Rental Housing

Copyright Josh Reynolds 2010

Landlord Sued for Wrongful Death After Assailant Shoots Four Guests At House Party, Killing One

A landlord’s worst nightmare is someone getting hurt, or worse, shot and killed on their rental property, and then getting sued for wrongful death. This was the situation facing a property owner in Dorchester in the recent case of Belizaire v. Furr, (Appeals Court 13-P-1908 Sept. 11, 2015). Fortunately for the landlord, the Court ultimately concluded that she was not legally responsible for the shooting because there was no reason to predict it would happen. Had the facts been different in this case, the landlord would not have been so luck to escape liability. After discussing this important case, I’ll talk about some ways that landlords can manage their risk.

Shooting at House Party, 5-7 Edson Street, Dorchester

The landlord owned a two-family in Dorchester which she rented out to several individuals. The landlord was fairly lax with written lease agreements, with some of the tenants having leases, but others not. On the night in question, the landlord’s son and one of the occupants (who were friends) hosted a party with a DJ, alcohol and dancing. Carl Belizaire attended the party as a guest. Late at night, an unknown assailant shot up the room, killing Belizaire and injuring three other guest. The assailant was never found or charged. There was no prior history of violence at the property.

Landlord Sued For Wrongful Death

Belizaire’s estate sued the landlord for wrongful death, alleging that she failed to keep the property safe. The Court first analyzed whether there was a tenancy or lease in place, because that would minimize the landlord’s liability and control over injuries occurring on rental property. The landlord’s failure to secure leases with the tenants at the property, particularly the tenant who threw the party, resulted in the court concluding that there was insufficient evidence to rule that there was a valid tenancy in place to shield the landlord from liability.

The Court, however, ultimately ruled that the landlord was not liable for the shooting because there was no evidence of prior shootings or similar violent incidents on the property. Although there was evidence of prior drug activity at the property, the court found this insufficient to support a finding of liability. There was no evidence of other large parties with uninvited guests similar to the one in question taking place on the property. Nor was there any evidence that the landlord was affiliated in any way with, or knowledgeable about, the assailant or any dispute that the assailant may have had with the victim. The evidence submitted suggests that the victim’s death was tied to events beyond the party at the rental property. As a general rule, a landowner does not owe a duty to take affirmative steps to protect against dangerous or unlawful acts of third persons. In certain exceptional circumstances, landlords may be liable for ignoring criminal activities that occur on their premises and were known or should have been known to them. That was not the case here.

Managing The Risks Of Property Ownership: Use Strong Leases and Set Up LLC’s to Hold Title

Many of my landlord clients often worry about liability issues at their rental property. They often ask me whether they can get sued over someone getting hurt on their rental property and what they can do to minimize their risk.

The landlord in this case made some catastrophic mistakes which, had the facts been different, could have resulted in a multi-million dollar liability. The first mistake she made was not securing written leases for all tenants and occupants at the rental property. The form lease that I have drafted contains a unique indemnification clause which would have help shield the landlord for liability for injuries caused by the tenants. The second major mistake made by the landlord was holding title to the rental property in her individual name, thereby exposing her personal assets to a lien or judgment. Although not always appropriate for every landlord, it’s a prudent idea to hold rental property in a limited liability company which would shield the landlord’s personal assets from liability. There is expense to set up the LLC and there is a $500 annual fee, but in my opinion, it’s well worth it relative to the risk of getting sued for wrongful death.

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100316_photo_vetstein-2.pngIf you are a rental property owner and would like advice concerning your leases or would like to discuss setting up an LLC, please contact me at rvetstein@vetsteinlawgroup.com or 508-620-5352. I would be happy to help you in any way.

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Restricted-Access-Signs---Industrial-43894BBHPLYALU-baBy-Pass Housing Court For Expedited Superior Court Restraining Order Procedure

I recently handled an interesting case involving an unauthorized family member taking up residence in my client’s rental unit. My client, a doctor, owns a very nice condo unit in the Theatre District in Boston. He and his family live next door in the adjacent unit. The client signed a one year lease with a wealthy foreign national from Jordan, a middle aged lady. Per the lease, the tenant was the only authorized occupant for this 1BR unit. There was no discussion about family members being authorized occupants, and my client would not have agreed to it.

