Housing Courts Will Likely Face Increased Caseload
Giving an early Christmas present to distressed homeowners, the Supreme Judicial Court today ruled that a foreclosed upon homeowner may challenge a bank’s title and foreclosure sale irregularities through counterclaims in a post-foreclosure eviction in the Housing Court — rather than being forced to file a separate equity lawsuit in the Superior Court. The case is Bank of America v. Rosa, SJC-11330 (Dec. 18, 2013).
The high court also held that the Housing Court has jurisdiction to hear other counterclaims against foreclosing lenders, including fair housing, consumer protection (Chapter 93A), and HAMP related claims.
The likely impact of this ruling will be that the already busy Housing Court will now be “Ground Zero” for foreclosure related litigation. Foreclosed property owners will have more weapons to delay and prevent being evicted after foreclosures.
Overall, while the ruling seeks to protect the rights of foreclosed property owners, it has the potential to delay the housing recovery in Massachusetts. The longer folks who don’t pay their mortgages are allowed to live rent free in their foreclosed houses, the more the housing market suffers. There are plenty of creditworthy buyers and investors willing and able to buy up and rehab these foreclosed properties. Letting them sit and blight neighborhoods doesn’t help anyone in the long run. Just my opinion…
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.
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.”
Landlords Could Be Held Responsible for Tenant Paralyzed Jumping from Trampoline into Kiddie Pool
I don’t write a lot about premises liability in this blog, but this tragic case out of my hometown of Framingham may be a classic example of the saying that “hard cases make bad law.” The Supreme Judicial Court has granted a new trial to a man paralyzed by jumping off a trampoline into a kiddie pool while playing with his small son. The case is Dos Santos v. Coleta(SJC – 11188). This is a case which will get all the tort-reformers screaming in protest, but it is evident that premises liability law in Massachusetts keeps on evolving and not in a good way for property owners.
The moral of this case for landlords and all homeowners is to not leave potentially dangerous contraptions in yards for tenants and kids to get injured on. Also, make sure you have liability insurance coverage for at least $1 Million, and look into getting an excess umbrella policy for up to $5 Million.
Summer Fun Goes Terribly Wrong
In the summer of 2005, Cleber Dos Santos lived with his wife and son in one unit of a two-family home in Framingham that he rented from the Coleta family. The landlords, who lived in the other unit, set up a trampoline immediately adjacent to an inflatable kiddie pool in the backyard. The landlord disregarded warnings printed on the side of the pool cautioning against jumping or diving into the pool. He knew that setting up the trampoline next to the pool might be dangerous but thought it would be “fun.”
The landlords moved to South Carolina on July 31, but they maintained ownership of the home and continued to rent the other unit to Dos Santos and his family. The landlords left the pool and trampoline in the backyard and understood that both items would continue to be used by their friends and family.
On the evening of August 2, 2005, Dos Santos, who had never before used the trampoline, came home from work and decided to play with his son on the trampoline while his wife recorded a video of them to send to their extended family in Brazil. He decided to entertain his son by flipping into the pool. He severely underrotated the flip, entered the water headfirst, and struck his head on the bottom of the pool. As a result of the impact, Dos Santos sustained a burst fracture of his C-5 vertebrae, and is permanently paralyzed from the upper chest down. He has been hospitalized ever since with medical bills exceeding $700,000.
SJC Clarifies Open and Obvious Danger Rule
Perhaps not surprisingly, the jury rendered a defense verdict on the basis that Dos Santos’ backflip from a trampoline into a kiddie pool was an “open and obvious” danger. But the SJC found the trial judge’s jury instructions lacking, holding that even if the jury believed that the danger present was open and obvious, the jury should have considered whether the absentee landlord should have removed or remedied the dangerous trampoline/pool setup from the backyard.
Having established that the existence of an open and obvious danger will not necessarily relieve a landowner of all duties to lawful entrants with regard to that danger, we set out to answer the following principal question: where the duty to warn has been negated, in what circumstances will the duty to remedy nevertheless exist–or, in other words, in what circumstances “can and should a landowner anticipate that the dangerous condition will cause physical harm to the lawful entrant notwithstanding its known or obvious danger”?
In plain English, Judge Cordy is basically saying that performing a backflip from a trampoline into a kiddie pool may be stupid and dangerous, but it’s also just as stupid and dangerous for a landlord to leave the deadly contraption out in the backyard for anyone to get injured on.
The justices ordered a new trial in the case, so this tragic 8 year legal saga will continue on. (Also remember that it appears that the landlords are covered by a liability insurance policy, the amount of which is unknown).
In sum, the SJC has now shown that Massachusetts premises liability law continues to shift towards even greater responsibility and liability for rental property owners.
Ruling Calls Into Question Boston Ordinance Prohibiting 5 or More Students In One Unit
Those screams you are hearing now on Comm. Ave. aren’t the students. They are the landlords who are undoubtedly rejoicing upon news that the Supreme Judicial Court just issued a major ruling in how student rentals occupancy limits — indeed all rentals — will be treated by housing inspectors and licensing authorities. This is an important decision which may have far-ranging implications across the state and not just to student housing.
The closely watched case is City of Worcester v. College Hill Properties (download link to case here) where the SJC has held that renting to 4 or more students in one apartment unit of a two and three family home is not a “lodging house” requiring a special license under the Massachusetts lodging housing law, provided that the apartment meets all other sanitary and building code square footage occupancy thresholds. The state code requires 150 s.f. of living space for the first occupancy and 100 s.f. for each additional person (3 occupants = 350 s.f. of living space), and 70 s.f. of bedroom space for the 1st person, plus 50 s.f. for additional person (120 s.f. for 2 persons in one bedroom). This decision applies state-wide and to every type of rental housing, including multi-families, buildings and townhouses.
For history buffs, the opinion is fun to read as it traces the Lodging House Law back to the days of brothels, houses of ill-repute and tenements. Using a common-sense analysis, Justice Lenk reasoned that lodging houses, which are essentially temporary rentals of rooms without such amenities as a separate kitchens and bathrooms, are quite different from the modern day apartment units with its more expensive amenities. The court ruled that if an apartment satisfies the state sanitary and building code provisions for the amount of living/sleeping space, utilities, egress, etc., then it would be not be deemed a lodging house despite the number of unrelated occupants.
