The sole issue for decision in this case is whether two five-unit residential developments, built simultaneously on adjacent parcels in Cambridge, were in common ownership or under common control during a specified time period so as to constitute a single, phased development within the meaning of the Cambridge Zoning Ordinance (the Ordinance). If the two properties were in common ownership or under common control during the relevant time period, the inclusionary housing provisions of the Ordinance would be triggered, requiring the developer to reserve fifteen percent of the units to be so-called affordable units.
The parties filed cross-motions for summary judgment, and a hearing on the motions was held on March 17, 2015. Because I conclude that the two properties were not in common ownership or under common control for the requisite time period, the inclusionary housing provisions of the Ordinance may not be invoked.
The material undisputed facts pertinent to this motion for summary judgment are as follows:
1. Section 11.200 of the Ordinance is entitled, Incentive Zoning Provisions and Inclusionary Housing Provisions. Pursuant to Section 11.200, any residential or mixed use development containing or creating ten or more new or converted dwelling units, including phased projects, must make fifteen percent of the units available as affordable units.
2. A phased project is defined in Section 11.201 of the Ordinance as any residential or mixed use development or developments at one site or two or more adjoining sites in common ownership or under common control within a period of five years from the first date of application for any special or building permit for construction on the lot or lots, or for the twelve months immediately preceding the date of application for any special or building permit, where a total of no less than ten new or converted units are built.
OWNERSHIP AND CONTROL OF THE TWO PROPERTIES
3. Prior to January, 2008, Stuart Lubin, Robert Wax and Ruben Moreno formed an oral partnership for the development of the adjacent properties at 42 Bay State Road and 54 Bay State Road in Cambridge.
4. In furtherance of the partnership, Lubin, Wax and Moreno formed two limited liability companies, Geobuilt Partners LLC (Geobuilt) and Calefacto Partners LLC (Calefacto). Moreno was the manager of Geobuilt, Wax was the manager of Calefacto, and Lubin was a member of both.
5. On different days in January, 2008, Geobuilt purchased 42 Bay State Road from Fornax Corporation, and Calefacto purchased 54 Bay State Road from Fornax Corporation.
6. Wax, Lubin and Moreno ran into difficulties with their plans to develop the properties, and could not agree among themselves whether to sell or to keep trying to develop the properties. On August 31, 2010, Wax sent Lubin and Moreno a letter purporting to dissolve the partnership.
7. Subsequently, on October 12, 2010, Wax sued Lubin and Moreno in Middlesex Superior Court (C. A. No. 10-3865), seeking, among other relief, a declaration that the partnership was dissolved, a windup of the partnerships business, and the appointment of a receiver to sell the assets of the partnership, namely, the properties at 42 Bay State Road and 54 Bay State Road.
8. On February 3, 2011, the Superior Court appointed a receiver and tasked the receiver with liquidating the assets of the partnership, including the two properties at 42 Bay State Road and 54 Bay State Road.
9. On May 16, 2011, the Superior Court allowed the motions of the receiver seeking authority to sell each of the two properties, specifically finding, for each property, that [t]he Purchaser is deemed to be a good faith purchaser and will provide the Receiver with fair and valuable consideration for the Property.
10. On July 15, 2011, the receiver sold the property at 42 Bay State Road to 42 BSR LLC for consideration of $432,500.00, and sold the property at 54 Bay State Road to 54 BSR LLC for consideration of $432,500.00. The deeds were recorded on July 18, 2011 with the Middlesex South District Registry of Deeds, respectively, in Book 57154, Page 79, and Book 57154, Page 310.
11. Ling Yi Liu is listed in filings with the Secretary of the Commonwealth as the resident agent of 42 BSR LLC and as the person authorized to execute instruments purporting to affect an interest in real property (no manager is listed). Ling Yi Liu is a member of 42 BSR LLC, but the record is not clear as to whether he is the sole member.
