Condominium Law

A Ticking Time Bomb: HOA Covenants Across Massachusetts May Have Silently Expired

by Rich Vetstein on July 13, 2024

in Condominium Law, Deeds, Land Court, Massachusetts Property Values, Massachusetts Real Estate Law, Title Defects, Title Insurance

Hundreds of Massachusetts Homeowner’s Association (HOA) Covenants, Conditions and Restrictions (CCR’s) May Be Void and Unenforceable

After a homeowner balked about paying a late fee, I was recently asked by a local homeowner’s association down the Cape to review their Homeowner’s Association Covenants. To my surprise, I discovered that in light of an under-the-radar 2017 Appeals Court ruling, the covenants had silently expired and gone into void and unenforceable status, with no legal ability to resurrect them. Upon further research, I learned that hundreds of HOA covenants across the state may be unwittingly facing the same situation.

Background: Declaration of Restrictive Covenants

In my situation, a “Declaration of Restrictive Covenants” for a subdivision of some 40 lots was recorded back in 1977 with the Barnstable County Registry of Deeds. The Covenants created the homeowner’s association to govern the subdivision, assess HOA fees, and imposed numerous rules and regulations on what could be done by homeowners, including regulating exterior house design and changes, installation of fences, parking of trailers and boats, and trash/recycling. The Original Restrictive Covenants did not specify a duration for which they were effective. Accordingly, by default under Massachusetts law (Mass. Gen. Laws ch. 184, §§ 26-30), the restrictions could only be in place for 30 years, with an option to extend for an additional 20 years upon an owner vote and recording of a formal extension. (Note that the restriction statute does not apply to condominiums). Although the Original Restrictive Covenants provided that the original developer, his successors and assigns reserved the right to “waive, alter, or amend” the restrictions, the document critically failed to provide a clear mechanism for if and how the restrictions could be extended in the future. In my situation, the HOA tried to extend the term of the covenants by the additional 20 years, but unfortunately did so well after the original covenants had already expired.

Berger v. 2 Wyndcliff LLC, Appeals Court (2017)

Based on my analysis of current Massachusetts law, especially new case law considering similar restrictive covenants to the one here, I concluded that the original covenants had expired and that the attempt to extend them was futile. The issue is controlled by a 2017 Appeals Court decision, Berger v. 2 Wyndcliff, LLC, 92 Mass.App.Ct. 517 (2017) which holds that restrictive covenants cannot be extended unless the original covenants contain a clear mechanism for such extension.

In Berger, in the course of developing land in Acton, a developer executed an agreement of protective covenants and easements for the benefit of future mortgagees, buyers, and owners of the land. As is common, the covenants expressly provided that they are to “run with the land” and bind the parties claiming under them “for a period of thirty (30) years from the date these covenants are recorded.” The covenants limited construction on each lot to one single-family dwelling, with a two– or three-car garage. The agreement provided that they “may be amended or revoked, in whole or in part, by an instrument signed by two thirds or more of the then owners of the lots covered hereby, said amendment or revocation to be effective upon recording thereof at the … Registry of Deeds.”

Twenty one (21) years after the original restrictions were recorded, the owners filed an amendment to provide specifically that the original duration would be thirty years from the date the original agreement was recorded, plus that the restrictions could be extended for further periods of not more than twenty (20) years upon a sufficient vote by owners. Shortly thereafter, the owners recorded an extension document purporting to extend the restrictions for the additional 20 years.

In Berger, a disgruntled owner challenged the validity of the restrictions on the basis that they did not clearly provide for a mechanism or right to extend past the 30 year term. Both a Land Court judge and an Appeals Court panel of three justices agreed. As the Appeals Court summarized, the applicable law on restrictions governing subdivisions (referred to also as a “common scheme”) is as follows: “Restrictions on land are generally disfavored, and the Legislature has established procedures by which a landowner may remove or prevent the enforcement of obsolete, uncertain or unenforceable restrictions. At the same time, the Legislature has not precluded landowners from bargaining for, and enforcing, beneficial land use restrictions that contain a lengthy, but definite term of duration. One method the Legislature has employed to address these competing interests is to limit enforcement of restrictions to 30 years generally and, while freely allowing longer durations, requiring landowners to comply with certain specific steps should they desire to impose restrictions lasting more than thirty years. Even restrictions that contain an express durational limitation in excess of 30 years may not be enforced for more than 30 years unless certain steps are taken.”

As noted above, Mass. General Laws provides a “sunset” requirement for all restrictions and extensions as a part of subdivisions: “No restriction imposed after December [31, 1961,] shall be enforceable . . . (b) after thirty years from the imposition of the restriction, unless (1) the restriction is imposed as part of a common scheme applicable to four or more parcels . . . and provision is made in the instrument or instruments imposing it for extension for further periods of not more than twenty years at a time by owners of record, at the time of recording of the extension, of fifty per cent or more of the restricted area in which the subject parcel is located, and an extension in accordance with such provision is recorded before the expiration of the thirty years or earlier date of termination specified in the instrument . . . .” See Mass. Gen. Laws. Ch. 184, § 27.

In the Berger case, the Appeals Court ruled that under the above statute, in order to impose a restriction for more than 30 years, the instrument originally creating the restriction must include a provision for extensions, and this one critically did not. The Court also added that “where extension provisions are not contained in the original instrument, the statutory scheme does not allow subsequent amendments to add new provisions for extensions.” The Court found the original language wholly lacking as to the right to extend where it only provided that the restrictions “may be amended or revoked” and nothing more. Thus, the covenants were now void and unenforceable.

Impact and What Now?

This is a great question. We are now in 2024, so the 30 year period under G.L. c. 184, § 26 would take us back to 1994.

Accordingly, any HOA Declaration of Restrictive Covenants recorded before 1994, which was not properly extended before expiring or contained the fatal defect of not having an extension mechanism at all, is now at risk of having expired unwittingly under the Berger ruling.

This situation likely affects hundreds of HOA’s in Massachusetts, with a fair amount of them being down the Cape, it appears. (Remember condominiums are excluded from the restriction statute, otherwise this would be a complete disaster across the state).

My clients were quite shocked to learn that most of their HOA covenants were now void and unenforceable. When I say “most” I mean that the rules that actively restrict use of property, i.e, design and construction rules, parking, rentals and the like, cannot be enforced. Annual dues and assessments, common area maintenance, etc. likely can be enforced as an “equitable servitude.”

Can a new set of restrictive covenants be recorded and implemented? I’m not so sure of that, given the state legislative policy of setting a hard sunset expiration period. I’m sure some HOA’s will try to get lot owner votes in place and record a new set of covenants as if they were original to the subdivision. We will have to see how this plays out at the registries of deeds and in the courts if these HOA covenants are challenged. I welcome the comments from other conveyancing attorneys and title insurance counsel.

If your homeowner’s association is facing this issue or you need further guidance on this topic, please feel free to reach out to me at [email protected].

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Coronavirus (COVID-19): Impact On Massachusetts Real Estate

by Rich Vetstein on March 10, 2020

in Closings, Condominium Law, COVID-19, Electronic Closings, Land Court, Massachusetts Real Estate Law, Purchase and Sale Agreements, Real Estate Market, Realtors, Refinances, Safety

Potential Impacts: Registry of Deeds Closings, Financing Delays, New Covid-19 PSA Clause, Housing Market Slow Down?

