Condo Media - November 2016 - 30

MIXED FEELINGS
Although 40b is certainly well
known, it is not well loved. It continues
to stir opposition in communities
subject to it (see related sidebar), and
it creates tension in some of the condominium communities that include a
mix of affordable and market-rate units.
Industry executives say that tension often comes from owners annoyed because
buyers of affordable units got a break they
didn't receive. But most of the tension is
triggered by differences in the lower beneficial interest assigned sometimes (but
not always) to affordable units, resulting
in common area fees lower than those
paid by market-rate owners.
"It is hard for some people to understand why buyers who have the same
units and are sharing the same amenities, have lower fees," Ellen Shapiro, a
partner in Goodman, Shapiro & Lombardi, LLC, explains.
NECESSARY AND RESENTED
Supporters of 40b and similar affordable
housing programs sponsored by local
housing agencies say the lower fees are
necessary to make the units affordable-
and keep them affordable over time; critics say the disparity unfairly shifts the
burden of subsidizing affordable buyers
from the sponsoring housing agencies
to the owners of non-subsidized units in
the condominium community.
Equalizing the beneficial interests is
arguably fairer, Scott Wolf, CMCA, AMS,
PCAM, owner of Greater Boston Properties, Inc., AAMC, agrees. But it also threatens to "bankrupt" lower income owners,
who might not be able to afford higher fees
or a full share of special assessments.
That issue is playing out now in a 250unit New Jersey condominium association, where a proposed bylaw amendment
would set the beneficial interests of
market rate and affordable units at the
same level. The change would increase
the common fees paid by the 40 affordable owners from $94 to $281.32, while
reducing the fees of other owners to that
amount from the $317 they currently pay.
Affordable owners are suing to block
the increase, which they say violates
the agreement under which the condo-

30

CONDOMEDIA

minium was developed; the association's
board says the increase is required to
comply with a 2004 change in state
regulations, specifying that there should
be no distinction in the assessments for
affordable and market-rate units.
STATUTORY CHANGE
In Massachusetts, until the state condominium statute was amended in 2010,
it specified that the percentage interest
must be set "in the approximate relation
that the fair value of the unit on the date
of the master deed bears to the then aggregate fair value of all the units."
Based on that requirement, some 40b
developers considered the affordability
requirement and set a lower percentage interest for those units, but others
assigned equal beneficial interests to
affordable and market units.
The 2010 amendment clarified the
confusion about what developers were required to do. The amendment, sponsored
by the Citizens Housing and Planning
Agency and supported by the CAI Massachusetts Legislative Action Committee
(MALAC), gave developers the option of
considering the affordable housing restriction in allocating percentage interests,
but did not require them to do so. (The
amendment also allows associations to
base common fees on the square footage of
units rather than their percentage interest
of the condominium-a simpler formula
more easily grasped by many owners.)
Virginia Bullock, senior housing
planner for Brookline, notes, "We try to
structure our affordable housing projects so the beneficial interest is lower.
The higher the condominium fee," she
says, "the lower the purchase price will
have to be" to make the units affordable.
Developers, for obvious reasons, will usually opt for lowering the beneficial interest
(which affects other owners), rather than
reducing the purchase price, which affects
the developers' profit margin. This explains
why so many 40b developments-including those constructed after the statute
was amended-differentiate between the
beneficial interests of market rate and affordable units, and why some owners resent
the affordable units in their community.

"It is hard for some
people to understand
why buyers who have
the same units and
are sharing the same
amenities, have lower
fees."
-Ellen Shapiro,
Partner, Goodman,
Shapiro & Lombardi, LLC
Condo Media - November 2016

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