12. Neither Stuart Lubin nor 54 BSR LLC has any ownership interest in 42 BSR LLC.
13. Stuart Lubin is listed in filings with the Secretary of the Commonwealth as the resident agent of 54 BSR LLC and as the person authorized to execute instruments purporting to affect an interest in real property (no manager is listed). Stuart Lubin is a member of 54 BSR LLC, but the record is not clear as to whether he is the sole member.
14. Neither Ling Yi Liu nor 42 BSR LLC has any ownership interest in 54 BSR LLC.
15. On April 19, 2012, 42 BSR LLC acquired a $1,600.000.00 construction loan to finance the construction on 42 Bay State Road. The loan was secured by a mortgage, security agreement, financing statement and assignment, to Cambridge Savings Bank. The mortgage, security agreement, financing statement and assignment was signed on behalf of 42 BSR LLC solely by Ling Yi Liu, as member.
16. On April 25, 2012, 54 BSR LLC acquired a $1,700.000.00 construction loan to finance the construction on 54 Bay State Road. The loan was secured by a mortgage, security agreement and assignment of leases and rents, to Brookline Bank. The mortgage, security agreement and assignment of leases and rents was signed on behalf of 54 BSR LLC solely by Stuart Lubin, as member.
17. To facilitate the construction of the proposed five-unit building on each of the two properties, 42 BSR LLC and 54 BSR LLC each entered into a separate, but essentially identical AIA contract with Bald Hill Builders LLC, to serve as general contractor for the construction on each of the two properties.
18. To facilitate the construction of the proposed five-unit building on each of the two properties, 42 BSR LLC and 54 BSR LLC each entered into a separate, but essentially identical Development Agreement with Abodez LLC, to serve as Development Manager to oversee the construction of each of the two buildings. Ling Yi Liu is the owner and manager of Abodez LLC.
19. Both of the Development Agreements include the following provisions:
a. Owner hereby retains Development Manager as an independent contractor with the authority to act on behalf of, and to bind, Owner, but subject to the specific limitations set forth in this Agreement. (Section 2.1)
b. The Development Manager agrees to: Use all reasonable efforts to further the interests of the Owner with respect to the Project [m]ake recommendations to Owner in connection with decisions regarding the Project reserved to Owner, including, without limitation, the retention of consultants, [d]evelop with the Owner and pursue a plan for the marketing of the units in the Project, whether as rentals, condominium sale units or both, and consult with and advise the Owner on choosing marketing agents, brokers, property managers and other consultants as needed, (Section 3.1)
c. Unless otherwise instructed by Owner from time to time, Development Manager, as authorized agent of Owner, shall exercise any and all rights and responsibilities of Owner under each Construction Contract, except (a) any exercise which would result in (i) any modification (including change orders) or termination of the Construction Contract, or (ii) any change in the work covered by such Construction Contract. (Section 6.3)
d. Any proposed changes (to the Construction Contract) shall be submitted to Owner, together with Development Managers recommended action. No work shall be commenced based on, or with respect to, any proposed change until Owner has approved a change order therefor. (Section 6.4)
e. All Loan Agreement documents shall be executed by the Owner or such persons as the owner may authorize. (Section 7.1)
f. Owner reserves the right of final approval as to all material documentation relating to the Property, including, without limitation, all Project Documents, all other third party contractors for the development of the Project, all change orders and any substantial change in any of the foregoing. (Section 9.4)
g. Owner may terminate this Agreement without cause (Section 12.5)
THE DEVELOPMENTS AND THEIR PERMIT HISTORY
20. On September 12, 2011, 42 BSR LLC, as the owner of 42 Bay State Road, filed an application with the Cambridge Board of Zoning Appeal (the Board) for a special permit for a common driveway, to be utilized to access each of the two proposed five-unit projects at 42 Bay State Road and 54 Bay State Road. On the same date, 54 BSR LLC filed an essentially identical corresponding application for the adjacent property it owned at 54 Bay State Road.