My client comes to find out that the tenant’s 20-something year old son, who attends a local college, has taken up residence in the unit. To make matters worse, the kid hosts several loud late night parties reeking of marijuana and cigarette smoke. My client is incensed, and to add insult to injury, he is fined several thousand dollars for noise and lease violations by the condo association. My client attempts to take action against tenant and son, but they hire a well known tenant’s rights attorney who stonewalls the two attorneys hired by the client. The client finally hires me.

Typically, this type of case would be filed as a standard eviction case in busy pro-tenant Boston Housing Court. The tenant’s attorney is also well known there. Accordingly, I needed to find a way to bypass Housing Court and take away this lawyer’s home court advantage.

So I came up with an creative approach. I filed a restraining order application in Superior Court to remove the son as an illegal trespasser. Although Superior Court typically handles major civil cases, it does share jurisdiction with the Housing Court over trespass cases requesting equitable relief. I served the interloper with a formal trespass notice, then filed the Superior Court application a few days later. The judge granted the move out order, after which my client and I had the pleasure of taking a victory walk down Tremont Street to serve the move out order. We were able to have the management company immediately change the locks and remove all the kid’s possessions. He is now permanently barred from entering the building. And the best part was that he left his wallet and passport in the unit! My client is now preparing the unit for rent to a better tenant. 

As the saying goes, “possession is 9/10ths of the law”!!!

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MRHAI am honored to be one of four fantastic speakers at the Massachusetts Rental Housing Association (MRHA) Annual Meeting and Conference on Saturday, May 30, 9AM-1PM at the Embassy Suites, 550 Winter Street, Waltham, MA.

My presentation will be “War Stories from the Eviction Court Trenches.” I will retell some colorful stories from my career handling over 5,000 evictions throughout the Commonwealth, as well as talk about my thoughts for fixing the system going forward.

Other speakers include:

Jamie Williamson, Commissioner, Massachusetts Commission on Discrimination(MCAD)Fair Housing Laws and How to Avoid Lawsuits

We have all heard of the large penalties inflicted upon unsuspecting landlords who are not aware of fair housing  laws, protected classes of people and discrimination red flags. Ms. Williamson is a Commissioner of the Massachusetts Commission on Discrimination(MCAD) and her presentation is not to be missed.

Marcus Papajohn, Financial Planner, www.MarcusPapajohn.comThe Good, the Bad and the Ugly, Estate Planning for Landlords 

How do you plan your estate of  income properties? Whether your properties total $200,000 or $2,000,000, whether you are  25 years old or 52 years old or 82 years old, whether you have children or not, you are wise to have an estate plan. Mr. Papajohn is a financial planner who has worked with MRHA for many years.

Mark Leger, MRHA Legislative Chair

Do you charge late fees? Have you had the “free rent” trick played on you? If “survivors of domestic abuse” become a protected class, will you be able to evict them? Mr. Leger explains landlord bills before the Massachusetts legislature that will effect the way you conduct your rental property business.

Click here to Register for the Conference. 

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cls-6State House Hearing Set For May 12, 1pm, Joint Committee for Judiciary Hearing Room A-2 

For the last decade, Massachusetts landlords have been lobbying for a tenant rent escrow bill which would prevent tenants from using the infamous “free rent trick” in evictions. The free rent trick works like this:  Tenant stops paying rent for various reasons, such as economic hardship or by design. After receiving a 14 day notice to quit for non-payment of rent, the tenant will immediately call the board of health to get the owner cited for minor or cosmetic code violations such as a hole in a window screen. Under current Massachusetts law, any code violation cited, however minor, allows the tenant to withhold rent until the eviction case is resolved. What usually happens is that the tenant skips out of town or agrees to a move out but never pays the months of accrued unpaid rent, leaving the landlord stuck with thousands of lost income to pay their mortgage and expenses.

Even the liberal Boston Globe recently published a compelling piece on how the Massachusetts legal system unfairly penalizes small landlords in these situations.

Unlike most other states, there is no requirement in Massachusetts that the tenant post the withheld rent into some form of escrow account. There have been many instances where tenants have intentionally inflicted property damage to claim code violations or just made them up altogether.

Bill Would Level Playing Field Between Small Landlords and Tenants

Hopefully, this will finally be the year that the Legislature passes this much needed reform to curb tenant abuses of the eviction process. Three bills will be discussed, H.B. 1654H.B. 1663 and H.B. 1664. Landlords are urged to come and testify before the committee and otherwise support the bill by contacting their local representatives and senators.