City of Boston Undergrad Student Rule On the Chopping Block?
In the City of Boston, a new zoning ordinance went into effect in 2008 prohibiting 5 or more undergraduate students from living in one apartment unit. There is certainly a question as to whether the College Hill ruling effectively overrules this ordinance. We will have to see whether the ordinance is challenged in court.
The other impact of this ruling is we should see an push for even more increased density in apartment rental housing which is exactly what Mayor Menino and the City of Boston doesn’t want.
Case Highlights Importance of Rent Acceleration Clause In Commercial Leases
In a decision underscoring the importance of careful commercial lease drafting, the Massachusetts Supreme Judicial Court has ruled that a commercial landlord must wait out a 12 year lease term to recover unpaid rent from a tenant who abandoned the premises in year 2 of the lease. We lawyers call this a Pyrrhic victory: “a victory offset by staggering losses.” The case is 275 Washington Street Corp. vs. Hudson River Int’l, LLC (SJC-11217).
Practice Pointer: This case is an important reminder for all residential and commercial landlords to have their leases reviewed to ensure that they can recover all available lost rental damages. Contact me at [email protected] for a lease review.
Facts: Dental Practice Goes South Quickly
The landlord and tenant, a dental practice, entered into a 12-year lease beginning in 2006 for medical office space located at 221-227 Washington Street in downtown Boston. Barely a year later, the dental practice went under and closed. In May 2008, the dentist told the landlord that he would not be making any further lease payments.
Fortunately, the landlord found a new tenant. A new 10 year lease was signed, covering the remainder of the dentist’s term, but at a lower rent. The landlord sued the dentist for the rent differential — some $1 Million Dollars.
Standard Indemnification Clause
The lease contained a standard default indemnification clause found in many older standard lease forms:
The LESSEE shall indemnify the LESSOR against all loss of rent and other payments which the LESSOR may incur by reason of such termination during the residue of the term. If the LESSEE shall default, after reasonable notice thereof, in the observance or performance of any conditions or covenant on LESSEE’s part to be observed or performed under or by virtue of any of the provisions in any article of this lease, the LESSOR, without being under any obligation to do so and without thereby waiving such default, may remedy such default for the account and at the expense of the LESSEE.
Common Law Rule: Put It In The Lease
The SJC pointed out long standing Massachusetts common law “where the contract is a commercial lease, our common law does not provide ‘benefit of the bargain’ damages in the event of termination of the lease following a breach. Once a landlord terminates a lease, the tenant is no longer obligated to pay the rent, and, unless the lease otherwise so provides, the landlord is not entitled to posttermination damages.” This may be contrary to common understanding, but it’s the reason why lawyers have developed rent acceleration and liquidated damages provisions for commercial leases.
Despite the urging of the Real Estate Bar Association, which filed a friend-of-the-court brief, the SJC saw no need to alter the harsh common law simply because this particular landlord’s lease failed to provide a proper rent acceleration clause. Justice Gants didn’t mince his words in cautioning commercial landlords to use proper lease provisions:
A landlord left without an adequate remedy following breach of the lease by a tenant has only itself to blame for entering into a lease that fails to provide such a remedy. We shall not disrupt the settled expectations of leasing parties in order to protect a landlord from the consequences of failing to insist on an adequate remedy in the negotiation of a commercial lease. Nor shall we invite uncertainty as to the availability and scope of a landlord’s remedy for “benefit of the bargain” damages where the contours of such a remedy are not delineated in the lease but left to be determined under the common law.
The lease in this case appears to be of an older variety and did not contain a rent acceleration/liquidated damage clause. Such a clause provides that upon a rent default, all unpaid rent is due through the end of the lease term as liquidated damages. All commercial leases should contain this type of rent acceleration clause, and I would also recommend a provision enabling the landlord to recoup the cost of expensive tenant build outs where a tenant has defaulted early in the lease term. Contact me at [email protected] for a lease review.
This story makes me sick to my stomach. Unfortunately, this practice is endemic in the Allston-Brighton area as local landlords frequently exploit the countless students in the area. You can expect the City of Boston ISD to start cracking down on these slumlords big-time.
As reported today on Boston.com, the owner of the Allston two family residence on Linden Street where a Boston University student died in a fire this weekend was cited today for operating an illegal rooming house because she allegedly allowed 19 people to live in a two-family home. Landlord Anna Belokurova was also cited for failing to obtain proper permits before creating bedrooms in the basement of the building at 87 Linden St., where a three-alarm fire Sunday killed Binland Lee, a 22-year-old BU marine sciences student from Brooklyn, N.Y.
A City of Boston ordinance also says that no more than four unrelated undergraduate students are permitted to live in a dwelling, while authorities say that at least six of the 19 residents were BU students.
The city last inspected the building in 1992 when it approved a prior owner’s plan to convert a single-family home into a two-family. Those modifications included a firewall that closed the internal stairway between the first and second floors, creating a maze-like path from one story to another, interrupted by a steel door that served as a divider between the units,the Globe reported today.
A quick search on the Suffolk County Registry of Deeds indicates that Ms. Belokurova was under financial distress, as several foreclosure and condo lien proceedings were filed against her in recent years. Perhaps this is why she attempted to pack tenants in her rental property like sardines.
The code violations are going to be the least of Ms. Belokurova’s concerns as the family of the deceased student is likely readying a wrongful death lawsuit. Again, there is just no excuse for flaunting the law like this, especially given the tragic end-result.
New Online System Enables Landlords To Screen Tenants for Prior Evictions/Problems
After years of lobbying from rental housing groups, the Massachusetts Housing Court has finally announced a powerful new and free tool for tenant screening: public internet access to all Summary Process, Small Claims, Civil and Supplementary Process case types. Case information can be accessed via the Trial Court’s eAccess internet site at www.masscourts.org.