21. By undated identical decisions filed with the city clerk on November 28, 2011, the Board approved the applications for common driveway special permits.
22. By applications signed on November 29, 2011, 42 BSR LLC applied to the Cambridge Inspectional Services Department for a building permit to construct five residential units at 42 Bay State Road, and 54 BSR LLC applied to build five residential units at 54 Bay State Road. The two applications were signed by the same licensed construction supervisor and same owners agent.
23. On August 30, 2012, the Cambridge Inspectional Services Department issued consecutively numbered certificates of occupancy, signed by the Inspectional Services Commissioner, for each of the two projects at 42 Bay State Road and 54 Bay State Road. The certificates authorized the occupancy of each of the buildings as a five-unit dwelling.
24. On May 6, 2013, the Inspectional Services Commissioner sent separate but essentially identical letters to Ling Yi Liu, the resident agent for 42 BSR LLC, and to Stuart Lubin, the resident agent for 54 BSR LLC [Note 1], asserting that the building permit applications had been submitted without disclosing the prior ownership history of the two properties, asserting that the two properties constituted a phased project subject to the inclusionary housing requirement of Section 11.200 of the Ordinance, and that fifteen percent of the units must be set aside as affordable units. The Commissioner instructed the two owners to provide the department with drawings showing the units to be designated as affordable, and warned that failure to do so would result in further action.
25. Ling Yi Liu and 42 BSR LLC filed a timely appeal of the May 6, 2013 letter to the Board. Stuart Lubin and 54 BSR LLC did not file an appeal. [Note 2]
26. The Board held a public hearing on 42 BSR LLCs appeal on July 11, 2013, and by a decision filed with the city clerk on August 28, 2013, denied the appeal. This action pursuant to G. L. c. 40A, §17 followed.
Summary judgment is granted where there are no issues of genuine material fact, and the moving party is entitled to judgment as a matter of law. Ng Bros. Constr. v. Cranney, 436 Mass. 638 , 643-44 (2002); Mass. R. Civ. P. 56(c). The moving party bears the burden of affirmatively showing that there is no triable issue of fact. Ng Bros., 436 Mass. at 644. In determining whether genuine issues of fact exist, the court must draw all inferences from the underlying facts in the light most favorable to the party opposing the motion. See Attorney Gen. v. Bailey, 386 Mass. 367 , 371, cert. denied, 459 U.S. 970 (1982). Whether a fact is material or not is determined by the substantive law, and an adverse party may not manufacture disputes by conclusory factual assertions. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Ng Bros., 436 Mass. at 648. When appropriate, summary judgment maybe entered against the moving party and may be limited to certain issues. Community Nat'l Bank v. Dawes, 369 Mass. 550 , 553 (1976); Mass. R. Civ. P. 56(c).
Cambridge adopted its Incentive Zoning Provisions and Inclusionary Housing Provisions, codified as Section 11.200 of the Ordinance, in 1998. The goal of Section 11.200 of the Ordinance is to add to the citys stock of affordable housing by providing incentives to developers of certain commercial projects to pay into an affordable housing fund or create a certain number of affordable units depending on the size of a commercial project, and to create a requirement, in the case of development projects of at least ten dwelling units, for the set-aside of fifteen percent of the units as affordable units. See Cosco & Tymann, Low and Moderate- Income Housing: The Anti-Snob Zoning Act, Linkage, Inclusionary Zoning, and Incentive Zoning, Massachusetts Zoning Manual, § 5.11.2 (2013).