The Coronavirus (COVID-19) is a highly infectious respiratory virus, which originated in Wuhan, China, and has spread across the globe, wreaking havoc on financial markets, public health systems, schools, universities, and daily lives. As of March 9, there are 729 reported cases in the US, with 27 deaths. Here in Massachusetts, as of March 9, there are 41 cases with no reported deaths. Infectious disease experts predict that the virus will continue spreading across the United States, affecting just about every aspect of our lives.

Update (3/17/20): Registry and Court Closings

Update (3/27/20): Impact on Rental Housing

Update (3/26/20): Remote Notarization Legislation

Here in Massachusetts, we are beginning to see significant impacts. Harvard University just cancelled all classes in favor of online instructions. Mayor Walsh has cancelled the St. Patrick’s Day parade. Some schools are closing temporarily and cancelling events. Companies are cancelling conferences and restricting travel. And of course, the stock market has dropped precipitously.

Likewise, in the real estate industry we are starting to see impacts as well. Despite the COVID fear factor, most agents are still reporting robust attendance at open houses and market activity, as confirmed by Curbed Boston. However, that may soon change as the virus gets increasingly widespread and the impacts to the financial markets begin to set in. I’m going to outline some potential impacts going forward, and I’ll update this post as developments emerge.

Registry of Deeds and Court Closings

Update (3/13/20): Suffolk and Salem Registry have shut down public closings. Only title examiners and attorneys are allowed access. They are still recording documents.

We are starting to see court and government building closings in other states. Federal courts in New York’s Southern District, including Manhattan, are restricting entry. No one will be allowed in who traveled within the past 14 days to China, South Korea, Japan, Italy or Iran, or who had close contact with someone who has. Trials have been postponed in Seattle and Tacoma courts.

No closings have been announced here in Massachusetts, but it’s a possibility. Virus impacts may result in Registries of Deeds and the Land Court being forced to closed or operate with a skeleton staff.

Fortunately, we have electronic recording capabilities here in Massachusetts. If the registries are closed, hopefully they will still allow for e-recording which should enable closings to keep on track. However, registry staff must still examine each electronically recorded document so there still could be impacts. We don’t know the fully extent of the impacts, if any.

Lender/Financing Delays

I have not yet heard of any major disruptions to lenders’ ability to provide financing. However, it’s not out of the realm of reason if companies are requiring their employees to work from home, etc. Further, if there are government employee impacts such as at the IRS for processing tax transcripts, there could be delays with underwriting. The same is true if appraisers cannot get out into the field and do their reports. I’ve already heard of at least one lender asking an attorney for a COVID-19 delay provision in a purchase and sale agreement, which brings me to the next topic…

COVID-19 Delay Clause In Purchase and Sales Agreement

Due to the various impacts and possibilities for delays as outlined above, we are already seeing requests for language dealing with the Coronavirus in purchase and sales agreements. As just mentioned, there may be lender delays affecting a buyer’s ability to obtain timely financing due to virus impacts. Buyers and sellers may be subject to quarantines, or if they are traveling, they may be stuck in a public health purgatory like the Princess Cruise ship. If Registries are closed and no e-recording is allowed, then closings will need to be cancelled or rescheduled. My colleagues and I are working on a new COVID-19 clause that will balance all of these concerns.

Our draft provision (subject to change) is as follows:

COVID-19 Impacts. The Time for Performance may be extended by either Party by written notice for an Excused Delay which materially affects the Party’s ability to close or obtain financing. As used herein an Excused Delay shall mean a delay caused by an Act of God, declared state of emergency or public health emergency, pandemic (specifically including Covid-19), government mandated quarantine, war, acts of terrorism, and/or order of government or civil or military authorities. Notwithstanding anything to the contrary contained in this Agreement, if the Time for Performance is extended, and if BUYER’S mortgage commitment or rate lock would expire prior to the expiration of said extension, then such extension shall continue, at BUYER’S option, only until the date of expiration of BUYER’S mortgage commitment or rate lock. BUYER may elect, at its sole option, to obtain an extension of its mortgage commitment or rate lock. Notwithstanding the foregoing, said Extension shall not exceed [insert number of days].

Impact On The Real Estate Market

If you’re in the market for a house, all this uncertainty might have you worried about the housing market. Will it suffer a swoon similar to Wall Street? There are a few ways the virus could affect the housing market that you should be aware of. However, I think we can breath a sigh of relief, because a housing catastrophe on the scale of the 2008 financial crisis is almost certainly not going to happen.

The good news is that mortgage interest rates are still at historic lows. However, I’m also hearing that a lot of lenders are at full capacity with demand for both refinances and purchases so rates may be heading up in the very near future.

I think as we are heading towards a global recession and the continuing daily life impacts of the virus, we are going to see a slowing down of the real estate market in general. Uncertainty is the hobgoblin of the home buyer. Indeed, this is exactly what Lawrence Yun, Chief Economist at the National Assoc. of Realtors is saying:

I hope I’m wrong. Comment below or shoot me a line ([email protected]) and tell me what you’re seeing out there. I’ll keep you posted with any developments.

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Contract Deadlines Can Be Waived and Other Cautionary Tales From the Real Estate Trenches

by Rich Vetstein on November 6, 2019

in Closings, Condominium Law, Massachusetts Real Estate Law, Offer To Purchase, Purchase and Sale Agreements, Real Estate Litigation

Parties Who Negotiated Past Purchase and Sale Agreement Deadline Waived It, Court Rules

The Massachusetts Appeals Court just came down with a ruling which should be a cautionary tale to everyone in the residential real estate business. It’s an interesting fact pattern, but not necessarily unusual. For those with short attention spans, the Court held that the standard deadline to execute the purchase and sale agreement is not necessarily a hard deadline. Rather, the deadline can be waived by the parties if they negotiate beyond the date, even without a formal extension in place. The Court also held that where the property is owned by several individuals, even if only one of those individuals sign the offer, this is not necessarily fatal to the deal.

Ferguson v. Maxim, Mass. Appeals Court, 18-P-1081 (Nov. 6, 2019)

In the case, the buyer, David Ferguson, and the seller, Joyce Maxim, signed the standard form Offer to Purchase put out by the Massachusetts Association of Realtors for the sale of residential property in Leominster. (For my post comparing the MAR form with the Greater Boston Real Estate Board, click here). It turns out that title to the property was actually held by a group of five individuals including Maxim, but we will get to that in a few. As is standard, the Offer provided that the parties would enter into a standard form purchase and sale agreement by a specific deadline. However, the seller’s attorney did not sent out a draft PSA until after the deadline, and negotiations continued well past the deadline without any issue raised by the parties or their attorneys. Both attorneys had suggested formalizing an extension of the PSA deadline at various times, but a formal extension agreement was never signed. At some point the seller’s attorney tried to cease the negotiations acknowledging that “we are well beyond our [PSA] date.” A week later, the buyer’s attorney tried to resurrect negotiations and save the deal. Further negotiations ensued between the parties, but they were abruptly stopped by the seller’s attorney who stated that the deal was for all intents and purposes dead.

Mr. Ferguson, the buyer, was naturally upset, and sued, seeking an order of “specific performance” to enforce the deal, based on well established law that an offer to purchase is a legally binding contract for the sale of real estate. (Read the case if you want to learn about various procedural issues that arose in the case with respect to the buyer’s obtaining a lis pendens and the seller’s special motion to dismiss under the lis pendens law.).