The site allows users to conduct searches by case type, case number or case name. Users can find detailed instructions on the Housing Court page of the Trial Court’s website. Electronic access to all publicly available case types also continues to be available at public access computers at the five Housing Court divisions and at courthouses throughout the state.
This new system will enable landlords to research whether a potential or current tenant has been a party to a previous eviction, small claims or related housing case. Obviously, a rental applicant with a lengthy eviction history would not be a good candidate for rental housing.
I would caution landlords that despite whatever information may be gleaned from the new system, the fair housing and discrimination laws still remain in place. Under Massachusetts law, a landlord cannot refuse to rent to a tenant on the basis of the tenant’s race, color, national origin, ancestry, gender, sexual orientation, age, marital status, religion, military/veteran status, disability, receipt of public assistance, and children (except for an owner occupied two family dwelling).
Denial of rental applications must be based on non-discriminatory reasons, and a lengthy eviction history where the tenant was found liable for nonpayment or other serious violations of a lease would arguably qualify as such.
Largest Lead Paint Penalty On Record for Attorney General Coakley
Landlords with lead paint beware…enforcement of the state’s strict Lead Paint Law remains a priority for Attorney General Coakley’s office. The AG just hit a Boston area property owner with the largest fine on record — $75,000 — and ordered him to de-lead his rental units, resolving allegations that he engaged in a pattern of unlawful and retaliatory practices against tenants with young children in order to avoid his obligation to comply with state lead paint laws. The AG’s press release can be read here.
The offending landlord is Keith L. Miller, of Newton, who at the time owned and managed at least 24 residential rental units in Chelsea, Newton, Arlington, and Brighton. This is the largest fair housing settlement with a landlord that has been reached under AG Coakley.
The Massachusetts Lead Paint Law, one of the strictest in the U.S., imposes a mandatory obligation to de-lead if there is a child under 6 residing in the rental premises. A property owner or real estate agent cannot get around the law simply by refusing to rent to families with young children. They also cannot refuse to renew the lease of a pregnant woman or a family with young children just because a property may contain lead hazards. And property owners cannot refuse to rent simply because they do not want to spend the money to de-lead the property. Any of these acts is a violation of the Lead Law, the Consumer Protection Act, and various Massachusetts anti-discrimination statutes that can have serious penalties for a property owner or real estate agent.
The Boston City Council and Mayor Menino’s Office have passed a sweeping new rental property registration and inspection ordinance which is now effective for the year 2013. The new ordinance requires, among other things, that all rental property owners register with the Inspectional Services Department (ISD), and are subject to inspections every 5 years. Details of the new ordinance are summarized below.
Who is covered?
All rental property owners, regardless of state residence, must register their rental properties with ISD. This also includes condominium units which are rented out. Excluded from the inspection requirements (but not the registration requirements) are owner-occupied buildings containing no more than 6 units, licensed lodging houses, government owned or operated housing.
What are my registration obligations?
Landlords are required to register with ISD no later than July 1 of each year. A fee of $25/unit will be charged. All non-resident owners must designate a Boston-based resident agent to accept service of process on the owner’s behalf. You can now register online at Cityofboston.gov or download an application from the same site. The City has also posted a Frequently Asked Questions Page here.
When will my rental property get inspected?
ISD will inspect rental properties at least once every 5 years. ISD intends to first inspect the “problem” properties which have a history of code violations. Landlords will receive a notice from ISD about the inspection. Landlords have the option of having an outside “authorized inspector” perform the inspection at the owner’s expense. Annual inspections conducted by the Boston Housing Authority (BHA) and similar government programs will be accepted by ISD. For most buildings, the inspection fee is $75 for the first two units, and $50/unit thereafter.
Are there any new signage requirements?
Yes. A sign of not less than 20 square inches must be posted adjacent to the building’s mailboxes or other conspicuous location. The sign must contain the contact information of the landlord and property manager, if any.
My property has been cited for violations in the past. Will this be a problem?
It could be. The new ordinance has a new classification for “Problem Property” if:
the police have been called to the property at least 4 times in one year; or
4 or more noise complaints; or
4 or more ISD complaints for unsanitary conditions/code violations
Problem Properties must be inspected every year and the owner must submit a management plan to address the issues.
How do I coordinate the inspection with my tenants?
A tenant is entitled to “reasonable advance notice” before an inspection. If access is denied, the landlord must notify ISD within 7 days, and if ISD verifies same, the landlord will be exempted from inspection for 1 year. Tenants are entitled to a copy of all inspection reports.
I am buying a rental property. By when does the new owner need to register?
ISD must be notified of the sale of any rental property 30 days after the closing, and the new owner must register with ISD within this 30 day window. Within 90 days of closing, the new owner must complete any pending inspection or submit an application for approval of an alternative inspection plan.
Under the new Massachusetts Domestic Violence Act recently signed into law, victims of sexual assault and stalking have the right to break their leases without significant financial penalty, have the landlord change their locks, and other important protections. The important provisions of the new law are as follows:
In order to break a lease, victims are required to provide notice to landlords that they were subject to a sexual assault or rape or under imminent threat of same within three (3) months of the incident
Landlords may request supporting documentation such as a police report or restraining order (which they must keep confidential).
Provided the tenant victim provides the proper notice, she will be relieve of financial liability for 30 days or one full rental period of rent, plus a return of any last month’s rent and security deposit.
The new law applies to anyone in the renter’s household.
Victims of sexual assault or stalking may require that the landlord change the unit’s locks within 48 hours at the tenant’s expense. If the landlord fails to act, the tenant may change the locks herself.
If the perpetrator of the sex crime or threat is a household member (i.e., spouse/boyfriend), the landlord may authorize the lock-out the perpetrator by changing the locks and withholding the new key.
Landlord’s who comply with the new law are generally absolved from liability to the perpetrator.
Noncompliance with the new law can result in damages equal to 3x the rental amount, plus payment of the tenant’s legal fees, which may be set off against any unpaid rent.
