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massachusetts condominium super lienRuling Hurts Condominium Associations’ Collection Efforts

The Massachusetts Condominium Act gives condominium associations the ability to file a “super-lien” for unpaid monthly condominium fees, six months of which is given priority over a first mortgage against the unit. The super-lien has proven to be a very effective method for condominiums to collect delinquent fees because lenders will often pay off the super-priority amount so as not to affect their mortgage priority.

But what happens when a unit owner owes more than six month’s worth of condo fees? In that situation, innovative condominium attorneys have developed a practice of filing multiple lien lawsuits to create a “rolling” lien for successive 6 month periods. Unfortunately for condominium associations, the Appeals Court recently put the kibosh on this practice in the case of Drummer Boy Homes Association v. Britton (Nov. 7, 2014).

Rolling Lien Practice

In the Drummer Boy case, the unit owner withheld payment of condo fees in a dispute with the condominium trustees over parking rights and fines. (Note, this is a big “no-no” as the law provides that a disgruntled unit owner must pay fees under protest). The condominium lawyers filed three separate and successive lawsuits asserting a super-lien over 18 months worth of unpaid fees. The lawsuits were all consolidated. A district court judge ruled, however, that the association had a super-priority lien over only the first 6 months before the first lawsuit, not the 18 months’ worth claimed.

Court: 6 Months Of Fees Only

On appeal, the Appeals Court likewise held that the association’s super-lien only covered the initial 6 month period, not the 18 month period claimed. The Court reasoned that the Mass. Condominium Act was modeled after the Uniform Condominium Act which clearly provided that the maximum amount of a super-priority lien was 6 months worth of fees, and that this was a fair balance between the interests of lenders and condominium associations. Of course, the condominium association is free to collect all of the outstanding fees from the unit owner and sell the unit at auction, but the first mortgage will have priority over all of the fees except for 6 months plus attorneys’ fees, so it’s essentially a Pyrrhic victory.

Going forward, condominium associations will have to lobby the Legislature for a change in the super-priority lien amount over above the 6 month cap. I doubt they will be successful.

 

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Distressed Homeowners Take Another Hit

In another court ruling against embattled homeowners facing foreclosure, the Massachusetts Appeals Court has ruled that a defective 150 day cure notice is not a valid defense to a foreclosure sale. The case is Haskins v. Deutsche Bank (click for link to case). The ruling will make it more difficult for distressed homeowners to challenge foreclosure and could accelerate the pace of pending foreclosures.

150 Day Cure Notice

The 2010 Foreclosure Prevention Act requires that foreclosing lenders provide a borrower with a 150 day right to cure prior to starting a foreclosure proceeding. The notice must identify the current “holder” of the mortgage. Before this ruling, some trial courts had ruled that a bank’s failure to strictly comply with those requirements was sufficient grounds to halt a foreclosure sale.

In the Haskins case, the borrower challenged his foreclosure on technical grounds because the cure notice incorrectly identified the holder of the mortgage as IndyMac Mortgage Services. IndyMac was the mortgage servicer and mortgage was legally held in a securitized trust operated by Deutsche Bank.

Justice Mark Green, a former Land Court judge and former banking general counsel, recognized that today the vast majority of residential mortgages are serviced by large mortgage servicers while owned and held in securitized trusts. Rejecting the borrower’s form-over-substance argument, Justice Green ruled that as long as the borrower receives an accurate cure notice with the correct loan balance information and payment address so the borrower can pay up and cure, an erroneous identification of the actual mortgage holder should not affect the validity of the pending foreclosure.

Massachusetts foreclosure defense attorney Adam Sherwin, who represented the borrower, put up a valiant fight in this case. However, with this ruling and several recent decisions before it, foreclosure defense attorneys have suffered several setbacks in the courts, making it more difficult for distressed homeowners to challenge and stop foreclosures.

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80140012Legislation Set To Expand Housing Court Statewide

About 30% of people in Massachusetts do not have access to the state’s Housing Court — one of Massachusetts’ specialized courts handling landlord-tenant disputes, evictions and sanitary code enforcement. The unserved areas include the largest county in the state, Middlesex County and most of Norfolk County, with high density rental towns including Cambridge, Framingham, Brookline, Waltham, Dedham, Malden and Somerville. Also unserved by a Housing Court is all of Cape Cod and the Islands and Chelsea.

Under a plan touted by Supreme Judicial Court Justice Ralph Gants, the Housing Court would be expanded to cover the entire state by July 1, 2015. “We believe that all residents of the Commonwealth, regardless of where they live, should have the opportunity to have their housing case heard by a Housing Court, and benefit from its specialized expertise in residential housing matters,” Gants said in a statement.

As an eviction and landlord-tenant attorney who practices quite a bit in both Middlesex County and in the Housing Court, I can say positively that this is a great idea. In Framingham District Court, for example, the Thursday eviction session can be standing room only with landlords and tenants often spilling outside into the hallway. The busy court is already swamped with criminal matters, and getting a trial date in an eviction case can take upwards of several months — certainly not “just, speedy and inexpensive” as mandated by the Uniform Summary Process Rules.

The Housing Court would be able to take the burden off the local, overworked district courts. With a few more full time judges and already with one of the lowest cost-per-case ratios of any court, they should be able to handle the increase in cases. The “X-factor” will be the overall cost, of course.

The Legislature is set to take up the proposal in early 2015. I’ll keep tabs on any developments.

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Electronic-signature1.jpgThis is a summary of the Boston Bar Association’s recent seminar, E-Recording: Practices and Pitfalls, a Roundtable Discussion, which I moderated last week. The speakers were:

Current Statistics

Electronic recording (e-recording) of deeds, mortgages and other title instruments has been available in Massachusetts registries since 2007. E-recording capabilities are now fully operational in every Massachusetts registry of deeds except for Bristol South (Fall River/New Bedford). E-recording is proving to be less expensive and faster than the traditional method of recording by sending a title examiner down to the registry of deeds to wait in line. In most cases, a transaction can be “on record” within 30 minutes of an in-office closing. It also eliminates the need to hire a courier or fight traffic and hold closings at Cambridge or other hard-to-get-to registries. E-recording is legal and binding, and accepted by Fannie Mae, Freddie Mac and virtually every major lender.

Middlesex South District Registry in Cambridge (which happens to be the 6th largest registry of deeds in the U.S.) leads the state in total number of documents electronically recorded and also has the lowest average recording time in the United States. Very impressive!