Two Important Take-Aways

The important take-aways from the ruling were twofold. First, the Court ruled that the typical deadline to execute the purchase and sale agreement is not always a hard deadline. Some people may be surprised to here that, but under Massachusetts law, a deadline in any contract can be “waived” by the parties words, actions, or conduct. Here, the Court said that a waiver of the deadline could be found where the seller’s attorney didn’t provide the draft PSA until after the deadline and the parties freely negotiated well past the deadline, even without a formal extension in place. Second, the Court also held that where the property is owned by several individuals, only having one of those individuals sign the offer is not necessarily fatal to the deal. If there is evidence that the signatory had apparently authority to sign for the others, or that the sellers ratified the offer, then the contract could be enforced. So now the buyer’s case will continue on for trial. Interestingly, during the pendency of the case, the sellers sold the property to another party. If the buyer is successfully, that new buyer is going to be very unhappy because his transfer will be voided! He may want to lawyer up himself.

Let’s Play Monday Morning Quarterback!

Now, what could have been done differently in this case to avoid the bad result for the seller? For starters, the seller’s attorney should have delivered the draft PSA on time. Once the parties started negotiations after the PSA deadline, they were in “no man’s zone” and that can only come back to hurt the sellers. Deadlines need to be taken very seriously, and sharp lawyers will always send out emails or other written reminders of them, and reserve their rights to terminate an agreement if the parties blow past a deadline without a written extension in place. The buyer’s attorney played this correctly, and didn’t push on the deadline issue because the law would favor his client on the waiver issue (which it ultimately did).

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Vetstein Says “Yes, Always!” to Owner’s Title Insurance in Boston Sunday Globe Magazine Piece

by Rich Vetstein on October 8, 2019

in Closings, Condominium Law, Deeds, Massachusetts Real Estate Law, Title Defects, Title Insurance

Benefits and Affordability Of Owner’s Title Insurance Coverage Praised In Widely Read Article

When my friend Jim Morrison, formerly of Banker and Tradesman and now a freelance real estate reporter, contacted me about an article on owner’s title insurance, I was rather surprised. After all, title insurance isn’t the most “sexy” of real estate topics. However, I did have a whole bunch of horror stories to tell Jim about what happens when buyers don’t elect to get owner’s title insurance coverage. I told Jim the stories and, as always, recounted how I got owner’s title insurance on my own house purchases, even though I was pretty certain the title was clean. The article would be posted on Boston.com, Jim said. Sound great, Jim, thanks for letting me comment, I said.

Well, Jim wrote a fantastic article. And what do you know, but the article was so widely read and shared that the Globe decided to put it in the Boston Sunday Globe Magazine with yours truly featured in the inset! I was thrilled — not only for the good press, but more importantly, to spread the word that owner’s title insurance is a “must-have” for every buyer and a good deal financially.

You can find a link to the article here: What Is Title Insurance, and Why Do You Need It? It is really one of the best articles on owner’s title insurance that I’ve seen in a long time. For all my fellow law colleagues, real estate agents, and mortgage professionals, it’s a great piece to share on your social media feed and client newsletters!

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Governor Baker Approves New Short Term Rental (Airbnb) Law and Taxes

by Rich Vetstein on January 1, 2019

in Condominium Law, Landlord Tenant Law, Leasing, Massachusetts Real Estate Law, Real Estate Taxes, Rental Housing, Short Term Rentals

New Occupancy Tax, Statewide Registry, Insurance Requirements, and Inspections

At the very end of 2018 without much fanfare, Governor Baker signed into law a bill regulating and taxing short-term rentals. The new law provides for new taxes, a statewide registry, insurance requirements, and inspections varying by town/city. It becomes effective on July 1, 2019.

Overview of Requirements
The new law expands the state’s hotel and motel tax to include the short-term rental of homes (condominiums, single family, multifamily, etc.). This applies to Airbnb, VRBO, and all other short term rental platforms. The tax applies to all rentals for a period of 31 days or less, regardless of whether the rental is for recreational, vacation, personal, or business use. The burden is on the owner to collect and remit the taxes to their local town/city and the Mass. Dept. of Revenue, which is expected to issue guidance later in the year.

Tax Structure
The short-term rental rate varies by locality and is the total of the following rates:

State: 5.7%
Local: up to 6% (Boston 6.5%)
Cape Cod & Islands: includes additional 2.75% to fund Cape Cod and Islands Water Protection Fund
A community impact fee of up to 3% may be assessed locally on professionally managed properties (Owners of two or more units in one town).

The law requires regulations to minimize the administrative burden on tax filings for those who only rent their unit five (5) months or less each year.

Are there any exemptions in the law?
The tax imposed by the new law does not apply to properties rented for fewer than fourteen (14) days per calendar year. It is important to note that these properties are still subject to the other requirements of the law, such as insurance and registration.

When will this law take effect?
July 1, 2019

What about the 2019 rentals I already booked?
The law exempts from tax any 2019 rental that is booked on or before December 31, 2018. Rentals booked on or after January 1, 2019 for stays on or after July 1, 2019 will be subject to the tax. We anticipate that the Department of Revenue will issue guidance on how to handle the tax on bookings made on or after January 1, 2019.

Does this apply to the units I rent?
As stated above, the new law applies to all rentals for a period of 31 days or less. Ordinary rentals, such as an annual lease or a tenancy-at-will are not covered. The new law applies regardless of whether the owner rents the property themselves, hires a rental agent to rent the property, or uses an online platform to facilitate the rental.

Do I need to collect the tax?
Most likely, yes. The law requires intermediaries (which includes rental agents who post the property for rent online) who enter into a written agreement with the owner or operator to collect rent or facilitate the collection or payment of rent on behalf of the operator to collect and remit the tax. The Department of Revenue will issue regulations to clarify how often the tax should be remitted to the Department. This also means that an agent who does not collect or facilitate the collection of rent on behalf of the owner or operator does not need to collect and remit the tax.

Do I need to carry insurance for the listed properties?
Yes. Owners are required to maintain $1 million dollars in liability insurance to cover each short-term rental. The coverage is required to defend and indemnify the owner or operator and any tenants in the building for bodily injury and property damage. Realtors may elect to offer insurance coverage as part of their services but are not required to.

Before offering a property for short-term rentals, a hosting platform (including Realtors) must provide notice to the owner or operator that standard homeowners or renters insurance may not cover property damage or bodily injury to a third-party arising from the short-term rental.

Do the properties need to be registered with the state or city/town?
Each rental unit will need to be listed with the state short-term rental registry. Additionally, each city and town is permitted to create a registration requirement for short term rentals. Check with your municipal government office for details.

Are there any inspections required?
Cities and towns may implement a health and safety inspection requirement and set the frequency of inspections. Short-term rental operators are required to cover the cost of inspections and will likely face a fee to cover registration costs as well.

What are some best practices I can apply as the new law gets implemented?

Owners and rental agents should disclose to prospective renters that any booking made on or after January 1, 2019 may be subject to a tax and that the tax rate may change before the rental period.
Develop a policy to verify the number of units owned by each client in a municipality and that those units are properly insured.

The Mass. Association of Realtors has provided the following documents to help manage short-term rentals: an updated Short-Term Rental Lease, a Community Impact Fee Form, a 14-day Exemption Form, and a required Insurance Disclosure Form. These documents can be found at marealtor.com/ShortTermRentals

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Airbnb Seeks Federal Injunction Against Boston Short Term Rental Rules

by Rich Vetstein on November 13, 2018

in Condominium Law, Leasing, Massachusetts Real Estate Law, Rental Housing

Court Challenge Puts City of Boston Short Term Rental Ordinance In Legal Limbo

Referring to new City of Boston short term rental rules as “Orwellian,” Airbnb has sued the City of Boston in federal court, challenging the legality and constitutionality of recently enacted short term rental rules passed by the City Council. The rules, set to take effect on January 1, are among the most stringent efforts in the nation to regulate the burgeoning industry. The rules would bar investors and tenants from renting their homes by the night through popular websites such as Airbnb, while allowing homeowners and owner-occupants of two- and three-family houses to continue to do so.