A mandatory rent escrow law would require any tenant who exercises their right of rent withholding to pay the withheld rent into an escrow account until the unsafe conditions or 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 on average three months to resolve, much-longer-delayed evictions and the free rent trick will be stopped.

The bills will most benefit small landlords and owners-occupants of multi-family residences who rent out apartments. These property owners are typically on strict budgets, and any lost rent and attorneys’  fees will prevent them from paying their mortgages, real estate taxes and property expenses, potentially leading to default and foreclosure.

For more information on how you can support these bills, please contact the Massachusetts Rental Housing Association and the Massachusetts Small Property Owner’s Association.

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100316_photo_vetstein (2)-1Richard D. Vetstein, Esq. is a vocal advocate for Massachusetts landlord rights and can be reached at rvetstein@vetsteinlawgroup.com or 508-620-5352.

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917BdkbVovL._UX250_Elizabeth Gerhman, a writer for the Boston Globe Magazine and owner of two rental units, is fed up with how the Massachusetts legal system favors tenants over landlords.

In her article Think It’s Tough to Rent? Try Being a Landlord, she describes that

“In just five years as a rental, the other [unit] — which has hardwood floors, granite countertops, and a $1,200 dishwasher — has been a nightmare, with tenants who bounced checks, didn’t pay their rent, and threatened to call the building inspector over, among other things, a loose toilet seat, a missing outlet cover, and, I’m not kidding, a bedroom that is allegedly 0.389 of an inch too small. The tenant who detailed these horrific, slum-like conditions also threatened to take me to court over some food that had spoiled when the refrigerator broke — which is what prompted the intimidation tactics in the first place.”

As landlord groups have been arguing for years, one of the major problems with the current system is that Massachusetts has no rent escrow law. Under the present system, a tenant can withhold months of rent for any cosmetic or minor problem with the unit until the eviction case is resolved, leaving the landlord unable to pay their mortgage. We call that the “free rent trick.” As Ms. Gerhman correctly points out, “with an average judgment of about three months’ rent, this can be a real hardship for house-poor landlords. And once a landlord does evict a tenant who owes back rent, he or she must pay to move the tenant’s belongings out of the apartment in addition to three months’ storage costs.” As I was quoted in the article, many landlords opt for “cash for keys” deals to avoid huge losses during an eviction.

A rent escrow law would require any tenant who withholds rent to simply pay it into an escrow account until the unsafe conditions or code violations are repaired and the eviction case is resolved. 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. The “free rent trick” would be gone and landlords less likely to get left holding the money bag.

Sounds fair? Tell that to your state legislators who have been sitting on rent escrow bills for over a decade.

New rent escrow bills return to the Legislature this session as House Bill 1654 sponsored by Rep. Chris Walsh and House Bill 1112 sponsored by Rep. Brad Jones. Both bills are expected to get hearings at the State House this spring. I will keep you posted.

Personally, I think a fair legislative compromise would be for landlord groups to support the Housing Court Expansion bill under the condition that a Rent Escrow Bill is passed along with it. That would be a win-win for both sides.

In the meantime, please email and call your local state rep and senator and tell him or her you are in favor of these bills. If you have any tenant horror stories, make sure you include those as well. Also, consider joining your local chapter of the Massachusetts Rental Housing Association or Masslandlords.net. Both organizations will be coordinating legislative efforts on the rent escrow bill and other landlord legislation. Lastly, please share this article and the Globe Magazine article on your Facebook pages, Twitter feeds and email blasts!

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NickCLRAttorney General’s Office Accused of Smearing Local Landlords In Press

A Craigslist rental ad posted online for merely 8 days turned into a complete nightmare for a Melrose father and son who claim that Attorney General Martha Coakley’s office ran roughshod over their rights and tried to smear their reputations in the local newspapers. After a five year legal saga, the landlords, Nicholas Keramaris (pictured right) and George Keramaris, fought back and won, convincing the Appeals Court to overturn a $38,000 civil penalty and attorneys’ fees assessed against them.

“Apartment Is Not De-Leaded”

The Keramaris family trust owns a 20 unit apartment building in Melrose. All of the units originally contained lead paint, and five of the apartments have been deleaded. One of the leaded units became available for rent, and Nicholas Keramaris, who is also an attorney, researched the lead paint laws prior to posting an advertisement on Craigslist stating “Note that this apartment is not de-leaded, and therefore it cannot be rented to families with children under six years old.”

