On October 28, the United States District Court for the District of Massachusetts (Talwani, D.J.) issued a noteworthy decision concerning the applicability of the statute of repose with respect to a phased condominium. The Federal Court’s decision essentially adopted a ruling issued earlier this year by the Essex Superior Court, which ruled that the statute of repose does not begin to run – with respect to a phased condominium – until the final phase is recorded.
The Federal Court’s decision essentially adopted a ruling issued earlier this year by the Essex Superior Court, which ruled that the statute of repose does not begin to run – with respect to a phased condominium – until the final phase is recorded.
The case – D’Allessandro v. Lennar Hingham Holdings, LLC, No. 17-CV-12567-IT, 2019 WL 5550629 (D. Mass. Oct. 28, 2019) – involves the Hewitts Landing Condominium, a development consisting of 28 two- and three-story buildings located on the harbor waters of Hewitts Cove, the former site of the Hingham Shipyard in Hingham, Massachusetts. The project was planned as a “phased condominium” where the developer – Lennar Northeast Urban (“Lennar”) – would build 150 units over the course of twenty-four phases of construction between 2008 and 2015. “Phasing of a condominium permits a developer to expand the size and scope of a condominium project in response to market conditions. In a phased condominium development, groups or stages of units are completed over a period of several years and become part of the condominium by successive amendments to the master deed. ‘Phasing’ is not a statutory term, but is a usage that has grown out of the general enabling provisions of G.L. c. 183A.” Queler v. Skowron, 438 Mass. 304, 312 n.15 (2002) quoting Podell v. Lahn, 38 Mass.App.Ct. 688, 689 n.3 (1995).
The condominium trust initiated the lawsuit seeking to recover damages related to certain alleged widespread deficiencies in the design and construction of the common areas and facilities of the condominium. The alleged construction deficiencies included claims of deficient flashing that led to water infiltration, as well as claims that many of the 58 decks throughout the development were not properly affixed to their respective buildings. Lennar – in a motion for summary judgment – contended that the condominium trust’s claims were partially time barred under the statute of repose.
The statute of repose provides, in pertinent part, that “in no event shall [an action arising out of any deficiency in the construction of an improvement to real property] be commenced more than six years after the earlier of the dates of: (1) the opening of the improvement to use; or (2) substantial completion of the improvement and the taking of possession for occupancy by the owner.” M.G.L. c. 260, § 2B. Simply put, most of an association’s construction defect claims are absolutely time barred six years from the date that construction of a condominium is completed. Lennar contended that the statute of repose began to run – for each of the 24 phases of the condominium – when the project architect issued certifications of substantial completion and/or when Hingham issued certificates of occupancy as to the units and buildings in the condominium as they were completed. In light of the fact that six of the twenty-eight condominium buildings were substantially complete more than six years prior to the trust’s initiation of the lawsuit, Lennar argued that the claims involving those buildings should be time barred.
The condominium trust countered that the “improvement” to real property was not 150 different subprojects relating to the individual units – or even twenty-eight different subprojects relating to the individual buildings – but rather one endeavor to build a single condominium development. As such, the trust argued, the statute of repose should not begin to run for the common areas of the condominium until the entire condominium development – not just the portions of the condominium – was completed. The United States District Court agreed with the condominium trust. The Court reasoned as follows:
[The statute of repose] was motivated out of a sense of fairness regarding the outsized liability faced by those in [the construction business]. Where Lennar was sued two and a half years after completing the Condominium, the court does not find that Lennar has been subject to an outsized liability that could not be anticipated. The same is true for the Legislature’s concern that the passage of time would result in the possibility that documents and witnesses would no longer be available, and memories would have faded. Since Lennar saw this continuous project through from start to finish, the practical concerns about the availability of witnesses and evidence are not implicated in the same manner as they would have been if different general contractors had completed discrete portions of the project more than six years before this action was filed.
In sum, the Court found that – at least with respect to the specific facts at issue in the Lennar case – the construction of a portion of a condominium project cannot constitute completion of an improvement for triggering the repose period while the overall project remains underway.