Airbnb is not challenging the law on those grounds. Instead, it argues that requiring online hosts to enforce the rules violates the federal Communications Decency Act, which protects online platforms from being sued over third-party content, and also infringes on the company’s First Amendment right to free speech.

Airbnb means business, as it has hired one of the best attorneys in Boston, Howard Cooper of Todd & Weld. “This is a case about a city trying to conscript home-sharing platforms into enforcing regulations on the city’s behalf,” Mr. Cooper told the Boston Globe. “The City of Boston has enacted an ordinance limiting short-term residential rentals by hosts. But it goes much further than that. The ordinance also enlists home-sharing platforms like Airbnb into enforcing those limits under threat of draconian penalties, including $300-per-violation-per-day fines and complete banishment from doing business in Boston.”

A bill on Beacon Hill that would have created the nation’s first statewide short-term registry has been in legislative limbo since August, when Governor Charlie Baker sent it back to lawmakers, requesting several key changes, after the end of the legislative session.

Airbnb is seeking an injunction to prevent the new rules from going into effect. A hearing is expected to occur sometime in the next 30 days. Check back here for more developments as they occur. A copy of the lawsuit is embedded below.

Airbnb v. City of Boston by Richard Vetstein on Scribd

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Cambridge, Other Cities Exploring Giving Tenants Legal Right to Purchase Rental Properties

by Rich Vetstein on March 3, 2018

in Affordable Housing/40B, Condominium Law, Landlord Tenant Law, Leasing, Massachusetts Real Estate Law, Rental Housing

Property Owners Vehemently Opposed to “Right of First Refusal” Proposals Giving Tenants Up to 240 Days to Purchase Rental Properties For Sale

In an effort to stem the affordable housing problem, cities like Cambridge and Somerville are exploring giving tenants a legal right to purchase the homes and apartments they are renting when owners go to sell them on the open market. The concept is a “right of first refusal” which would be triggered when the owner lists the property for sale and gets a bona fide offer from a third party buyer. Under the Cambridge proposal embedded below, a tenant would have up to 240 days to put down a deposit, obtain financing and close on the purchase, and would also have the right to assign the contract to a non-profit housing trust for affordable housing. The proposed law would apply to all rented single family homes, condominium units, multifamily and apartment buildings except owner two-family residences fully owner occupied or with one of the units occupied by the owner’s immediate family. (These definitions are somewhat unclear).

Somerville State Senator Denise Provost originally filed a Tenant Right to Purchase Bill with the Legislature, but it did not move past committee. Now, Cambridge and Somerville are considering Home Rule Petitions to pass their own Right of First Refusal laws. If these proposals gain traction, they could spread to other cities and towns like Boston.

Property owner groups vehemently oppose these proposals. A similar proposal was passed in Washington, D.C, and the Huffington Post has exposed how it’s been an abysmal failure and abused by tenants. As the HuffPost, writes, “some tenants are using [the Act] to extract money from landlords, should a landlord decide to sell a building. At present, TOPA is holding up or blocking real estate transactions, causing grief for developers and homeowners and victimizing low-income residents stuck living in buildings owners are unable to sell but forced to maintain at a financial loss.”

I agree that this would be a terrible idea and extremely unfair to Massachusetts property owners. No, it’s not just terrible. It’s crazy and socialist. First, any sale of rental property is always subject to an existing tenancy or lease. That’s been the law in Massachusetts for centuries. So renters are already protected from displacement. Second, the proposal would wreck havoc on the local real estate market and skew free market dynamics. The Cambridge law would give tenants with no skin in the game 8 months to purchase a property. That’s 3 real estate cycles! Knowing that any offer would be subject to a tenant right of first refusal, investors would avoid making offers for occupied properties for sale, or would reduce offering prices, thus chilling sales. Tenants would be able to “flip” their right of first refusal to local nonprofits for affordable housing, walking away with a tidy profit. There are much better ways to create affordable housing than this idea.

Update (3/6/18): After Owner Outcry, Cambridge City Council Votes Down Proposal

Cambridge MA Tenant Right of First Refusal Home Rule Petition by Richard Vetstein on Scribd

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Mass. Lawmakers: Tax and Regulate Airbnb Rentals

by Rich Vetstein on June 27, 2017

in Condominium Law, Landlord Tenant Law, Leasing, Massachusetts Real Estate Law, Real Estate Market, Rental Housing, Technology

Proposal: 5%-10% Tax, Plus Comprehensive Regulations

Like Uber and Lyft, is the law finally catching up with the new economy-disrupting technologies for the real estate industry like Airbnb? The answer is yes if Massachusetts legislators have their way. Today, Massachusetts House legislators are holding a hearing on a new bill which would tax and regulate Airbnb and other short term rentals. The proposal is House Bill 3454 (click to read). The proposal would impose a new excise tax between 5% – 10% on short term rentals, depending on whether the host rents his/her own residence, is a “commercial host,” or the rental is professionally managed.

According to a recent Boston Globe article, Airbnb, the largest of such rental sites, reports that it logged about 592,000 guests in Massachusetts last year. Had those stays been subject to the state’s hotel tax rate of 5.7%, that would have added an estimated $15 million to the Commonwealth’s coffers. The availability of such easy tax revenue may be too much for legislators to pass up this year, although a similar effort failed at the last minute last year.

Airbnb is happily sharing these calculations because it wants to be taxed, and this week it’s airing a new TV commercialabout the issue. Now don’t think for a second that this is some kind of benevolent new-economy thing. Guests, not Airbnb, pay the tax! Taxation is also a form of legitimization for these online portals.

The House proposal would also establish a comprehensive regulatory and safety scheme on Airbnb rentals, similar to that imposed on bed and breakfasts and other small local lodging facilities. Local towns and cities would be permitted to restrict certain types of short term rentals, the number of rental days allowed, require business licenses and a housing registry, and make the host obtain liability insurance of at least $1M in coverage. Violations of the new law carry a stiff fine of up to $1000/day for the illegal rental period.

The proposal has received much attention in recent months as hearings have been held across the state. The Massachusetts Association of Realtors has come out in opposition to the bill, as with many Airbnb hosts who rely on this source of additional income.

I will keep up with developments, so check back here from time to time.

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Rolling Condominium Super-Priority Lien Upheld By SJC

by Rich Vetstein on March 31, 2016

in Condominium Law, Liens

Drummer Boy Homes Association, Inc. v. Britton

In a long awaited ruling pitting condominium associations against mortgage lenders backed by the Federal Housing Finance Authority, the Supreme Judicial Court has upheld the so-called “rolling” super-priority lien for unpaid condominium fees. What this means for condominium associations in Massachusetts is that they are able to seek super-priority liens for successive 6 month periods of unpaid condominium fees, rather than be limited to one six month period. The super-priority lien takes priority over the first mortgage on the delinquent unit, thereby giving the condominium association a powerful tool to collect unpaid condo fees.

Thomas Moriarty, Esq. of Marcus, Errico, Emmer and Brooks, who represented the condominium association told me that “we are pleased with the results and we believe that this leaves condominium associations with the power to ensure payment of condominium fees as was intended by the Massachusetts legislature when it enacted the priority lien provisions of the statute 23 years ago to deal with the emergency created by unit owners not paying condominium fees to pay for essential services.”