A Melrose mother, who did not have a child under six and who did not attempt to rent the advertised apartment, filed a complaint with the MCAD about the ad. (This could have been a dummy renter employed to find fair housing violations). Once the landlords were notified of the complaint, they took the ad off Craigslist. It ran for a grand total of 8 days.

1379349493000-martha-coakleyAG’s Office Steps In

Attorney General Martha Coakley’s Office then stepped in and filed a civil action for discriminatory rental practices, seeking penalties and damages under the state Consumer Protection Act, Chapter 93A. According to the Keramaris family, “from the day that the Assistant Attorney General assumed responsibility over the case, he insisted on collection of steep penalties as a condition for settlement. Also, the Attorney General’s office publicly smeared us through repeated press releases while the case was pending. Our request for the Attorney General’s office to stop issuing negative press releases was described as a “non-starter” for settlement negotiations. Therefore, this very simple case, which involved a relatively benign violation, dragged on for almost five years.”

Award Struck Down

Despite the fact that the ad ran for only 8 days and no one was actually harmed, the Attorney General was able to persuade a Superior Court judge to assess an aware of nearly $38,000 in penalties and attorneys’ fees. Unwilling to accept this unjust result, the Keramaris family appealed and got the justice they deserved.

Employing some well needed common sense, the three judge appellate panel concluded that although the ad technically violated the lead paint discrimination statute, any harm done was minimal and did not rise to the egregious level of a Consumer Protection Act violation. In a rare ruling, the judges ruled that the lower court abused its discretion, finding that this was nothing but a good faith mistake by landlords who were not intentionally setting out to violate the law. The Appeals Court ultimately stuck down the entire award, leaving the Keramaris family with justice, albeit after 5 long years and I’m sure thousands in legal fees.

Where’s the Discretion?

I have handled numerous rental discrimination cases involving the Attorney General’s Office. The one thing I can say is that they often have a very one sided view of cases and suffer from tunnel vision. They also hardly ever exercise their discretion to back down. It’s usually all or nothing. I would like to see them try to see both sides of the coin in future cases and be more open to negotiated settlements. Maybe this ruling will encourage that. I won’t hold my breath though.

And lastly, I’m curious if the Attorney General will issue a press release announcing that the Appeals Court overturned this award? I doubt it.

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I will be speaking at the upcoming Metrowest Resourceful Realtor Meeting on March 2, 2015 at John Harvard’s Brewhouse at Shoppers World, Framingham. Networking starts at 5:45PM with dinner and speakers starting at 6:30PM. Any licensed estate agent welcome.

I’ll be talking about the latest court rulings and legislation affecting Massachusetts real estate law, intermixed with a few colorful war stories from the front lines. Topics will include the status of the independent contractor office model, the new CFPB closing disclosures and settlement statements, and a rental housing update.

Also speaking is Sandy Krenz, a 30-year interior designer and consultant with Debsan Paint in Natick. She will talk about color and decorating trends.

RSVP to aimee.siers@commonmoves.com with your choice of dinner (see invite).

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City Universities Providing ISD With Addresses of Student Apartments

In the coming weeks, some Boston college students living off-campus and their landlords may be greeted by city inspection officers at their doors. Shrugging off privacy concerns, pursuant to a new city ordinance, the city’s 31 local colleges and universities have sent the city’s Inspection Services Department the addresses of their students who live off-campus. Of the 25,000 addresses it received, ISD will pay visits to the 580 it deems to be suspect of violating zoning codes. Boston.com reporter Julie Xie in her article “City Will Inspect Off-Campus Student Apartments, And It’s Legal” reported this new development.

They’ll primarily be looking for issues related to overcrowding. There are over 45,000 undergraduate and graduate students living off-campus in Boston, according to The Boston Globe . A 2008 city ordinance prohibits more than four undergraduates living together in one apartment.

The city’s crackdown comes in the wake of BU senior Binland Lee’s tragic death in 2013 from a fire in her overcrowded Allston apartment. Flames blocked the staircase from the third floor — her only egress. Scofflaw landlords and poorly managed units unsafe for students were the subject of the Globe’s “Shadow Campus” investigation last year. Now, an ordinance requires colleges to provide a list of where students live off-campus every semester. Another requires private rental units to register their properties annually, and inspections are performed every five years.

