Section 6, paragraph (d) of Chapter 183A of the Massachusetts General Laws states that a condominium organization of unit owners shall issue a statement in recordable form attesting to the common expenses and any other sums due and owing for a particular unit, within ten (10) days of the written request, which includes a statement of the amount that is entitled to priority over a first mortgage holder pursuant to Section 6(c). The majority of 6(d) certificate requests are made in connection with a refinance or sale of the unit and are typically not ordered until a closing date has been set and therefore become time sensitive to the closing parties despite the ten (10) day issuance allowance. However, as the language of Section 6, paragraph (d) dictates that the statement “shall operate to discharge the unit from any lien for other sums then unpaid” and “shall be binding on the organization of unit owners,” it is important that the issuance of the 6(d) certificate should not be rushed.
As many of us worked from home during 2020, and continue to do so, we need to keep in mind that the importance of routine matters cannot be overlooked or rushed in order to prevent them from later turning into larger problems.
The following are some practical tips to keep in mind in preparing a 6(d) certificate:
• The unit owner should be the party requesting issuance of the 6(d) certificate. Whether amounts are due and owing is private, personal information and under both state and federal privacy and consumer laws should not be disclosed to unauthorized third parties without written authorization by the unit owner. If the request is coming from a broker or lender, they should also provide a copy of the unit owner’s written authorization to release information to the requestor before the 6(d) certificate is released.
• Make sure the condominium and the owner’s organization are properly named and that the recording information of the governing documents establishing the condominium are correctly referenced in the 6(d) certificate. Also, be aware that when board members or management companies change, documents may be copied incorrectly, and typographical errors can be carried on for years. Thus, it is important to make sure that all information is updated and matches the information in the condominium documents and is consistent throughout the 6(d) certificate.
• Check to make sure that the correct number of trustees signing the 6(d) certificate are properly authorized to sign and that a valid certificate of election of trustees has been recorded with the Registry of Deeds. Be advised that whenever an election takes place or a board changes, a new certificate of trustees is required to be recorded with the appropriate Registry of Deeds. It is required that the 6(d) certificate include the correct recording information in order to attest to the trustees’ authorization to sign. Similarly, if a condominium board has authorized a property manager to issue and execute 6(d) certificates on its behalf, the trustees’ authorization is required to be recorded at the appropriate Registry of Deeds.
• Once a unit owner’s account has been sent to legal counsel for collections, the unit owner’s account should be flagged as such by the board or management company in order to ensure that the common expenses and any other sums due and owing for a particular unit that are identified in the 6(d) certificate include any and all attorneys’ fees and costs. Thus, once the written request for a 6(d) certificate is made, collection counsel should be notified in order to review the current ledger to ensure that all collection legal fees and costs have been posted and are included in the total amount to be shown as due and owing on the 6(d) certificate. As the 6(d) certificate is binding on the condominium, if legal fees and costs are not included in the total amount stated as due and owing, the condominium will not be able to seek reimbursement from the unit owner of the legal fees and costs owing, and the condominium will remain liable for same.
• Closings can be delayed, so the 6(d) certificate should provide the total amount due and owing as of the date the 6(d) certificate is signed and notarized, even if the balance is $0.00. Additionally, if the 6(d) certificate is executed on the 10th day of the month, the 6(d) certificate should not provide that it is good through the end of the month. No one can predict what may happen in the intervening days between issuance of the 6(d) certificate and closing, such as the incurrence of fines, damage caused to common areas by a tenant, seller or the buyer in the move, or the unexpected necessity of an emergency supplemental assessment. While closing counsel often demand that the 6(d) certificate state that the amount due and owing is good through the end of the month, there is no requirement in M.G.L. c. 183A, § 6(d) that the certificate be good through a future date. Thus, should a closing be delayed for a significant amount of time, an updated 6(d) certificate should be requested by seller.
• If a supplemental assessment has been assessed, two issues arise: First, if the assessment is required to be paid in full upon sale of a unit, the balance of the assessment must be stated on the 6(d) certificate to receive payment in full at time of the closing. Second, if the assessment is continuing and will become the responsibility of the new owner, the assessment balance should again be listed along with details as to how long the assessment will run. This also provides irrefutable notice to both the buyer and lender as to the existence of the assessment.
• The statute does allow an owners’ organization to charge a “reasonable fee” for issuance of the 6(d) certificate but does not state what amount is considered to be reasonable. A property manager can assist in setting fees for not only the 6(d) certificate, but for issuance of other condominium documents typically requested for a closing, such as copies of the condominium documents, the current budget, certificate of insurance and completion of a condominium questionnaire.
• While there is no issue with an owner paying outstanding common fee arrearages from the closing proceeds, closing counsel and/or brokers often demand that the condominium trust issue a “clean” 6(d) certificate showing no amounts to be due and owing, with the promise that any amounts due and owing shall be paid from the closing proceeds. We do not recommend this. First, as mentioned above, the closing could be delayed. Second, once the clean 6(d) certificate is out of your hands, it is also out of your control. There is no statutory obligation to issue a 6(d) certificate that states $0.00 is due and owing, unless and until payment in full has been received. By the statutory language of § 6(d), the statement is acting as a discharge. A mortgage holder would never issue a discharge of mortgage unless and until it receives payment in full, and neither should a condominium organization. If someone pressures a condominium trust to issue a clean 6(d) certificate prior to payment, then kindly refer them to your condominium counsel and advise them that the amount due and owing will increase if legal fees are incurred. An alternative is for closing counsel to have certified funds brought to the condominium trust or its management company the day of closing in exchange for a clean 6(d) certificate. Otherwise, closing counsel is perfectly capable of closing with a “dirty” 6(d) certificate stating the full amounts due and owing, and if needed, they can order an updated certificate after payment showing no amounts as due and owing.
• Finally, it is recommended to have condominium counsel review the 6(d) certificate form that is currently being used in order to check that all accurate and correct information is being provided.
As many of us worked from home during 2020, and continue to do so, we need to keep in mind that the importance of routine matters cannot be overlooked or rushed in order to prevent them from later turning into larger problems. Thus, if a situation, demand or question concerning a routine matter such as a request for a 6(d) certificate seems odd or confusing, it is always best to first check with condominium counsel before taking a guess and releasing the 6(d) certificate.