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So You Want to Amend Your Master Deed? Then Organize

So You Want to Amend Your Master Deed? Then Organize

There comes a time in the life of most condominiums in Massachusetts when the governing board concludes that the master deed should be amended. This can be a daunting task, as in nearly all instances the board cannot unilaterally amend a master deed. Depending on the provision to be amended, the required level of support can range from a majority of owners to all of the owners. On top of that, the consent of mortgage holders may be required. And, for good measure, master deeds often include time limits (the most common being six months from the date of the first unit owner signature) that, if not honored, could render ineffective the hard work of the board. The process, then, can be time consuming and, as counsel likely will be called upon at some point for advice and drafting services, potentially costly. Therefore, it behooves a board to get organized before heading down the amendment path. In this article, we suggest some steps which boards may take along the way to pursue a master deed amendment in an orderly and efficient manner which, in turn, may increase the likelihood of success and, perhaps, better control overall costs. But, first, a few words about this document we call a “master deed.”

Invariably, at some point, a board, whether on its own initiative or that of one or more of the unit owners, will want to amend the master deed.

Condominiums in Massachusetts are governed by M.G.L. c. 183A (Chapter 183A), the Massachusetts Condominium Act. The master deed is the document by which a condominium is submitted to the provisions of Chapter 183A, with many of its most important parameters, including the nature and extent of the property interests of the parties being established in that instrument. The master deed describes the land, the units, and the building and other common elements of the Condominium and identifies the organization through which the unit owners will manage and regulate the condominium. The permitted purposes of the units, as well as restrictions on their use are to be contained in the master deed, as is the method by which the instrument may be amended. These and other requirements for a master deed are set forth in Section 8 of Chapter 183A. However, Chapter 183A, which has been described by the courts as an “enabling statute,” that is, one that lays out certain minimum requirements for setting up a condominium and also provides planning flexibility so that matters not specifically addressed in the statute can be worked out by the declarant (developer) and the unit owners. In reality, however, most master deeds are not the product of negotiations between developers and the unit owners, but generally reflect the interests of the developer who signs and records the master deed and sells the units. So, when the unit owners take control of the unit owner organization and the developer no longer has any rights in the condominium, the board members often find that certain provisions fail to meet the ongoing needs of the condominium community or suffer from poor drafting or other deficiencies. Invariably, at some point, a board, whether on its own initiative or that of one or more of the unit owners, will want to amend the master deed.

While the specifics may vary, depending on the type of provision at issue, the following organizing principles should have general applicability to the master deed amendment process.

1. Determine What Constitutes Your Master Deed. Before embarking on the amendment process, make sure that you have the recorded master deed and all recorded amendments. Do not rely on the so-called “condominium presentation” which may have been distributed by the declarant of the condominium (developer) during the marketing phase. If you are not sure you have a complete copy of the recorded master deed, as amended, arrange for the records of the registry of deeds to be reviewed by counsel or a title examiner. Only with such a review completed can you determine what provisions you want to amend because only then can you be sure that you are looking at the operative provisions of your master deed.

2. Discuss What is to be Amended at One or More Board Meetings. Once you have the recorded master deed and any recorded amendments, identify the provisions that the board believes require amendment, including by determining what is deficient about or missing from the existing provision and how the board envisions making it better. In most cases, the focus will be on one or two, perhaps a few, problematic provisions. However, if the board has the sense that the existing master deed is deficient in multiple respects and, too often, fails to clearly and in a commonsense way address issues that arise regularly at the condominium, consideration of a full restatement of the master deed may be warranted. In sum, then, read and critically review your master deed to determine what works and what doesn’t, and to identify obsolete provisions. This initial analysis can be of great help to the board’s counsel when brought into the process.

3. Appoint a Committee to Drill Down on the Details. Particularly if consideration is being given to amendments of the master deed that will be broad in scope (such as a possible restatement of the entire instrument) or may prove controversial with certain unit owners (such as the imposition of a pet restriction), or the board includes more than three to five members, efficiency may be enhanced by having a committee of two or three board members accept the responsibility of reviewing the master deed and reporting their recommendations to the full board. For this to work as intended, those volunteering for the committee must be willing to take the time to read the documents carefully and critically so that recommendations to the full board will be helpful when the full board makes its decision to amend and, if so, the scope of the amendments to be proposed to the unit owners.

4. Determine the Requirements for Approving the Amendment. Once the board has an idea as to the scope of the amendments to be made, a determination should be made as to what percentage of unit owner (and possibly first mortgagee) consents will be required for approval of the amendment. This likely will turn on the substance of the particular amendment to be made, and will require review of (i) the general amendment provisions in the master deed, and (ii) as often is the case with residential condominiums, separate provisions for the protection of mortgagees intended to comply with guidelines of Fannie Mae, Freddie Mac, or FHA. Such provisions, if included, usually are found in the master deed but sometimes appear in the instrument containing the by-laws of the condominium. These secondary mortgage market provisions often require the consent of a specified percentage of so-called eligible mortgagees (generally, those who have given written notice to the unit owner organization) for approval of certain types of amendments to the master deed. Therefore, if these provisions for protection of mortgagees are not found in the master deed, the instrument containing the by-laws, as amended, also should be reviewed. Making such technical determinations often will require expertise in condominium law and may well be the point at which, if not done sooner, that counsel should be consulted.