Electronic recording adoption rates have steadily increased with Middlesex (Cambridge and Lowell) leading the way at 40% of all recorded documents. That means, however, that 60% plus of registry business is still done through the traditional in person recording method.

E-Recording Process

As outlined by Brian Kilfoyle of Simplifile, one of the approved vendors for Massachusetts e-recording, the process of e-recording a document is relatively straight-forward:

  • Sign up with one of the registry’s authorized electronic recording vendors (SimplifileErxchange,Ingeo/CSC, or New England Title/Escrow). There is a $350 annual fee.
  • Scan original document to create an electronic image (pdf)
  • Log on to the secure website and enter data about the document and upload the document image
  • Perform a quick online title run-down to ensure no title issues have arisen since the first title exam
  • Press “send to the registry” button
  • The registry verifies the quality of the image and the accuracy of your data
  • Once accepted by the registry, the document is officially “on record” with recording data and document image immediately available on the registry website
  • The filer immediately gets an electronic receipt with all recording information along with an electronic copy of the recorded document.
  • Fees are paid by electronic funds transfer from the closing attorney’s bank account. There is a $5.00 surcharge for every e-recorded document which is typically passed along to the responsible buyer or seller.

Title Insurance and Gap Coverage

One of the earlier concerns about e-recording is the so-called “gap coverage” — dealing with the risk of an attachment or other lien recorded on your title while you are in the process of e-recording. As confirmed by Sarah Supple of Chicago Title, all Massachusetts owner’s title insurance policies will automatically protect the title agent (attorney) and the owner from any intervening liens recorded during the electronic recording process. Ms. Supple noted that the risk of an intervening lien was just as high when the title examiner is physically waiting in line as opposed to online.

Practice Pointer: Ms. Supple recommends that closing attorneys perform one run-down right before submitting the document into the e-recording “queue” and also a “mini-run down” right before disbursement of funds.

Fortunately, a survey of participants at the seminar revealed zero instances of an intervening lien/attachment filed in an e-recording situation.

What’s Next?

Hugh Fitzpatrick updated the audience on recent and future developments. As a member of the Registry Technology Commission and advocate, he is working with the Registries, Legislature and Governor’s Council on electronic notarization so documents can be signed and witnessed virtually in a secure system like DotLoop or Docusign. Another goal is to have all of the registries unified in their document search portals like masslandrecords.com. Right now, several registries have their own systems. Hugh also noted that the new CFPB rules are strongly encouraging electronic signing and recording.

Electronic recording is a very exciting development in the real estate title industry, proving to be cost-efficient, accurate and convenient for all parties to the transaction. My Needham office is fully e-recording capable, and we often have the documents recorded within 30 minutes of the closing.

Please note that the BBA Real Estate Section’s Next CLE is Real Estate Attorneys, Are You Ready for CFPB Compliance? Nov. 18, 2014, 3pm at Boston Bar Association. Click here for more info and to register.

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Tax-Information-about-Employees-and-ContractorsSJC To Hear Important Employment Classification Case

The critical question of whether real estate agents are governed by the state’s strict independent contractor law is now headed to the Supreme Judicial Court, the highest appellate court in Massachusetts. The SJC will hear arguments in December, and a decision is expected in the Spring of 2015.

Hanging in the balance is the fate of the historically independent, commission based real estate brokerage office model. An unfavorable result at the SJC would essentially turn this model upside-down, requiring brokerages to pay their agents minimum and overtime wages and provide all the statutory benefits afforded to employees. The real estate office as we know it today would likely cease to exist.

The case is Monell v. Boston Pads, LLC, a class action brought by a group of disgruntled real estate agents at Jacob Realty, one of the largest real estate offices in Boston. As I wrote about in this post, Judge Robert Cosgrove ruled last year that the agents should be considered independent contractors and not employees. Given the importance of the case, the SJC granted direct appellate review.

The Massachusetts Association of Realtors has filed a friend of the court brief, in support of classifying agents as independent contractors. I agree with the MAR that real estate agents should be classified as independent contractors given its unique and historically independent business model.

However, this is a very difficult case to handicap. The problem arises when brokerages, such as Jacob Realty, ask its agents to do many of the things traditional employees must adhere to, such as required office hours, dress code, and performance benchmarks. This is especially so where courts have, in the last few years, strictly interpreted the independent contractor and wage laws in other industries. The more requirements imposed on agent, the more likely they should be treated as employees and not independent contractors, the argument goes.

Also likely to play a large role is that in 2008 the Legislature tried — and failed — to amend the law to make real estate agents exempt from the independent contractor law. Governor Patrick vetoed the legislation. This legislative history hurts the brokers.

There is a decent chance this case could go against the industry. In that event, I hope the MAR has legislation ready to preserve the existing office model so there will be no adverse effect on Realtors. And by then, Gov. Patrick — who’s been no friend of the real estate and title business — will be long gone from office.

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Parking Lot Owner Allowed To Introduce Evidence of Future Development Potential

8397753417_6c894cfcef_zI have not written about eminent domain on this blog. This isn’t intentional because the topic is one of the most interesting aspects of real estate law, although it does not come up very much in the residential context.

Eminent domain, or a “taking,” as it’s also called, is a power vested in the state (or federal government) to appropriate private property for public or other permissible use. The government, however, must pay the landowner “just compensation” for the land.

Massachusetts city planners have historically made judicious use of eminent domain power to construct some of the largest projects in Boston and beyond, including the Big Dig, the new Boston Convention Center, and the new Greenbush commuter rail line. Eminent domain trials are often high stakes, big money cases. In 2009, a jury awarded a Medford family $4 Million in connection with the Mystic River’s Edge Project. In 2011, a Cape Cod jury awarded Sagamore property owners $2.1 Million for takings in connection with the Sagamore “Flyover” Highway Project.

The battleground in eminent domain cases almost always centers on how much the land is worth, i.e, how much money the state should pay the landowner. The recent Appeals Court case of Rodman v. Commonwealth, Mass. Appeals Court (Oct. 7, 2014) gives an interesting glimpse into the complicated and difficult task of an eminent domain attorney. Often, the land taken by the state is either vacant or underutilized, and the attorney’s objective is to show the development potential of the land. There is a limit on how far the attorney can go, and the Rodman case illustrates that tension.

