Introduction and Facts
Plaintiff Jeremy Robin owns Unit A of the five-unit Five Myrtle Street Condominium in Boston. Unlike all the other owners, he does not reside in his unit. Instead, he rents it to tenants. The condominium master deed permits rentals so long as the tenants have first been approved in writing by the Trustees of Five Myrtle Street Condominium Trust; provided however, that such approval shall not be exercised so as to restrict use [or] occupancy of Units because of race, color, creed or national origin. Master Deed of Five Myrtle Street Condominium, Boston, § 8(d) (Apr. 29, 1980).
Mr. Robins tenants have not been popular with the owners of the other units, who claim the tenants cause them concern[s] about the safety and the security of [the] building. Aff. of Linda Richelson at 2, ¶ 7 (Feb. 12, 2009). In addition, the other owners are troubled generally about the impact rental units have on [the] value of the building and, as a result, passed a motion at the January 19, 2009 condominium association meeting to direct the trustees not to approve additional rental tenants in the building. Id. at 3, ¶¶ 12, 15-16. Mr. Robin filed this action in response.
Mr. Robin originally sought the following relief: (1) invalidation of the motion and any bylaws adopted in accordance with its direction; and (2) a declaration and order that the trustees exercise reasonable judgment in approving or denying all future tenants in the condo building. Complaint (Jan. 29, 2009). Since that time, he has amended his complaint twice; first, to assert a challenge to a bylaw amendment (Bylaw Art. XIII) that explicitly made any decision of the Trustees or the Trust in the administration of the Condominium subject to mandatory arbitration (Amended Complaint (Mar. 4, 2009)) [Note 1] and, second, to challenge a proposal not yet implemented that outlined an approval process for prospective tenants (Amended Complaint (Feb. 12, 2010)). He also challenges a motion by the association members (that was, again, never implemented) that purported to direct the trustees to act with discretion as prescribed by the Master Deed when considering whether or not to grant approval to tenants. Amended Complaint (Mar. 4, 2009).
The motion to direct the trustees not to approve additional rental tenants in the building has been mooted since it was rescinded at a subsequent association meeting before it was ever implemented. [Note 2] The approval process proposal and the motion to direct the trustees to act with discretion as prescribed by the Master Deed likewise do not present a case in controversy properly before this court for adjudication since neither has been implemented. [Note 3] See Mass. Assoc. of Ind. Ins. Agents and Brokers, Inc. v. Commr. Of Ins., 373 Mass. 290 , 292 (1977) (requirement of actual controversy before court may hear petition for declaratory relief since such proceedings are concerned with the resolution of real, not hypothetical, controversies).
The remaining two issues (the standard under the Master Deed by which tenant approvals must be judged and the validity and effect of the amendment to Bylaw Art. XIII making arbitration mandatory), however, are very much alive. [Note 4] On the first issue, Mr. Robin contends that the master deed requires tenant decisions to be both reasonable and made within a reasonable timeframe. The defendants argue that, aside from rejections based on sex, race, creed, color or national origin, [Note 5] the master deed allows them to base their decisions on whatever criteria, and within whatever timeframe, they choose. Overlaying this substantive issue are two other questions. First, is this dispute within this courts subject matter jurisdiction? Second, is it subject to mandatory arbitration? These questions have all been put in issue by the plaintiffs motion for preliminary injunction, the defendants response to that motion, the parties submissions in response to the courts February 12, 2009 order, the defendants motion to dismiss, the plaintiffs response thereto, the plaintiffs motion to invalidate the amendment to the condominium bylaws, and the defendants response thereto. The resolution of these questions is entirely dependent upon the proper interpretation of the master deed, the declaration of trust, the bylaws, and condominium law generally. These documents and law, in relevant part, are unambiguous and the parties have fully briefed and argued the remaining two issues based upon such documents and the law. Accordingly, I may decide them at this stage of the proceedings. See Sullivan v. Southland Life Ins. Co., 67 Mass. App. Ct. 439 , 442-43 (2006) (where documents are unambiguous, their interpretation is a question of law for the trial judge and the reviewing court).
For the reasons set forth below, the plaintiffs request for declaration and the defendants motion to dismiss/compel arbitration are each ALLOWED IN PART and DENIED IN PART. The plaintiff is entitled to, and hereby receives, a DECLARATION that the defendants must act in accordance with the implied covenant of good faith and fair dealing in reviewing tenant applications, must act in timely fashion on those applications, and must clearly articulate their grounds for rejection if an application is not approved. Pursuant to amended Article XIII of the associations bylaws, any future dispute regarding these decisions (either the validity of a bylaw or rules and regulations, or a particular applicants approval or rejection) is now subject to mandatory arbitration. Since no such decisions are currently pending (no bylaws or rules and regulations have yet been adopted and no tenant applications have either been submitted or acted upon), the remainder of plaintiffs case is DISMISSED for lack of ripeness.