Richard D. Vetstein, Esq. is a Massachusetts real estate attorney who frequently advises landlords on their legal obligations under Massachusetts landlord and tenant law.
This post will provide you with frequently asked questions concerning Massachusetts snow and ice removal law.
I am a homeowner and rental property owner. Am I legally required to clear snow and ice after a storm?
The law now in Massachusetts is that all Massachusetts property owners and landlords are legally responsible for the removal of snow and ice from their property. In 2010, the Massachusetts Supreme Judicial Court overruled 125 years of legal precedent which protected property owners from “natural accumulations of ice and snow,” and announced this new rule. My prior post on the case can be read here. The rule applies across the board, to homeowners, landlords, commercial business owners, restaurants, everyone.
I am a landlord. How long do I have to shovel snow and ice on my rental property?
There is no clear cut answer to this question, and juries and courts will ultimately decide what is reasonable. The City of Boston’s policy is to give businesses 3 hours to clean snow, and 6 hours to residents. My advice is to shovel and treat snow and ice early and often. Even a thin coating of black ice can cause someone to slip and fall and seriously hurt themselves. (Admit it if you’ve dumped on your rear end like I have!). If you are an out-of-town landlord, you must hire someone to shovel your snow.
My lease states that the tenant is responsible for snow shoveling. Will that protect me from liability?
Probably not. A person who is injured due to untreated snow or ice will likely sue both the property owner and the tenant. The property owner must ultimately ensure that the property is safe for visitors. The landlord may bring a claim for contribution/indemnification against the tenant.
I live in Boston, and I heard I have to shovel the public sidewalk in front of my house after a storm. Is that true?
Yes. On top of their added responsibilities, property owners in several Massachusetts communities, including Boston, Cambridge, Newton, Lynn, and Worcester, are required by local ordinances to clear municipal sidewalks in front of their residences or businesses. The City of Boston mandates clean sidewalks within 6 hours of a storm; Worcester is 12 hours.
Will my homeowner’s or CGL insurance policy cover any injuries from slip and fall on snow/ice?
Yes, usually. The standard Massachusetts homeowners insurance policy and commercial general liability insurance policy (CGL) will have liability coverage for slip and falls on property. Make sure you have ample liability coverage of at least $500,000 to 1 Million. (You can never have enough insurance!). As with any insurance question, it’s best to contact your personal insurance agent.
If you have additional questions, please ask them in the comment forms below!
Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney who advises property owners and landlords as to liability issues. Please contact him at 508-620-5352 or at [email protected].
Does Lodging House Law Apply to Student Apartments?
The Massachusetts Supreme Judicial Court has agreed to hear the City of Worcester v. College Hill Propertiescase which may significantly impact renting apartments to students and in other multi-family situations. The justices will decide whether renting to 4 or more unrelated persons in one apartment unit requires a special license under the Massachusetts lodging housing law, which would require fire sprinklers and other expensive upgrades. The SJC will hear oral arguments in the case on January 7, 2013.
The case arose at The College of the Holy Cross in Worcester where several landlords rented out apartments to groups of unrelated students. The Housing Court and Appeals Court had previously ruled that the landlords ran afoul of the lodging house law by renting to more than 3 unrelated persons in one rental unit without the special lodging house license.
Impact Outside College Towns?
Prior to the Appeal Court’s decision, housing authorities typically allowed 4 or more unrelated adults to occupy single apartments as roommates without a lodging license provided that minimum space requirements were met: 150 s.f. of living space for the first person, 100 s.f. for each additional person (3 occupants = 350 s.f. of living space); 70 s.f. of bedroom space for 1st person, plus 50 s.f. for additional person (120 s.f. for 2 persons in one bedroom).
In the City of Boston, a new zoning ordinance went into effect in 2008 prohibiting 5 or more undergraduate students from living in one apartment unit. We will see how the Boston Inspectional Services Dept. interprets the College Hill ruling.
The SJC’s decision will hopefully clarify this grey area of Massachusetts rental property law.
I always look forward to recapping the year that was, and bringing out the crystal ball to predict the year ahead. This year, like years prior, was an active year for Massachusetts real estate law, with several important court rulings, legislative developments, and emerging legal trends. The year 2013 is expected to be just as busy.
Eaton v. Fannie Mae and Fannie Mae v. Hendricks Foreclosure Rulings
Another year, another pair of huge foreclosure rulings by the Massachusetts Supreme Judicial Court. On June 22, 2012, in Eaton v. Federal Nat’l Mortgage Ass’n, the SJC held that lenders must establish they hold both the promissory note and the mortgage in order to lawfully foreclose. This posed major problem for the vast majority of conventional mortgages which lenders securitized and sold off on the secondary mortgage market, thereby splitting the note and mortgage among various securitized trusts and mortgage servicers. Responding to pleas from the real estate bar, the SJC declined to apply its ruling retroactively, thereby averting the Apocalyptic scenario where thousands of foreclosure titles would have been called into question. My prior post on the Eaton ruling can be read here.
The FNMA v. Hendrickscase had the potential to change Massachusetts foreclosure practice, but the SJC rejected the challenge. The court upheld the validity of the long-standing Massachusetts statutory form foreclosure affidavit which provided that the foreclosing lender has complied with the foreclosure laws,rejecting the borrower’s claim that the affidavit was essentially robo-signed.
New Medical Marijuana Law Has Landlords, Municipalities Smoking Mad
Burned up Massachusetts landlords and anti-pot local pols are still fuming with concern over the state’s newly passed but hazy medicinal marijuana law. The law — rolling out Jan. 1 — mandates the opening of at least 35 medicinal marijuana dispensaries, and grants users the right to grow a two-month supply of marijuana at home if they cannot get to a dispensary because they are too sick or too broke. The new law also potentially opens landlords up to federal prosecution for violating the federal controlled substances laws. Many towns and cities are contemplating banning dispensaries or passing zoning by-laws regulating their locations. My prior post on the new marijuana law can be read here.