In an apparent effort to prevent developers from impermissibly splitting a single project into two or more projects, either by subdividing the land and developing a project on ostensibly separate sites, or developing a project in phases over time, so as to avoid the ten-unit affordable housing trigger, Cambridge instituted, as part of the Ordinance, the phased project definition. Under the phased project definition, two projects that are on adjacent sites, or that may be developed over a period of time, are to be considered as one development for the purposes of the inclusionary housing requirements of the Ordinance, if they are in common ownership or under common control within a period of five years from the first date of application for any special or building permit for construction on the lot or lots, or for the twelve months immediately preceding the date of application for any special or building permit, where a total of no less than ten new or converted units are built. The Board argues that the two five-unit projects at issue in this case are a phased project within the meaning of the Ordinance, making applicable the fifteen percent affordable housing requirement.
There is some superficial appeal to the Boards argument. The Board points out that the two projects were, at least at some point prior to the application for special permits, indisputably in common ownership or under common control: the two sites were originally intended to be developed by a partnership that set up separate limited liability companies to own the two sites but that had interlocking ownerships; and the two buildings constructed are almost identical and were designed and built by the same architect, the same contractor, and the same development manager.
The plaintiffs counter that, at the time the applications were filed and the buildings were actually built, the two projects were in separate ownership. Furthermore, although the two buildings were designed and built by the same architect, development manager and general contractor, plaintiffs claim the separate owners used the same consultants and contractors only for convenience and efficiency, and that the owners maintained independent control, as evidenced by the rights reserved by the owners in the development agreements, and as further evidenced by the fact that the two owners obtained different levels of construction financing from different banks. Plaintiffs argue that they have demonstrated, on the undisputed facts, not only separate ownership, but an absence of common control.
These arguments are examined below.
THE LOOK-BACK PROVISION: FOR OR WITHIN?
The Board argues that if the two properties were in common ownership or under common control at any time within the twelve months preceding the filing of the applications for a special permit on September 12, 2011, then the two projects should be deemed a phased project. The plaintiffs argue that in order to be a phased project, the two properties must have been in common control or under common ownership for the entire twelve months preceding the filing of the special permit application. The issue is whether, in common ownership or under common control for the twelve months immediately preceding the date of application for any special or building permit, is to be construed as meaning for the entire twelve-month period, or only at any time within the twelve-month period. This is an important distinction to the Board, because common ownership or common control is more easily demonstrated if all that must be shown is common ownership or control at any time within the twelve months preceding September 12, 2011, rather than for the entire twelve months.
Essentially, the Boards position is that the phrase in the Ordinance, for the twelve months immediately preceding the date of application for any special or building permit, should be construed as if the word for means within. The Board offers no rationale for this reading of the Ordinance, other than to argue that this is the Boards interpretation of its governing ordinance, and that the Boards interpretation should be afforded deference. The Board is correct that a local boards interpretation of its zoning bylaw or ordinance ordinarily is due some deference. Deadrick v. Zoning Board of Appeals of Chatham, 85 Mass. App. Ct. 539 , 546 (2014). However, where an administrative agencys interpretation of its governing regulation or bylaw is inconsistent with the plain language of the enactment, no deference is due. See Warcewicz v. Department of Environmental Protection, 410 Mass. 548 , 550 (1991). An administrative agency is entitled to interpret its authorizing legislation, but not to ignore it when the meaning of the enactment is plain. See Schiffenhaus v. Kline, 79 Mass. App. Ct. 600 , 605 (2011).
Here, the Boards interpretation is at variance with the plain language of Section 11.201 of the Ordinance. This is illustrated by the use of the word within in the very same sentence, in connection with the look forward provision of the Ordinance. The determination of common ownership or common control applies, within a period of five years from the first date of application for any special or building permit for construction on the lot or lots, or for the twelve months immediately preceding the date of application for any special or building permit (emphasis added)
The drafters of the Ordinance must be presumed to have understood the difference between for and within when they chose to use for in connection with the look-back provision and within in connection with the look forward provision. As used in the Ordinance, the word for indicates the duration of a period of time, meaning that the entire twelve-month period is included. This is a usual and plain use of the word for, which is defined, in this context, as, Used to indicate amount, extent, or duration. The American Heritage Dictionary of the English Language (3rd edition, 1992). When a statutes language is plain and unambiguous, we afford it its ordinary meaning. Commonwealth v. Keefner, 461 Mass. 507 , 511 (2012). Where the language of a statute is clear and unambiguous, it is conclusive as to the intent of the Legislature. Welch v. Sudbury Youth Soccer Association, Inc., 453 Mass. 352 , 355 (2009).