There is no question that some Boston landlords catering to the huge undergraduate population have skirted the law, creating dangerous living spaces for far too long. Regardless of the issue of occupancy limits, landlords need to comply with the sanitary and building codes so they don’t create fire traps for housing.

However, I have always had issues with the legality of the 4 undergraduate rule. I’m quoted in the article as saying that the no-more-than-four rule has always been somewhat suspect, arbitrary, and tough to enforce. Though neighbors do complain about late-night parties and loud college students, not all undergrads are troublemakers.” “Undergrads are not a protected class under any discrimination laws, and they’re transient, so it’s not like they’re going to come up with a lobbyist or fight for their rights in that way,” I’m quoted. “Colleges don’t want to get in trouble and they know they won’t get much pushback from Boston’s student body.”

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computer-searchLandlords Get Useful Tenant Screening Tool for Massachusetts District Court Records

In a much anticipated announcement, expanded online court docket information is now available for all district courts in Massachusetts including records on evictions, small claims, civil, and supplementary process (collection actions) cases. The website is Masscourts.org. It is free to use.

Using this site, landlords can check to see if prospective tenants have been involved in any prior evictions or have been sued by creditors. Housing Court dockets have already been available for about a year.

The only downside to the site is that users must search each individual court separately. My advice for landlords is to match the court with the prospective tenant’s former address and check to see if they were previously involved in any summary process or debt collection lawsuits.

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80140012Legislation Set To Expand Housing Court Statewide

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

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

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

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

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

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

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

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

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

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

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

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

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

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airbnbLaw Catching Up With Popular Airbnb Room Rental Website

With the promise of relatively easy money, Airbnb (Air Bed & Breakfast) is making innkeepers of many Greater Boston homeowners 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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eviction-notAvoid Being Dead On Arrival In Eviction Court

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

A.      Non-payment of Rent

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

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

1. Service of the Notice

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

2.  Tenants At Will

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

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

3. Calculating Notice Date

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

4. Cure Rights

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

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

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

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

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

B.      Termination of Tenancy At Will

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

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

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

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

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

D.      For Cause Situations

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

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

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

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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.

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100316_photo_vetstein (2)-1Richard 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 atinfo@vetsteinlawgroup.com.

 

 

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NIGHTCODE_CRR3The 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.

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100316_photo_vetstein (2)-1Richard 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 rvetstein@vetsteinlawgroup.com or 508-620-5352.

 

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1240410_10152181877527492_1822384462_nJoint Committee on Housing Considering Tenant Abuse Reform

Yesterday I was honored to testify before the Massachusetts Legislature’s Joint Housing Committee in favor of House Bill 1131, the Rent Escrow Bill. The bill will level the playing field between landlords and tenants and make Massachusetts more hospitable to rental property owners.

The bill prevents tenants from being allowed to withhold rent for minor or cosmetic property condition issues through the entire pendency of an eviction case. Instead, tenants would have to pay the withheld rent into an escrow account administered by the court or the attorneys until such time as the judge rules on the property conditions. Both landlord and tenant would have “skin in the game,” and it would cut way down on the expense and length of evictions.

For more detailed information about the bill please read my prior post:  Massachusetts Tenant Rent Escrow Bill Set To Pass This Term?

As a landlord tenant attorney who has handled over 5,000 evictions, I told legislators some horror stories about how “professional tenants” have victimized my landlord clients by creating minor code issues, withholding rent, then attempting to extort my clients out of thousands of dollars. It certainly appeared to resonate with the lawmakers and I even got a nice round of applause from the gallery after my testimony!

If you are a landlord, please contact your state rep and senator to support House Bill 1131. After many years trying to get this bill through, we may finally have the best environment to pass this much-needed reform to the eviction system.

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eviction-notBill Would Curb Tenant Abuses of Eviction Process | State House Hearing Set For Feb. 25

For the last decade, Massachusetts landlords have been lobbying for a tenant rent escrow bill which would prevent tenants from using the infamous “free rent trick” in evictions. This may finally be the year that the Legislature passes this much needed reform to curb tenant abuses of the eviction process. Two bills, H.B. 1131 and H.B. 1110, have made their way to public hearing at the State House for a February 25th hearing before the Joint Committee on Housing. Landlords are urged to come and testify before the committee and otherwise support the bill by contacting their local representatives and senators.

