Representing condominium developers - by Saul Feldman

Like most condominium lawyers, I represent condominium associations and developers. In this article, however, I am going to summarize some of my thoughts on representing condominium developers. 

I am deliberately being provocative and aggressively pro-developer in this article. As Sasha said to Yvonne in Casablanca:  “Yvonne, I love you dearly, but he” (i.e., Rick) “pays me!”  

Developer Conduct
The Massachusetts Condominium Statute, Chapter 183A, is merely an enabling act, Tosney v. Chelmsford Village Condominium Association, 397 Mass. 683 (1986). Matters not prohibited by Chapter 183A may be left to the developer and his consumers – i.e., the unit purchasers. If a potential buyer does not like the condominium documents, he need not buy. As long as the developer owns any unit in the development, the developer needs broad discretion in order to build and market units. “Absent overreaching or fraud by a developer, we find no strong public policy against interpreting Chapter 183A, Section 10(a) to permit the developer and unit owners to agree on the details of administration and management of the condominium units.”  Barclay v. DeVeau, 384 Mass. 676, 682 (1981).

Method of Organization of Association of Unit Owners –Trust, Corporation or Unincorporated Association
Because of its wide use in Massachusetts, a trust is usually used. I advise my developer clients to use a limited liability company (an “LLC”) as the initial trustee of the condominium trust. If used properly, the LLC will protect the developer from any personal liability in most cases. It is not easy to pierce the corporate veil. As trustees are fiduciaries, other forms of association may have a lower level of responsibility. For example, a developer may prefer an unincorporated association with a developer controlled LLC as the sole initial manager until the turnover date.

Phasing
Developers like phasing because it allows them flexibility in building and marketing the units over time. I believe that the developer may allocate the percentage ownership interests of the units which are not yet built and phased in as long as there is compliance with Chapter 183A, the Massachusetts Condominium Statute, and the master deed clearly provides for this. The developer should be able to retain control of the association until all of the units are built and conveyed. Developer’s Reserved Rights, e.g., Parking, Air Rights, and Additional Floors. Developers want broad reserved rights because parking and laundry are lucrative and because rooftop rights allow for the development of additional floors. If the condominium documents are drafted properly, a condominium association may and should be entirely cut out of these lucrative areas.

Saul Feldman, Esq., is an attorney with Feldman Law Office, Boston, Mass.