Thus, in order to bring the two properties within the ambit of the inclusionary housing provisions of the Ordinance, they must have been in common ownership or under common control for the entire twelve months preceding September 12, 2011, or at any time within the five years commencing September 12, 2011.
COMMON OWNERSHIP AND COMMON CONTROL
At the beginning of the twelve-month period preceding the application for the special permit, the two properties were owned respectively by Geobuilt and Calefacto. Although nominally separate legal entities, these two limited liability companies had at least some elements of common ownership, with Stuart Lubin, Robert Wax and Ruben Moreno each having contributed money to each entity, and with Stuart Lubin, at the least, being a member of both entities. Moreover, the three owners formed the two limited liability companies to implement their oral partnership, the purpose of which was to develop both properties. The fact that the three partners came to be at odds over how or whether to develop the properties does not negate their common ownership. Where nominal separate ownership of adjacent lots is belied by actual common ownership or common control, the nominal separate ownership may be disregarded.
DiStefano v. Town of Stoughton, 36 Mass. App. Ct. 642 , 644 (1994) (disregarding checkerboard conveyances of lots to create the appearance of separate ownership to avoid zoning merger); Planning Board of Norwell v. Serena, 27 Mass. App. Ct. 689 , 690-691 (1989). I conclude that during this period of ownership by Geobuilt and Calefacto, notwithstanding the fact that the owners could not agree on a development plan, the two properties were in common ownership or under common control.
From February 3, 2011 to July 15, 2011, the two properties remained nominally in the ownership of Geobuilt and Calefacto, respectively, but were actually under the common control of a receiver appointed by the Superior Court. I conclude that this period constitutes common ownership or common control within the meaning of the Ordinance.
It remains then, necessary to determine only whether the two properties were in common ownership or under common control for the remainder of the twelve-month period leading up to the date of the applications for the common-driveway special permit on September 12, 2011, or for any part of the time following that date, up to a period of five years. On July 15, 2011, the receiver deeded the property at 42 Bay State Road to 42 BSR LLC, and deeded the property at 54 Bay State Road to 54 BSR LLC. The two limited liability companies were undisputedly separate legal entities, and undisputedly had completely separate ownerships as a matter of record, with Liu owning and controlling 42 BSR LLC and Lubin owning and controlling 54 BSR LLC.
Notwithstanding the separate legal ownership of the entities owning each of the two properties, the two properties could be determined to be under common control for purposes of the Ordinance if, despite the separate legal ownership, (1) the two legal owners blurred the distinction between the two entities by failing to observe the formal barriers between the two entities, My Bread Baking Co. v. Cumberland Farms, Inc., 353 Mass. 614 (1968), or (2) Liu exercised control over both properties after the conveyance to the two limited liability companies, DiStefano v. Town of Stoughton, supra.
In My Bread Baking Co. v. Cumberland Farms, Inc., supra, common control was a given, but the case is instructive because even where there was common control, separate legal entities could be disregarded for liability purposes only if the owners did not sufficiently respect the formality of the separate corporate entities. [F]ailure (a) to make clear which corporation is taking action in a particular situation and the nature and extent of that action, or (b) to observe with care the formal barriers between the corporations with a proper segregation of their separate businesses records, and finances, may warrant some disregard of the separate entities in rare particular situations in order to prevent gross inequity. Id. at 620. Utilizing the My Bread Baking test, it is clear that Liu and Lubin took care to preserve the formalities of the separate legal nature of the entities owning each of the two properties, albeit for the most part with nearly identical documents. Each limited liability company filed separate special permit applications and building permit applications, and executed separate contracts with the same general contractor. The City of Cambridge, honoring the separate applications, at least until the Commissioner issued his enforcement orders several months after completion of the two buildings, issued separate special permit decisions, separate building permits and separate certificates of occupancy for each of the two buildings. There could be no doubt as to which limited liability company was acting for which property, and it is evident that the owners took care to respect the separate nature of the entities that owned each of the two properties.
