v. Specht that a condominium developer could not unilaterally extend its phasing rights beyond a seven-year period imposed in the property’s condominium master deed. The court also ruled that lenders holding mortgages recorded before the master deed did not subordinate their mortgages to the master deed when they partially released their mortgages on units sold.

Kettle Brook Lofts LLC acquired property in Worcester to develop a condominium project, using financing from Haymarket Capital LLC and Commerce Bank and Trust Co. The developer recorded a master deed in 2008, which was junior to the lenders’ mortgages. The master deed allowed construction of up to 109 units in phases over a seven-year period. It also allowed the developer, while it owned units or during the seven-year period, to unilaterally amend the master deed if the amendment did not substantially impair unit owners’ rights.

The developer built 53 units in three phases, selling 48 units and retaining five. The lenders released the sold units from their mortgages, but not the five unsold units. Years passed without the developer adding more phases.

A Worcester condo developer filed suit in Superior Court prevent the trustees and unit owners from interfering
with development plans, but lost.

In 2015, one day before the phasing rights were scheduled to expire, the developer recorded amendments to the master deed, extending its phasing rights for seven more years, expanding its control over the condominium, and adding 56 partially constructed but uninhabitable units to the condominium. The developer then claimed to own more than 75 percent of the condominium’s beneficial interests and removed the condominium association’s trustees, appointing itself as their successor.

Dispute over Future Control
To further this scheme, the developer filed suit in Superior Court to prevent the trustees and unit owners from interfering with its development plans and control of the condominium. The trustees filed a separate suit in Land Court to invalidate the developer’s actions. The trustees also sought a declaration that the lenders had released their interests in the condominium’s common areas and subordinated their mortgages to the master deed when they partially released sold units.

The developer’s lawsuit was transferred to the Land Court, which heard both cases together. The Land Court ruled in favor of the trustees, declaring that the developer’s phasing rights had expired, its amendments to the master deed were invalid and the lenders’ mortgages were subordinate to the master deed. The developer and lenders appealed.

The Appeals Court affirmed the Land Court’s decision regarding the developer’s phasing rights and master deed amendments but modified it as to the lenders’ mortgage priorities. As to the phasing rights, the Appeals Court examined the Condominium Act and language in the master deed. The Condominium Act states that when buyers re-cord unit deeds, they effectively consent to subsequent phases and reductions of their undivided interests – but only if the master deed, when the unit deeds were recorded, allowed additional phases and an accurate determination of the resulting change to each unit’s undivided interest.

Court: Statute Protects Buyers
The Appeals Court construed this statute as protecting unit buyers, so when they purchase units and record their deeds, they can rely on limits on phasing rights in the master deeds at the time of recording, without concern that developers will later expand those rights to the buyers’ detriment. The court found that in this case, the developer’s unilateral expansion of its phasing rights did not comply with the statute.

The Appeals Court also determined that the master deed’s general provision allowing amendments by the developer did not validate the developer’s amendments, because adding units after seven years would decrease the benefits associated with the existing units. The court ruled that the developer’s amendments did not comply with the Condominium Act or the master deed.

Having upheld the Land Court’s decision invalidating the developer’s actions, the Appeals Court turned to whether the lenders’ mortgages were subordinate to the master deed. The court noted that although the lenders had released their mortgages on 48 units, they still held mortgages on the developer’s five units. Therefore, the mortgages remained superior to the master deed as to those five units and their appurtenant interests in the common areas. The court amended the Land Court’s judgment to reflect this ruling. The practical consequences of this amendment are open to debate and will likely result in further litigation.
The Appeals Court’s ruling shows that developers must play by the rules of their original master deeds when exercising phasing rights. It also underscores the importance of requiring lenders that finance condominium construction to subordinate their mortgages to subsequently recorded master deeds.

Download the article as seen in Banker & Tradesman on November 29, 2021. Learn more about Christopher R. Vaccaro.

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Wetlands Violation Trips Up New Owner

November 8, 2021 admin Leave a comment

Buyer Ordered to Restore Property
By Christopher R. Vaccaro
Special to Banker & Tradesman

Last August in Conservation Commission of Norton v. Pesa, the Supreme Judicial Court put buyers on notice of the risk of ignoring unresolved wetlands orders of conditions.

