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October 2018

Philadelphia Attorneys Obtain Significant Victory in a Case of First Impression on behalf of Condominium Association Client

Philadelphia partner Michael J. Cawley and associate Alexander Brown recently obtained a significant victory in a case of first impression for Philadelphia’s Commerce Court.  Gordon & Rees represented a Condominium Association (“Association”) of an exclusive center city residential complex. The Association was sued in the Commerce Court by several of its members all of whom owned penthouse units in the condominium.  At the heart of the dispute was the opposition by the penthouse owners to a new rule the Association adopted which now required the penthouse owners to pay for the replacement and/or maintenance of the roof decks which were attached to each penthouse unit.

Prior to the rule change, the penthouse owners shared the replacement and repair costs for their roof decks with the other 70 plus unit owners at the condominium.  None of the other unit owners, however, had any right to use the penthouse owners’ roof decks.

The rule requiring all unit owners to pay for the roof decks was contained in the condominium by-laws.  Although not central to the case, there were indications that these by-laws, themselves, were improperly amended when the units were initially sold to the current owners by the developer. The original condominium by-laws—which were provided to each owner prior to purchase— never mentioned that each unit owner had an obligation to pay for the roof decks.  However, when the unit owners received a copy of the amended by-laws shortly before closing on their respective units, the developer had secretly added the provision requiring all unit owners to pay for the replacement, repair and/or maintenance of the penthouse roof decks.

To remedy this grossly unfair, fraudulent and inequitable contractual term, the Association passed the new rule with a two-thirds vote of its members. The Association interpreted the Pennsylvania Uniform Condominium Act (“Act”) to permit a two-thirds vote for the amendment.   In its lawsuit, the penthouse owners alleged that the rule was unenforceable because the Act required a unanimous vote.

This issue had never been previously considered by any Pennsylvania court.  

After considering the parties competing motions for judgment on the pleadings, the court granted the Association’s motion and dismissed the penthouse owner’s claims with prejudice.  The court’s decision means that the Association will not have to pay (1.) the more than $500,000 in estimated remedial repairs which are needed immediately to stabilize the rooftop decks and (2.) the millions of dollars needed over the next 25 years to replace each rooftop deck and the sections of the roof to which the decks are permanently affixed. 

In its ruling, the Commerce Court agreed with Gordon & Rees’ interpretation of the Act. The court concluded that the Association was well within its power to amend its by-laws and to place the burden of paying for the rooftop decks on the penthouse unit owners who had the exclusive use and enjoyment of the decks. The court also agreed that the Association could pass the rule change with a two thirds vote of all Association members and that it need not obtain unanimous approval.

Furthermore, the Commerce Court commented approvingly on Gordon & Rees’ argument that the legislature never intended the Act to be manipulated in such a way so that a majority of owners were required to pay for a feature unique to the most expensive units, which could only be enjoyed by the individuals that owned those penthouse units. The court specifically endorsed Gordon & Rees’ view that it would be wholly inequitable to permit the penthouse owners to require all other unit owners to subsidize their rooftop decks.

The plaintiffs did not appeal the ruling to the Pennsylvania Superior Court. As a result of this ruling, Pennsylvania’s 50 plus year old condominium law has been further clarified: a Pennsylvania Condominium Association is not required to obtain a unanimous vote in order to change its by-laws over issues involving the allocation of replacement and repair costs for those features of a condominium development designed to benefit only a particular subset of owners (i.e. penthouse unit owners).

Alexander S. Brown
Michael J. Cawley