MA, RI AND NH CONDOMINIUM ACTS CONTAIN DIFFERENT PROVISIONS RELATIVE TO DEVELOPER PROTECTIONS AFFORDED TO OWNERS

Published on: August 25, 2017

Representing condominium associations in three different states can be daunting.  MA, RI and NH have three very different condominium acts.  This document compares and contrasts the differences in the developer related provisions in the 3 acts.

This comparison chart refers to pure statutory provisions themselves and does not include case law interpreting the same, I will leave that for another day.

I hope you will find this reference chart helpful.

Differing Statutory Levels of Developer Protection

I.   Basic Introduction of MA, NH and RI Condominium Acts.

The Massachusetts Condominium Act has been described by the Massachusetts Supreme Judicial Court as a primitive First Generation Condominium Act. It has been coined an “enabling act” in which the Developer is free to be creative with little statutory control and even in some circumstances to avoid or alter statutory provisions.  Interestingly, while Massachusetts is among the most primitive acts, it probably has the strongest super lien or priority lien for collection of common expenses in the Country.

The New Hampshire Condominium Act is based loosely on the 1977 version of the Uniform Condominium Act. It is considered a consumer protection act and has rigid developer guidelines.

The Rhode Island Condominium is the most modern of the 3 acts and is based on the 1980 Version of the Uniform Condominium and has been amended to contain additional protections.

Both the RI and NH Condominium Acts have prior acts that can apply. In RI condominiums created before July 1, 1982 will be governed in part by the R.I. Condominium Ownership Act (which is a primitive first generation act) and in part by the R.I. Condominium Act.  In New Hampshire Condominiums created before September 10, 1977 will be governed in part by the New Hampshire Unit Owner Real Property Act and in part by the New Hampshire Condominium Act.  In both R.I. and New Hampshire, condominiums that are created under the older acts can opt in to the newer acts.  The older acts are not summarized or included herein.

The purpose of this chart is to examine how each act addresses or deals with developer issues.

II.  Transition from Developer Control.

Massachusetts

No specific statutory requirement, threshold or time limit for transition of developer control.

New Hampshire

RSA 356-B:36(I) and 40(iv) Declarant control of Board is expressly recognized and authorized. Time limit to end control is:

  • Traditional condominium 2 years from creation or sale of 60% of units have been sold whichever comes first.
  • Convertible land condo (phased) 3 years from creation or 60% of units have been sold, or 2 years after units have last been marked for sale, or 2 years after development rights were last exercised, whichever comes first.
  • Expandable land condo (phased) 5 years from creation or 60% of units have been sold or 2 years after units have last been marked for sale, or 2 years after development rights were last exercised, whichever comes first.
  • New Hampshire Condominium Act mandates unit owner participation on a Declarant controlled board during period of declarant control as follows:
    • After ¼ of all units that may be created have been sold, at least one member and no less than 25% of the Board must be elected by unit owners other than the declarant.
    • After ½ of the units that may be created have been sold, at least 50% of the Board must be elected by unit owners other than the declarant
  • Following Transition—unit owners shall elect a minimum 3 member board, a majority of whom shall be unit owners. RSA 356-B:40(VI). The Declarant can be a unit owner, as can be corporate directors, trustees of an entity that holds title to the unit, unless the documents provide that only natural persons can be on the board. RSA 356-B:40(VII, VIII).

Rhode Island

RIGL § 34-36.01-3.03

  1. Declarant appointed board owes a fiduciary duty to unit owners. Unit owner elected board owes duty of ordinary and reasonable care.
  2. Declarant Control of Board expressly recognized § 3.03(d), an earlier date can set in the Declaration however, declarant control terminates upon the earlier of the following events no matter what the documents say:
    1. 60 days after conveyance of 80% of units to 3rd parties.
    2. 2 years after declarant has ceased to offer units for sale in ordinary course of business;
    3. 2 years after any development right to add new units was last exercised.
  3. RI Condominium Act § 3.03(e) mandates unit owner participation on a declarant controlled board during period of declarant control as follows:
    1. After sale of 25% of units to be created, board must have at least one unit owner member but not less than 25% total composition TO BE ELECTED BY UNIT OWNERS OTHER THAN THE DECLARANT;
    2. After Sale of 50% of units to be created, board must have at least 1/3 of its members elected by unit owners other than the declarant.
  4. Following Transition—unit owners shall elect a minimum 3 member board, a majority of whom shall be unit owners. Section 3.03(f). However, the Declarant if it owns units can be a unit owner.

