On June 22, 2009, the Massachusetts Supreme Judicial Court
("SJC") issued a decision analyzing the lapse provision of G.L. c.
40A, §9 in the context of a special permit for a phased condominium
project. In Lobisser v. Sutherland, 454 Mass. 123
(2009), the SJC confirmed, in connection with a special permit
authorizing the construction of a phased condominium, it is
sufficient that substantial use or construction of the condominium
project as a whole commence or begin within the applicable lapse
period. More specifically, the SJC rejected the notion that
each phase of a condominium project is subject to a separate lapse
analysis. In addition, the SJC found that while a special
permit may be subject to a condition imposing an outside time limit
for construction, such limitation must be contained in express
language in the special permit.
Facts
Crystal Springs Condominium (the "condominium") is presently a
41-unit residential condominium located in Bellingham created by
the recording of a master deed on March 31, 1987.
The condominium's original declarant sought and obtained a
special permit in December of 1985 authorizing the phased
construction of 84 townhouse condominiums subject to certain
conditions. The conditions of the special permit which were
most relevant to the SJC's decision are as follows:
3. Plans shall be submitted under Section
1420 Site Plan Review, in annual phases, at a scale of 1" =
40'. Drawings for the primary access drive and its drainage
and utilities shall meet the Street Plan and Profile drawing
requirements of the Bellingham Subdivision Regulations.
Drawings shall be consistent with recommendations of the Water
department and Police Department, as specified in their letters
attached to this decision, except that the looping of water to
Debra Lane will be required only if easements can be obtained
without cost to the applicant.
. . .
5. Building permits shall not authorize
construction of more than the following cumulative totals of
dwelling units:
Prior to January 1, 1987: 21 units; to begin at South Main
Street;
Prior to January 1, 1988: 42 units;
Prior to January 1, 1989: 63 units;
Prior to January 1, 1990: 84 units.
The special permit does not, by its own terms, place a time
limit on the construction either in totality, or for each
phase.
In connection with the construction of Phase I in 1986, the
original developer built and/or installed several common elements
designed to serve the entire development. The elements
constructed and or installed in connection with the construction of
Phase I in 1986 included, without limitation, the entranceway and
site drive.
The building inspector for the Town of Bellingham issued the
first occupancy permit in connection with a building at the
condominium on March 20, 1987.
The condominium was created on March 31, 1987, when the
condominium's original developer caused the master deed to be
recorded with the Norfolk County Registry of Deeds, thereby
submitting the subject premises to the provisions of G.L. c.
183A. The condominium as so established included 21 townhouse
condominium units in five buildings. The original developer
reserved in the master deed the right, but not the obligation, to
add three additional phases, to include 63 additional units (the
"development rights").
On or about Jan. 20, 1987, the original developer submitted
Phase II plans under Town of Bellingham Zoning By-law Section 1420
for approval, pursuant to the requirements of the special permit
decision at section 3. Substantial steps toward the
construction of infrastructure directly related to Phase II
obviously did not commence until after Jan. 20, 1987. On
Sept. 29, 1987, the declarant amended the master deed to include
Phase II as part of the condominium, which phase consisted of an
additional 20 units. After the submission of Phase II, the
condominium contained 41 units in 10 buildings.
Phases III and IV have not been submitted to the
condominium. The original developer's reserved development
rights expired on March 30, 1994.
After an extended delay, on or about Oct. 4, 2005, the
association, with the consent of at least 75 percent of the unit
owners, revived the rights to develop additional units at the
condominium.
On Sept. 7, 2005, the association entered into a written
agreement with Lobisser agreeing to transfer the development rights
to Lobisser, contingent upon the planning board's grant of the
special permit modification and the development plan approval.
Lapse under G.L. c. 40A, §9
The central issue considered by the SJC was whether the lapse
provision in G.L. c. 40A, §9 subjected each phase in a phased
condominium project to a separate lapse analysis. The Trial
Court had held the special permit lapsed with regard to the final
phases of the project because, inter alia, neither
substantial use commenced nor was construction begun with regard to
those final phases. The Trial Court held that with regard to
a phased condominium, in order to avoid lapse with regard to any
particular phase, use or construction must be undertaken with
regard to each specific phase or presumably within the lapse
period. G.L. c. 40A, §9 provides, in relevant part, as
follows:
Zoning ordinances or by-laws shall provide that a special
permit granted under this section shall lapse within a specified
period of time, not more than two years … from the grant thereof,
if a substantial use thereof has not sooner commenced except for
good cause or, in the case of permit for construction, if
construction has not begun by such date except for good
cause.
Section 1550 of the Bellingham Zoning By-law established a
one-year lapse period. The SJC, relying on the clear language
of G.L. c. 40A, §9, held that the statute did not require
substantial use or construction of each phase of the project to
commence or begin within one year. The SJC noted that not
only was there nothing in the statute which imposed such
requirement, but that reading the statute in such manner "would
make no sense." The SJC expressed its ultimate holding in
clear and concise terms, as follows:
Here, where construction of the project began within one
year of special permit approval and where the special permit
contains no time limit, there is no basis to conclude that the
special permit has lapsed.
