Convicted Felon, Allen Seymour of Oxford, MA Named Again In Forgery Lawsuit
As a Special Attorney General Grand Jury hears evidence of a sophisticated real estate fraud conspiracy orchestrated by convicted felon, Allen Seymour, and his alleged accomplices, my firm has filed the third lawsuit for another victim of this predatory scam. The suit, filed in Middlesex Superior Court on behalf of two Somerville homeowners, alleges that Seymour approached them with a bogus reverse mortgage plan then forged two quitclaim deeds purporting to sell their home out from under them, flipping it to well known Boston real estate investors. One of the deeds was purportedly signed by a dead woman, and the other may have been stamped with a stolen notary public seal.
As a result of the lawsuits filed by my office and cooperation with the Attorney General’s office, Seymour was recently arrested in South Carolina, and was arraigned in Brookline District Court on June 18, with bail set at $2.5 Million. Seymour’s scheme is to approach elderly or naive homeowners who are in foreclosure, and offer them a “foreclosure rescue” loan or a bogus reverse mortgage. Using the alias “Richard Chase” to hide his true identity, Seymour persuades the homeowner to sign legal paperwork, then uses forged deeds and purchase contracts to flip the properties to investors, pocketing the money. The two other lawsuits involve properties in Brookline and Cambridge, where Seymour and his associates (one allegedly including a Newton Police officer) have allegedly absconded with millions of dollars in sale proceeds. We are aware of several other transactions where Seymour and his partners were involved.
These cases are being discussed around the Greater Boston real estate bar, with several leading Massachusetts title insurance companies on the hook for insuring these fraudulent sales.
If you have any information concerning Mr. Seymour or any of these transaction, please email me confidentially at [email protected].
Property Owners Vehemently Opposed to “Right of First Refusal” Proposals Giving Tenants Up to 240 Days to Purchase Rental Properties For Sale
In an effort to stem the affordable housing problem, cities like Cambridge and Somerville are exploring giving tenants a legal right to purchase the homes and apartments they are renting when owners go to sell them on the open market. The concept is a “right of first refusal” which would be triggered when the owner lists the property for sale and gets a bona fide offer from a third party buyer. Under the Cambridge proposal embedded below, a tenant would have up to 240 days to put down a deposit, obtain financing and close on the purchase, and would also have the right to assign the contract to a non-profit housing trust for affordable housing. The proposed law would apply to all rented single family homes, condominium units, multifamily and apartment buildings except owner two-family residences fully owner occupied or with one of the units occupied by the owner’s immediate family. (These definitions are somewhat unclear).
Somerville State Senator Denise Provost originally filed a Tenant Right to Purchase Bill with the Legislature, but it did not move past committee. Now, Cambridge and Somerville are considering Home Rule Petitions to pass their own Right of First Refusal laws. If these proposals gain traction, they could spread to other cities and towns like Boston.
Property owner groups vehemently oppose these proposals. A similar proposal was passed in Washington, D.C, and the Huffington Post has exposed how it’s been an abysmal failure and abused by tenants. As the HuffPost, writes, “some tenants are using [the Act] to extract money from landlords, should a landlord decide to sell a building. At present, TOPA is holding up or blocking real estate transactions, causing grief for developers and homeowners and victimizing low-income residents stuck living in buildings owners are unable to sell but forced to maintain at a financial loss.”
I agree that this would be a terrible idea and extremely unfair to Massachusetts property owners. No, it’s not just terrible. It’s crazy and socialist. First, any sale of rental property is always subject to an existing tenancy or lease. That’s been the law in Massachusetts for centuries. So renters are already protected from displacement. Second, the proposal would wreck havoc on the local real estate market and skew free market dynamics. The Cambridge law would give tenants with no skin in the game 8 months to purchase a property. That’s 3 real estate cycles! Knowing that any offer would be subject to a tenant right of first refusal, investors would avoid making offers for occupied properties for sale, or would reduce offering prices, thus chilling sales. Tenants would be able to “flip” their right of first refusal to local nonprofits for affordable housing, walking away with a tidy profit. There are much better ways to create affordable housing than this idea.