The SJC recognized that the non-payment of condominium fees can have disastrous consequences upon a condominium association, especially smaller projects. The super-priority lien was established by the Legislature in reaction to the real estate recession in the early 1990’s where many condominium associations were financially devastated by non-payment of condo fees. Among other protections, the super-priority lien enables an association to leverage the mortgage lender to pay up to 6 month’s worth of outstanding condominium fees on behalf of the delinquent owner. The “rolling” lien practice developed by condominium attorneys where the outstanding balance exceeded 6 months worth of fees. Two years ago, the Appeals Court ruled that the rolling lien procedure was not permissible, leaving condominium associations in limbo regarding their ability to collect unpaid fees.

Led by Tom Moriarty and Alan Lipkind of Burns & Levinson, condominium associations successfully persuaded the SJC that the Legislature intended for associations to have the protections of the “rolling” lien. The justices reasoned that “our interpretation of the statute is consistent with the Legislature’s long-standing interest in improving the governance of condominiums and strengthening the ability of organization of unit owners to collect common expenses, thereby avoiding a reemergence of the serious public emergency that developed in the early 1990”s.”

This is a major victory for condominium associations who should all be having collective sigh of relief. If you have any questions about this ruling or need assistance collecting unpaid condo fees, please contact me at [email protected] or 508-620-5352.

Drummer Boy Homes Association v. Britton

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$1.85 Million Verdict Upheld Against Demoulas In-Law In Back Bay Condo Squeeze Out

by Rich Vetstein on January 8, 2015

in Condominium Law, Massachusetts Real Estate Law, Real Estate Litigation

One of Largest Verdicts In A Condominium Dispute

In a David vs. Goliath case pitting a Demoulas family heir against an elderly Brandeis professor over a tony Back Bay townhouse, the Appeals Court has let stand a $1.85 Million jury verdict — one of the largest awards in a private condominium governance dispute. The case is also one of the first to successfully employ the Massachusetts Civil Rights Act in a private real estate dispute. With interest and an award attorneys fees of $1.9 Million, the judgment will swell close to $4 Million — providing a cautionary tale to condominium trustees who abuse their power for ulterior purposes. The case is Kettenbach v. Wodinsky, Mass. Appeals Court (Jan. 6, 2015), embedded below.

A Classic David vs. Goliath Tale

In 1996, Michael and Frances (Demoulas) Kettenbach bought a unit in the 5 unit townhouse located at 303 Commonwealth Avenue in the Back Bay. (Frances is the sister of Arthur T. Demoulas who was recently reinstated as CEO of Market Basket after a publicized family fight). With the goal to acquire all of the units and convert the building to a grand single family Back Bay residence, Kettenbach purchased three more units, leaving only the top floor unit owned by Jerome and Bernadette Wodinsky. The Wodinskys, who had owned their the fourth floor unit for over 30 years, didn’t want to sell.

According to the court’s ruling, Kettenbach enlisted Gary Crossen, a former prominent Boston attorney who was the Demoulas family’s trial lawyer in their epic family litigation in the 1990’s. When the Wodinsky’s made it clear they were not selling, Kettenbach and Crossen began to put the proverbial “squeeze” on them. Armed with the controlling interest in the condominium association, they summoned state inspectors to condemn the building elevator, leaving the 82 year old Wodinsky, who suffers emphysema, to make the daily climb up 86 stairs to his fourth floor unit. Instead of repairing the elevator, Kettenbach voted to replace it at a $275,000 price tag. When the roof leaked, rather than repair it, Kettenbach insisted on installing a new one – even though it was only 10 years old. He also completely replaced the building’s heating system and did a massive overhaul of the electrical system. The result was a $1 million special assessment, 20% of which Kettenbach attempted to impose on Wodinskys. Kettenbach also hired a private investigator who showed up at Mrs. Wodinsky’s workplace and threatened her with bankruptcy.

Staggering Jury Verdict

Not backing down, the Wodinskys sued, asserting claims under the little used Massachusetts Civil Rights Act, abuse of process, civil conspiracy, and the Consumer Protection Act, Chapter 93A. They won an early victory when a trial judge issued an injunction forcing Kettenbach to fix the elevator. The case went to trial in 2011 over 19 days, and the jury returned a whopping $1.85 Million verdict in the Wodinsky’s favor. Although the trial judge vacated the judgment on the Chapter 93A count, which would have given the Wodinsky’s triple damages, he left the judgment intact on all other claims. Both parties appealed.

Jury Verdict Upheld on Appeal

On appeal, Appeals Court Justice William Meade upheld the entire jury verdict and judgment, and awarded the Wodinsky’s their appellate attorneys’ fees and costs, which will balloon the judgment against Kettenbach to well over $4 Million and change. The justice held that there was ample evidence that:

Kettenbach and Crossen coerced, intimidated, and threatened the Wodinskys in an effort to force them out of their home. This evidence includes: the Kettenbachs’ active attempts to condemn and decommission the building’s only elevator; the excessive period of time during which the elevator was unusable, which forced the elderly Wodinskys to walk up and down four flights of stairs; Crossen and the Kettenbachs’ manipulation of the board’s voting process to the Wodinskys’ detriment; the Kettenbachs’ demand that the Wodinskys pay twenty percent of expensive, unneeded projects that were not lawfully voted upon by the board; the Kettenbachs’ instituting litigation against the Wodinskys to collect such payments while simultaneously forgiving the assessments of another owner who agreed to sell her unit; and the Kettenbachs’ hiring of a private investigator to visit Bernadette at her work place for the specific purpose of threatening the Wodinskys with bankruptcy.

Since a member of the Demoulas family is involved, you can bet that this case isn’t over yet, and that he will try to get the Supreme Judicial Court to hear this case. And he might be successful as this is a huge jury verdict and, as mentioned earlier, one of the largest involving the Massachusetts Civil Rights Act.

Expansion of Condominium Trustee Liability?

Although this was a particularly unique and egregious case, this ruling could be used to expand liability against condominium trustees to for state civil rights violations arising out of contentious governance and assessment disputes. I’m not so sure that the Mass. Civil Rights Act is the appropriate vehicle to address this sort of private claim, because I don’t see how it invokes traditional constitutional rights which the Act was intended to protect. The SJC will have to sort this out but if they don’t take this case, this ruling will be the law of the land. Either way, I will bet that we haven’t heard the end of this dispute.

Kettenbach v. Wodinsky

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3% Down Payment Loans Early Holiday Present From Fannie Mae

by Rich Vetstein on December 11, 2014

in Condominium Law, Fannie Mae, FHA, Mortgages

Feds Hope New Low Down Payment Will Boost Housing Market

Ho, ho, ho, early Christmas and holiday presents are coming to first time home buyers courtesy of Fannie Mae! Hoping to broaden the pool of home buyers and boost the real estate market, Fannie Mae and Freddie Mac are launching mortgage programs with down payments as low as 3%. The new loan program, unveiled Monday, reverse a trend of tighter lending standards by the government-sponsored mortgage giants since their taxpayer-financed bailouts. To qualify, at least one of the borrowers (if a couple) must be a first time home buyer.

This is great news for the 2015 real estate market!

Like the holiday gift flyers, expect to see mortgage professionals waiving the 3% down payment banner in the months to come.