Apartment Rental Occupancy Limits
In 2013, the SJC will consider the Worcester College Hillcase which will significantly impact landlords renting apartments to students and in other multi-family situations. The question is whether renting to 4 or more unrelated persons in one apartment unit requires a special “lodging house” license which would, in most cases, make it cost-prohibitive to rent to more than 3 unrelated persons. (Lodging houses require a built-in fire sprinkler system, for example). The SJC will hear oral arguments in the case on January 7, 2013.
Foreclosure Prevention Act Passed
On August 3, 2012, Governor Deval Patrick signed the Foreclosure Prevention Act. The new law requires that lenders offer loan modifications on certain mortgage loans before foreclosing. Unfortunately, the law did not fix the problem with existing title defects resulting from the U.S. Bank v. Ibanez case in 2010. (Sen. Moore’s office plans to re-introduce Senate Bill 830 in 2013). My prior post on the new law can be read here.
SJC To Consider Realtor’s Liability for Erroneous MLS Info
Sometime in 2013, the SJC will issue a very important opinion in the controversial DeWolfe v. Hingham Centre Ltd. disclosure case where a Realtor was held liable for failing to verify the zoning of a listing on the Multiple Listing Service. The Court will also consider whether the exculpatory clause found in the Greater Boston Real Estate Board’s standard form purchase and sale agreement legally prohibits a buyer’s misrepresentation claim against the real estate agent. The Massachusetts Association of Realtors and the Greater Boston Real Estate Board have filed friend of the court briefs urging the SJC to limit Realtors’ disclosure obligations in the case. My prior post on the case can be read here.
Good Faith Estimate, TIL, and HUD-1 Settlement Statement To Change Dramatically
In the second major overhaul of closing disclosures in three years, the Consumer Financial Protection Bureau will be rolling out in 2013 a new “Lending Estimate” and “Closing Estimate” which will replace the current Good Faith Estimate, Truth in Lending Disclosure, and HUD-1 Settlement Statement. The changes are part of the Dodd-Frank Act, and has the lending and title insurance industries scrambling to figure out who should be ultimately responsible for the accuracy of closing fees and other logistics in delivering these new disclosures. My prior posts on the topic can be read here.
Fiscal Cliff Anxiety Syndrome
The Year In Review would not be complete without mention of the dreaded Fiscal Cliff. As of this writing, President Obama and the House (which even rejected its own Speaker Boehner’s last proposal) have been unable to work out a deal to resolve the more than $500 billion in tax increases and across-the-board spending cuts scheduled to take effect after Jan. 1, 2013. If there is no deal, and the country goes over the fiscal cliff, the consensus is that it will have quite a negative effect on the economy and the real estate market in particular.
Upcoming Event! On January 8, 2013, we are sponsoring a breakfast seminar with veteran real estate journalist Scott Van Voorhis, who will offer his predictions on 2013. Please email me to sign up. The Facebook Event invitation is here. The venue is Avita in Needham, 880 Greendale Ave., Needham, MA.
Richard D. Vetstein is an experienced Massachusetts real estate attorney who hopes the White House and Congress can get their acts together and pass a compromise bill to avoid the Fiscal Cliff.
Concern Over 60 Day Supply Provision & Federal Ban On Pot
Burned up Massachusetts landlords are fuming with concern over the state’s newly passed but hazy medicinal marijuana law. The law — rolling out Jan. 1 — grants medical marijuana users the right to grow a two-month supply of weed at home if they cannot get to a marijuana dispensary because they are too sick or too broke. The new law also potentially opens landlords up to federal prosecution for violating the federal controlled substances laws.
Skip Schloming, executive director of the state’s Small Property Owners Association, expressed deep concern about the 60-day supply provision:
“You could have as many as 24 plants that are 6 feet tall,” Schloming told the Herald. “And that could cause all sorts of property damage, from water damage, to mold and humidity, to wiring issues that could cause a fire. … This has the potential to be a disaster.”
The SPOA called for a 6 month delay in implementing the law.
I hate to be a “buzz kill” for medical marijuana users, but I believe the landlords have a legitimate gripe. In the landlord-tenant context, landlords own the property and remain primarily responsible for what goes on in their apartment buildings. I’m no weed expert, but imagine a small studio apartment loaded with a veritable jungle of pot plants — a prospect which would frighten any residential landlord for a number of reasons.
First, a medical marijuana grower could be targeted for burglarization. If they are truly sick and broke enough to qualify as home growers, then they would be equally vulnerable to pot bandits stealing their stash.
Second, maintaining marijuana cultivation requires specialized equipment not necessarily compatible with close-knit apartment living. I did some research, and found this website dedicated to hydroponic growing equipment. Growing marijuana plants is fairly sophisticated. Growers need to monitor pH and moisture levels, carbon dioxide outputs and germination of seeds. Failure of this equipment could conceivably cause mold, mildew and other damage to interior units.
Bay State landlords are also concerned about running afoul of federal drug laws as marijuana remains a federally prohibited controlled substance. Landlords are begging Beacon Hill lawmakers to give them the right to refuse to rent to tenants who grow pot for medical use over fears their property could be seized. As reported in the Boston Herald, commercial and residential landlords are right to worry, drug forfeiture attorneys say, because landlords can be charged as conspirators if their tenants are targeted by the feds.
No matter landlords’ concerns, medical marijuana is here to stay in Massachusetts. It will be up to the state Department of Public Health — the same agency rocked by the highly publicized state crime lab fiasco — to enact sensible rules and regulations governing medical marijuana. Let’s hope that the DPH considers the practicalities and logistics for marijuana growing in tight-knit apartment buildings. Strict rules on home growing eligibility are a must. Same for the approval of safe, tested growing equipment. Immunizing landlords from liability for medical marijuana growing or use by tenants would be another good idea.
School is back and summer is over. September 1 and the start of the new rental cycle is right around the corner. It’s time to review my best practices to get trouble-free, paying tenants in your Massachusetts rental property.
