Fall 2013: Condominium Buyers Need to Be Cognizant of Condominium Phasing Rights

For the past six years, following the burst real estate bubble, residential condominium sales remained slow. Recently, however, condominium sales have begun to recover in certain markets, including Boston. Along with this recovery will come not only new project submissions but also construction of additional phases of already existing condominium projects.

Condominium projects are often developed in phases. This allows great flexibility to developers to determine construction scheduling based upon the real estate market and other factors impacting their projects. Phased development is specifically provided for through provisions of the Massachusetts Condominium Statute (M.G.L. Chapter 183A). In a phased development, condominium units are built over a period of time (often several years) and legally become part of the condominium by recording phasing amendments to the condominium master deed. When a new unit or group of units is added or phased in, the developer records a phasing amendment to add the new unit(s) to the total number of existing units and the percentage interests of the existing units in the common areas and facilities are reduced accordingly.

When a developer seeks to begin construction of additional phases after a significant lapse of time, he may find that the time period for phasing has expired under the condominium master deed. M.G.L. Chapter 183A, Section 5(b)(2)(iii) allows the developer to revive his development rights and to add additional units or land to the condominium but requires the approval of at least 75% of the unit owners and 51% of the first mortgagees. Given these statutory requirements, the developer must be willing to make concessions in order to revive or extend the development rights.

At the same time, condominium boards should be aware that development rights are a potentially valuable asset. Further, Buyers should be aware of any possible future phases, and how future phasing might impact their ownership rights which could result in amendments being substantially more favorable to the phase I owners than to the future phase owners. It is always advisable for all condominium documents and amendments to be carefully reviewed by a real estate attorney.