Up until now, the only game in town for low downpayment loans has been FHA. But FHA mortgage insurance (MIP) costs have risen to dizzying heights in the last few years, so first time buyers have stepped back to assemble more down payment and qualifying virtues to secure conventional financing.

Enter 3% down payment conventional mortgage financing and the landscape changes dramatically. Conventional financing does not handcuff borrowers to mortgage insurance forever like FHA loan programs. Once equity targets (20% – 22%) are reached, current appraisal supported value can eliminate conventional PMI (Private Mortgage Insurance). Not so with FHA, once you get it, the only way to get rid of it is to refinance out of the FHA loan or sell the house.

In other words, boom does the dynamite for first time buyers! If you are interested in how you can obtain a 3% down payment loan, send me an email to [email protected] and I can put you in touch with a great mortgage banker.

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Appeals Court Puts Brakes On Condominium Rolling Super Lien Practice

by Rich Vetstein on November 22, 2014

in Condominium Law, Liens, Real Estate Litigation, Title Defects

Update 3/30/16: SJC Reverses Appeals Court, Allowing Rolling Lien Procedure

Ruling 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: Super-lien Limited To 6 Months Of Fees

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.

As the condominium attorneys over at Perkins|Ancil are saying, this ruling may be appealed to the SJC and going forward associations will likely be forced to avail themselves of the remedy of foreclosure sooner rather than later in order to fully protect their financial interests. Failing that, condominium associations will have to lobby the Legislature for a change in the super-priority lien amount over above the 6 month cap. This remains a case to watch!

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Airbnb Rentals Raise Thorny Legal Issues

by Rich Vetstein on July 24, 2014

in Condominium Law, Housing Court, Landlord Tenant Law, Massachusetts Real Estate Law, Mortgages, Permitting/Zoning, Premises Liability, Rental Housing

Law 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 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, whether it violates condominium rules and regulations, and whether guests qualify as tenants. For example, in a recent case, a Back Bay condominium fined a unit owner over $9000 for unlawfully renting his unit out through Airbnb in violation of the condominium rules.

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. 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.

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 that they will not 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, many of which prohibit short term rentals, business use of units, or both. 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. These cases should be popping up more and more.

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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Easier For Condominium Association To Sue Over Defective Construction, SJC Rules

by Rich Vetstein on July 22, 2014

in Condominium Law, Construction Law

Wyman 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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SJC To Consider Marijuana Possession In Rental Housing

by Rich Vetstein on April 5, 2014

in Condominium Law, Housing Court, Housing Discrimination, Landlord Tenant Law, Leasing, Massachusetts Real Estate Law, Medical Marijuana, Rental Housing

Decision Could Have Wide Impact Upon Marijuana Use By Tenants

The law on marijuana and rental housing remains clouded to say the least. And that’s no pun. This week on April 8th, the Supreme Judicial Court will consider the first of probably many cases dealing with marijuana use in rental housing. In this particular case, Boston Housing Authority v. Figgs (SJC 11532), the high court will assess whether a state housing authority may evict a subsidized tenant and terminate her federal housing benefits for the alleged possession of less than one ounce of marijuana — which is no longer a criminal offense in Massachusetts, but still a crime under federal law. With the decriminalization of small amounts of marijuana, the rollout of the medical marijuana dispensaries and the conflict with federal drug laws, this case may have wide-ranging impacts upon the relationships of landlords, tenants, housing authorities and even condominium owners and trustees over the use of marijuana, both recreationally and medicinally.

Oral arguments are available via live stream here. Legal briefs and filings in the case can be found here. A final opinion and ruling is expected this summer.

This case should also put the new Medical Marijuana Law into re-focus. Landlords have been increasingly anxious about how to manage and regulate tenants’ use of medical and recreational marijuana, if at all. The law not only grants qualified patients the right to obtain medical marijuana but it also allows patients the right to grow a two-month supply of marijuana at home if they cannot get to a marijuana dispensary because they are too sick or too broke. There is a bill in the Legislature granting landlords the right to prohibit medical marijuana on rental property without fear of being sued for disability discrimination.

I’ll be monitoring this new and dynamic area of the law. It will surely be a hot topic in the next couple of years.

__________________________________________

Richard D. Vetstein, Esq. is an experience Massachusetts landlord tenant and real estate attorney. If you are concerned or have questions about the new Medical Marijuana Law, please contact him at[email protected].

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The Massachusetts State Sanitary Code: Everything A Landlord Wanted to Know But Was Afraid To Ask

by Rich Vetstein on March 21, 2014

in Condominium Law, Housing Court, Landlord Tenant Law, Lead Paint, Leasing, Massachusetts Real Estate Law, Premises Liability, Rental Housing, Safety

The Massachusetts State Sanitary Code governs the minimal standards of fitness and conditions for human habitation of rental occupancy of property. Unfortunately, most landlords become familiar with the lengthy code only after tenants or the local Board of Health cites them for code violations. As a landlord-tenant attorney, I’ve created this comprehensive summary of the Massachusetts State Sanitary Code. Mind you, this does not cover every single provision, just the important ones, in my opinion. Keep this handy guide on your nightstands in case you have insomnia! Seriously, this is important information for all rental property owners in Massachusetts.

Scope

The Massachusetts State Sanitary Code is found at 105 Code of Massachusetts Regulations 410, which can be downloaded by clicking here. The Sanitary Code applies to all rental properties in Massachusetts including owner-occupied multi-families, rooming houses and temporary housing. The only exceptions are dwellings located on a campground and civil defense shelters.

Kitchen and Bathroom Requirements

The Code provides that every rental unit where common cooking facilities are provided shall contain a kitchen sink, a stove and oven and space and proper facilities for the installation of a refrigerator. Each unit must include at least one toilet, one washbasin (which cannot be the kitchen sink) and one bathtub or shower in a separate bathroom. Privies and chemical toilets are prohibited except with Board of Health permission.

Potable Water

Landlords must provide “a supply of potable water sufficient in quantity and pressure to meet the ordinary needs of the occupant” either connected to town/city water or private well with Board of Health approval. The landlord may charge tenants for actual water usage if separately assessed and metered. Hot water must also be provided of not less than 110°F and no more than 130°F.

Heating

Landlords must provide for adequate heating in every habitable room of a rental unit including bathrooms. Portable space heaters and similar equipment are prohibited. Heating must be provided to no less than 68°F between 7AM and 11PM and at least 64°F between 11PM and 7AM, except between June 15 and September 15.

Natural Light and Lighting Fixtures

The Code requires at least one window in all rooms except the kitchen if less than 70 s.f. Lighting fixtures must be provided in all bathrooms. Two outlets must be provided in every habitable room, and sufficient lighting provided in all hallways, foyers, laundry rooms and the like. Buildings over ten units must have auxiliary emergency lighting. Screens must be provided for all windows on the first floor.

Maintenance Obligations

An oft-litigated area, the Code provides for maintenance obligations for both landlord and tenant. Landlords must maintain and repair whatever appliances he has installed in the unit. If a tenant has paid for and installed an appliance himself, however, he is responsible for maintaining it. Tenants are also responsible for the general cleanliness of toilets, sinks, showers, bathtubs, and kitchen appliances. So when the tenant claims there is mold in the bathroom, the landlord can argue that the tenant’s lack of cleanliness is the cause. Landlords must also exterminate any pest, insect or rodent infestation.

