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Gerfman Global, LLC v. Kershaw

Superior Court of Massachusetts, Suffolk

May 17, 2016

Gerfman Global, LLC
Irene Kershaw et al., as they are Trustees of the Nautica Leasehold Condominium Trust No. 133750


          Mitchell H. Kaplan, Justice

         This case arises out of a dispute between plaintiff Gerfman Global, LLC (Gerfman), which owns the Parking Garage Units (Garage Unit) of the Nautica Leasehold Condominium (Nautica), and the defendant Trustees of the Nautica Leasehold Condominium Trust (the Trustees and the Trust, respectively). Nautica is a mixed use condominium located in Charlestown, Massachusetts; it consists of 117 residential units and a parking garage. The upper level of the garage has 188 parking spaces for use of the residences, while the lower level consists of commercial spaces. The lower level is owned by Gerfman. The Master Deed establishing the condominium was executed in 2001. It divides the common elements into two categories: the Condominium Common Elements (CCE), which relate to all of the units, and the Residential Common Elements (RCE), which relate only to the Residential Units. The By-laws of the Trust, which are set out in the Nautica Declaration of Trust, similarly divide expenses into CCE expenses, which are to be assessed against all unit owners, and RCE expenses, to be assessed only against the residential unit owners. Gerfman filed this action seeking a declaration that (1) the Trustees cannot retroactively reallocate expenses that the Trustees had previously allocated to the RCE for a number of years to the CCE and then retroactively assess Gerfman for its proportionate share of those reallocated expenses, and (2) the allocation of expenses between the CCE and RCE that the Trustees imposed prospectively beginning in 2013 violate the terms of the Declaration of Trust. Gerfman also complains that the Trustees failed to follow the procedural notice and meeting rules set out in the By-laws when they voted for the reallocation of expenses and retroactive assessments. The Trustees, in turn, filed counterclaims against Gerfman seeking (i) a declaration that their reallocation and retroactive assessments are valid, as are their current allocation of expenses and consequent assessments; (ii) judgment against Gerfman for all current and past assessments as recalculated by the Trustees, plus attorneys fees and costs incurred in collecting these amounts, as provided by G.L.c. 183, § 6; (iii) the establishment of a lien on the Garage Unit pursuant to that statute; and (iv) an order authorizing the sale of the Garage Unit to satisfy that lien.

         The case is now before the court on the Trustees' motion for summary judgment in which they seek to establish Gerfman's liability to them for current and retrospective common area assessments, the amount of that liability to be determined in a subsequent hearing for assessment of damages. For the reasons that follow, the Trustee's motion is ALLOWED, in part, and DENIED, in part.


         The following additional material and relevant facts are undisputed.

         Under the Master Deed, the residential units are assigned 82.033% of the common areas of Nautica and the Garage Unit, 17.967%. Nautica's developer sold all of the residential units after establishing the condominium, but retained title to the Garage Unit, which it operated as a commercial garage. Shortly after the Trust was established, it entered into a property management contract with a firm called Peabody Properties, Inc. (Peabody). Peabody was affiliated with the developer. Apparently, Peabody's duties included allocating expenses to the CCE and RCE accounts. The only expense that it allocated to the CCE was the cost of Nautica's hazard insurance policy, all other condominium common expenses were allocated to the RCE.[1] In December 2006, the developer sold the Garage Unit to Gerfman. In 2008, Hodan Property Management and Development, Inc. (Hodan), a firm unaffiliated with the developer, replaced Peabody as Nautica's property manager. Hodan continued Peabody's practice of only allocating the hazard insurance costs to the CCE expenses until January 2013.

         In 2008, the Trustees filed suit on behalf of the Trust against the developer and certain other defendants to recover damages caused by alleged construction defects. The Trustees allocated all of the litigation expenses associated with that suit to the RCE. In consequence, Gerfman was not assessed and did not contribute to litigation-related expenses. The litigation was settled in 2010; pursuant to that settlement Nautica received approximately $1.8 million. Some of the settlement was used to refund prior litigation assessments made to the residential unit owners and some of it used to fund repairs to Nautica. The summary judgment record suggests that some of the repairs funded by the settlement benefited the Garage Unit; although the extent to which that may have occurred is not established.

         In January 2013, Hodan, acting on behalf of the Trustees, began to allocate a number of condominium expenses previously allocated only to the RCE account to the CCE account with the result that Gerfman would begin to pay its alloquat share of those expenses, in addition to the hazard insurance premiums. In February 2013, Hodan sent Gerfman a letter explaining that it had retroactively reallocated several items previously allocated as RCE expenses such that they were now CCE expenses and was retroactively assessing Gerfman for the amounts that Gerfman allegedly should have been assessed for the years 2007 through 2012, according to its revised apportionment of these categories of expenses between the RCE and CCE accounts. On behalf of the Trustees, Hodan demanded that Gerfman pay in excess of $600, 000 based on this retroactive assessment.

         Since February 2013, Hoban, on behalf of the Trustees, continued on a current basis to allocate Nautica's expenses using this same methodology and, therefore, to make current assessments to Gerfman based on that expense allocation. Since 2013, Gerfman has refused to pay those assessments.[2]


         This is not a case in which there is any dispute as to any relevant, material fact. The question of whether the Trustees can retroactively reallocate expenses and assess Gerfman for condominium expenses incurred in years prior to 2013 presents only an issue of law. With respect to current assessments made pursuant to the new methodology for allocating expenses between RCE and CCE employed from 2013 to the present, Gerfman did not pay its assessments and therefore, as a matter of law, cannot challenge them.

         Retroactive Assessment

         Neither party, each represented by attorneys who are exceptionally knowledgeable in condominium law, has directed the court to a decision addressing retroactive assessment of condominium charges, nor has the court found one. This appears to be an issue of first impression.

         The court notes that the condominium documents treat assessment of condominium operating expenses as a forward looking exercise. Section 5.4 of the Declaration of Trust is entitled " Common Expenses, ...

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