This Court Has Jurisdiction to Hear the Plaintiffs Request for Declaration of the Meaning of § 8(d) of the Master Deed
The preliminary question of this courts jurisdiction to hear and decide the plaintiffs request for declaration of the meaning of Master Deed § 8(d) is easily addressed. G.L. c. 185, § 1(k) grants the land court original jurisdiction [of] all cases and matters cognizable under the general principles of equity jurisprudence where any right, title or interest in land is involved, including actions for specific performance of contracts. The plaintiffs right to rent his condominium unit and under what conditions is an aspect of his right, title or interest in that property as governed by the master deed and his individual unit deed (which references that master deed). See Beaconsfield Towne House Condominium Trust v. Zussman, 401 Mass. 480 , 482 (1988) (ownership of a condominium unit constitutes an interest in land); contrast Grasso v. Cohen, 2009 WL 2579570, at *2 (Mass. Land. Ct. Aug. 21, 2009) (issues regarding monetary damages, negligent performance of duties, and improper promulgation of condominium rules and regulations [do not] involve right, title, or interest in land). Furthermore, since the mandatory arbitration provision was not effective until after the filing of this action, this issue is not subject to arbitration. As such, this court has jurisdiction to address it.
The Standard by Which Tenant Approvals Must Be Judged
The defendants agree, as they must, that unless and until the master deed is amended, unit rentals are permitted. Master Deed at § 8(d) (Apr. 29, 1980); CBK Brook House I Limited Partnership v. Berlin, 64 Mass. App. Ct. 913 , 914 n. 4 (2005) (master deed prescribes rules of the game); see also Bylaw Art. XV (bylaws are subject always to the provision of the Condominium Act, the Master Deed of the Condominium and the Declaration of Trust). The plaintiff agrees, as he must, that such rentals are contingent on the trustees prior approval of the tenant. Id. The parties diverge, however, on the standard by which such approvals must be judged. Clearly, the trustees may not reject a tenant for reasons of sex, race, color, creed or national origin. Massachusetts Constitution, Part I, Art. I. But what other restrictions exist, if any, on the trustees discretion to approve or disapprove?
A condominium master deed is a type of contract the binding agreement by which the unit owners, through their purchase of a unit, consent to be governed. G.L. c. 183A. In Massachusetts, all contracts have an implied covenant of good faith and fair dealing. Fortune v. National Cash Register Co., 373 Mass. 96 , 102 (1977). In this context (the master deed contains a provision, which permits rentals, so long as the tenant has first been approved by the condominium trustees), good faith means more than the prohibition of decisions based on sex, race, color, creed or national origin and the allowance of decisions based on anything else. To use the example discussed at oral argument, a prospective tenant could not be rejected simply because he or she had red hair. Rather, the reasons for rejection must be rationally related to a legitimate concern and the condominium associations requests for information regarding prospective tenants must be tailored and confined to those concerns. See G.L. c. 183A, § 11(e) (making clear that restrictions on and requirements respecting the use and maintenance of the units must be as are designed to prevent unreasonable interference with the use of their respective units and of the common areas and facilities by the several unit owners (emphasis added)).
In order to monitor and enforce this requirement, the condominium associations requests for information and decisions regarding prospective tenants must be in writing. If a tenant is rejected, the condominium association must provide a clear articulation of the reasons for such rejection. Moreover, the time frame and procedures by which prospective tenants are evaluated must be reasonable and not used as pretexts for rejecting all tenants or for rejecting tenants based upon reasons not rationally related to legitimate concerns. Anything else would be bad faith. See Equip. & Sys. for Indus. v. Northmeadows Construction Co., Inc., 59 Mass. App. Ct. 931 , 932 (2003) (explaining breach of implied covenant of good faith and fair dealing as implicating a dishonest purpose, consciousness of wrong, or ill will in the nature of fraud).
The Scope and Effect of the Amended Arbitration Clause on the Resolution of Future Disputes Regarding Tenant Applications, Approvals, and Rejections
G.L. c. 183A, § 12 permits condominium bylaws to provide a procedure for submitting the disputes arising from the administration of the condominium to arbitration. The Five Myrtle Street Condominium has done do, previously with an optional arbitration provision (Bylaw Art. XIII in its original form) [Note 6] and now, effective February 17, 2010, a mandatory arbitration provision (Bylaw Art. XIII). [Note 7] The amendment was validly adopted by approval of the trustees and the requisite number of unit owners, duly certified, and recorded at the Registry. Mr. Robin is subject to this bylaw. G.L. c. 183A, § 4(3).