Even respecting the formalities of the separate legal entities would not be enough to defeat a conclusion that the properties were under common control, if not ownership, if the facts show the separate legal ownership to be, in effect, a sham. DiStefano v. Town of Stoughton, supra, 36 Mass. App. Ct. at 644. On the undisputed facts, that is not the case here. The two owners did act in concert in many ways, with Liu, through his company Abodez LLC, hiring the contractors and overseeing the development of both properties. But if this was done for efficiency and practicality, and did not represent an abdication of control by Lubin over his property at 54 Bay State Road, it does not lead to a conclusion that the properties were under common control.
Under the Development Agreement that Lubin signed on behalf of 54 BSR LLC, Liu, through his company Abodez, was given responsibility for every phase of the development of the five-unit dwelling at 54 Bay State Road as well as for his own property at 42 Bay State Road, but in every significant respect, that responsibility, with respect to 54 Bay State Road, was subject to Lubins approval or to Lubins right to reject Lius advice or choice. Lius right to act, under the Development Agreement, on behalf of the owner of 54 Bay State Road, was subject to the specific limitations set forth in this Agreement (Section 2.1); his capacity was in many respects advisory only (Section 3.1); his right to act as authorized agent of the owner of 54 Bay State Road was subject to the caveat: [u]nless otherwise instructed by Owner from time to time (Section 6.3); no changes to the project were to be instituted unless submitted to and approved by the owner (Section 6.4); the owner reserved the right of approval for all material project documents, including third-party contracts and change orders (Section 9.4); the owner could terminate the Development Agreement without cause at any time (Section 12.5); and finally, all loan documents had to be executed by the owner (Section 7.1).
It is also plain and undisputed on the record that the right of the owner of each of the two properties to make independent decisions on material issues was not just a formality, but was actually exercised. Each owner obtained a different amount of construction financing, and obtained it through a different lender. Liu, for his entity 42 BSR LLC, obtained a $1,600,000.00 construction loan from Cambridge Savings Bank, while Lubin, on behalf of his entity 54 BSR LLC, obtained a $1,700,000.00 construction loan from Brookline Bank. Each construction loan was secured by a mortgage on only one of the two properties. It is unlikely that if the two entities were in fact under common control, the common owner would have gone to different lenders to finance the two parts of the project. It is further likely, that if the two properties were in fact under common control, they not only would have been financed by the same lender, but the loans would almost certainly have been cross-collateralized.
Based on these undisputed facts, I conclude that from July 15, 2011 to September 12, 2011, and thereafter, 42 Bay State Road and 54 Bay State Road were not in common ownership and were not under common control.
Accordingly, the requirement of common ownership or common control for the twelve months preceding the application for a special permit or a building permit, or at any time during the five years after such applications, has not been met so as to authorize the Commissioner to invoke the affordable housing impositions of the inclusionary housing provisions in Section 11.200 of the Ordinance.
For the reasons stated above, the Board exceeded its authority, and its decision affirming the order of the Inspectional Services Commission is ANNULLED. The Boards motion for summary judgment is DENIED, and the plaintiffs cross-motion for summary judgment is ALLOWED.
Judgment will enter in accordance with this Decision.
[Note 1] Filings by each of the LLCs with the Secretary of the Commonwealth do not indicate that a manager has been appointed for either entity.
[Note 2] There is nothing in the record to indicate what, if any, action the Inspectional Services Commissioner has taken to enforce his unappealed May 6, 2013 letter with respect to 54 Bay State Road.