In the Rodman case, the Mass. Highway Dept. took by eminent domain 5 acres of a parking lot property in connection with highway improvements around Patriot Place/Gillette Stadium. As is common in these cases, the landowner’s engineering expert planned to testify that the takings made the property less valuable by some $2 million dollars based on a potential hotel/office/retail development on the land. However, the judge refused to allow the expert to proceed on that theory which was based on a hypothetical development and subdivision plan, as the property was merely used as a temporary parking lot at the time of the taking and no formal plans had been filed. This ruling essentially torpedoed the landowner’s case, and not surprisingly, the jury awarded him only $600,800.

On appeal, the Appeals Court sided with the landowner and granted him a new trial to put forth his $2M development plan theory. The Court reaffirmed that property owners in eminent domain cases are entitled to submit the “highest and best use” of the property which is “physically possible, legally permissible, and financially practicable” even if the land was vacant and undeveloped at the time of the taking. With a prime piece of real estate directly abutting Gillette Stadium and the new Patriot Place in a new economic development zone, the court agreed that the owner may have the opportunity to show a jury that the land could have been used for a hotel/office/retail development. This is true even though special permits and other zoning relief would be necessary. This is a huge victory for the landowner and his attorney.

If you are faced with an eminent domain situation, please contact me at rvetstein@vetsteinlawgroup.com. I can put you in touch with some of the best Massachusetts eminent domain attorneys in the state.

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Beverly-Carter-jpgShould The Real Estate Industry Change The Way Agents Do Showings and Open Houses?

What other industry requires unaccompanied female (and male) agents to meet perfect strangers in empty houses? None. One would think this is a recipe for disaster. It is.

Last night, authorities found the body of Arkansas real estate agent Beverly Carter, days after she vanished while showing a house to a prospective customer. Aaron Lewis, 33, has been apprehended and admitted to the kidnapping after being questioned by police, ABC News said.

This is not the first time an agent has been murdered, raped or assaulted while on the job. According to the latest Bureau of Labor study, the real estate industry experiences about a 40% higher rate of on-the-job crime than the average profession. Indeed, one my close Mass. Realtor friends was accosted several months ago and was very shook up about it.

My mother was a long time Realtor. My father recalls how nervous he was that some stalker would do something terrible at an open house or showing. Thankfully that never happened.

There must be a better way. I think the time has come for a change. What can be done?

Should open houses be outlawed? Should open houses be allowed only if there are two agents present? Most Realtors say they are a waste of time anyways. Should Realtors have a special exemption under the law to carry mace, a taser or even a handgun? What about a new lockbox system so prospective home buyers can peek into a home themselves without an agent present? What about some type of panic button device or other technology? Here is a great article on Using Technology for Realtor Safety.

What is your office doing to protect your personal safety? What is the National Association of Realtors and local chapters doing about this issue?

Regrettably, the NAR issued a rather weak statement on the Beverly Carter tragedy:

“As both a REALTOR® and an Arkansan, I am saddened by this morning’s news of Beverly Carter’s untimely death. My heart goes out to her family, her friends, her co-workers, and everyone whose life Beverly touched in her 49 years with us.

Working in real estate involves risk and, unfortunately, that risk takes many forms. As an industry, we collectively work very hard to promote safety awareness among our members. We are fully committed to educating REALTORS® about potential threats and providing them with resources to protect themselves.

I urge all REALTORS® to honor Beverly Carter by keeping safe and looking out for each other.”

“Keeping safe and looking out for each other” frankly isn’t going to cut the mustard in my humble opinion. The NAR should be at the forefront of this issue, and doing a lot more than telling agents to “keep safe.” That doesn’t help anyone. 

How about paying for some of the personal safety devices for agents as part of the membership dues? How about lobbying Congress and state legislatures for exemptions for personal defense weapons like mace, tasers and firearms? How about lobby for increased criminal penalties for crimes against Realtors? Anything but telling agents to “keep safe”….

For its part, the Massachusetts Association of Realtors has issued its own Realtor Safety Tips.

There has to be a better way.

As always, I’m here to support real estate agents anyway I can.

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100316_photo_vetstein-2.pngRichard D. Vetstein, Esq. is a Massachusetts real estate attorney who works with Realtors every day. He can be reached at rvetstein@vetsteinlawgroup.com.

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I have a great FREE SEMINAR to announce for new and returning home buyers! A Home Buyer Boot Camp Seminar BBQ on October 14, 2014 at Firefly’s BBQ Restaurant in Marlboro, 350 E. Main St (Rt. 20). Sponsored by the Vetstein Law Group, David Gaffin of Mortgage Master and Amy Uliss and Heidi Zizza of mdm Realty in Framingham. Ribs, pulled pork and BBQ + great local real estate experts = AWESOME EVENT! Please RSVP to dgaffin@mortgagemaster.com.

boot camp flyer copy

 

 

 

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vote_today

I endorse Charlie Shapiro and Robert Jubinville

Today is the Massachusetts Primary Election. In Democrat-dominated Massachusetts, today’s election is often more important than the general election in November. Please take the time to exercise your civic duty and vote today.

As far as this real estate law is concerned, the Governor’s Council race is important as it will shape the future of the Massachusetts judiciary. The Governor’s Council has the final say on all judicial nominations. There are two races which I will comment on.

District 3 (Sudbury, Concord, Marlboro, Watertown, Newton, Brookline Weston, Waltham, much of Wellesley): Marilyn Petitto Devaney (Incumbent) faces a challenge from Charlie Shapiro of Newton. As you may recall from reading this Blog, Ms. Devaney was one of the leaders of the shameful opposition to Jewish nominee Joseph Berman stemming from his affiliation with the Anti-Defamation League and its position on Armenian Genocide recognition.

Devaney is certainly a colorful character, but in my opinion, Charlie Shapiro has a much better background and temperament to be trusted to select the next generation of Massachusetts judges. A former teacher and broadcaster, he is a former Newton City Alderman, and created the Alzheimer’s Silver Alert Program which tracks down missing elderly folks. Mr. Shapiro has garnered an impressive list of endorsements including Rep. John Lawn, Rep. Alice Peisch, Rep. Jay Kaufman and current Councillor Mike Albano. Going forward, we need less drama and more competency on the Council. Vote Shapiro. 