Aside from Mr. Robins request for a declaration of the meaning of Master Deed § 8(d) (specifically, a declaration of the standard by which tenant applications must be judged) and the scope and effect of the amended arbitration clause (both addressed above), there currently is no case in controversy between the parties. Mr. Robin has not submitted any tenant applications and none have been approved or rejected. No rules, regulations, or bylaws have been adopted regarding the tenant approval process. Mr. Robin may have fears about the treatment he may receive in the future, but those fears are not legally cognizable absent a context (a rule, regulation, bylaw, or decision). Furthermore, if and when they do arise in a specific context, they would fall within the definition of a decision of the Trustees or the Trust in the administration of the Condominium and thus would be within the scope of mandatory arbitration. The arbitrators decisions are reviewable in accordance with the provisions of G.L. c. 251, §§ 11-13. See also Bylaw Art. XIII (The results of such arbitration shall, subject to the provision of Chapter 251 of the Massachusetts General Laws, be final and conclusive on all persons). Conclusion
For the foregoing reasons, this court declares that Master Deed § 8(d), unless and until amended, requires the condominium trustees to judge tenant applications in accordance with the implied covenant of good faith and fair dealing. All such decisions must be rationally related to a legitimate concern and the condominium associations requests for information and decisions regarding prospective tenants must be in writing. If a tenant is rejected, the condominium association must provide a clear articulation of the reasons for such rejection. Moreover, the time frame and procedures by which prospective tenants are evaluated must be reasonable and not used as pretexts for rejecting all tenants or for rejecting tenants based upon reasons not rationally related to legitimate concerns. Pursuant to Bylaw Art. XIII, all future disputes regarding any decision of the Trustees or the Trust related to tenant approvals (i.e., bylaws, rules, regulations, and the trustees decisions themselves), including whether or not they comply with this declaration, must be submitted to mandatory arbitration, reviewable in accordance with the provisions of G.L. c. 251, §§ 11-13. All other claims in this action are DISMISSED. Judgment shall enter accordingly.
By the court (Long, J.)
[Note 1] The amendment to Bylaw Art. XIII was formally adopted on February 17, 2010 and recorded at the Suffolk County Registry of Deeds on that date in Book 46087, Page 304.
[Note 2] It would not have had any legal effect in any event since, except in the case of nominee trusts, trustees are required to exercise their independent judgment. See Welch v. Flory, 294 Mass. 138 , 142 (1936) (The general rule is that those acting in a trust capacity must exercise not only good faith but also sound judgment in the performance of their duties. They must also use that degree of intelligence and diligence which a man of average ability and ordinary prudence under such responsibility would exercise in like circumstances.); compare City of Worcester v. Sigel, 37 Mass. App. Ct. 764 , 768 (1994) (a nominee trust is one as to which the beneficiaries exercise the controlling powers, and the action which the trustees may take on their own is very limited). Moreover, the trustees would have been legally bound to follow the commands of the Master Deed (which explicitly permits rentals) regardless of the directions in the motion. CBK Brook House I Limited Partnership v. Berlin, 64 Mass. App. Ct. 913 , 914 n. 4 (2005) (master deed prescribes rules of the game) (quoting Strauss v. Oyster River Condominium Trust, 417 Mass. 442 , 452 (1994)); see also Bylaw Art. XV (bylaws subject always to the provision of the Condominium Act, the Master Deed of the Condominium and the Declaration of Trust).
[Note 3] The motion to direct the trustees to act with discretion would not have had any legal effect since, again, trustees are required to exercise their independent judgment. See n. 2, supra.
[Note 4] The defendants argument that pre-amendment Art. XIII also made arbitration mandatory is incorrect as a matter of law. It provided that any Unit Owner aggrieved by any decision of the Trustees or the Trust in the administration of the Condominium may . . . appoint an arbitrator. Bylaw Art. XIII (emphasis added). May is not shall (the new language in the amendment). Shall is mandatory. See Concise Oxford Dictionary at 1316 (10th ed. 1999) (expressing an instruction or command). May means optional. See id. at 881 (expressing possibility).
[Note 5] The Master Deed says race, color, creed or national origin. Master Deed at § 8(d). But the defendants concede, as they must, that decisions based on an applicants sex are also prohibited as a matter of law. Massachusetts Constitution, Part I, Art. I; G.L. c. 183A, § 12(c).
[Note 6] See n. 4, supra.
[Note 7] Bylaw Art. XIII now provides for the following, in relevant part:
Any Unit Owner aggrieved by any decision of the Trustees or the Trust in the administration of the Condominium shall, except as expressly provided otherwise in the By-Laws or the Master Deed, within thirty (30) days after the decision or action of the Trust or Trustees, appoint an arbitrator and give notice that this matter has been submitted for arbitration to the Boston office of the American Arbitration Association ..The results of such arbitration shall, subject to the provision of Chapter 251 of the Massachusetts General Laws, be final and conclusive on all persons. Failure to utilize arbitration in the prescribed time frame will render the grievance moot.
Amendment to Declaration of Trust Five Myrtle Street Condominium, recorded in the Suffolk Registry of Deeds at Book 46087, Page 304 (Feb. 17, 2010).