My colleague at Rackemann, Jonathan Hayden, has been watching this pending SJC decision and the following is his take on the case:

The Supreme Judicial Court’s upcoming decision in Trustees of Cambridge Point Condominium Trust v. Cambridge Point, LLC has the potential to change significantly the landscape for condominium litigation in Massachusetts.  The decision also has the potential to either increase lawsuits initiated by condominium boards, or eliminate the possibility of lawsuits against future condominium developers.

When developers draft condominium bylaws they often include a provision restricting the board’s ability to initiate litigation without consent of a specific percentage of unit owners.  The bylaws of the Cambridge Point Condominium Trust includes such a provision, requiring consent of 80% of unit owners to consent to the litigation, while also requiring that 80% of the unit owners review and approve a not-to-exceed budget for the litigation and that the condominium trust immediately assess all unit owners for the total amount of the approved not-to-exceed budget.

The Cambridge Point Condominium Trustees argue these provisions simply allow condominium developers to insulate themselves from potential suit and has asked the Supreme Judicial Court to invalidate such limitations on the condominium board’s authority to initiate litigation.  If the Court rules in favor of the Cambridge Point Trustees, it could result in a surge of litigation against condominium developers for construction defects because the litigation could then be brought by a small group of determined unit owners who secure seats on the condominium board, regardless of whether unit owners desire to proceed with the litigation.  However, if the Court rules in the developer’s favor, future condominium developers would have a roadmap describing how to immunize themselves from future litigation risks.

The Cambridge Point Trustees argue that the bylaw provisions violates the Massachusetts Condominium Act by restricting the condominium board’s authority to initiate litigation, which the Condominium Act specifically enumerates as a power of the condominium board.  Additionally, the Cambridge Point Trustees argue that even if the 80% vote requirement does not violate the Massachusetts Condominium Act, it should be void as against public policy because it allows condominium developers to insulate themselves from future litigation related to the condominium’s development.

It is easy to see the rationale to the arguments from both the trustees and the developers.  The trustees are likely correct that developers could virtually immunize themselves from future litigation by owning a specific number of condominium units until the applicable statutes of limitations and repose have run.

However, it is also understandable that condominium unit owners would want to avoid being saddled with extensive litigation costs when a condominium board initiates costly litigation without overwhelming support of the unit owners, and that the opportunity to vote out condominium board members that initiate foolhardy litigation is not necessarily the best protection from incurring such costs.

While legislation is always available to resolve any extreme, unwanted consequences resulting from the upcoming decision, condominium developers, condominium boards, and their respective counsel will need to be ready to deal with the decision’s impact, regardless of which direction the Court chooses.