Published on: December 28, 2018
Many times smaller associations allow for each Unit Owner to be a Trustee and when the number of owners/trustees is two or four invariably there will be instances where the trustees’ votes are split and the question becomes what happens then? Typically in these situations the condominium’s governing documents (Master Deed, Declaration of Trust, Bylaws, etc.) will require either a unanimous vote (say 2-0) or a majority vote (3-1) for the trustees to act, which can lead to trouble when half of the trustees want to do something that the other half won’t approve. At times a party may decide that they are going to do something that is contrary to the governing documents with the mindset that because the trustees’ votes are split the trust cannot act to enforce the rules against a violating party. Having this mindset can be a costly mistake.
Recently, we were contacted by two trustees of a four Unit Association where each Unit Owner was a Trustee. In this particular Condominium each Unit had their own yard area, which they had the exclusive right to use. The Condominium’s governing documents allowed for a Unit Owner to build a shed in this yard area, but only upon obtaining the written approval of the Trustees prior to doing so. Here, one Unit Owner/Trustee wanted to build a shed, and another Owner/Trustee supported this request. However, the other two Unit Owners/Trustees were not in favor of this request and sought additional information concerning this proposed shed. After several months of back and forth concerning the shed and its proposed design and location the votes remained split, 2-2. The shed requesting Unit Owner, then opted to take matters into its own hands and simply built the shed despite the fact that he had not received written approval from the Trustees. At point the shed opposing trustees were left in a difficult decision as while the building of the shed was not approved, the vote as to whether the Condominium Trust should take action against the Shed Owner was also tied at 2.
From here, we filed suit on behalf of the Condominium Trust through the shed opposing Unit Owner/Trustees, in what is referred to as a derivative suit, which allows for a non-majority of the trustees to file suit and enforce the condominium’s rules and regulations when the majority of the trustees fail to do so. One of the key elements of filing a derivative action is that it simply places the non-majority trustees in the shoes of the condominium trust if it was acting on behalf of the entire board and allows for the same recovery as the condominium trust. In Calvao v. Raspallo, 92 Mass.App.Ct. 350 (350), the Massachusetts Appeals Court indicated that this includes the ability to recover attorney’s fees and costs incurred in enforcing the condominium trust’s rules.
In the shed case, faced with an upcoming trial date the shed requesting Unit Owner/Trustee elected to voluntarily remove the shed to avoid the likely consequences at Trial. However, the shed opposing Unit Owner/Trustees sought the recovery of the attorney’s fees and costs they incurred in bring the lawsuit and in relying on the Calvao, case referred to above the Judge awarded approximately $15,000.00 in attorney’s fees and costs against the shed building Unit Owner/Trustee.
In the end, the shed building Unit Owner/Trustee had to incur the costs of building the shed, removing the shed and pay for attorney’s fees and costs relating to building the shed without meeting the requirements referred to in the condominium’s governing documents. Derivative actions allow a non-majority of a condominium’s trustees to act to enforce the condominium’s documents even when they do not have the numbers to enforce the association’s rules and regulations and gives them all of the power the association would have if the full board was acting. These actions are particular important in smaller associations with an even number of trustees where ties are more likely to occur.
For any questions regarding this article please contact Norm Orban at email@example.com.