By Richard D. Vetstein, ESQ
I've been getting a fair amount of calls these days regarding what I like to term dysfunctional condominium management.
Usually these are smaller, self-managed condominiums. Converted
multi-family homes, etc. Sometimes, however, the problem of
dysfunctional condominium management can plague larger condominiums.
The problems can range from poor to no financial management, unpaid
monthly condominium fees, problems with the transition from the original
developer to the association of unit owners, power hungry condo
trustees, special assessments, and disputes over costly repairs and
capital improvements. Here's some advice for would-be condominium buyers
and condo unit owners to prevent and deal with dysfunctional
condominium management problems.
A. Financial Mismanagement
A condominium is supposed to run like a democracy with trustees being
elected by the majority of unit owners, and subject to being voted out
of office when they do a poor job. The procedures for elections and
removal should be set forth in the condominium declaration of
trust/by-laws. In the case of financial mismanagement, unit owners often
may have difficulty enforcing the internal governance rules. At
minimum, disgruntled unit owners should call a special meeting and
attempt to removal or vote out trustees who are causing problems. If the
internal governance doesn't work, unit owners may seek legal action for
"breach of fiduciary duty" against the trustees in the Superior Court.
In egregious cases, the court can grant preliminary injunctions and
other remedies to protect the unit owners from financial harm.
B. Unpaid Condominium Fees
With the down economy, unpaid condo fees have become a real problem,
especially for smaller condos who rely on the monthly income to pay
common area expenses. Fortunately, we have a strong Massachusetts condominium lien law
with some teeth, called the "Super Lien Law." Condominium associations
can file a lien for unpaid condo fees against the delinquent owner, and
the first 6 months of unpaid fees will have "super-priority" status over
and above the mortgage(s) on the unit. The association can then
foreclose on the lien and sell the unit at auction. Attorneys' fees and
collection costs can also be pursued. The condominium may even require
that a unit owner's tenant pay the association rent to pay down the
unpaid fees. These are a very valuable enforcement mechanisms to ensure
that condominiums get their condo fees paid. Often the mortgage lender
will pay the condo fees on behalf of the borrower to avoid the
C. Transition Issues
For new construction condominiums, the developer desires to have
control over the condo management during the majority of the sell out
process. This, however, can create conflicts with unit owners who have
bought units. Typically, the condo documents will give the developer
control over the association until 75% of the units are sold out or 3
years after the master deed is recorded, whichever is earlier. But what
if the developer isn't managing the finances properly or isn't doing
much of anything? Often the only viable remedy in this type of situation
is a Superior Court lawsuit for breach of fiduciary duty against the
View more from The Massachusetts Real Estate Law Blog
Mr. Vetstein has represented clients in hundreds of lawsuits and disputes involving business, real estate, construction, condominium, zoning, environmental, banking and financial services, employment, and personal injury law.
In real estate matters, Mr. Vetstein handles residential and commercial transactions and closings. In land use, zoning, and licensing matters, Mr. Vetstein offers his clients an inside perspective as a former board member of the Sudbury Zoning Board of Appeals. Mr. Vetstein has an active real estate litigation practice, and was a former outside claims counsel for a national title company.
Drawing on his own business degree and experience, Mr. Vetstein assists his business clients with new business start ups, acquisitions, sales, contract, employment issues, trademarks, and succession planning. Mr. Vetstein also litigates, arbitrates and mediates a wide variety of commercial disputes.
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