The bills are designed to reform tenant abuses of the rent withholding law, including the infamous “free rent trick.” The free rent trick works like this:  Tenant stops paying rent for various reasons, such as economic hardship or by design. After receiving a 14 day notice to quit for non-payment of rent, the tenant will immediately call the board of health to get the owner cited for minor or cosmetic code violations such as a hole in a window screen. Under current Massachusetts law, any code violation cited, however minor, allows the tenant to withhold rent until the eviction case is resolved. What usually happens is that the tenant skips out of town or agrees to a move out but never pays the months of accrued unpaid rent, leaving the landlord stuck with thousands of lost income to pay their mortgage and expenses.

Unlike most other states, there is no requirement in Massachusetts that the tenant post the withheld rent into some form of escrow account. There have been many instances where tenants have intentionally inflicted property damage to claim code violations or just made them up altogether.

A mandatory rent escrow law would require any tenant who exercises their right of rent withholding to pay the withheld rent into an escrow account until the unsafe conditions or 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 on average three months to resolve, much-longer-delayed evictions and the free rent trick will be stopped.

The bills will most benefit small landlords and owners-occupants of multi-family residences who rent out apartments. These property owners are typically on strict budgets, and any lost rent and attorneys’  fees will prevent them from paying their mortgages, real estate taxes and property expenses, potentially leading to default and foreclosure.

For more information on how you can support these bills, please contact the Massachusetts Rental Housing Association and the Massachusetts Small Property Owner’s Association.

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100316_photo_vetstein (2)-1Richard D. Vetstein, Esq. is a vocal advocate for Massachusetts landlord rights and can be reached at rvetstein@vetsteinlawgroup.com or 508-620-5352.

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Where-are-you-from-512x273Innocent Small Talk Apparently Illegal, According to Boston Fair Housing Commission

The seemingly innocent question posed by a Boston rental agent to Gladys Linder when they were searching for an apartment was “Where are you from?”

“Venezuela,” she answered.

Gladys and her husband went on to find an apartment a month later without further incident. But she found the question about her national origin insulting and upsetting.

This is Massachusetts, and you know what came next.

Stokel filed a complaint with the Boston Fair Housing Commission, claiming that rental agent’s question was discriminatory and caused her to suffer fear, anxiety and sleeplessness over a three-year period.

Seriously?

Massachusetts General Laws Chapter 151B and the Boston Fair Housing Commission Regulations make it illegal for any licensed real estate broker “to cause to be made any written or oral inquiry or record concerning . . . national origin.”

Although this was the agent’s first discrimination complaint and there was no discriminatory impact on the tenants at all, the Commission found that the question itself was unlawful and issued one of the largest penalties I have seen in recent years — $10,000 in emotional distress damages, plus $44,000 in attorney’s fees and costs and a $7,500 civil penalty against the broker — a whopping $61,500 in total liability for this single question, not to mention the tens of thousands the agent had to pay for defense legal fees.

The ruling can be found here:  Linder v. Boston Fair Housing Commission, Mass. Appeals Court (Dec. 17, 2013).

Appeals Court Uses Some Much Needed Common Sense

The case went up on appeal, and fortunately the Massachusetts Appeals Court exercised some common sense and slashed the award, likely by more than half pending further proceedings. But the court let stand the commission’s ruling that the one innocuous question did indeed violate the discrimination laws. So the broker will remain on the hook for a sizable liability.

Honestly, I’m having a lot of trouble with this ruling. It appears that the broker was simply engaging in some harmless small talk by asking the applicant where she was from. There was no evidence that the broker refused to rent to her or took any other discriminatory action against them. What if the applicant had a Southern accent and said she was from Alabama? That’s not illegal discrimination, but since she is from another county, it makes the question unlawful discrimination? Unbelievable! This is one of those cases where the anti-discrimination laws result in a totally absurd result.

So thank you to the Boston Fair Housing Commission for making small talk illegal. Unfortunately, the lesson to be learned from this case for rental agents and Realtors: Don’t ask a client where they are from. I kid you not. Only in Massachusetts…

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100316_photo_vetstein-2.pngRichard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney who often consults with Realtors and rental agents on their legal and ethical duties. He can be reached at info@vetsteinlawgroup.com.

