Condominiums at Lilac Lane Unit Owners’ Association v. Monument Gardens, LLC (New Hampshire)
The primary issue presented in this case is whether the 5-year time limit for completion of phased condominiums established by the New Hampshire Condominium Act can be subverted and avoided by a declarant, simply by failing to use, recognize and/or refer to the statutory "phasing" terms in the condominium declaration. The secondary issue presented in this case is whether units in a phased condominium (built during the 5-year time limit) can spring into existence by the issuance of a certificate of occupancy as opposed to a "phasing" amendment to the Declaration, as required by the New Hampshire Condominium Act.
Lilac Lane Condominium’s declaration does not use the words or terms "convertible land condominium" and contains no reference to any statutorily required provisions for a convertible land condominium. However, the Condominium is clearly a phased condominium despite the lack of reference to and use of the statutory terms. It meets the definition of a "convertible land condominium” under the New Hampshire Condominium Act, as all of the land was submitted to the condominium on March 3, 2010 and is described as common area.
The Declaration further states that the Condominium shall contain a maximum of up to 120 condominium units in 5 buildings (numbered 12, 13, 14, 15 and 16-each containing 24 units). The Declaration identifies by number all 120 units and the plats and plans identify the location of all 5 buildings and 120 units, even though at the time the Declaration was recorded, the entire condominium consisted of a single building (Building 12) containing 24 units.
The Declaration provides that units will exist or spring into existence when a certificate of occupancy is issued for each unit, as a way of circumventing the amendment requirement. A separate document called a Memorandum of Understanding recognizing a "phasing plan" for the condominium was recorded by the Declarant subsequent to the creation of the Condominium in connection with a sale of the development rights to a successor declarant. The Declaration contains absolutely no reference to phasing otherwise.
Building 13 was completed in June 2013, raising the number of units in the Condominium to 48. No Amendment to the Declaration was recorded recognizing or adding Building 13 or the 24 units contained therein. Building 14 was completed in July 2014 raising the theoretical total of units to 72. No Amendment to the Declaration was recorded recognizing Buildings 13 and 14 and the units contained therein. There is no document in the registry of deeds stating when Building 13 and 14 and units became a part of the Condominium.
The Declarant has not sold any units in Buildings 13 and 14. All units in buildings 13 and 14 are rented by the successor Declarant to third parties. It is unclear why he has not sold any units in Buildings 13 and 14. It is possible that he has not been able to get a title policy due to lack of statutory compliance. The successor declarant has not yet begun construction on buildings 15 and 16. The original 24 unit owners in Building 12 are unable to sell or refinance their units because of the large amount of declarant owned inventory and rentals in Buildings 13 and 14.
The Condominium Association filed a lawsuit in the New Hampshire Superior Court in 2015 seeking a Court Declaration that: (1) this is a convertible land condominium, since it is clearly a phased condominium and meets the definition of a "convertible land" condominium under the New Hampshire Condominium Act, as it purports to create additional units on common area land over time, (2) that development rights or convertible land rights for proposed buildings 15 and 16 have expired by virtue of the fact that the parties are beyond the 5 year time limit for the exercise of convertible land rights contained in the New Hampshire Condominium Act, and (3) that since the Declarant did not properly reserve and comply with statutory formalities under the New Hampshire Condominium Act for a convertible land condominium, i.e. that he did not record an amendment adding buildings 13 and 14 and all purported units contained therein to the condominium prior to the expiration of the 5 year time frame, the units in contained in Buildings 15 and 16 are not lawfully created condominium units.
The parties filed cross-motions for summary judgment. The court ruled against the Condominium. The court held that because the Condominium Declaration makes no reference to and fails to use the term "convertible land" that it is not a convertible land condominium and therefore is not subject to any of the statutory requirements for a convertible land condominiums, including phasing amendments for adding subsequent phases and is not subject to the statutory 5 year time limit for addition of the subsequent phases.
Essentially, the Trial Court ruled that the Declarant has unfettered discretion and can employ any methodology to create additional units and it allows the creation of additional phases of the Condominium that are unlimited in time. The decision is inconsistent with the "convertible land" provisions and requirements of the New Hampshire Condominium Act and the Legislature's specific imposition of a time limit for phased condominiums, as well as the method and means for creating additional units.
Further, the decisions creates a loophole in the New Hampshire Condominium Act, as it recognizes a new category or hybrid type of common law phased condominium in New Hampshire that allows declarants to avoid all of the statutory requirements for the creation of phased condominiums, including the 5 year time limit established for the completion of such developments. The Trial Court's Decision also creates uncertainty as a matter of title to the legal existence of condominium units. While the New Hampshire Act is not based on the Uniform Act, this interpretation could have far-reaching implications in States that utilize similar provisions and contain statutory time limits and other strict requirements for phased condominiums.
Amicus Brief
Prior Rulings: Supreme Court Decision, Superior Court Decision
CAI Amicus Brief Author: Gary Daddario, Esq.