My Endorsement: Charlie Shapiro

District 2 (Milton, Sharon, and southern metro) Robert L. Jubinville (Incumbent) faces a challenge from Bart Timilty. Although Bob Jubinville ultimately voted against Joe Berman, I still think he’s a great Governor’s Councillor and actually one of the best on the panel. He’s a long time practicing litigator with decades of real life experience before judges. His advocacy for addiction and heroin treatment is also extremely impressive. He is also a former State Police Detective. Bob is really an ideal fit for the position. 

My Endorsement: Robert Jubinville

Don’t complain, vote!

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20b0e63Perry v. Equity Residential: Application Fee, Amenity-Community Fee, Move-In Fee and Upfront Pet Fee Held Illegal

In a stinging class action ruling on August 26, 2014, Boston federal district court judge Rya Zobel ruled that Equity Residential’s up front apartment fees are illegal under Massachusetts law. Even worse for the national apartment owner, the judge found the fees also violate the Massachusetts Consumer Protection Act which imposes up to triple damages and attorneys’ fees. With potentially thousands of affected tenants, Equity Residential could be faced with a sizable legal tab for this policy.

The class action was brought by Brian and Kim Perry, former tenants at Longview Place in Waltham, and Cheryl Miller, who lived at Emerson Place in Boston. The Perrys paid Equity an upfront $100 application fee and a $99 amenity or move-in fee, while Miller paid $50 application and $500 amenity fees, according to the lawsuit. Equity also allegedly charged a $250 pet fee and $500 “community” fee.

Judge Zobel held that the application fee, amenity/move in fee, the community fee and the upfront pet fee was unlawful under the Massachusetts Security Deposit Law which prohibits landlords from charging any upfront fees except for first, last months rent, security deposit and a lost key fee. The judge also found that Equity attempted to do an unlawful end-around the law by charging some of the fees in the second month of the tenancy.

The judge also ruled that the case can be consolidated with another federal lawsuit pending against Equity and granted it class-action status. The potential number of Massachusetts tenants impacted is unclear. Chicago’s Equity leases some 31 apartment complexes in the Bay State with about 6,680 units.

This ruling comes in the wake of a similar federal court ruling against Archstone Properties in 2012.

This case is yet another big wake up call for Massachusetts landlords, both large and small, to be extremely careful about up-front move in charges imposed upon tenants. This is also one of the first publicized cases calling into question the practice of charging an upfront application fee. Application fees are very much widespread, and I would counsel landlords and property managers to think twice about charging them under any circumstance. This ruling may also call into question the legality of charging prospective and actual tenants credit report and background check fees.

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RDV-profile-picture.jpgIf you have any questions about this ruling or your policy for upfront fees, please contact Attorney Richard Vetstein at rvetstein@vetsteinlawgroup.com.

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Beacon Hill MAIt’s a classic Boston neighborhood turf battle. Mayor Martin Walsh, the Irishman from Savin Hill vs. the Brahmins of Beacon Hill. The nature of the dispute:  sidewalk ramps in Beacon Hill for the disabled.

Boston Mayor Marty Walsh is fed up with some of Beacon Hill residents’ long time opposition to the installation of disability sidewalk ramps and other accommodations for the disabled under the Americans With Disabilities Act. Always up for a fight to preserve the historical character of “the Hill,” the Beacon Hill Civic Association and its members are upset because they feel that Mayor Walsh is not willing to consider what they feel is more historically appropriate materials and designs for Beacon Hill sidewalks and streets. They also accuse Mayor Walsh of exacting political revenge for not getting any votes in the recent mayoral election — he was decimated in Beacon Hill voting by a 70% margin over challenger, Harvard trained John Connolly. Hogwash, says the Mayor. Caught in the middle of this unfortunate fight are disabled folks who have a hard time navigating Beacon Hill’s narrow, winding, cobblestoned thoroughfares.

20140717_142510-1200x675The brouhaha has now moved to Suffolk Superior Court where the BHCA has filed an interesting lawsuit against the City, claiming that the Beacon Hill Architectural Commission has the final legal say in what type of materials and design are used for the accessibility project. Some interesting legal issues will be decided in this case, the most important of which would be whether the federal ADA trumps local and state regulations on historical design where a district or building is listed on the National Registry of Historical Places.

The streets of Beacon Hill are lined with red brick sidewalks, giving it a warm, welcoming feel. The proposed disabled ramps are grey concrete, topped with bright red panel inserts. Yes, these ramps didn’t exist during the times of John Hancock, but Charles Street was also lined with horse dung for all to step on. Let’s hope Mayor Walsh and Beacon Hill residents can put the emotion and rhetoric aside to do what’s right for the disabled. After all, they have every right to enjoy Charles Street, with or without horse dung. 

 

 

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Cannabis-BankCourt Side-Steps Whether Sec. 8 Tenant Can Be Evicted For Possession of Under 1 Oz. of Marijuana

In the first of what should be many cases dealing with marijuana use in rental housing, the SJC ruled last week that a Section 8 tenant could be evicted for an undetermined amount of marijuana combined with allowing her live-in boyfriend to deal marijuana and possess a gun at the leased premises. The court overruled Boston Housing Court Justice Jeffrey Winik’s prior decision stopping the eviction of the tenant. Judge Winik was unconvinced that a public tenant could be evicted for marijuana possession unless it was over 1 oz. which makes it a crime in Massachusetts, whereas possession of under 1 oz. is merely a civil infraction.

The case is Figgs v. Boston Housing Authority (SJC 11532). A link to the opinion can be found here.

Based on oral arguments and briefings, court watchers were expecting the justices to address the interplay between the recent Mass. law decriminalizing the possession of under 1 oz. of marijuana and federal public housing eviction laws. The justices, however, side-stepped the weight issue, ruling instead that there was more than sufficient evidence of drug dealing at the apartment to warrant eviction based on a serious violation of the lease and criminal activity. Police found a small amount of marijuana, plastic baggies, cash and a firearm in the bedroom of the tenant’s boyfriend, charging him with possession with intent to distribute and unlawful possession of a loaded firearm.

Although the question of whether a tenant can be evicted for possession of a recreational sized amount of marijuana (and medicinal marijuana) will be left for another case, the Figgs decision can be used to hold tenants responsible for the drug and criminal activity of their household members, including boyfriends, husbands, children and guests. This should be a helpful tool to enable public housing authorities and private landlords to keep drugs and guns out of rental housing.