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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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P_154_092811110348Guest Post By:  Philip B. Posner, Esq., 

Part independent living, part assisted living and part skilled nursing home, a Continuing Care Retirement Community (CCRC) offers a tiered approach to the aging process, accommodating residents’ changing needs. Upon entering, healthy adults can reside independently in single-family homes, apartments or condominiums. When assistance with everyday activities becomes necessary, they can move into assisted living or nursing care facilities within the same community. CCRCs give older adults the option to live in one location for the duration of their life, with much if not all of their future care already figured out.

With the Baby Boomer generation hitting retirement age, CCRC’s are now a multibillion-dollar industry, particularly among the upper-middle class and affluent. At least 745,000 older adults now live in such communities, according to the American Association of Homes and Services for the Aging. And those numbers are expected to rise as baby boomers hit their 70s.

This Isn’t Your Grandparents’ Nursing Home

Building styles of CCRCs run the gamut from urban high-rises to mid-rise suburban campuses to garden apartments, cottages cluster homes, or single-family homes. Some are as luxurious as five star hotels. Some CCRCs provide units that are designed for people with special medical conditions, such as Alzheimer’s disease. Because of the substantial up front Entry Fee, CCRCs are targeted toward a middle and upper middle class demographic. All CCRCs have large staffs, necessary to provide the diverse and elaborate services and amenities which are provided as part of the CCRC model and are demanded by those seniors interested in this type of housing and lifestyle.

CCRC residents typically pay a hefty entry fee and a monthly fee in return for the “promise” of care for the rest of the residents’ lives. Of course, this “promise” sets CCRCs apart from over-55 and assisted living facilities and nursing homes. And CCRCs are very distinct from the ‘aging in place’ model which may require extensive adaptation of a residence for the physical needs of an aging senior and the delivery of services through various community and other means. CCRCs are designed from the ground up to provide increasingly intensive services under the ‘continuum of care’ model to accommodate the needs of their residents.

The continuum of facilities and services available to CCRC residents typically includes:

  • An independent residential unit with one or more meals, housekeeping, social and recreational activities, and some transportation.
  • A separate assisted living area on the same campus, where additional support services are provided. Some of these are secure for people with memory loss.
  • A separate health care and skilled nursing facility on the premises, with nursing and/or physical rehabilitation, either short-term or long-term.

The on-site community, services, healthcare and activities are factors that attract many people to CCRCs. In addition entry into a CCRC requires only one major transition to a new “home” for those resident for whom stability is appealing or necessary. The facilities and options will vary widely so residents and their families considering this housing option are cautioned to thoroughly review each project on an individual and intensive basis.

It is also important to recognize that entry into the skilled nursing facility that is a part of the CCRC cannot in all cases by guaranteed. In the event that the nursing units are filled or otherwise unavailable, typical CCRC agreements permit placement of an ailing resident in an alternate nursing facility.  This reality should be carefully reviewed with the CCRC and with a potential resident and information gathered with regard to the likelihood of such an event.

CCRCs generally maintain a diverse suite of on-site medical and social services and facilities. Residents may enter a CCRC while still relatively healthy and then move on to more intensive care as it becomes necessary. CCRCs offer various options for lively communal living not available in many age-limited (over-55) properties and available only with more effort for seniors who may choose to remain in their own homes.

MI-BF100_Family_NS_20100806204302CCRC Fee Structures:  Costly, Confusing And Not Without Risk

The downside of a CCRC is the substantial cost of the Entry Fee and the confusing structure of the contracts and agreements between the CCRC and the resident. Prices depend on the amount of care provided, the type of contract, and the unit’s size and geographic location. Entry fees may range from $100,000 to more than $500,000 depending on the CCRC project, real estate market and factors such as whether or not the Entry Fee will be refunded in full or in part at such time as the resident leaves the CCRC or passes away. Monthly Service Charges and Fees range widely based, not only on the real estate market and prevailing regional costs but also the type of contract between the CCRC and the resident. Unlike other types of senior housing, the costs of CCRCs is highly variable and has been difficult to quantify in national surveys. For more info, here are links to a recent cost surveys by Metlife Mature Market Institute and Genworth Financial.

Seniors often use the proceeds from the sale of their home to pay the Entry Fee of the CCRC. However, the resident should be cautioned than in most CCRCs, the payment of the Entry Fee is not the same as the purchase of an apartment or real estate of any kind. The agreements in many cases are akin to a lease. Moreover, to the extent that the current federal and state tax law (also highly changeable) results in a taxable gain upon the sale of the residence – no “roll over” to defer a gain of potentially highly appreciated real estate will be available upon entry into a CCRC.

