Published on: January 12, 2016
A recent change in the Massachusetts Condominium Statute is making it much easier for Associations to amend their condominium documents. Effective as of April 7, 2015, the addition of Section 23 to M.G.L. c. 183A has streamlined the process for obtaining the required consent from mortgagees in order for Associations to amend their documents.
In order to amend the Master Deed, Declaration of Trust, or By-Laws many condominium documents require the Association to obtain the consent of a certain number of the mortgage holders on the Units, as well as the necessary consent from a certain percentage of Unit Owners. In particular, when contemplating a large change in the Condominium that alters the percentage interest of the Units, M.G.L. c. 183A, §5(b)(1) requires 100% consent of all the Unit Owners. Many condominium documents similarly require 100% consent of all the mortgage holders as well. This previously posed a huge problem for Associations. Getting all the Unit Owners to agree on one thing is a miracle in and of itself, then to have to get all the interested banks to give their consent was seemingly impossible. With all the consolidations and mergers that have occurred, finding the right person at the right bank with the authority to consent, never mind getting 100% of these people to provide their consent in the timely manner, was previously an unmanageable task.
Section 23 now allows Associations to obtain the consent of a mortgagee by sending written notice of the amendment via first class mail and certified mail, return receipt requested. If the mortgagee does not affirmatively object within 60 days, consent of the mortgagee shall be deemed given. Most new condominium documents already contain a section like this, however, for many of the older ones that do not, those Associations can utilize this streamlined process for getting mortgagee consent.
One of our clients that we have been working with has the potential to benefit greatly from Section 23. It is an older condominium with documents that required 100% mortgagee consent for any amendment that alters the percentage interest of the Units (in addition to needing 100% Unit Owner consent), with no existing provision like Section 23 already in the documents. This Condominium had several habitable rooms, with valid occupancy certificates, spread out in the basements of the many buildings that make up its campus. The rooms are legally part of the common area property, and used for such things as storage and housing for onsite personnel. Given the recent resurgence of demand in the housing market over the past few years (and dire lack of supply), it dawned on the Board of Trustees that these habitable living spaces may be enormously valuable for the Association if converted into condominium Units and sold. In order to convert these spaces into Units, the Association needs to amend their Master Deed, and thereby alter the percentage interest of all the other Units by removing these previously classified common area spaces from the common area.
This Association had previously come to us with this idea, however, at that time before the effective date of Section 23, it really wasn’t realistic to think of obtaining 100% affirmative mortgagee consent. If attempted, notice of the proposed amendment would have been mailed to the bank, and by the time it arrived, the bank would have merged, the person of authority fired, and the headquarters moved to another state. Now the Association has a real shot at making these spaces Units. There still are many hurdles to overcome, but the desired result is much more attainable than before. And it is certainly worth the effort to try, as with the current shortage in housing throughout Massachusetts, and spike in high prices, this Association could be looking at roughly $1,000,00.00 in a total combined sales price for these potential Units…if not more. That will certainly make it easier to obtain 100% Unit Owner consent, and Section 23 will make it easier to obtain the necessary mortgagee consent.
This is a very recent change to the Massachusetts Condominium Statute, so please contact our office if you think your Association can benefit.