Asbestos and Lead Paint Materials

If there is asbestos material in the unit, the landlord must keep it in good repair, free of all defects, cracks and tears which would allow for the release of asbestos dust. Due to the liability exposure, it’s a good idea for any landlord to remove all asbestos materials. Lead paint is absolutely prohibited where children under 6 are occupying. See my previous posts on the Lead Paint Law for more info on this complex area.

Utility Metering

Owners must provide electric and gas service to tenants unless they are separately metered and billed to the unit and the lease provides for same. Separate water metering is permissible so long as the landlord gets written approval from the local Board of Health and complies with the metering requirements of General Laws chapter 186, section 22. For homes heated with oil, the owner must provide the oil unless it is provided through a separate oil tank servicing only that dwelling unit.

Minimum Square Footage

* 150 s.f. for the first occupant, and no less than 100 s.f. for each additional occupant
* Bedrooms — 70 s.f. for first occupant, 50 s.f. for each additional occupant
All ceilings must be no less than 7 feet.

Egress/Snow and Ice Removal

Property owners must keep all means of egress free from obstruction. As for the removal of snow and ice, the Code provides that the owner shall maintain all means of egress at all times in a safe, operable condition and shall keep all exterior stairways, fire escapes, egress balconies and bridges free of snow and ice. A landlord may require the tenant be responsible for snow and ice remove only where a dwelling has an independent means of egress, not shared with other occupants, and a written lease provides for same. Otherwise, landlords are responsible for snow and ice removal. Even if the tenant is responsible, the landlord could still face liability for slip and falls on snow and ice under recent Massachusetts case law.

Locks

Owners must install locks for every door of a dwelling unit capable of being secured from unlawful entry. The main entry door of a three unit dwelling or more must be installed with a automatic locking mechanism.

Smoke/CO2 Detectors

Smoke and carbon monoxide detectors must be installed in accordance with the Mass. Fire Code.

Railings

Owners must provide safe handrails for every stairway, and a wall or guardrail on every open side of a stairway no less than 30 inches in height. For porches and balconies, a wall or guardrail at least 36 inches high must be provided. Between all guardrails and handrails, balusters at intervals of no more than 6 inches for pre-1997 construction, and at 4.5 inches for post 1997 construction must be provided.

Inspections and Code Violations

The Code provides that the local Board of Health or Inspector can inspect any unit upon the oral or written complaint of an occupant. Inspections are supposed to take place within 24 hours of the complaint, but that rarely happens. The inspector will prepare a code violation form. Serious violations such as failure to provide heat or water must be corrected within 12 hours. Less serious violations should be corrected within 5 – 30 days depending on the type of violation. Violators have a right to a hearing before the board of health to contest any code violations.

Code violations are criminal proceedings and should not be ignored. Penalties can result in $500/day fines and even condemnation of the premises.

______________________________

Richard D. Vetstein, Esq. is an experienced Massachusetts landlord-tenant attorney. If you have been cited for violations of the State Sanitary Code or have questions about it, please contact me at [email protected] or 508-620-5352.

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Houston, We Have A Problem…Is The Standard Mass. Notary Acknowledgment Problematic for POA’s?

by Rich Vetstein on November 28, 2013

in Closings, Commercial Real Estate, Condominium Law, Deeds, Massachusetts Real Estate Law, Mortgages, Title Insurance

Court Points Out Potential Problem with Standard Notary Acknowledgment Form

Could the the standard form notary acknowledgment clause used in virtually every recent Massachusetts deed, mortgage and other recorded instrument be defective in certain situations involving power of attorneys? That may be the result of a recent court decision by the First Circuit Bankruptcy Appellate Panel in Weiss v. Wells Fargo Bank (click for link to case).

The ruling is causing quite a bit of angst in the real estate conveyancing community. Since Revised Executive Order 455 – Standards of Conduct for Notaries Public was passed by Gov. Romney in 2004, notaries public and attorneys have been using the approved notary acknowledgment form providing that the document is signed “voluntarily for its stated purpose. ” In the Weiss case, however, the court held that the notary acknowledgment of an attorney-in-fact under a power of attorney was defective as it failed to indicate that the principal has signed under “his free act and deed.”

The facts in the Weiss case are rather unique so it may have limited effect. But it should serve as a wake-up call for notaries public, attorneys and lenders that the better practice may be to use a notary public acknowledgment with the “free act and deed” language as was common before the 2004 notary rules.

Practice Pointer: Going forward, I recommend that real estate attorneys, notaries public and lenders should consider using “free act and deed” language in notary public acknowledgments. See below for form language.

Fact of the Case: Botched Notarization With Power of Attorney

In the Weiss case, a bankruptcy trustee for Chicopee homeowners attempted to use his “strong-arm” powers to void a refinance mortgage. The borrowers took out a refinance loan on their Chicopee home with Wachovia Mortgage. They signed a limited power of attorney to enable a one Shannon Obringer (who I assume was a bank employee) to sign the mortgage. The actual signing of the mortgage occurred in Pennsylvania by a Pennsylvania notary (I assume at Wachovia’s offices). You know this wasn’t going to end well….

The pre-printed notary acknowledgment form on the mortgage was the approved MA Executive Order form, which the notary partially completed as follows:

On this 11 day of June 2007, before me, the undersigned notary public, personally appeared Shawn G. Kelley and Annemarie Kelley by Shannon Obringer as Attorney in Fact, proved to me through satisfactory evidence of identification which was/were ________________ to be the person(s) whose name(s) is/are signed on the preceding document, and acknowledged to me that he/she/they signed it voluntarily for its stated purpose.

Although there was some ambiguity from the wording as to who actually appeared before the notary and the notary failed to fill out the identification form blank space, the Court held that these were not necessarily fatal. However, the Court ruled that the language in the notarization that it was signed “voluntarily for its stated purpose” was fatally defective because it did not sufficiently demonstrate that it was the borrowers’ “free act and deed” by the attorney-in-fact’s signature, as required by Massachusetts statutory and case law. The Court went on to void the mortgage in favor of the bankrupt debtor.

New Notary Public Acknowledgment

Going forward, I would consider using a notarization acknowledgment with the older “free act and deed” language in power of attorney signing situations. The 2004 acknowledgment should be ok for typical individual notarizations. Of course, you should consult with your title company, lender and/or attorney before notarizing in any tricky situations.

If you have any questions about notarization after this court ruling, please contact me at [email protected] or 508-620-5352.

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Poor Condominium Document Draftsmanship Leads To Confusion Over Balcony Repair Responsibility

by Rich Vetstein on September 4, 2013

in Condominium Law, Deeds, Massachusetts Real Estate Law

Or What Happens When Condo Docs Suck…

A recent case handed down by the Appeals Court illustrates the fundamental importance of careful condominium document draftsmanship concerning what amenities are included within the definition of a “unit” — and the unintended results when deficient documents get in the hands of judges.

The case is Sano v. Tedesco (Mass. App. Ct. Aug. 28, 2013) and concerned a Lynn condominium dealing with a large repair bill for its crumbling balconies. Half of the 8 unit building enjoyed their own private balconies. Faced with a substantial repair bill, the unit owners without balconies balked at paying the bill, arguing that the balconies were part of the units they served.

The problem was that due to poor draftsmanship, the master deed inconceivably made no mention of the balconies or the support beams. Left with little guidance, the court turned to the Mass. Condominium Act, which defines a unit as “a part of the condominium including one or more rooms, with appurtenant areas such as balconies, terraces and storage lockers if any.” The judges ultimately came down the middle, ruling that each unit owner was responsible for repairs to their own balcony, but that the condominium trust was responsible for the support beams for each balcony. And even the three justice court panel couldn’t agree on that bizarre result! A dissenting judge thought that each unit owner should have been responsible for both the balconies and support beams.