Nationally, CCRCs typically provide for three basic fee schedules:

  1. Extensive contracts, which include unlimited long-term nursing care at little or no increase in the monthly fee. This arrangement requires residents to pay a higher fee initially.
  2. Modified contracts, which include a specified duration of long-term nursing care, beyond which fees rise as care increases.
  3. Fee-for-service contracts, in which residents pay a reduced monthly fee but pay full daily rates for long-term nursing care.

CCRC contracts have evolved over time with new and confused variations within each fee schedule. For example, a CCRC might offer two different extensive contracts and one modified contract, with different levels of refundability for each. CCrcdata.org provides a national directory of CCRCs and general information regarding the amenities provided by a CCRC and the contract terms.  Many facilities now provide samples of the their contract and related documents on-line in PDF format. Care should be taken, however, to review not only the CCRC contracts but also the financial information and individual project data to determine whether or not the particular CCRC being reviewed is financially stable and likely to remain so over time.image2

CCRC Entry Requirements

Most CCRCs require that a resident be in good health, be able to live independently when entering the facility, and be within minimum and maximum age limits. As a prerequisite to admission, facilities may also require both Medicare Part A and Part B, and perhaps Medigap coverage as well. A few are now even requiring long-term care coverage as a way of keeping fees down. Some CCRCs are affiliated with a specific religious, ethnic or fraternal order and membership in these groups may be a requirement. Of course, applicants will have to demonstrate that they have the means to meet the required fees. The applicant may be placed on a waiting list, since CCRCs have, until relatively recently been highly sought after.

CCRC residents usually self-fund their residency and care out of their own pockets. As noted above, CCRCs are generally targeted toward seniors with middle to upper class means.  However, Medicare, and at times Medicaid, can be used to pay for certain services, and most CCRCs accept either Medicare or Medicaid. Although Medicare does not generally cover long-term nursing care, it often covers specific services that a CCRC resident might receive, such as physician services and hospitalization. Because the financial requirements for residence are fairly strict and the costs are relatively high, very few CCRC residents are eligible for Medicaid.

Recent Financial Challenges

According to a recent survey prepared by underwriter of financing for non-profit senior living providers, there were approximately 1850 CCRCs in the United States as of the end of 2009. Approximately 30% of CCRCs currently under development are for-profit status according to the survey. This represents a shift from the current norm of non-profit ownership of CCRCs. Profit and non profit projects alike, are developed utilizing complex financial instruments including municipal bonds, tiered financings, and oftimes complex management contracts between ongoing non-profit management companies controlled by the project developer. Moreover the CCRC “model” relies on the up front provision of large sums of money from each resident raising issues of financial management, disclosure and security of such deposits.

Due, in part, to the recent financial crises, the Erickson Retirement Communities, Inc. (the developer of the various ‘Erickson’ communities) was forced to reorganize in Chapter 11 Bankruptcy and its real estate and financial assets under management were acquired by in an auction. New capital was injected into the operations of all of the individual CCRCs by the successful bidder. Notwithstanding the financial concerns, occupancy rates and confidence in the individual Erickson communities (as well as other CCRCs nationally) has remained high.

The risk in the CCRC industry has led the U.S. Senate Special Committee on Aging to seek a Government Accountability Office investigation into CCRC operations and finances. Although the prospects for the industry remain positive, given importance to seniors of maintaining stability in their housing accommodations, a thorough review of a particular CCRCs financial position is an important component of counsel’s overall review of a CCRC project.

Despite their risks, CCRCs still hold widespread appeal. They promise to alleviate one of the biggest worries facing families with aging loved ones: how to secure, and in many cases pay for, future long-term care.

How To Evaluate A Facility And CCRC Contract

Deciding on a CCRC may be an once-in-a-lifetime choice, and it is a decision that should be made carefully and with the benefit of expert counsel. CCRC contracts are extremely complex and variable. An experienced elder law attorney’s assistance is, in my opinion, invaluable in selecting a community and reviewing its contract. Assistance from a certified financial planner may also be beneficial.

For your information, please download my own FREE CCRC Checklist For Clients.

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pposner_photoPhilip Posner, Esq. is a Massachusetts attorney with offices in Wakefield, Massachusetts. Phil practices primarily in land-use law. Phil can be reached at land.law@verizon.net or 781-224-1900.

 

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