 

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mass ibanez titleSenate Bill 1987 Would Have Cleared Title For Innocent Homeowners

Acceding to the demands of fair housing community activists, Massachusetts Governor Deval Patrick has rejected Senate Bill 1987, An Act Clearing Titles to Foreclosed Properties. The bill would have cleared title of homes affected by defective foreclosures with a one year waiting period from enactment of the bill while giving homeowners three years to challenge wrongful foreclosures. The Governor filed an amendment to the bill, raising the statute of limitations for homeowners to challenge foreclosures from 3 years in the current bill to 10 years. The Senate and House are unlikely to agree on such an absurdly long statute of limitations, so Patrick’s action should effectively kill the bill.

This is truly devastating news for the thousands of innocent homeowners who are stuck with bad title due to botched foreclosures.

The bill had cleared the Senate and House with near unanimous support. The bill also received favorable press in the Worcester Telegram and Boston GlobeThe bill preserves the right to challenge foreclosures and sue the banks, while helping innocent homeowners stuck with bad title. Despite this, organizations such as the Massachusetts Alliance Against Predatory Lending and activist Grace Ross were successful in getting Governor Patrick on their side.

The Governor’s statement accompanying his action on the bill states as follows:

Massachusetts is emerging from a period of far too many foreclosures, on far too many families, and in far too many communities facing significant economic challenges. It is no secret that, too often, the foreclosure was not properly effectuated.  The entity purporting to foreclose did not have the legal authority to do so.  The effect of these impermissible foreclosures has been lasting.  Families were improperly removed from their homes.  Buyers who later purchased the property — or, at least, believed they had done so — are now faced with title questions.  Many of these buyers were investors, but many are now homeowners themselves. I commend the Legislature’s effort to address these problems.  But I believe the proposed three year period is insufficient.  A family improperly removed from its home deserves greater protection, and a meaningful opportunity to claim the right to the land that it still holds.  The right need not be indefinite, but it should extend for longer than three years.  Certainty of title is a good thing — it helps the real estate market function more smoothly, which ultimately can help us all.  But this certainty should not come at the expense of wrongly displaced homeowners or, at least, not until we have put this period further behind us.

As a long time supporter of this bill, I am truly disheartened at this result. I thought the bill did a great job in balancing the rights of innocent home buyers who are stuck with unsellable properties through no fault of their own with the rights of folks who are fighting foreclosures. A three year statute of limitation — which is the same length for malpractice and personal injury claims — is a reasonable amount of time to mount a challenge to a foreclosure, especially when debtors have many months prior notice before a foreclosure sale. The people who would have benefited from this bill are everyday people who bought properties out of foreclosure, put money into them and improved them. I have personally assisted several of these families. Everyone agrees that the banks are largely at fault for the mess left behind with the foreclosure crisis but why put the rights of those who don’t pay their mortgages above those who do? I will never understand this rationale. Perhaps that’s why I could never be in politics!

So where do we go from here? I honestly don’t know. Fortunately, the Land Court recently issued a ruling which may help clear some of these toxic titles. Maybe the legislation will get another chance at the next session or when Patrick leaves office at the end of the year.

 

 

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Senate Bill 1987 Passes Legislature at Midnight Hourstop20foreclosure1.jpg

Senate Bill 1987, sponsored by Shrewsbury State Senator Michael Moore and the Massachusetts Land Title Association, would render clear and marketable to any title affected by a defective foreclosure arising out of the U.S. Bank v. Ibanez ruling. Estimates are that hundreds of innocent homeowners are affected by paperwork errors by foreclosure lenders, rending them unable to sell or refinance their homes.

After some favorable press in the Worcester Telegram and Boston Globe (to which I was happy to contribute), the Legislature passed the somewhat controversial bill at the midnight hour on July 31, the last night of the legislative session. The bill moves on to the Governor’s desk where housing advocates are still lobbying for rejection of the bill. The housing advocates’ arguments really show a complete lack of understanding of the title defect problem and its disasterous effect on the housing market. The bill preserves the right to challenge foreclosures and sue the banks, while helping innocent homeowners who are stuck with bad title. The upside of the bill is that more affordable homes can hit the real estate market. Isn’t that the goal of housing advocates rather than allow foreclosed homes to sit, blighted and decadent?

If you have been affected by an “Ibanez” title defect and otherwise support the bill, please contact the Governor’s Office through his email system:

http://www.mass.gov/governor/contact-us.html#email

Hopefully, I will have good news to report in the coming days…

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mass ibanez titleIt appears we may be nearing the end of the misery resulting from the infamous U.S. Bank v. Ibanez foreclosure decision, which has caused hundreds if not thousands of title defects across the Commonwealth. A recent Land Court ruling combined with significant movement on curative legislation may clear the vast majority of these defective titles.

By way of background, titles of properties afflicted with Ibanez title defects came out of faulty foreclosures, and in worst cases, cannot be sold or refinanced. Many homeowners have been waiting for 5 years or longer for some kind of resolution so they can sell or refinance their homes. 

Daukas v. Dadoun Land Court Ruling

This past week on July 23, 2014, Land Court Justice Keith Long (ironically the same judge who wrote the original Ibanez ruling) held that an Ibanez title can be cleared through the foreclosure by entry procedure as long as three years have passed since the faulty foreclosure. Typically in Massachusetts lenders use both the power of sale/auction method and entry method of foreclosure. Unlike the power of sale/auction method, however, a foreclosure by entry takes three years to ripen into good title. Judge Long ruled that even where the power of sale/auction method was defective due to non-compliance with the Ibanez decision, the foreclosure by entry method would not be affected by this non-compliance provided that the lender was the “holder” of the mortgage at the time of the entry and three years have passed since the entry.

So what does that mean in plain English? It means that titles with Ibanez defects may be insurable and marketable provided that (1) the foreclosing lender conducted and recorded a proper foreclosure by entry, (2) the entry was conducted by a lender who was the proper holder of the foreclosed mortgage, and (3) three (3) years have passed since the foreclosure entry. If you have been dealing with an Ibanez defective title, it’s best to contact an experienced title attorney and/or your title insurance company (if you have one) to see if you qualify. Feel free to contact me at rvetstein@vetsteinlawgroup.com.

Thank you to Attorney Jeffrey Loeb of Rich May PC for alerting me to the Land Court case.

Senate Bill 1987

Senate Bill 1987, sponsored by Shrewsbury State Senator Michael Moore and the Massachusetts Land Title Association, would render clear and marketable to any title affected by a defective foreclosure after 3 years have passed from the foreclosure. The bill, which has been passed by the Senate and is now before the House, is very close to being passed by both branches of the legislature, hopefully during this summer legislative session.