Screening Prospective Massachusetts Renters: What You Can and Cannot Ask
Landlords canlegally ask prospective renters about the following:
income and current employment
prior landlord references
credit history
criminal history
Your rental application should include a full release of all credit history and CORI (Criminal Offender Registry Information). Use CORI information with caution, however, and offer the tenant an opportunity to explain any issues. Landlords should also check the Sex Offender Registry as they can be held liable for renting to a known offender. Use the rental application and other forms from the Greater Boston Real Estate Board.
Landlords cannotask about the following:
race, color, national origin, ancestry, or gender
sexual orientation
age
marital status
religion
military/veteran status
disability, receipt of public assistance
children.
If you deny a renter’s application, it should be based on financial reasons, such as questionable credit, income or rental history. Stay away from reasons related to children, public assistance and the like. Be aware that this time of year the Massachusetts Commission Against Discrimination and Attorney General’s Office send out dummy rental applicants in an attempt to catch unwary landlords who deny housing for discriminatory reasons.
Students, especially undergraduates, often create problems for landlords. It’s important to meet with students personally before signing the lease and firmly explain a “no tolerance” policy against excessive noise, parties and misbehavior. Remember, under a two year old Boston zoning ordinance, no more than four (4) full time undergraduate students may live together in a single apartment.
Careful screening of tenants is far less expensive than the cost of evicting a problem tenant.
My Property Has Lead Paint. Can I Refuse To Rent to Tenants With Small Kids?
Under the Massachusetts Lead Paint Law, whenever a child under six years of age comes to live in a rental property, the property owner has a responsibility to discover whether there is any lead paint on the property and to de-lead to protect the young children living there. A property owner or real estate agent cannot get around the legal requirements to disclose information about known lead hazards simply by refusing to rent to families with young children. They also cannot refuse to renew the lease of a pregnant woman or a family with young children just because a property may contain lead hazards. Landlords cannot refuse to rent simply because they do not want to spend the money to de-lead the property. Any of these acts is a violation of the Lead Law, the Consumer Protection Act, and various Massachusetts anti-discrimination statutes that can have serious penalties for a property owner or real estate agent.
For more information about Massachusetts rental screening, landlord-tenant law and evictions, please read these articles or contact me below. I would be happy to help you get good tenants.
Consistent with his reputation as the “urban mechanic,” Mayor Thomas M. Menino, along with the City Council, want to pass a new ordinance to clean satellite dish clutter on residential properties in Boston. As reported by the Boston Globe, the proposal would require the removal of all obsolete satellite dishes and ban new installations from facades and other walls facing the street, unless an installer can prove there is no other place to get a signal. Dishes would have to be placed on roofs, in the rear, or on the sides of buildings. East Boston Councilor Salvatore LaMattina, who has spearheaded the effort, says that this ordinance will help “save the character of our neighborhoods.’’
Ordinance May Run Afoul of FCC Rules
The proposed ordinance, however, may face legal challenge by the satellite dish industry and affected satellite subscribers. The Federal Communications Commission (FCC) has ruled that state or local laws are invalid if they unduly impair the right of a subscriber to receive satellite programming on a one meter dish installed on property within owner or renter’s exclusive use or control. For a person living in a multi-dwelling unit, an area such as a balcony, patio or garden not shared with other tenants would be considered property within the individual’s exclusive control. Under the FCC rule, the only two situations where restrictions are permissible is if (1) the restriction is necessary for a clearly defined, legitimate safety objective; or (2) it is necessary to preserve a historic building.
A Solution: Building Wide Equipment
Granted, the satellite dishes covering buildings in many neighborhoods isn’t the nicest thing to see. See Cambridge Street in Allston, for example. However, since the proposed ordinance is concerned predominantly with aesthetics and not any legitimate safety concerns, it may not survive judicial review.
The FCC rules do, however, permit and encourage building-wide community satellite facilities so all residents can get a strong signal without cluttering up the facade of a building with a myriad of dishes. Perhaps the Mayor and the City Council can work with the satellite providers on getting funding for this equipment rather than waste taxpayer money defending a questionable ordinance.
Richard D. Vetstein, Esq. is a Massachusetts real estate and zoning attorney. Mr. Vetstein frequently represents Boston residents and companies in zoning matters before City of Boston zoning and licensing boards.
Why Would Anyone Want To Be A Landlord In Massachusetts?
I just settled a very troubling landlord-tenant case which demonstrates everything which is wrong and unfair with Massachusetts landlord-tenant and eviction law from the landlord perspective. This horror story is played out every Thursday in the summary process sessions of District and Housing Courts across the state. The laws which favor tenants so dramatically were passed decades ago in the 1970’s when tenements and slumlords still existed. Those days are long gone, but the outdated laws remain on the books, giving Massachusetts the well-deserved reputation of being one of the most unfriendly places to own investment property. The time has come to restore some semblance of legal balance between small property owners and tenants.
A Familiar Horror Story
The landlord is a 70 year old woman who rented out her family’s old farm house. The tenants lived there under a month-to-month tenancy at will agreement for 6 years without incident. The owner wanted to move back into the home for financial reasons, so she informed the tenants who immediately started threatening to call the board of health. Mind you, the owner had the right to ask the tenants to leave for any reason at all under a 30 day tenancy at will. The owner was forced to serve a 30 day notice to quit which resulted in the tenants’ immediate report to the local board of health and withholding of rent. The owners were cited for several minor code violations which they addressed promptly, but every time the health inspector came out, the tenant “reported” new alleged problems (likely caused intentionally by the tenants), and often did not allow the inspector to gain access. When the owner started an eviction action, and the tenants predictably shot back with a slew of counterclaims. Because the law is so favorable to the tenants, as I will discuss below, the owner was forced to pay the tenants money to get them to move out. Even though the owner felt she addressed all the issues promptly and competently, the existence of any code violation, however minor, rendered her case “dead on arrival” in Housing Court. To get rid of the headaches and potential liability, the landlord had to pay ransom money and waive the unpaid rent.
Unfortunately, this story is all too common in Massachusetts eviction courts, and something has to be done.