III.  Development Rights.

  1. Time Limit.
    1. Massachusetts: No Time Limit Required.
    2. New Hampshire Maximum Development Time Limits:
      1. Convertible Land: Maximum 5 years from recording declaration. RSA 356-B:23(III).
      2. Expandable Land: Maximum 7 years from recording declaration. RSA 356-B:16(III)(c).
      3. Contractible Condominium (i.e. withdraw land): Maximum 7 years from recording declaration. RSA 356-B:16(IV)(c).
    3. Rhode Island Development Right Time Limits:

Like MA and NH, in RI development rights constitute the right to add units or create limited common areas, subdivide units or add or withdraw land. RI uses the additional term “special declarant rights” which include among other things the right to complete improvements, the right to maintain sales offices, the right to subject a condominium to a master association, the right to make a condominium part of a PUD, the right to use easements on an adjoining parcel for purpose of making improvements which may be added to the condominium.   See, R.I.GL. § 34-36.1-1.03(11) and (26)

RIGL § 34-36.01-2.05(a)(8):

Any development rights (or special declarant rights) defined in the condominium declaration must have a time limit by which they are exercised, however, there is no proscribed time, just a requirement that there be a time limit.

2.  Extension or Revival of Development Rights.

  1. Massachusetts:
    1. M.G.L. c. 183A § 5(b)(2)(iii) provides that a condominium can extend, revive or grant rights to develop a condominium, including the right to add units to a condominium, provided that the right to add additional units are set forth or authorized in the Master Deed, with a 75% unit owner vote and consent of 51% of first mortgagees that have given their notice of their desire to be notified in such an event.
    2. M.G.L. c. 183A § 5(b)(2)(iii) permits withdrawal of condominium land with a 75% unit owner vote and consent of 51% of first mortgagees that have given their notice of their desire to be notified in such an event, provided that at the time of withdrawal no unit has been added to the condominium in accordance with the master deed and that the withdrawal is not prohibited by the Master Deed.
    3. M.G.L. c. 183A § 19 also permits withdrawal of a portion of or the entire condominium it also requires 75% unit owner vote but consent of ALL lien holders of record.
  2. New Hampshire:  RSA 356-B:54 (V)(a) provides that the 5 and 7 year time limits for convertible, expandable and contractible land may be extended for an additional 5 or 7 year period by agreement of unit owners of substantially completed units having 2/3 of votes in condominium or such larger percentage required by the Declaration. However, if the time limit has expired then requirement for revival is a vote of 4/5ths of the unit owners.
  3. Rhode Island:RIGL § 34-16.1-2.10(c)(3) and (4) require a 75 % unit owner AND mortgagee consent to extend or revive development rights.Creation or increasing special declarant rights requires 100% unit owner consent. RIGL § 34-16.1-2.17(d).

IV.  Protections From Developer Abuse.

a.  Massachusetts:

  1. No Use of Condo Funds:  M.GL. c. 183A § 10(j) provides that a declarant shall not use any condominium funds to pay for construction, marketing or development of the project or to pay declarant’s share of common expense or for anything else not related to operation of the condominium.
  2. Lender Foreclosure:  M.G.L. c. 183A § 22 provides that in the event of a foreclosure up[on a condominium development, the lender shall succeed to the declarant’s obligations with unit owners , except that developer shall remain liable for any misrepresentations and warranties for work done prior to the transfer.

b.  New Hampshire:

  1. Registration and Public Offering Statement:  New Hampshire Condominium Act is a consumer protection act. All Condominiums must be registered with Attorney General’s Office and a public offering statement must be prepared, updated and amended and given to prospective purchasers.  Strict Requirements for disclosure of complex and amenities.  RSA 356-B:48-66.
  2. One Year Structural Warranty:  In addition to legal liability at law premised upon negligence, the Declarant must warrant or guarantee the units and common areas from structural defects for a period of one year. One year period runs on common areas depends on type of common area.  RSA 356-B:41(II).  Structural defect is something that affects stability or safety or restricts normal or intended use of all or a part of the structure and requires repair or replacement.
  3. Automatic Termination of Developer Control Contracts.  No management contract, lease of recreational areas or any other contract or lease executed by or on behalf of the condominium during the period of developer control unless renewed or ratified by 51% of the unit owners. RSA 356-B:36(II).
  4. Declarant Easement Rights.  Declarant has an easement over common areas as long as development rights are valid and existing to build units and sell and market units. Sales offices that are not designated units shall become property of condominium association when development rights expire. 356:B:27 and 28.  Declarant is responsible for any damage to the condominium caused by the use of his easements.  RSA 356-B:29(III).
  5. Declarant’s Obligation to Complete and Restore.  Declarant must complete all improvements shown on site plans that are labeled “NOT YET COMPLETED”, unless the condominium documents provide that there is no such obligation. Portions of Site Plans identifying potential improvements as “NOT YET BEGUN”, Declaration must specify whether they will be completed or not. RSA 356-B:29(I) and (II).
  6. Compliance with Condominium Instruments.  Declarant (and everybody else, board, unit owners) must comply with the condominium documents. Any aggrieved party has a right of action for failure to comply.  Prevailing party in any such suit is entitled to attorney fees RSA 356-B:15.  Obviously this cuts both ways but could be used against Developer.

c.  Rhode Island

  1. Declarant May Not Evade.  RIGL § 34-36.1-1.04 provides that a declarant may not act under a power of attorney or use any other device to evade limitation or prohibitions of the chapter.
  2. Registration and Public Offering Requirements.  Like NH, RI has extensive public offering requirements for the protection of consumers. The disclosure requirements are exhaustive and strict and in some cases if violated can subject a declarant to divestiture of a unit, attorney fees, and/or compensatory or punitive damages. RIGL § 34-36.1-4.01-4.20.
  3. Taxation.  Any portion of common elements for which declarant has reserved declarant rights must be taxed against Declarant separately and paid by the Declarant. RIGL § 34-36.1-1.05(c).
  4. Declarant Easement Rights.  Declarant has an easement over common areas as long as development rights are valid and existing to build units and sell and market units. Sales offices that are not designated units shall become property of condominium association when development rights expire. RIGL § 34-36.1-2.15 and 2.16.
  5. Transfer of Special Declarant Rights and Successor Liability.  The RI Condominium Act contains detailed provisions for the transfer of development rights and special declarant rights as well as provisions relating to successor liability. RIGL § 34-16.1-3.04.
  6. Termination of Contracts.  If entered into by the developer or developer controlled board, (1) any management contract, employment contract, or lease of recreation or parking areas or facilities, (2) any other contract or lease between the association and a declarant or an affiliate of the declarant, or (3) any contract or lease that is not bona fide or was unconscionable to the unit owners at the time entered into under the circumstances then prevailing, may be terminated without penalty by the association at any time after the executive board is elected by the unit owners takes office upon not less than 90 days’ notice to the other party.  R.I.G.L. § RIGL § 34-16.1-3.05.
  7. Declarant Liability for Expenses/Development Rights.  The Declarant alone is liable for all expenses in connection with real estate subject to development rights. RIGL § 34-16.1-3.07(b). Likewise Declarant gets all of the profit associated therewith, unless the Declaration provides otherwise.   RIGL § 34-16.1-3.07(b).
  8. Declarant’s Tort and Contract Liability.  Neither the association nor the unit owners are responsible for declarant’s torts in connection with any portion of the condominium that declarant has the responsibility to maintain. RIGL § 34-16.1-3.11.  If wrong occurred during period of declarant control, condo board and/or unit owner must give declarant reasonable notice and opportunity to defend the action, which makes declarant liable for: (1) all uninsured tort losses suffered by association or unit owner, and (2) all costs the association would not have incurred but for the breach of contract or other act or omission. RIGL § 34-16.1-3.11.  Whenever Declarant is liable to association for torts or contract liability as described above the declarant is liable for all litigation costs including reasonable attorney fees. RIGL § 34-16.1-3.11.  Any statute of limitations affecting right of condominium association to bring an action to recover or seek indemnity for Declarant’s Torts or Breaches of Contract is tolled until the period of declarant control terminates. RIGL § 34-16.1-3.11.
  9. Declarant’s Obligation to Pay Common Expenses.  Obligation of declarant to pay expenses on units begins to run when declaration is recorded or an amendment to declaration is recorded creating units.   RIGL § 34-16.1-3.15(b)(2).
  10. Declarant’s Express Warranties of Quality.
    1. In RI express warranties do not need to have magic language. Any written or printed statement by the declarant that relate to the unit, its use or rights appurtenant thereto, area improvements that would benefit a unit or the right to use facilities, creates an express warranty.
    2. Use of a model or a description of physical characteristics of condominium is an express warranty that condominium will conform to the same.
    3. Any description of quantity or extent of real estate to be in condominium is an express warranty as to the same.
    4. A provision that a buyer may put a unit only to a specified use is an express warranty that said use is lawful. RIGL § 34-16.1-4.13.
    5. Express warranties identified above are transferred with the sale of the unit. RIGL § 34-16.1-4.13.