This is great news for the real estate market. I don’t have firm numbers, but there are probably hundreds, if not thousands, of these unsellable properties just sitting on the sidelines, and now they can get back onto the market. This is exactly what the inventory starved market needs.

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airbnbLaw Catching Up With Popular Airbnb Room Rental Website

With the promise of relatively easy money, Airbnb (Air Bed & Breakfast) is making innkeepers of many Greater Boston homeowners and even renters who are taking advantage of the popular website’s rental listing service. For those who don’t know already, Airbnb is a website where you can rent out one or more rooms in your home, condo or apartment for a nightly, weekly or monthly fee. But with some homeowners earning upwards of $20,000/year on rental income, Airbnb raises a multitude of thorny legal issues in Massachusetts, including whether an innkeeper or rooming house license is required and whether guests qualify as tenants. Last year, a group of Brookline residents dropped a dime on a local homeowner who rented out rooms to foreign exchange students via Airbnb. According to Brookline Building Commissioner Dan Bennett, an owner may rent up to two rooms to two lodgers as of right, as long as there are no separate cooking facilities. If an owner wants to have another lodger, they would require relief from the Zoning Board of Appeals.

According to a recent Boston Globe article, Airbnb’s website currently lists nearly 3,500 properties for rent in the Boston area — a 63% increase since July 2013. Some of the lodging arrangements offered cost less than $50 per night and involve little more than a bed, a key, and zero conversation. Others offer entire homes, bed-and-breakfast-intensity chitchat, and prices that can top $800 per night. Aspiring innkeepers are everywhere, from Dorchester to Revere, Boston to Somerville, advertising “treetop views,” “steps to the T,” “cozy penthouses,” even “lovely puppies.”

But with success has come negative attention from cities and towns that want to tax the lodging arrangements as they do hotels, from landlords with leases that prohibiting sublets, and from neighbors who don’t want strangers traipsing through buildings. There are also some horror stories popping up with Airbnb guests turning into squatters and refusing to leave. In New York City, the Attorney General is waging a publicized legal fight to get Airbnb host names and recover unpaid hotel taxes. 

Licensing and Registration Requirements

From a legal perspective, there is no doubt that Massachusetts municipalities will eventually be considering whether Airbnb qualifies as a rooming or lodging house, bed and breakfast or hotel for purposes of both regulation and taxation. Hey, you think cities will pass up a golden opportunity to increase tax revenue? No way.

The state Executive Office of Health and Human Services recently opined in a memo that lodging of this type is subject to local licensure as a bed and breakfast. For now, the City of Boston Inspectional Services Department has issued a temporary policy not to issue citations to homeowners while an internal group works on recommendations. A city policy is expected this fall, and as yet, no per-bed fee rate has been set.

The Licensing Board for the City of Boston requires a lodging house license if lodgings are rented to four or more persons not within the second degree of kindred to the person conducting the lodging. This license is an annual requirement and a lodging house is further required to keep, in permanent form, a register of the true name and residence of occupants for a period of one year. Lodging house license may require upgrades with smoke detectors and fire prevention systems which may be cost prohibitive for any Airbnb host.

The Boston Inspectional Services Department requires that a property be registered if it is to be occupied without the owner of the property present. This registration is done on an annual basis and inspection of the property is required on a five (5) year cycle by the Inspectional Services Department. This regulation applies to “a non-owner occupied room or group of related rooms within a dwelling used or intended for use by one family or household for living, sleeping, cooking and eating.” More information is available here.

In the suburbs, Airbnb may also run afoul of zoning by-laws which regulate whether a home is a single family or multi-family dwelling.

Taxes. The City of Boston excise and convention center taxes (together known as room occupancy taxes) may apply to an Airbnb listing. Refer to the Massachusetts Room Occupancy Tax Guide for more details. In addition, the Massachusetts excise tax may also apply. Refer to Section 64G(3) of the State Tax Code.

Guests Considered Legal Tenants?

Airbnb offers rentals for a daily, weekly or monthly charge. Whether a guest would be considered a legal tenant entitled to the vast protections under Mass. law depends primarily on the length of the tenancy. Under state law, if the premises is deemed a rooming house or lodging house, a rental for three consecutive months constitutes a tenancy at will which can only be terminated with a rental period notice of at least 30 days. Occupancy of a dwelling unit within a rooming house or lodging house for more than 30 consecutive days and less than three consecutive months may be terminated only by seven (7) days notice in writing by the operator of the rooming house or lodging house to the occupant. A daily rental is a grey area and would likely be considered a mere license. However, in all instances, the host must use court eviction proceedings to evict the guest, and cannot resort to self-help such as changing the locks, lest they be subject to liability.

Apartments

If you have the chutzpah of renting out a room in your leased apartment via Airbnb, the rental will likely violate your lease’s provision against sub-leasing and your landlord will not be happy. Most standard form apartment leases provide that any sub-lease must have the written consent of the landlord so the landlord can control who occupies the unit. Most landlords I know will not approve of an Airbnb rental situation, unless they are getting income and are assured of the security and safety of the situation. Renting out your apartment through Airbnb can violate your lease and subject you to a quick exist via eviction. From one legal question and answer website, tenants are already facing eviction for using Airbnb.

Condominiums

If you are renting out a room in your condo, Airbnb rentals may also conflict with condominium rules and regulations. I highly doubt your condominium association and fellow unit owners would be happy if a unit were turned into a revolving door of bed and breakfast guests. Most condominium documents provide for rules governing the type and length of rentals of units. Unit owners who violate these rules can be subject to fines, penalties and court action.

Mortgage and Homeowner Insurance Policy Ramifications

Most conventional single family and condominium Fannie Mae compliant mortgages contain a provision where the owner agrees that the mortgaged property will remain the borrower’s principal place of residence and not an investment property. Investment property mortgage typically carry a higher interest rate and are sold in a different category in the secondary mortgage market. Homeowners who make a practice of using Airbnb may unknowingly be violating their mortgage agreements by converting the property into in essence a rental property. The same holds true for a standard homeowner’s insurance policy. Turning your home into a bed and breakfast certainly raises a host of new risks for both the homeowner and the insurance company underwriting those risks. If there is an unfortunate accident involving an Airbnb guest, watch out because the insurance company could deny the claim due to converting the character of the insured property into a rental property.