5. Contact Counsel for Analysis and Drafting of Amendment Documents. Experienced condominium counsel will be helpful in answering the board’s questions about the scope of the amendments to be made (e.g., limited or a comprehensive restated of the master deed), the viability of the amendments as conceived by the board, and the type and number of consents that will be required for approval of those specific amendments. If the board decides to move forward after consultation with counsel, the attorney usually is asked to draft the amendment, as well as the related documents (e.g., unit owner consent form, mortgagee consent form, if applicable), and to prepare or review written communications from the board to the unit owners explaining the amendments and the approval process. However, the board’s role, often aided by the organization’s property manager, does not end there.

6. Keep the Unit Owners Informed. Particularly if the board will be proposing amendments to multiple provisions in the master deed, or amendments that might prove controversial (for example, the addition or amendment of a restriction on the keeping of pets in units), keeping the unit owners apprised of the process as it unfolds can be helpful when the time comes to formally ask the owners for their written consents or votes. This can be done through written communications by the board to all owners explaining the amendments that the board would like to submit to them for approval and why the board believes the owners should grant their consent. Also, including in he agenda for an upcoming annual or special meeting of unit owners a period of time for comment on proposed amendments that have been communicated to the owners, can also prove helpful in shaping the discussion and increasing the chances that the board will be able to garner the requisite consent for the amendment. If perceived as helpful to the process, particularly if a number of changes are to be made under the amendment, consideration should be given to having counsel present at such a meeting to advise the board as it interacts with the owners.

7. Use a Cover Letter/Summary in Seeking Unit Owner Consent. Although in some cases a master deed may require a vote of unit owners at a meeting to approve an amendment, more often a master deed will call for unit owners to provide their written consent or signature to the amendment. If so, then in requesting consent of unit owners, a cover letter should accompany the copy of the amendment and the consent or signature form which the unit owner will be asked to sign and return. So that the process does not linger, in most cases it will be advisable to highlight in the cover letter the date by which the form is to be signed and returned, and the address to which it should be delivered or mailed. Particularly if the consents or signature pages must be recorded as part of the amendment instrument, the letter should emphasize that the owner must deliver or mail back the original that he or she signed so that it will be acceptable for recording at the registry. Enclosure of a stamped return envelope can be helpful in this regard.

8. Confirm that the Consents Have Been Executed Properly and Dated by the Unit Owners. Once unit owner consents start coming in, a determination should be made as to whether the current unit owners for each consenting unit have signed and dated the consent form or signature page. For this purpose, it is good practice to have the registry records reviewed before the consents are sent out to confirm the identity of the current owners of the units rather than to rely on a list of unit owners that the organization may have on hand. If, upon review, it appears that there is some irregularity with the returned form (e.g., signed by someone other than the owner of record, omission of date of signing, return of a copy without an original signature such as by email or fax), good practice would be to follow up with the applicable unit owners to correct such matters in order to maximize the number of valid consents that are received overall. If any mortgagee consents are required, usually counsel will be asked to review title and supply the necessary consent forms and explanatory letter to each such mortgagee that is entitled to notice under the condominium documents.

9. Get to Record before Time Runs Out. It is not uncommon for the amendment provision in a master deed to require that an amendment be recorded with the registry of deeds no later than six months after the date of signing by the first unit owner to sign the amendment. So that the board can confirm compliance with such a requirement, unit owners should be reminded to date their consent or signature pages when returning them to the board or the property manager. A time limitation can be more problematic if consents of any holders of first mortgages on units are required, although Section 23 of Chapter 183A does set forth a notice procedure that, if followed, will result in a mortgagee who does not respond or object within 60 days to be deemed to have consented to the amendment.

10. A Word About Registered Land Condominiums. There are two systems of recording deeds in Massachusetts, with most properties constituting “recorded land,” but some being, in whole or in part, “registered land.” In brief, the registered land system allows an owner of land to make its title more marketable by obtaining a judicial determination in the Land Court Department of the Trial Court declaring the state of title with certainty as of the time the land is registered. The foregoing discussion should have generally the same applicability to registered land condominiums in Massachusetts as it does to recorded land condominiums. However, the Land Court has promulgated guidelines that, in practice, can make completion of the amendment process more difficult and time consuming.

In Part 2 of this article, we will identify some of the additional complications that may arise when a master deed of a condominium which includes registered land is to be amended.

Although no two condominiums are alike when it comes to master deed amendments, and there may well be other factors to consider which are not noted above, keeping these ten points in mind should help a board bring structure and organization to the amendment process which, in turn, may increase the likelihood of a favorable outcome.

William DeBear Condo Law Blog

Should you have any questions regarding this article, please contact William DeBear at 781-817-4900 or by email at wdebear@lawmtm.com.

William DeBear