Metrowest MA condominium attorney

Doggy Doo-Doo Bags, Flippin’ the Bird, and Grumbling Signs: Complaining About Condominium Management Is A Constitutional Right, Court Holds

by Rich Vetstein on November 3, 2011

in Condominium Law, Massachusetts Real Estate Law

Old Colony Village Condominium v. Preu, Massachusetts Appeals Court No. 10-P-875 (Oct. 31, 2011). Click here for link to full text of case.

I love when constitutional law intersects with real estate law. It’s rare, and full of drama. A recent decision by the Appeals Court considered a condominium unit owner’s unalienable right to complain, moan and kvetch about condominium management. The First Amendment and the unit owner won this battle.

Doggy Doodie Bags, The Bird & Signs

The case is right out of the Seinfeld episode where Jerry’s dad, Morty, is embroiled in a condo trustee election battle at the “Del Boca Vista” condominium project in Florida. Mr. Preu and the condominium management had a history of, shall we say, bad blood between them. Mr. Preu ultimately went on a rampage, placing in the common area bags containing dog feces and labeled with the name of board president Gerard Ritzinger, apparently in response to Preu’s belief that Ritzinger had allowed his dog to defecate in an area in which it was forbidden. He gave the middle finger to condo trustees walking through the hall and to security cameras. He wrote nasty memos on his condo fee checks. He also obstructed common area fire doors. Lastly, he posted signs in the common area and a note on a unit owner’s door about the cleanliness of the condominium.

The trial judge found that the bag of doggy doo-doo and messing with fire doors violated the condo rules, but that the posting of signs, flipping the Bird, and the nasty memos were protected speech under the First Amendment. The Appeals Court only considered the free speech issue.

Check Your Free Speech Rights At The Door?

The Court held that condominium unit owners do not check their First Amendment rights at the condominium door. “A condominium association does not have as free a hand in restricting the speech of unit owners in the common areas in which those owners share an undivided property interest as another property owner might in dealing with a stranger on his or her property,” the court held. Accordingly, the court ruled that Preu’s posting of signs, flipping the middle finger and nasty memos — although not the most civil of behaviors — were protected First Amendment speech which could not be punished under condominium by-laws and rules.

Lessons to be Learned…

So what’s the take-away from this case?

For prospective condo buyers, know what you are getting yourself into before buying a condominium unit. Ask for the condo meeting minutes going 3 years back to see whether there are a history of internal dysfunction and disputes like the Old Colony Village Condo.

For condominium trustees and management, the lesson is a bit tougher. While you don’t want to put up with a lot of over-the-top cr*p from unit owners, think twice about starting World War III litigation like this case. The only person in this dispute who made out well is the condo board attorney, as this dispute easily ran over $25,000 in legal fees through a trial and an appeal. Was that a solid investment of condo funds by the board? Over dog poop? Probably not.

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Richard D. Vetstein, Esq. is an experienced Massachusetts Real Estate Condominium Real Estate Attorney. For further information you can contact him at [email protected].

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New Fannie Mae Condo Rules Over Pending Litigation Make Condos Harder To Sell

by Rich Vetstein on March 18, 2011

in Condominium Law, Fannie Mae, Massachusetts Real Estate Law, Purchase and Sale Agreements

Litigation Over Condominium Construction Can Derail Financing

It’s always humbling to be quoted in a major real estate publication such as Inman News. Last summer, I wrote about the nasty effect of the newer pending litigation Fannie Mae condo rules. Steve Bergsman, from Inman, was gracious enough to retell a story about how these rules left my client with a denial of his financing just days before his condo closing, leaving him living in a motel for weeks. (Another attorney represented him in the transaction, who I believe bordered on committing malpractice by not following my guidelines, below).

My legal advice for Realtors and condo buyers is to:

  1. Have the condominium association disclose whether it is involved in any type of pending litigation which could trigger the Fannie Mae guidelines.
  2. Get this information as early as possible, because it’s a deal killer.
  3. I always put a provision in my purchase and sale agreement rider in which the seller represents there is no pending litigation involving the condo.

Here is the Inman story, entitled New Rules Make Condos Harder To Sell (March 18, 2011):

Attorney Richard Vetstein told me this story: A client was going to buy a unit in a condominium development and thought he had it all wrapped up; he had an agreement in hand, deposit down and was two days away from closing.

Then he got a call from his lender, who said there were issues. “Issues?” the client asked. Essentially, his lender said there was active litigation involving the condominium building, and the loan would not be approved by underwriters.