What’s Next?

Airbnb is certainly a game-changing technology in the rental space. As is common with any new distruptive technology the law is just catching up. But the law will catch up and Airbnb hosts and guest must pay attention and comply with whatever regulations and law that are passed. Check back here for more developments as I will be monitoring the situation.

 

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ma-lowell-hamiltoncanal-2Wyman v. Ayer Properties:  SJC Holds That Economic Loss Doctrine Inapplicable In Condominium Construction Defect Claims

In an important ruling which will make it less difficult for condominium associations and trustees to seek redress for faulty or defective construction, the Supreme Judicial Court has jettisoned the “economic loss doctrine” in the condominium context and affirmed a $300,000 plus judgment against a Lowell based real estate construction company over faulty construction at a condominium. A link to the opinion can be found here.

The economic loss doctrine provides that a claimant must suffer some sort of property damage or personal injury in a negligent construction claim before being able to recover compensatory damages. The strict application of the economic loss doctrine in condominium construction defects was often the “magic bullet” used by insurance companies to defend these claims. Using some much needed common sense, the court held that the doctrine should not apply strictly in the condominium setting due to the peculiar nature of a condominium ownership structure with the association/trustees owning the common areas but with unit owners having contracts with the developer.

Going forward, condominium trustees will likely have more success in recovering their losses for defective construction against developers over common areas. On the flip side, insurance premiums for construction companies may rise due to the increased liability exposure.

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Hull-Wind-Turbine-from-seantyler-via-FlickrControversial Wind Turbine Project Approved, Over Neighbors’ Opposition, Appeals Court Rules

Plans for a controversial wind turbine on top of Turkey Hill in swanky coastal Cohasset could soon move forward after the Massachusetts Appeals Court upheld a land court ruling that the town’s planning board acted appropriately when it approved the project. The court dismissed opposition arguments by neighbors and a nearby skilled-nursing home who challenged the project’s legality.

The wind turbine is proposed to be sited at the apex of 410-foot-tall Turkey Hill in the northwest corner of Cohasset, in the 314-acre Whitney Thayer Woods, and would be within 1,000 feet of the Golden Living skilled-nursing home and homes on the Hingham side of the border. The nursing home and neighbors complained that the turbine would emit excessive “shadow flicker,” noise and also risk various public safety issues. 

In 2011, the Cohasset Planning Board held hearings on the wind turbine plans, and issued a special permit with numerous conditions for which the operator must comply. The abutters focused on the “flickering shadows” that the 150-foot blades would cast on nearby properties. Land Court judge Gordon Piper in 2012 upheld the board’s approval, determining that the permit’s special conditions adequately address safety concerns and follow zoning bylaws. For example, the permit requires that the organization monitor flickering and make sure that it doesn’t exceed 30 minutes per day or 300 hours per year.

The Appeals Court quickly shot down all of the neighbor’s concerns, holding that it would not second-guess the judgment of local officials who granted the permit.

According to the Patriot Ledger, Jim Younger, the director of structural resources and technology at the Trustees of Reservations said that the group is “very pleased” with the court’s ruling and grateful for the widespread support for the project. “At this time, we are still very interested in moving forward with the project and will be reassessing our options following the lengthy delays to the project. We will keep the community informed as we complete this review.”

Wind turbine projects are becoming increasingly more accepted by towns to boost both power and revenue so they are less reliant upon the “grid.” This ruling shows how difficult it is for abutters and neighbors to challenge a wind project once the town planning board has issued a permit.

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eviction-notAvoid Being Dead On Arrival In Eviction Court

The first step in evicting any Massachusetts tenant is issuing a notice to quit which is a legal document formally notifying the tenant that his tenancy is being terminated for a particular reason and giving him the date upon which he must move out. There are very specific rules as to how the notice must be drafted, what it must say, and how it must be delivered. Any mistakes in providing a proper notice to quit can torpedo your eviction case before you even see a judge. Needless, to say I recommend hiring an experienced Massachusetts eviction attorney to handle drafting and serving the notice to quit. Here are all the various rules and considerations for sending out a notice to quit.

A.      Non-payment of Rent

One of the most common reasons for starting an eviction is for non-payment of rent. Whether the tenant has a written lease or is a tenant at will the landlord must send the tenant a 14 day “notice to quit” before starting the eviction process. The notice to quit will typically provide as follows:

Dear Mr. Tenant: This office represents your landlord, Mr. Landlord. You are hereby notified that your tenancy is terminated and to quit and deliver up and move out of the premises you now rent namely: 123 Main Street, Anytown, MA and all appurtenant uses thereto 14 days after your receipt of this notice. The reason for this notice is that you have failed to pay the rent due as follows: Total Owed: $7,200.00.

1. Service of the Notice

Many landlords believe that a notice to quit should be served by certified/registered mail. This is a very bad practice because the tenant can always avoid the mailman. In court, the landlord has the burden of proving that the tenant received the notice. The best practice is to have the notice to quit served by a constable or sheriff to ensure proof of delivery. Under the court rules, service by a constable or sheriff is “good service” whether the tenant is served in hand or the notice is left at the premises.

2.  Tenants At Will

If a landlord is sending a 14 day notice to quit for nonpayment to a tenant at will (as opposed to a tenant with a written lease for a set term), the notice must also include the following language:

 “If you have not received a notice to quit for nonpayment of rent within the last twelve months, you have a right to prevent termination of your tenancy by paying or tendering to your landlord, your landlord’s attorney or the person to whom you customarily pay your rent the full amount of rent due within ten days after your receipt of this notice.”

3. Calculating Notice Date

The next trap for the unwary is calculating the notice date. You cannot start the eviction until 14 days have elapsed since the tenant is served with the 14 day notice to quit. So you need to know exactly when the tenant was served so you can properly calculate the date upon which you can start summary process. If you start the eviction too early, the case will get dismissed.

4. Cure Rights

Landlords should also be aware that under tenant-friendly Massachusetts law, a tenant at will can cure and reinstate his tenancy by paying the outstanding rent (plus court costs if claimed) up to the Monday answer date in the eviction case — and most judges won’t evict any tenant who shows up to court fully paid up.

