Just as the current winter onslaught highlighted the need for reinvestment in the rail infrastructure of the essential Metro Boston rail transit system – and upended the career of its general manager – so a particularly egregious condominium dispute case points to the need for some modification of the laws governing the leadership of condominium associations and their activities. In both cases, the question is – what will fix the problem?
The case Jerome Wodinsky et. al v. Michael L. Kettenbach 2 et al, decided Jan. 6 in the Massachusetts Suffolk Court of Appeals, included many elements that threw existing condo law into sharp relief. The Wodinskys had purchased their condo unit on Commonwealth Avenue in 1977. The defendants purchased the first unit in the five-unit building in 1996 and subsequently acquired the other three.
The defendants subsequently exercised their majority owner rights to make extensive improvements to the building. As the owners of one-fifth of the building, the Wodinskys would be responsible for 20 percent of the validly assessed expenses. The Wodinskys contested that the property could be maintained with less-costly repairs rather than replacement, and things went off the rails from there.
Ultimately, the law did protect the minority owner, due to the specific nature of the dispute. But in future cases, what’s the solution?
Condo law borrows from corporate law in that majority-minority disputes are treated along the same lines as shareholder disputes: Majority wins. The majority owners and the condo association have a fiduciary duty to maintain the condo entity – not the minority owners. Minorities must resort to litigation to protect what they see as their rights, and there is no guarantee of the outcome.
While current condo law does not give majority unilateral power to prevail, neither does it offer protection to the minority under the Civil Rights Act. It’s an unusual hybrid – driven by corporate law, but applicable to a communal living situation.
Also, the corporate law model as applied to condo law does not take into account the frequent disinclination of condo owners to read or understand the fine points in the master deed and declaration of trust. And condo association board members and trustees, mostly volunteer laypersons, sometimes don’t understand that they need to be businesslike and professional.
In other words, it’s a democracy.
But buried within that are the seeds of plutocracy. When the majority owners pressure a minority owner to sell, market forces come into play. According to attorney Clive Martin of Robinson+Cole, two diametrically opposite things can happen. The minority owner can give in to pressure to sell to the majority at the majority owners’ offering price, likely at a discount, because the remaining unit is not desirable on the open market. Or, the minority owner can hold out for a higher price because the majority owners are the most plausible buyers of the unit. It’s rather like fighting a cartel.
The minority plaintiff can bring a derivative suit against the trustees if they believe that the board isn’t fulfilling its duty. But that’s expensive and there’s no guarantee of outcome, because there is no statutory relief for plaintiffs. It’s a big legal gap that needs to be filled, and it’s a much wider gap than the one between the T car and the platform.