Vetstein, of the eponymous Vetstein Law Group in Framingham, Mass., has done a considerable amount of legal work in the always colorful condominium world. Of the client in the story, he said, “Luckily, I was able to negotiate his deposit back, but he lost the deal, and since he had sold his prior residence, for awhile he was living in a motel. It just ruined his life for a couple of months.”

The episode didn’t make the seller of the condo unit any happier, either. Buyers these days are extremely hard to come by.

So what happened?

Recent changes to the Fannie Mae Selling Guide, including some alterations that went into effect March 1, make that afternoon leisure time on your personal veranda with the ice tea in your tumbler and a Robert Patterson paperback in your hand more chilling than comforting.

Condo watchdogs generally are focusing on two changes that could affect your pocketbook, either as a homeowner or home seller. The first has to do with newly converted, non-gut rehabilitation condo projects, while the second, which affected Vetstein’s client, has to do with the collateral damage of an ongoing litigation.

Fannie Mae now declares mortgage loans in progress on a condo involved in any type of litigation, other than minor litigation (i.e., disputes over rights of quiet enjoyment), ineligible for delivery, said Orest Tomaselli, CEO of White Plains, N.Y.-based National Condo Advisors LLC.

“There are different types of litigation, from slip-and-fall cases to structural issues, so Fannie split it all up and any project where the HOA is named as a party defending litigation that relates to safety, structure (or) soundness of functional use (is) ineligible,” Tomaselli said. “These projects will not be able to enjoy Fannie Mae project approval nor the financing that results from it.”

The Fannie Mae guidelines read: “Any project (condo, co-op, or planned unit development) for which the homeowners association or co-op corporation is named as a party to pending litigation, or for which the project sponsor or developer is named as a party to pending litigation that relates to safety, structural soundness, habitability or functional use of the project, remains ineligible.”

What this means is, if your neighbor has some personal beef with the homeowners association or developer because his plumbing doesn’t work or the front door of the building has a bad lock and sues, well, that can affect you because a potential buyer can not get a Fannie Mae loan. Sure, the buyer can go to a bank and get a different loan, but that would just be more expensive.

What happened with Vetstein’s client was that a crazy, litigious unit owner was suing the condo association and prior builder for minor leaks.

“It was something that really should have been resolved by the trustees, builder or even insurer,” Vetstein explained. “It didn’t involve a lot of money, but the lawsuit was out there, pending and not resolved. There was no waiver because the litigation fell within these parameters of structural soundness and safety. Fannie Mae said, ‘Sorry, there’s no gray area here.’ ”

The changes present a conundrum for HOAs. It’s not uncommon in cold-weather states to experience poorly worked roofs resulting in water penetration of condominium units. Condo owners get upset, the HOA gets upset, and everyone wants to sue the builder or roofer. Unfortunately, this triggers a Fannie Mae issue.

“There is nothing the condo association can do about someone suing over defective conditions, but it certainly does have control over who they sue,” Vetstein said. “The HOA needs to know a lawsuit will have a ripple effect.”

The other problem for condo owners is specifically for those who live in developments that essentially have been converted from rentals into ownership units, or as Fannie Mae officially labels them, newly converted, non-gut-rehabilitation condo projects.

Those developments have to go through a Project Eligibility Review Service, or PERS.

The Fannie Mae Selling Guide updates read: “Many buildings are converted to condominiums without the replacement of major components resulting in eventual increased costs to unit owners for maintenance and major repairs. In order to mitigate the additional risk that newly converted, non-gut-rehabilitation projects pose, all newly converted, non-gut-rehabilitation condo projects must be submitted to PERS for review and approval.”

The problem is the cost to the HOA. Fannie Mae charges $1,200 for the review, plus $30 for every unit in the buildings, said Tomaselli. So, if you’re looking at 200-unit building, that’s $7,200 that has to paid out.

In addition, the newly converted non-guts have to undergo a reserve study to determine over a 30-year period of time what the repair costs are going to be in regard to such items as elevators, roofs, mechanical and structural systems, and the exterior.

“The current guidelines require that only 10 percent of the budget be set aside for reserve. Once the reserve study is done, an accurate number is given on what the reserve should be — and those numbers can be tremendous,” Tomaselli said.

The main goal of a reserve study is accuracy. “This guideline requiring reserve studies for new non-gut-rehab condominiums will ensure accurate reserve funding enforcement that will eliminate special assessments in most cases,” said Tomaselli.

It’s not a bad thing for Fannie Mae because it is making sure homeowners are protected — but for developments, increased maintenance can loom large.

Steve Bergsman is a freelance writer in Arizona and author of several books. His latest book, “After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade,” has been ranked as a top-selling real estate investment book for the Amazon Kindle e-reader.

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