In a dispute centering on a Norton property, the Supreme Judicial Court ruled that Massachusetts property owners are responsible for wetlands violations committed under previous ownership.

The Massachusetts Wetlands Protection Act generally prohibits removing, filling, dredging and altering wetlands without orders of conditions issued by local conservation commissions. Property owners must record these orders with the registry of deeds to put future buyers and lenders on notice of wetlands issues. After the work is done, owners must obtain and record certificates of compliance, showing that the work was properly completed.

In 1979, John Teixeira proposed to build a store with a sanitation system and parking lot in Norton. Teixeira’s project impacted protected wetlands. The Norton Conservation Commission issued an order of conditions allowing Teixeira’s project, but limiting fill near the wetlands. In 1984 and 1987, the commission sent letters to Teixeira, expressing concerns that he had exceeded the fill limits under the order of conditions. Teixeira apparently disregarded those letters. He transferred the property to himself and his wife Ann in 1996, then died in 2006, leaving Ann as the sole owner.

13K SF of Fill
Ann agreed to sell the property to Robert and Annabella Pesa in 2014. Before the closing, an attorney discovered the order of conditions, and asked the Norton Conservation Commission to issue a certificate of compliance. The commission refused, claiming that Teixeira had deposited 11,000 more square feet of fill than allowed under the order of conditions. The Pesas proceeded with the closing anyway in 2014. After the Pesas bought the property, the commission sent them an enforcement order asserting that 13,000 square feet of fill had been installed illegally and demanding that they restore the affected areas to their “original condition.” The Pesas did not comply with or contest the order.

In 2016, the Conservation Commission sued the Pesas in Superior Court for the violation, seeking injunctive relief and civil penalties. The Superior Court judge ruled against the commission, citing a statute of repose in the Wetlands Protection Act, which provides: “Any person who . . . acquires real estate upon which work has been done in violation of the provisions of this section or in violation of any order issued under this section shall forthwith comply with any such order or restore such real estate to its condition prior to any such violation; provided, however, that no action, civil or criminal, shall be brought against such person unless such action is commenced within three years following the recording of the deed or the date of the death by which such real estate was acquired by such person.”

The judge determined that this statute of repose barred the commission from enforcement actions three years after Teixeira transferred the property to himself and Ann in 1996.

The commission appealed, and the Supreme Judicial Court took up the case. The commission argued that the statute of repose only bars enforcement actions against a particular buyer after the three-year period expires, but it does not bar enforcement against a subsequent buyer until another three years expire after the subsequent buyer acquired the property. In other words, they argued the Wetlands Protection Act’s three-year statute of repose resets at zero and begins to run again and again for each subsequent buyer ad infinitum.

Statute of Repose ‘Does Not Run With The Land’
The SJC agreed with the commission’s argument, noting that the statute allows enforcement actions against “any person” who acquires land that violates the statute within three years after “such person” acquires the land. Therefore, according to the SJC, the statute does not bar enforcement actions against subsequent buyers of the land, even if no enforcement action was brought against any prior buyer within the three-year period. The SJC ruled that the statute of repose does not “run with the land,” but is instead “personal” as to each buyer. It set aside the judgment in favor of the Pesas and remanded the case to the Superior Court for further proceedings.

Given this decision, buyers must take care when purchasing land subject to wetlands orders of conditions, even if the orders were issued decades ago for work long since completed and there have been numerous intervening owners since. When recorded orders of conditions are discovered during routine title searches, buyers should make sure that certificates of compliance are obtained and recorded prior to closing.

Buyers who fail to do this assume the risk, as the Pesas did, that they will be saddled with the responsibility and cost of fixing wetlands messes caused by prior owners.

Download the article as seen in Banker & Tradesman on October 25, 2021. Learn more about Christopher R. Vaccaro.

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2021 Revised Minimum Standard Detail Requirements For ALTA/NSPS Land Title Surveys

November 2, 2021 admin Leave a comment

Check out this article written by Partner Shannon Slaughter and featured in the New England Real Estate Journal.

