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Superior Court Issues Landmark Decision Concerning Statute of Repose in Favor of Condominium Association

On January 28, the Essex Superior Court (Feeley, J.) issued a decision providing that (1) the statute of repose does not begin to run – with respect to a phased condominium – until the final phase is recorded; and (2) a developer may waive its rights – under the statute of repose – by executing a tolling agreement. There had previously been no reported Appellate Court decisions – or even trial court decisions – concerning these issues in the Commonwealth of Massachusetts.

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 case involves 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. “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). 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. 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.

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.

Statute Does Not Begin to Run Until Final Phase is Recorded
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 were 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 law suits 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.

The significance of the Court’s ruling 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. The Court’s ruling greatly expands the time within which an association can advance a lawsuit against a developer where the condominium has been developed in phases.

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.

Statute of Repose is Subject to Tolling Agreement
As the association went through the process of transitioning from developer control to unit-owner control – and concerns were raised with the developer over alleged deficiencies – the two sides executed a contract whereby the parties agreed that any and all limitations periods that may be applicable to any claim of any kind by the association against Toll Brothers would be “tolled.” Such contracts are commonly referred to as “tolling agreements.”

Despite admittedly and voluntarily executing a tolling agreement – and thereby waiving its rights under G.L. c. 260, § 2B – Toll Brothers proceeded to file a Motion to Dismiss contending that the statute of repose bars the Trust’s tort claims as to the first 15 phases and first 60 units of the subject Condominium.

To be clear, although Toll Brothers had signed an agreement with the condominium association – explicitly providing that it would not raise the statute of repose as a defense to a lawsuit – Toll Brothers proceeded to advance a motion to dismiss, arguing that “a tolling agreement cannot operate to revive a Plaintiff’s claims.”

Toll Brothers – relying almost entirely upon the U.S. Supreme Court’s Waldburger decision – contended that “Statutes of Repose are absolute bars, which are not subject to any form of tolling.” In actuality, however, the U.S. Supreme Court, in Waldburger, merely recognized that equitable tolling does not apply to the statute of repose. CTS Corp. v. Waldburger, 134 S. Ct. 2175, 2183-2184 (2017).

Although there were no reported decisions in the Commonwealth concerning the issue, the association pointed a relatively recent decision by the United States Court of Appeals for the Eleventh Circuit. In that case the court ruled that a statute of repose is subject to express waiver. Secretary, U.S. Department of Labor v. Preston, 873 F.3d 877, 884 (2017). The Court – in elucidating the not-so-subtle distinction between the equitable tolling at issue in Waldburger and the express waiver of a statutory right – provided, in pertinent part, as follows:

The Court in Waldburger observed only that statutes of repose aren’t subject to equitable tolling. Our case has nothing to do with equitable tolling; rather, the defendants here executed a series of contracts in which they expressly – and (as they have since acknowledged) knowingly, willingly, and voluntarily – renounced their rights under [the subject statute of repose]. That express waiver makes this case a whole different ballgame. The mere fact that a defendant ordinarily won’t lose the protection of a statute of repose through no fault (or even act) of his own – as in the equitable-tolling context – says nothing about whether he can expressly disavow that protection. A statute of repose confers on a defendant a personal privilege of sorts, in the form of an immunity from further liability. While that privilege can’t just be snatched out of the defendant’s hand – certainly not, as Waldburger confirms, by a squishy doctrine like equitable tolling – there is nothing to prevent the defendant from voluntarily giving it away.

Preston, 873 F.3d at 884.
The association acknowledged that the statute of repose is not subject to the principles of equitable tolling. The association, however, was not relying upon the doctrine of equitable tolling, but rather the fact that Toll Brothers intentionally and voluntarily waived its rights under G.L. c. 260, § 2B. Accordingly, the association maintained, its claims against Toll Brothers are not time barred.

The Court agreed with the association, rebuking Toll Brothers as follows:

No case cited by the Toll defendants supports that unfathomable contention that potential defendants can lull potential plaintiffs into delaying the commencement of suit by execution of a written tolling agreement, and then sandbag them by disavowing the legal effect of the written agreement. (emphasis supplied).

The Court clearly recognized that Toll Brothers’ conduct, in this regard, was particularly unseemly. Indeed, after signing a contract providing that it would not raise a statute of repose defense, Toll Brothers essentially argued that its promise was worthless and that the association was out of luck with respect to its claims of shoddy construction. Such actions should provide a cautionary tale as to the depths that developers will stoop to shirk responsibility for defective construction. Fortunately, in light of the Court’s ruling, associations can continue to rely upon tolling agreements as an effective tool for prolonging negotiations with a developer during the transition period.

In sum, the Court’s decision reflects a commonsense, pragmatic approach to these two issues. Indeed, it makes sense that a statute of repose – which is based upon the completion of construction – should not begin to run until construction of all phases of a condominium is complete. It also makes sense that a developer, who signs a contract waiving a statutory defense, should not be permitted to raise that waived defense in a lawsuit. Unfortunately, however, one can never be certain that the Court will adopt a sensible approach to such issues.

The Court’s ruling in the Regency at Methuen case should be viewed as a victory for the condominium industry, as well as yet another decision reflecting a general disdain for condominium developers’ efforts to avoid liability for defective construction. See e.g., Trustees of the Cambridge Point Condominium Trust v. Cambridge Point, LLC, 478 Mass. 697 (2018)(ruling that a condominium developer could not invoke an anti-litigation provision in the condominium’s governing documents to avoid liability – finding that the subject provision “is void because it contravenes public policy”); Wyman v. Ayer Properties, LLC, 469 Mass. 64 (2014)(economic loss rule does not apply to damage caused by negligent design and construction of the common areas of a condominium building).

Thomas O. Moriarty, chair of the Litigation Department and 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 above-referenced lawsuit is captioned 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. The Court’s decision may be found here at this link.

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Should you have any questions regarding this article, please contact David Rogers at 781-817-4900 or by email at drogers@lawmtm.com.

David Rogers