11.  Declarant’s Implied Warranties of Quality.

  1. Declarant’s impliedly warrants that unit will be in as good a condition at time of conveyance than at any earlier time in the process.
  2. Declarant impliedly warrants that unit and common elements are suitable for ordinary uses of real estate of its type and that condominium will be: (a) free from defective materials, and (2) constructed in accordance with applicable law, according to sound engineering and construction standards, and in a workmanlike manner.
  3. Declarant impliedly warrants to a purchaser of a residential unit that any existing use, continuation of which is contemplated by the parties, does not violate existing law at earlier time of conveyance or possession.
  4. All implied warranties are transferred. R.IG.L.  § 34-16.1-4.14.

12.  Exclusion of Implied Warranties.  Declarant can exclude implied warranties as to quality as unit by agreement with a disclaimer such as “as is”, “with all faults” or similar language.  However, the above language will not act an exclusion for implied warranty of quality as to residential units.  As to those there must be an express and specific defect or specified failure to comply with applicable law SIGNED by the purchaser if the defect or failure became part of the bargain.  RIGL § 34-16.1-4.15.

13.  Statute of Limitations for Warranties.

  1. Statute of limitations for statutory warranty claims under RI Condo act is 6 years after cause of action accrues. However period can be reduced to not less than two (2) years. However, if it’s a residential unit, purchaser must signs a separate document to that effect.
  2. Cause of action for breach of warranty of quality as to a unit accrues (statute of limitations starts to run) at time unit is conveyed.
  3. Cause of action for breach of warranty of quality as to a common element accrues (statute of limitations starts to run) at time common element is completed; or later if: (a) As to a common element that may be added to the condominium, at the time the first unit is conveyed to a bona fide purchaser; (b) As to a common element within any other portion of the condominium, at the time the first unit in the condominium is conveyed to a bona fide purchaser.
  4. If the warranty of quality extends to future performance or duration of any component at the co0ndominium, the cause of action accrues and the statute of limitations begins to run at the time the breach is discovered or at the end of the period for which the warranty explicitly extends, whichever is earlier. Cause of action for breach of warranty of quality as to a unit accrues (statute of limitations starts to run) at time unit is conveyed. RIGL § 34-16.1-4.15.

14.  Violation of Act.  Violation of any portion of the RI Condominium Act can subject declarant to attorney fees, compensatory and punitive damages.   RIGL § 34-16.1-4.15.

15.  Things Declarant Must Complete and/or Repair.

Declarant shall complete all improvements labeled “MUST BE BUILT” on plats and plans.

Declarant is subject to liability for repair and restoration of any portion of condominium damaged by virtue of his use in connection with exercise of development rights or special declarant rights. RIGL § 34-16.1-4.19

For any questions regarding this article, please contact Ed Allcock at eallcock@meeb.com.