454 Mass. at 132.
The SJC's rejection of a multiple and separate lapse analysis
under G.L. c. 40A, §9 was critical to preserve the viability and
utility of condominium phasing in the commonwealth. The Land
Court's decision would have forced a condominium declarant to
engage in unnecessary and potentially costly construction just to
prevent lapse. The utility of phased construction would have
been wholly undermined if a declarant were required to
unnecessarily construct elements exclusively serving each
subsequent phase no more than the two years from the special
permit's grant. Such obligation would have imposed artificial
costs which would have directly increased the price of the units
initially constructed and ultimately borne by consumers. In
addition, the Land Court decision would have limited flexibility by
eliminating any phasing scheme in which it would be infeasible to
construct an exclusive element for each separate phase within two
years or less of the special permit's grant. In cases where
such construction might be feasible, the risks associated with the
capital investment in infrastructure on phases which might never be
constructed might have been too great to justify. Finally,
financing the costs of construction of elements in subsequent
phases, which would add nothing to the present value of the
project, would have been difficult if not impossible, particularly
when financing options were limited by market conditions.
"Or" really means "or"
The SJC also took the opportunity to clarify that either the
commencement of substantial use or beginning construction is
sufficient to avoid lapse. The SJC appears to have addressed
the use of the disjunctive in G.L. c. 40A, §9 to clarify the
holding in Bernstein v. Chief Bldg. Inspector and Bldg. Comm'r
of Falmouth, 52 Mass.App.Ct. 422 (2001), a case with
strikingly similar facts. In Bernstein, the Appeals Court held:
Where a developer anticipates completing work in stages, has
begun construction within two years, and a
"substantial use" has commenced, authority to complete the project
continues absent express language to the contrary in the
permit. (emphasis added.)
52 Mass.App.Ct. at 427. The SJC observed that while both
substantial use and construction had occurred in
Bernstein, it was not a statutory prerequisite given that,
at least in the context of G.L. c. 40A, §9, "or" really means
"or."
Outside time limits
The SJC also addressed the question of whether outside time
limits for completion of construction could be imposed in a special
permit. The SJC considered the issue because the planning
board argued that the condition of the special permit which limited
the number of units which could be constructed each year
constituted an outside time limitation on construction. The
Trial Court also noted the purported five-year deadline in support
of its conclusion that "the time period within which to fully
exercise development rights under the special permit has long since
passed." The SJC rejected the planning board's contention,
and the Trial Court's reliance on same, but nevertheless concluded
that G.L. c. 40A, §9 empowered a special permit granting authority
to impose construction deadlines. The SJC relied on language
in G.L. c. 40A, §9 which provides, in relevant part, that a special
permit granting authority "may . . . impose conditions, safeguards
and limitations on time or use." While arguably
dicta in the decision, it is a clear and unequivocal
interpretation of G.L. 40A, §9 on this point and eliminates any
doubt as to whether construction deadlines can be properly imposed
as a condition in a special permit.
Practical implications
There are practical implications to the SJC's decision which go
beyond avoiding the disastrous consequences of the Trial Court's
order, as follows:
- Where a special permit granting authority wishes to impose
an outside time limit on completion of construction, the limitation
should be included by express language and a special permit
granting authority should not rely on a condition limiting the
number of units, which may be added over time;
- An applicant should ensure the conditions of a special
permit which purport to limit the number of units that can be added
over a specified time period cannot be read to impose an outside
deadline on construction. While the SJC found the language of
the special permit in Lobisser did not set a construction
deadline, the lack of clarity opened the door for such
argument.
- An applicant should preserve evidence as to the date upon
which substantial use commenced or construction began.
Municipal records are generally helpful in demonstrating that
construction did not begin before "x" date or that construction was
completed by "y" date, but that information might not be sufficient
to demonstrate commencement of use or construction within the lapse
period.
- An applicant should always distinguish between a reserved
phasing right under the condominium master deed and a special
permit condition which requires phased submission of condominium
units. It is not clear that the original developer ensured
the planning board understood the distinction and the conflation of
the concepts appears to have fueled certain of the planning board's
arguments in this case.
- A special permit condition which limits the number of
dwelling units which can be submitted over time could give rise to
these issues in contexts not involving phased condominium
development. An applicant would be wise to ensure that no
such condition could be viewed as imposing a construction deadline
regardless of the form of ownership of the contemplated
project.
Conclusion
The SJC's decision in Lobisser confirmed that to avoid
the lapse of a special permit for a phased condominium, the
declarant need only commence use or begin construction within the
applicable lapse period. The decision also clarifies that a
special permit can contain a deadline for construction. While
the decision answers those questions with clarify, it nevertheless
reminds the practioner that the importance of precision in a
special permit, and the conditions contained therein, cannot be
overstated.
The Author
Thomas O. Moriarty is a partner
with Marcus, Errico, Emmer & Brooks PC and is the head of the
litigation department. Moriarty is the chair of the Community
Associations Institute's Massachusetts Legislative Action
Committee, the present-elect of the Real Estate Bar Association and
a member of the Joint Bar Committee on Judicial
Nominations.