Proposal: 5%-10% Tax, Plus Comprehensive Regulations
Like Uber and Lyft, is the law finally catching up with the new economy-disrupting technologies for the real estate industry like Airbnb? The answer is yes if Massachusetts legislators have their way. Today, Massachusetts House legislators are holding a hearing on a new bill which would tax and regulate Airbnb and other short term rentals. The proposal is House Bill 3454 (click to read). The proposal would impose a new excise tax between 5% – 10% on short term rentals, depending on whether the host rents his/her own residence, is a “commercial host,” or the rental is professionally managed.
According to a recent Boston Globe article, Airbnb, the largest of such rental sites, reports that it logged about 592,000 guests in Massachusetts last year. Had those stays been subject to the state’s hotel tax rate of 5.7%, that would have added an estimated $15 million to the Commonwealth’s coffers. The availability of such easy tax revenue may be too much for legislators to pass up this year, although a similar effort failed at the last minute last year.
Airbnb is happily sharing these calculations because it wants to be taxed, and this week it’s airing a new TV commercialabout the issue. Now don’t think for a second that this is some kind of benevolent new-economy thing. Guests, not Airbnb, pay the tax! Taxation is also a form of legitimization for these online portals.
The House proposal would also establish a comprehensive regulatory and safety scheme on Airbnb rentals, similar to that imposed on bed and breakfasts and other small local lodging facilities. Local towns and cities would be permitted to restrict certain types of short term rentals, the number of rental days allowed, require business licenses and a housing registry, and make the host obtain liability insurance of at least $1M in coverage. Violations of the new law carry a stiff fine of up to $1000/day for the illegal rental period.
The proposal has received much attention in recent months as hearings have been held across the state. The Massachusetts Association of Realtors has come out in opposition to the bill, as with many Airbnb hosts who rely on this source of additional income.
I will keep up with developments, so check back here from time to time.
Mortgage Lender Wins Stunning Ruling Challenging $103 Million Fine
Characterizing Director Richard Cordray of the Consumer Financial Protection Bureau as the “single most powerful official in the entire U.S. Government, other than the President,” a federal appeals court ruled yesterday in the case of PHH Corporation v. CFPB, that the CFPB’s organizational structure and authority to impose fines violates the due process provisions of the U.S. Constitution. The surprising 101-page ruling called into question the Director’s authority to impose certain fines and the agency’s authority to enact rules and regulations, although future appeals are likely. The agency, the pet project of Sen. Elizabeth Warren, has long been criticized by the banking industry and congressional Republicans as wielding too much power.
PHH, a mortgage lender, made national headlines when it challenged Director Cordray’s decision to tack on a $103 million increase to a $6 million fine initially levied against PHH for allegedly illegally referring consumers to mortgage insurers in exchange for kickbacks in violation of the Real Estate Settlement Procedures Act. The case was one of the first times that a company fought back against the CFPB, the governmental agency championed by Elizabeth Warren and congressional liberals after the Bush era financial crisis and the Dodd-Frank Act.
In a unanimous decision, a three judge panel of the federal appeals court governing Washington D.C. ruled that the CFPB’s current structure allows the director to wield far too much power, more than any other agency in the entire U.S government. “Because the Director alone heads the agency without Presidential supervision, and in light of the CFPB’s broad authority over the U.S. economy, the Director enjoys significantly more unilateral power than any single member of any other independent agency,” the judges reasoned.
The fallout remains unclear, but certainly this ruling gives opponents of the CFPB heavy ammunition to challenge the agency on its decisions and rule-making authority. The Mortgage Bankers Association welcomed the decision and the clarification the decision presents for RESPA. “MBA is gratified that the court has issued an extremely thoughtful opinion. It addresses all of the key issues raised by the PHH case, including the proper interpretation of the Real Estate Settlement Procedures Act, the need for due process including reasonable statutes of limitations and the very constitutionality of the CFPB itself,” MBA President and CEO David Stevens said.