Regency at Methuen
The United States District Court noted that there was a “dearth of caselaw” on the issue, but cited to a relatively recent Superior Court decision in reaching its conclusion: Board of Trustees of the Regency at Methuen Condominium Trust v. Toll MA Land Limited Partnership, et al., Essex County Superior Court, Civil Action No. 1777-CV-01924.
That case involved the Regency at Methuen Condominium – an age-restricted (55+), gated community located in Methuen, Massachusetts – which was developed and constructed by Toll Brothers. The condominium initiated the lawsuit seeking to recover damages related to certain alleged widespread deficiencies in the design and construction of the common areas and facilities of the condominium.
The condominium’s master deed was recorded in 2011. Thereafter, sixty-six phasing amendments were recorded over the next four years as additional units were constructed and added to the condominium. After the final phasing amendment for the Regency at Methuen Condominium was recorded, the condominium contained 240 units.
Toll Brothers filed a motion to dismiss, contending that many of the association’s claims were barred by the statute of repose. Toll Brothers contended that the Trust’s tort claims – as to the first fifteen (15) phases and first sixty (60) units of the Condominium – were time barred by the statute of repose. These particular phases/units were opened/substantially completed before December 22, 2011 – more than six years before the association’s complaint was filed on December 22, 2017.
The association argued that a phased condominium should not be deemed to be substantially complete or open to use – for purposes of applying the statute of repose – until all construction is completed.
The association reasoned that if an organization of unit owners was required to file a lawsuit each time a particular phase was nearing the expiration of the repose period, an obligation would be created for the organization of unit owners to pursue piecemeal litigation while construction of the condominium was ongoing. Additionally – the association argued – a developer could manipulate the phasing process in an attempt to shirk liability under the statute of repose.
The Court agreed with the association, providing as follows:
[T]he law should not impose a duty on plaintiffs to commence separate lawsuits arising out of a large series of small construction phases one at a time to prevent the statute of repose from running on numerous small indistinct portions of one comprehensive and continuous condominium development.
It should be noted that the Court acknowledged that “[i]f this was a different case, and there were two distinct phases of the development, either distinct by geographical locations or perhaps by type of unit, such that construction was completed on one distinct phase prior to commencement of construction of a second distinct phase, the Toll defendants’ argument would have more force.” In other words, if the different phases of the condominium were sufficiently distinct – unlike at Regency, where there were sixty-six phases each comprised of a small number of units – the Court likely would have found claims concerning earlier-recorded phases to be time barred. The United States District Court, in D’Allessandro, similarly determined that the condominium project – as a whole – constituted the “improvement” to real property, for statute of repose purposes, based on the fact that the Hewitts Cove project utilized the same general contractor and architect throughout the project to construct “150 units, which were conceived of as the potential scope of the project from the very beginning.” The Court noted that “[t]he project was defined legally as a single Condominium, with a single Trust, maintaining exclusive control over the common and limited common elements of the entire Condominium.”
Thomas O. Moriarty, chair of the Litigation Department and a founding member of Moriarty Troyer & Malloy LLC opposed the defendants’ motion to dismiss on behalf the Trustees of the Regency at Methuen Condominium Trust.
The significance of the Court’s rulings in the Lennar and Toll Brothers cases should not be understated. The development of condominiums in phases is a practice commonly employed by developers. Associations have typically been advised that claims concerning phases that were recorded more than six years ago would be time barred under the statute of repose. These rulings greatly expand the time within which an association can advance a lawsuit against a developer where the condominium has been developed in phases.
Click on the following links to see the Decisions for D’Allessandro v. Lennar Hingham Holdings, LLC, No. 17-CV-12567-IT, 2019 WL 5550629 (D. Mass. Oct. 28, 2019) & Board of Trustees of the Regency at Methuen Condominium Trust v. Toll MA Land Limited Partnership, et al., Essex County Superior Court, Civil Action No. 1777-CV-01924.