Good News for Developers: Construction Not Required to Effectuate Condominium Conversions
Commerce Park Condominium Association v. Little Deer Valley, LLC (4.4.24)
No doubt to the relief of developers, the New Hampshire Supreme Court affirmed the understanding in the real estate community that condominium declarants need not build future phases within the statutory deadline to convert convertible land.
Background
The original declaration for Commerce Park Condominium was recorded in May 2005. The declaration stated that the condominium would comprise three buildings (A, B, and C). It included a clause giving the declarant the right to build Building C on convertible land within a five-year period from the date of the declaration, with the possibility of extending this period for another five years under certain conditions.
In April 2010, just before the initial five-year deadline, the declarant recorded an amendment to the declaration, stating its exercise of the right to convert the convertible land for Building C, and also filed a new site plan. Floor plans for Building C were not filed then or at any time afterward.
In April 2019, fourteen years after the original declaration, the declarant sought a building permit to construct Building C. The Association opposed the construction, arguing that the declarant's right to build had expired since, in their view, the land had not been properly converted within the allowable timeframe because no substantial construction of Building C occurred.
Trial court ruling – construction required
The Association filed a petition in superior court for injunctive relief to prevent the construction of Building C, asserting that the declarant's rights had expired. In May 2021, the court granted a preliminary injunction against the construction.
Both parties moved for summary judgment. The declarant argued it had converted the land within the required period by recording the amendment and the new site plan in 2010, thereby retaining the right to build Building C. The Association countered that the amendment extended the right to convert but did not actualize the conversion since no physical construction took place.
In January 2023, the superior court sided with the Association, holding that conversion under the Condominium Act (RSA 356-B) required substantial construction within the specified time period. Since the declarant had not engaged in significant construction of Building C before the deadline, its right to do so had expired.
Supreme Court’s Analysis
The Supreme Court concluded the Condominium Act does not require physical construction for the conversion of convertible land. Instead, conversion occurs upon the filing of "appropriate instruments" within the statutory deadline, without necessitating the physical construction of the planned Building C.
The Court found that the Condominium Act required the declarant to file appropriate instruments (amended declaration and new site plan) within a five- to ten-year period to convert the convertible land, which did not include a mandate for substantial construction within that timeframe for the conversion to be valid.
The Court determined the declarant properly converted the convertible land when it filed the amended declaration and new site plan in 2010. This action was deemed compliant with RSA 356-B:23, thus effectively converting the land for Building C.
The Court reasoned that the construction of Building C, based on the declarant’s 2010 filings, did not violate RSA 356-B:23 III nor the overall purpose of the Condominium Act. The Court emphasized that the Act allows for future development within a condominium project, provided the developer complies with the statutory requirements for conversion, which the Court found the declarant did.
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