A Legal Minefield For Landlords
For landlords, navigating Massachusetts landlord-tenant law is like walking barefoot through a IED-filled field in Afghanistan. At some point, you’ll likely blow off a leg. Allow me to outline just a sampling of these laws and the penalties for landlords’ non-compliance:
Breach of implied warranty of habitability: The first thing a savvy tenant will do after receiving an eviction notice is call the board of health to get the owner cited for code violations. Any violation, however minor, effectively enables the tenant to live rent-free during the case by withholding rent, and the owner will be compelled to make the necessary repairs while the eviction is pending. There have been many instances where tenants have intentionally inflicted property damage to claim code violations. Other penalties: reduction or elimination of rent owed; tenant cannot be evicted; triple damages; payment of tenant’s attorneys’ fees.
Breach of quiet enjoyment: This is another tenant favorite claim. It used to be for when slumlords would shut off utilities to tenants, but that rarely happens anymore. I’ve seen this used when tenants are “inconvenienced” by landlords’ repeated attempts to access the premises to make repairs. Penalties: tenant gets to stay in possession; up to 3 months’ rent or actual damages, whichever is more; payment of tenant attorneys’ fees.
Retaliation: Even if the landlord can evict a tenant at will for any reason, the landlord cannot “retaliate” against them if they make any complaints about property conditions. This is why tenants will immediately start squawking about property issues when faced with eviction, because the retaliation law will protect them even though they are not entitled to lifetime occupancy. Penalties: tenant gets possession; up to 3 month’s rent in damages; payment of tenants’ attorneys’ fees.
Security deposit/last month’s rent violations: Oh, where do I start on this one. As I’ve written about extensively here, Massachusetts landlords need a Master’s degree in Accounting to comply with the Security Deposit law and all of its procedural traps. From giving a special receipt and statement of condition, to putting the money in a special separate account, to paying interest every year, even one minor slip up will subject the landlord to mandatory triple damages and payment of tenants’ attorneys’ fees. This can torpedo an eviction case from the get-go.
Consumer Protection/Chapter 93A: If all these minefields weren’t bad enough, at the end of the day, tenants are allowed to claim that any of the above warrants an award of triple damages and attorneys’ fees under the Mass. Consumer Protection Act.
Time for Meaningful Legal Reform
As I mentioned earlier, the vast majority of the laws protecting tenants were passed in the 1970’s when rental housing was far more problematic than it is now in 2012. Due to political pressure from tenant activists and liberal groups, lawmakers have been reluctant to level the playing field. Unfortunately, these draconian laws disproportionately hurt the small property owners who own 80% of the rental stock in Massachusetts. Laws which make investing and managing rental property hurt the economy and result in higher rents. There are several bills pending at the State House which will provide landlords with more incentive to own rental property in Massachusetts. The most sensible proposal is the much-awaited rent escrow law.
A. Rent Escrow
Massachusetts is one of the minority of states which does not have some form of rent escrow law. The need for one is absolutely critical because without it landlords incur large losses when the tenant’s defensive claims of “bad conditions” turn out to be minor, nonexistent or, worse yet, the result of intentionally inflicted damage to the property by the tenant in order to live rent-free.
A mandatory rent escrow law would require any tenant who is claiming rent withholding to pay the withheld rent to a local court month by month until code violations are repaired. After repairs are done, either the landlord and tenant agree on how the escrowed rent should be divided, or a judge orders a fair settlement. In most cases, the owner will get back most of the withheld escrowed rent. But the most important impact of a mandatory rent escrow law is that those nonpaying tenants who do not escrow can be promptly evicted for nonpayment of rent. Although nonpayment evictions will still take about three months, and owners will lose about three months of rent, much-longer-delayed evictions and the free rent trick will be stopped.
B. Security Deposit Reform
Presently, the security deposit law provides mandatory triple damages and payment of tenants’ attorneys’ fees for a violation however minor. The law should be reformed to provide a safe-harbor and discretionary penalties for when landlords make a good faith effort to comply but get caught up in the procedural mess, like for example if they put the deposit in a savings account instead of a special deposit account.
C. Remove Automatic Possession For Tenants
Presently, the law is drafted so that if a tenant prevails on any number of claims for property conditions, etc., they most likely cannot be evicted. This is especially unfair in the tenancy at will context where the landlord does not need any reason to evict a tenant. The result is that tenants get free passes and occupancy for life as long as they can dig up a counterclaim or two. This needs to be changed.
What Property Owners Can Do: Lobby and Speak Out
The tenant community, backed by well-funded public interest legal services groups, have a strong lobby at the Legislature and love to portray these issues as a form of “class warfare.” In the end, however, everyone gets hurt, because if it’s more expensive to own rental property in Massachusetts, those costs will be passed on to tenants.
Visit your local legislator’s office during office hours and speak to them (or their aids) about your concerns on the issues. In many cases, they won’t know about the bills and you will have to educate them. Send letters and emails to your legislators identifying the bill numbers and explaining why you support or do not support these bills. Go to fund raisers for your Representatives and Senators. Let them know that you vote and that you want your vote to count!
Common Eviction Defenses Ruled Unavailable To Squatters Who Lived Rent/Mortgage Free For 3 Years
In a April 10, 2012 ruling, the Massachusetts Appeals Court just made it easier for foreclosing banks to evict squatters of foreclosed properties. This is one of the few pro-bank Massachusetts decisions coming out of the foreclosure crisis, and should help speed up the disposition and sale of foreclosure and REO properties which, in turn, should help the housing market.
The case is Deutsche Bank v. Gabriel, and can be downloaded here. The defendants were all members of a single family living at 195-197 Callender Street in Dorchester for over 28 years. In 2009, the property went into foreclosure, and Deutsche Bank acquired title by foreclosure deed. As has become common in neighborhoods throughout Boston, the foreclosed upon family refused to leave, and Deutsche Bank brought eviction proceedings against them.
The family fought the eviction tooth-and-nail, and asserted the very common statutory defense based on poor property conditions. This defense, if successful, can prevent a landlord from recovering possession. Aside from irony that the family had been living at the premises for 28 years and was therefore the clear cause of any bad property conditions, the Appeals Court held that the family were squatters (and not tenants) with no legal entitlement to raise this defense. Barring another appeal, the court cleared the way for the eviction, some 6 years after the foreclosure and presumably with the tenants living rent and mortgage free the entire time.