Sometimes, landlords make the mistake of accepting rent from a delinquent tenant without endorsing the check the proper way in order to avoid reinstating the tenants. If you receive a rental payment after a notice to quit is issued, you must endorse the check as follows:

“Accepted for use and occupancy only and not for rent”

Your notice to quit should also have the following non-waiver language:

If your tender of rent or payments does not comply with the requirements noted above or otherwise cure or excuse the breach as provided by law, any funds paid by you after the date of this notice shall be accepted for use and occupancy only and not for rent, shall not waive this notice or any subsequent eviction proceedings, nor shall it create or reinstate any tenancy.

B.      Termination of Tenancy At Will

Sometimes landlords just want to move on from a problematic tenant at will, raise their rent or change the lease terms. In these situations, landlords must serve a notice terminating tenancy at will. This is sometimes called a 30 day notice, but this is actually inaccurate because almost always more than 30 days notice is required to be given. It’s really a rental period notice.

Generally, at least a full rental period of notice must be given to a tenant at will, but the termination date must be at the end of the following rental period, or 30 days whichever is longer. For example, if you are terminating a tenancy at will on June 10, the notice must provide that the tenant must vacate by the following July 31. Terminating a tenancy at will in February will also be problematic.

In practice, judges will often give tenants in no-fault evictions a bit more leeway in terms of vacating the premises.

C.  Non-Renewal of Lease/Offer of New Tenancy

Most landlords get tripped up in the situation where a written lease self-extends but the landlords wants to raise the rent, change the lease terms or move on from the tenant. In this situation, a notice terminating tenancy must be issued to formally terminate the tenancy, coupled with an offer of a new lease/tenancy. If the tenant does not accept the offer of a new lease/tenancy, the tenancy will end on the date provided in the notice. If the landlord wants the tenant to move out, he doesn’t need an offer of a new tenancy obviously.

D.      For Cause Situations

“For cause” evictions encompass a wide range of bad behavior by tenants in violation of lease provisions or the law. It could be illegal activity, drug use, excessive noise, uncleanliness, harassment of other residents, non-approved “roommates” and the like. Like all other evictions, the landlord must issue a notice to quit to the tenant stating the specifics of the offenses. If the tenant has a standard form lease, the notice to quit will typically be a 7 day notice. For tenants without a written lease, it’s a gray area, but I would use a 30 day notice. For drugs and other illegal activity, Massachusetts also has a special expedited eviction process where you can go to court right away without any prior notice to quit, but the tenant is entitled to notice of the court proceeding and an opportunity to contest it and cross-examine witnesses.

Sending a proper notice to quit is merely the first step in the eviction process, but a very important one as it can get your case dismissed before a judge hears the merits of the case. There are so many other procedural traps for the unwary which follow during an eviction case. Again, if you are considering evicting a tenant, do not attempt to do it yourself.

____________________________________

100316_photo_vetstein-2.pngIf you need assistance drafting and serving a notice to quit and evicting a tenant, please contact Attorney Richard Vetstein via email at rvetstein@vetsteinlawgroup.com or telephone at 508-620-5352.

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how to handle criticismAttorney’s Obnoxious Conduct At Closing Factor in Large Award

Every now and then I have a contentious deal where I should be wearing a black and white referee’s shirt instead of a shirt and tie. I’m usually successful in getting everyone to calm down and close the transaction. The case of KGM Custom Home Builders v. Prosky (embedded below) recently decided by the Massachusetts Supreme Judicial Court is an example of how really bad behavior at a real estate closing can get a party into big legal trouble.

45 Acres in Mansfield for Sale

The Prosky family of Mansfield entered into an agreement to sell 45 acres of developable land to KGM Custom Builders. The sale price was linked to the number of buildable lots that KGM could permit. After spending over $300,000 in 5 years including weathering an appeal, KGM was able to obtain permits for 60 residential units. However, the Proskys received a better offer for the land and a dispute over calculation over the purchase price arose. Nevertheless, KGM was not willing to back down, and scheduled a closing. Repudiating the contract, the Prosky’s attorney informed KGM that it should calculate the liquidated damages provision in the contract because the sellers were not going to sell.

Closing Shenanigans

A closing was nevertheless scheduled at which the Prosky’s attorney showed up with a professional videographer as “defense strategy.” The parties’  attorneys started yelling at each other, and KGM’s attorney shut off all electricity to the building, but the videographer was able to tape with battery power. KGM’s attorney demanded that the Prosky’s attorney produce the closing documents he was supposed to have drafted. The Prosky’s attorney waived the documents in the air, and when the buyer’s attorney went to grab them, he pulled them back and asked if could read them from 2 feet away. KGM, with funds on hand, was ready, willing and able to close, and took the Prosky’s attorney’s antics at the closing as not engaging in good faith, and walked out. At the end of the closing, one of the sellers asked the videographer, “can you explain to me what just happened”? (I would love to see this videotape!).

Anticipatory Repudiation, Breach of Good Faith and Fair Deal, or Both?

Naturally, KGM sued the sellers. The trial judge ruled the sellers had engaged in anticipatory repudiation but he calculated the sales price in favor of the sellers at over $1M, giving the buyer the option of going forward with the deal or taking the liquidated damages because the buyers had also breached the covenant of good faith and fair dealing with their attorney’s antics at the closing. The buyer elected damages, and the judge awarded nearly $500,000 in permitting costs and attorneys’ fees. The sellers weren’t happy with this, so they appealed.

On appeal at the SJC, the legal issue was whether the law allowed the trial judge to provide the buyer with this favorable election of remedies. With few exceptions, outside of the commercial law context, Massachusetts has not generally recognized the doctrine of anticipatory repudiation, which permits a party to a contract to bring an action for damages prior to the time performance is due if the other party repudiates. One such exception occurs where a seller of land informs the “holder of an enforceable option” to purchase that he plans to sell the land to a third party. The high court ruled that this case fit within this exception and upheld the award of damages to the buyer. Naturally, the court seemed particularly upset about the behavior of the seller’s attorney at the closing. In fairness, the SJC did slash the attorneys’ fee award by $120,000, but with statutory interest accruing for several years now, the end result will likely be the same — the sellers are out a lot of cash.

Fortunately, these types of antics are very much the exception rather than the rule at Massachusetts closings. There is really no excuse for this type of unprofessional behavior at a closing, no matter how contentious the dispute. If a party is going to elect to terminate a deal, go ahead and do it without the theatrics. After all, what you say and do at a real estate closing may come back to bite you and your client.

KGM Custom Home Builders v. Prosky (MA SJC 5/30/14)

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