I doubt any of the unit owners expected this peculiar result, with a split of responsibility over balconies and support beams. If the master deed was drafted properly in the first place with the balconies being designated as either a limited common area (with sole repair responsibility lying with the unit owner) or common area with an exclusive easement for each unit owner (with the responsibility on the condo trust), this confusing result would have been avoided. The moral of the story is make sure you hire a competent Massachusetts condominium conversion attorney who is experienced in drafting condo docs!

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Serenity Now…Crafting Condominium Documents For Lasting Peace and Harmony

by Rich Vetstein on August 18, 2013

in Condominium Law, Fannie Mae, Massachusetts Real Estate Law

Special Considerations For Drafting Two and Three Family Massachusetts Condominium Conversions Documents

Avid readers of this Blog know that I’m a huge Seinfeld fan. One of my favorite episodes is the “Serenity Now” episode where Kramer went a little nutty after being tormented by neighborhood kids, muttering “serenity now, serenity now” outside his toilet papered apartment.

Serenity is a good topic when it comes to condominiums. Condominium living can often bring out the worst in people. I’ve written about the infamous case where a disgruntled unit owner dropped bags of dog poop labeled with the name of the condo board president in hallways and gave the “bird” to condo trustees. There are others, too many to mention here, where dysfunctional trustees have brought condominiums to financial ruin and chaos.

Despite this discordance, condominium conversions of two and three multifamily homes in and around Boston, Cambridge and Somerville continue to be a popular way to cash in on the hot real estate market. A lot of these homes are owned and occupied by extended families, some of whom stay in the new condominium, and some who leave for greener pastures. Smaller condominiums, however, can be a recipe for disaster without careful planning and drafting of the legal documents which govern them. I’m going to outline some important considerations in drafting Massachusetts condominium conversion documents which will put into practice the saying that “an ounce of prevention is worth a pound of cure.”

The Master Deed

The Master Deed is where it all starts. Condominiums are a “creature of statute.” That is, they are a special legal form of property ownership enabled only through a special law called the Massachusetts Condominium Act, General Laws Chapter 183A. The owner of the property must “submit” the property into the condominium regime through the recording with the registry of deeds of a master deed.

The Master Deed sets forth what is part of the units and what is part of the shared “common areas.” Units are typically defined as all of the interior space from the lower surface of finished ceilings, surface plaster of walls and the sub-floor in, while common area consists of the innards behind the walls and buildings, the roof, most common HVAC/plumbing/heating systems, yards, and exterior of the home, among other things.

The use of “limited common areas” or “exclusive use areas” are especially useful in two and three family condominiums. Limited common areas are technically common area space but reserved for the exclusive use of the unit owner which it serves. Examples include private decks, porches, roof decks, parking spaces, and storage areas. The drafter can be flexible and provide that limited common areas must be repaired by either the condo association or the unit owner.

The master deed will often impose restrictions upon the use of units or rights of first refusal for the trustees or other unit owners. Care must be taken here to ensure that the units remain marketable while also protecting the serenity of unit owners. Rights of first refusal are discouraged these days.

Declaration of Trust and By-Laws

The second component of creating a condominium is the Declaration of Trust, also referred to as the By-Laws. The declaration of trust creates the condominium trust association and a board of trustees which govern the condominium.

For smaller condominiums between 2 and 5 units, the key is crafting the provisions so as to prevent dead-locking on major decisions. I almost always provide for super-majority voting on all major issues. For 2 unit conversions, I recommend unanimous voting on all major issues. And for all condos I use a mandatory arbitration clause to mediate any deadlocks.

In the case of non-payment of condo fees, which can be financial disaster for two and three unit condos, I provide for the right of the paying unit owners to be granted authority and power to start condo lien proceedings against the non-payor and recover attorneys’ fees and costs.

The declaration of trust should also contain all of the unique rules and regulations of the condominium. Important note: If these are not attached and recorded with the declaration of trust, they are not binding on unit owners. Rules should be drafted in consultation with the owners and can cover anything from satellite dishes, pets, smoking, signs, preserving architectural integrity, noise, quiet hours, parties, trash, etc.

The declaration of trust should also have standard Fannie Mae/Freddie Mac provisions which will ensure that future buyers can obtain conventional financing on their units.

Annual Budget, Condo Fees and Real Estate Taxes

The condominium should have a written annual budget and monthly condo fees established. A separate condominium bank account should also be set up with checks, deposit slips, etc. For small projects, the budget can be rather simple, encompassing the master insurance premium, water/sewer, landscaping, maintenance, and a small capital reserve fund. The monthly condo fee is calculated as the annual budget divided by the number of units divided by 12.

With respect to real estate taxes on a condo conversion, the building will continue to be assesses as a single dwelling until the tax assessor catches up to the conversion. A tax letter agreement should be prepared so that real estate taxes are prorated and properly assessed and paid by each unit owner after the conversion until each unit becomes separately assessed.

Also don’t forget that in the City of Boston, a “Trager” excise tax of $500 per unit starting with the second unit will be assessed on all new conversions. The master deed must have a “Trager” stamp before being accepted for recording.

Unit Floor Plans and Site Plan

All new condominium conversions must have prepared unit floor plans, and in Boston, a surveyed site plan. Unit floor plans will detail each unit’s gross living area, and delineate common areas, limited common areas, exclusive use spaces, and units.

How Much Does All This Cost?

Even for two unit conversions, the cost is a fair amount. Legal fees range from $2,500 – $5,000 and upwards, depending on the complexity of the project and the attorney. Recording fees and Boston excise taxes run over $1,000 and upwards. Architect and survey fees range from $2,500 and upwards. And you always get what you pay for, so keep that in mind!

____________________________________________

Richard D. Vetstein, Esq. is a seasoned Massachusetts condominium conversion attorney. Please contact him at [email protected] or by phone at 508-620-5352.

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Boston Landlords Given Extension To August 31 To Comply With New Registration & Inspection Ordinance

by Rich Vetstein on August 7, 2013

in Condominium Law, Landlord Tenant Law, Rental Housing

With an abysmal 20% compliance rate, the City of Boston Inspectional Services Department is giving Boston area landlords until August 31, 2013 to register their rental units under a new registration and inspection ordinance. Under the recently-approved ordinance, every private rental unit in Boston was supposed to have been registered by Aug. 1.

According to Boston.com, since the registration period began on May 1, only about 26,150 units have been registered with the city, said department spokeswoman Lisa Timberlake. That represents less than 20 percent of the estimated 140,000 total units that are required to register.

Under the new ordinance, rental units will be inspected by ISD every five years. Owner-occupied dwellings with 6 or less units are exempt from the inspection requirements (but still must register). Rented out condominium units must register as well.

For more information about the City of Boston Rental Registration and Inspection Ordinance, read our prior post here.

Landlords who fail to register will be subject to fines and other action from the city, officials said. But, the city will likely use discretion in deciding whether to discipline landlords, according to Brian Swett, Boston’s Chief of Environment and Energy. “We’ll have to make an assessment as we get closer to Aug. 31,” he said. “If there are folks who are willfully not registering their properties that’s different from someone who hasn’t been informed about this yet by our outreach.”

More Information: Register your rental unit online at Cityofboston.gov or download an application from the same site. The City has also posted a Frequently Asked Questions Page here.

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Boston Landlords Given Extension To August 31 To Comply With New Registration & Inspection Ordinance

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