The minimum standard detail requirements for ALTA/NSPS Land Title Surveys was revised in 2021, effective February 23, 2021. Among the numerous revisions made to specific sections of the minimum standard detail requirements, the joint ALTA/NSPS Committee reviewed the case of Gutierrez de Martinez v. Lamagno, 515 U.S. 417 (1995), which held that in certain circumstances, such as those in Gutierrez de Martinez, the term “shall” could mean “may.” Gutierrez de Martinez involved a United States DEA agent that was in an automobile accident in Colombia. The plaintiff claimed that the DEA agent’s negligence and caused physical injuries and property damage and thus named DEA agent as party defendant. Under the Westfall Act, 28 U.S.C. § 2679(d)(1), the United States Attorney General is empowered to certify that an employee was acting within the scope of his or her office of employment and such certification “shall” conclusively establish the scope of office or employment according to the statute. Upon the Attorney General’s certification, the action shall be deemed an action against the United States, and the United States shall be substituted as the defendant. The SCOTUS held that the statutory language (i.e., whether the certification by the Attorney General is subject to judicial review despite the use of the word “shall”) is open to divergent interpretations. The SCOTUS included a footnote explaining that although “shall” generally means “must,” legal writers sometimes use, or misuse, “shall” to mean “should,” “will,” or even “may.”

To illustrate examples, the SCOTUS cited certain Federal Rules of Civil Procedure using the word “shall” to authorize, but not to require, judicial action. In light of the holding in this case, the joint ALTA/NSPS Committee reviewed each use of the word “shall” in the Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys and made determinations in each instance as to whether the word “shall” was intended to be directive or permissive and made revisions accordingly.

Section 5E of the minimum standard detail requirements for ALTA/NSPS Land Title Surveys was revised to require that surveyors disclose, among other things, evidence of easements, servitudes, or other uses by other than the apparent occupants of the surveyed property not disclosed in the documents provided to the surveyor. This includes but is not limited to utility locate markings as evidence of easements and utilities including a note as to the source of the markings (with a note if unknown), pipeline markers, manholes, valves, meters, transformers, pedestals, clean-outs, overhead lines, guy wires, utility poles on or within ten feet of the surveyed property, roads, drives, sidewalks, paths and other ways of access, utility service lines, or any other surface indications of underground easements or servitudes on or across the surveyed property.

In Table A, Sections 6(a) and 6(b) were revised to clarify that zoning research by the surveyor is not required. If this Table A item is requested, clients must provide a zoning report to the surveyor. However, a surveyor may conduct zoning research if so qualified and inclined. Former Item 10(b) of Table A addressed identification of whether certain walls were plumb on the survey–an item that has no bearing on title. This item was eliminated. It should be noted that the items in Table A may be negotiated between surveyors and clients. However, there are certain items in Table A that the surveyor must include to comply with state regulations that cannot be negotiated. Clients and their counsel are encouraged to clarify with lenders and title insurers which Table A items they require from the outset of the transaction to avoid delays and cost increases mid-transaction.

A number of other revisions were made to the 2021 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys that should be carefully reviewed.

Shannon Slaughter is a member of the New England Land Title Association and a partner at Dalton & Finegold LLP, Boston, Mass.

Commercial Real Estate, Litigation

Two Attorneys Selected to 2021 MA Super Lawyer List

October 18, 2021 admin Leave a comment

Dalton & Finegold, LLP is pleased to announce that two of our attorneys from the Andover office have been named in the 2021 MA Super Lawyers list by Super Lawyers Magazine. Christopher R. Vaccaro has been selected to the Super Lawyers list and Shannon Slaughter to the Rising Stars list.

Each year, no more than 5% of the lawyers in the state are selected for the Super Lawyers list and no more than 2.5% are named to the Rising Stars List. Super Lawyers, part of Thomson Reuters, is a rating service of outstanding lawyers from more than 70 practice areas Wordwho have attained a high degree of peer recognition and professional achievement. The annual selections are made using a patented multiphase process that includes a statewide survey of lawyers, an independent research evaluation of candidates and peer reviews by practice area. The result is a credible, comprehensive and diverse listing of exceptional attorneys. The Super Lawyers lists are published nationwide in Super Lawyers Magazines and in leading city and regional magazines and newspapers across the country. Super Lawyers Magazines also feature editorial profiles of attorneys who embody excellence in the practice of law. For more information about Super Lawyers, visit SuperLawyers.com.