With the housing market turning around, this decision is some long-awaited good news for those dealing with REO and foreclosed properties. Squatting tenants will be easier to evict and properties should be back on the market faster. Bad news for those fighting foreclosure, but good news for the real estate market.
I’ve recently become aware that some Massachusetts landlords are requiring that tenants procure their own policy of renter’s insurance as a condition of leasing. In fact, MSN Real Estate did a nice write up about the practice here. But I am also hearing about a dark side to this practice where some landlords have a kickback arrangement with the insurance provider where the landlord receives compensation for any policy taken out by a tenant.
Renter’s insurance is almost always a good idea, but under Massachusetts law, can a landlord require that a tenant get a policy (if the tenant doesn’t want one) and must it disclose a referral relationship with the insurance provider?
Landlords Should Be Careful About Renter’s Insurance Requirement
In light of recent court decisions, landlords should re-examine the legality of a mandatory renter’s insurance policy requirement. In the recent Hermida v. Archstone class action ruling, which considered amenity fees under the Massachusetts security deposit statute, the court held that landlords can only charge first and last month’s rent, a security deposit, and a lost key fee at the beginning of a tenancy, and no other types of fees. Any other type of fee or financial obligation required to be paid by the tenant at the beginning of the lease could be deemed illegal under the Mass. Security Deposit law, Mass. Gen. Laws ch. 186, sec. 15B. Accordingly, landlord must be very careful about what and how much they charge tenants at the inception of leases, over and above the standard rent deposits and new key fee. At the very least, renter’s insurance should be optional, and any affiliate or kickback arrangement should be fully disclosed to the tenant. This still may not prevent a landlord from getting sued over a mandatory renter’s insurance requirement.
Renter’s Insurance Still Smart Choice
That said, I always recommend that tenants get their own renter’s insurance policy. It’s fairly inexpensive and provides protection to your personal belongings. Massachusetts law does provide for a minimum of $750 per unit for tenant relocation assistance due to fire displacement. However, that is not nearly enough for the average renter.
Has your landlord required that you purchase renter’s insurance? Have they disclosed any referral relationship? I’d like to hear from you. The practice may well be illegal.
Using best practices to screen and select good tenants is the most important thing a Massachusetts landlord can do to avoid costly non-payment and eviction problems down the road, as I have posted about on this Blog. As the saying goes, an ounce of prevention is worth a pound of cure.
In my 14 years of practice, I have come across a sub-set of tenants which are extremely dangerous to Massachusetts landlords. They should be avoided like the Plague. I like to call them Professional Tenants.
Let me give you the profile of a typical Professional Tenant. (This is a generalization based on my personal experience, but it’s fairly accurate).
History of eviction history and/or delinquency with prior landlords
Surprising (and dangerous) knowledge of Massachusetts landlord-tenant law
Background in real estate, engineering, contracting
Marginal to bad credit: prior history of nonpayment collections, judgments or bankruptcies
Gaps in rental history
Non-existent or incomplete prior landlord references
The Professional Tenant’s Scheme
Shortly after moving in, they will start to complain about small issues with the rental property. Some will complain to the local board of health to have the landlord cited for code violations. (The state Sanitary Code can trip up even the most conscientious landlord.) Then the Professional Tenant will stop paying rent, claiming they are “withholding rent” due to bad property conditions. Of course, these tenants completely ignore the smart practice that any withheld rent be placed in an escrow account. Then the Professional Tenant will assert the landlord violated the last month rent and security deposit law, and ask for their deposit back, trying to set up the landlord for a triple damage claim.
In the meantime, months go by and the Professional Tenant has failed to pay any rent and the minor code violations, if any, are repaired. The landlord is forced to start eviction proceedings, only to be met with a slew of counterclaims and defenses from the Professional Tenant. The Professional Tenant then sends the landlord a myriad of document requests and interrogatories which automatically delays the eviction hearing by 2 weeks. If the Professional Tenant is really savvy, they will demand a jury trial, which in most small District Courts can delay the eviction by weeks and typically months. Meanwhile, the entire time, the Professional Tenant has still not paid any rent.
Months and thousands of dollars in attorneys’ fees later, the landlord finally gets his day in court. And the Professional Tenant doesn’t show up, leaving the landlord with a worthless judgment for thousands in unpaid rent and a trashed apartment.
Screen and Screen Again
The sad thing is that because Massachusetts landlord-tenant law is so tenant friendly, there is not much a landlord can do to avoid this situation, other than not rent to the Professional Tenant in the first place! Once a landlord has signed a lease with a Professional Tenant, they are stuck until the tenant violates the lease. My advice to landlords is to make screening the most important thing you do as a landlord, and do the following:
Invest in good credit history checks.
Follow up with landlord references
Check employment info
Check prior bankruptcies
If someone seems fishy, they probably are
If you find yourself stuck with a Professional Tenant, give me a call. There are certain things an experienced eviction attorney can do to prevent or minimize these shenanigans. At least you will be fighting back against what I perceive as scam artists.
Richard D. Vetstein, Esq. is regarded as one of the leading real estate attorneys in Massachusetts. With 25 years in practice, he was voted a "Super Lawyer," a "Top Lawyer" by Boston Magazine and "Best of Metrowest." For Rich's professional biography, click here. If you are interested in hiring Rich or have a legal question, email or call him at [email protected] or 508-620-5352.
Housing Courts Will Likely Face Increased Caseload
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.
Case Highlights Importance of Rent Acceleration Clause In Commercial Leases
New Online System Enables Landlords To Screen Tenants for Prior Evictions/Problems
Largest Lead Paint Penalty On Record for Attorney General Coakley
School is back and summer is over. September 1 and the start of the new rental cycle is right around the corner. It’s time to review my best practices to get trouble-free, paying tenants in your Massachusetts rental property.
