“In order to rise from its own ashes, a phoenix must first burn.” Octavia Butler, Parable of the Talents. While not quite as dramatic as a mythical bird regenerating itself, condominium buildings sometimes need to be rebuilt after sustaining fire damage (or other such casualty losses). Rebuilding a condominium from its ashes can be an expensive endeavor. What happens when a unit owner disagrees with a condominium board that is intent on rising like a phoenix?

While actions under G.L. c. 183A, § 17 are clearly uncommon, a board must be careful to respect the rights of each individual unit owner when embarking on an effort to rebuild a heavily damaged condominium.

In a relatively recent decision, the Suffolk Superior Court ordered the first known buy-back of a unit after the subject condominium was damaged by a fire and the owner objected to the reconstruction undertaken by the condominium trust. Samuels v. Stratford Condominium Trust (Suffolk Superior Court; Civil Action No. 1784 CV 0413). The Court recognized that the plaintiff had a statutory right – under the Massachusetts Condominium Act – to object to the restoration of the condominium building and to seek a court order directing the organization of unit owners to purchase his unit for fair market value.

On February 1, 2014, a seven-alarm fire damaged a six-story building located in the Back Bay, known as the Stratford 31 Condominium. The fire damaged units and the common areas of the Massachusetts Avenue building. At that point in time, Martin Samuels had owned his unit for thirty-one years. He used the commercial space, known as Unit 1-4, as an office. Mr. Samuels’s unit was damaged, although not by the fire itself. Instead, his unit was indirectly affected by the fire or efforts taken to extinguish the fire.

The condominium documents for the Stratford 31 Condominium – like the governing documents of most associations – contain provisions addressing casualty losses. More specifically, Section 5.5 of the condominium’s by-laws provides as follows:

Rebuilding and Restoration

A. In the event of any casualty loss solely to the common areas and facilities which does not exceed ten (10%) percent of the value of the condominium prior to the casualty, the Trustees shall proceed with restoration in the manner provided in Section 17 of Chapter 183A.

B. If such loss, as so determined, exceeds 10% of such value, the Trustees shall submit to all Unit Owners a form of agreement (the Restoration Agreement), which may be in several counterparts, specifying the estimated value of such loss, the amount of available common funds, including the proceeds of any insurance for that purpose to the extent they are determinable and authorizing the Trustees to proceed with the necessary repairs and restoration. Upon receipt by the Trustees of the Restoration Agreement signed by all of the Unit Owners, the Trustees shall proceed with the necessary repairs and restoration. The cost of repairs and restoration in excess of any available common funds, including the proceeds of any insurance, shall be a common expense.

If the Restoration Agreement is not signed by all of the Unit Owners, the Trustees shall proceed in accordance with the provisions of Section 17 of Chapter 183A.

General Laws c. 183A, § 17 provides as follows:

(a) Rebuilding of the common areas and facilities made necessary by fire or other casualty loss shall be carried out in the manner set forth in the by-law provision dealing with the necessary work of maintenance, repair and replacement, using common funds, including the proceeds of any insurance, for that purpose, provided such casualty loss does not exceed ten per cent of the value of the condominium prior to the casualty.

(b) If said casualty loss exceeds ten per cent of the value of the condominium prior to the casualty, and

(2) If seventy-five per cent of the unit owners agree to proceed with the necessary repair or restoration, the cost of the rebuilding of the condominium, in excess of any available common funds, including the proceeds of any insurance, shall be a common expense, provided however, that if such excess cost exceeds ten per cent of the value of the condominium prior to the casualty, any unit owner who did not so agree may apply to the superior court of the county in which the condominium is located on such notice to the organization of unit owners as the court shall direct, for an order directing the purchase of his unit by the organization of unit owners at the fair market value thereof as approved by the court. The cost of any such purchase shall be a common expense.

Following the fire, the Condominium Trust – apparently on the advice of counsel – sent a letter to the Condominium’s unit owners. The letter asked the unit owners to waive all their rights under Section 17 and the by-laws and permit the Trustees to proceed with the restoration process without having to adhere to the by-laws or the statutory requirements. Thereafter, more than 75% of the unit owners signed the letter and the Trustees proceeded with the restoration. Mr. Samuels, however, refused to waive his rights and objected to proceeding with the restoration and repairs. His refusal was based upon the Trustees’ alleged failure to provide the unit owners with any information concerning the repair and restoration work and the costs associated therewith.

The restoration that was performed cost more than $8 million. After applying $5.6 million in insurance proceeds that had been received by the Condominium Trust, there was a nearly $2.6 million balance to be paid by the unit owners as a common expense to perform the restoration work. To raise the funds, the Condominium Trust specially assessed each unit owner a substantial sum. The special assessment was based on the percentage ownership interest in the Condominium that is held by each unit owner. As the owner of Unit 1-4, Mr. Samuels was assessed $59,892, which he paid in full.

The restoration project was undertaken by Nauset Construction Corporation. Mr. Samuels contended that the restoration work was negligently performed – causing damage to Unit 1-4. Indeed, Nauset’s work allegedly suffered from delays and workmanship issues – with Nauset and the Condominium Trust ending up in separate litigation, which was ultimately settled.

With respect to Mr. Samuels’s lawsuit, the Condominium Trust contended, among other things, that it would be “catastrophically inequitable” for the Trustees to have to purchase Unit 1-4, where they lacked the funds to do so. They also contended that Mr. Samuels, who already paid the special assessment, could sell his unit on the open market – rather than forcing the other unit owners (who already suffered a large special assessment) to pay for his unit.

After a jury-waived trial, the Hon. Katie Rayburn found in favor of Mr. Samuels, ordering that the Condominium Trust – pursuant to the provisions of G.L. c. 183A, § 17(b)(2) – had to buy back Unit 1-4 (including its deeded parking spaces) for the amount of $835,000.00. In January, Mr. Samuels filed a document with the Court indicating that the Condominium Trust had fully satisfied the judgment entered by the Court.

A board faced with a casualty loss may believe that it is a given that rebuilding efforts should be undertaken. However, it is important for a board under such unfortunate circumstances to confer with counsel about provisions within the association’s governing documents concerning casualty losses – as well as about statutory requirements. While actions under G.L. c. 183A, § 17 are clearly uncommon, a board must be careful to respect the rights of each individual unit owner when embarking on an effort to rebuild a heavily damaged condominium.