The National Association of Realtors also welcomed the decision’s clarity surrounding marketing service agreements, which are clearly a target of the CFPB. “Today’s decision offers much-needed clarity on the legality of marketing service agreements, and makes clear that MSAs are compliant with RESPA provided that payment for goods and services actually furnished or performed are made at fair market,” said NAR President Tom Salomone. “We’re hopeful this will address any uncertainty moving forward and offer a clear road ahead for any of our members who have entered into MSAs with settlement service providers,” Salomone continued. “We will continue to monitor this case and the further appeals that are likely, and continue to communicate to Realtors on what this means for them and their business.”
I have been a vocal critic of the CFPB’s massive revision to the closing and settlement disclosure statements which went into effect last year. While there is no indication that the new Closing Disclosure and Loan Estimate will go away, this ruling will hopefully make the agency think twice about going over the top with future rules and regulations.
Eisai, Inc. v. Housing Appeals Committee: Master Plan Conflict Does Not Trump Need For Affordable Housing
Chapter 40B — the state’s so-called “anti-snob” affordable housing law — has pitted developers vs. towns and neighbors in contentious fights over affordable housing projects. It’s one of the most controversial laws in the state, with opponents seeking to reform or repeal the law in recent years. In my home town of Sudbury, for example, there are “Oppose Sudbury Station” signs all over town, in opposition to a planned 200+ unit development in the middle of the historic town center.
While battles rage on the local level, Massachusetts courts have been rather tough on 40B opponents and boards who oppose projects. Last month, in another setback to Chapter 40B opponents, the Massachusetts Appeals Court in Eisai, Inc. v. Housing Appeals Committee (June 20, 2016), allowed a controversial Andover 40B project to proceed over the local ZBA’s denial of the permit on grounds that the town master plan is a local concern that trumps the need for affordable housing.
In the Eisai case, an Andover developer filed a 40B Comprehensive Permit application to build a 248-rental-unit project within an existing office and industrial park. The local zoning board of appeals denied the application on the ground that the “proposed project is inconsistent with decades of municipal planning, economic development strategies, and planning with owners and tenants of the abutting industrial properties[,] . . . most notably, the rezoning of the locus and abutting properties to accommodate and develop a modern, competitive, and viable industrial park and industrial center.” On appeal by the developer, the state Housing Appeals Committee, a state agency which hears appeals of 40B permits, reversed and ordered the local board to issue the Comprehensive Permit. The case was further appealed to the Superior Court, which upheld the permit, then to the state Appeals Court.
The important aspect of the appellate ruling was the Court’s endorsement of a new reformulated four factor test announced by the HAC under which the ZBA must offer more evidence of local concerns to outweigh the regional need for affordable housing. On its face, the reformulated test requires boards to provide a greater amount of more specific, higher quality information in order to tip the scale in favor of upholding the master plan and denying a 40B project.
Project opponents must now demonstrate the following:
The extent to which the proposed housing is in conflict with or undermines the specific planning interest.
The importance of the specific planning interest, under the facts presented, measured, to the extent possible, in quantitative terms . . . .
The quality . . . of the overall master plan (or other planning documents or efforts) and the extent to which it has been implemented. A very significant component of the master plan is the housing element of that plan (or any separate affordable housing plan). The housing element must not only promote affordable housing, but to be given significant weight, the Board must also show to what extent it is an effective planning tool. . . .
The amount [and type] of affordable housing that has resulted from affordable housing planning.
Faced with the new, reformulated test, my prediction is that local boards and 40B opponents are going to have a much tougher time opposing 40B projects.
On June 23, the Warren Group will host its widely attended Midyear Mortgage Update & Conference at the Verve Hotel in Natick, MA. The Midyear Update, for the mortgage and real estate industry, recaps the first 6 months of 2016, in addition to forecasting the remainder of the year.
Featured speakers include Middlesex North Registrar of Deeds Richard (Dick) Howe, Paul T. Pouliot, First Vice President, Mortgage Manager, Federal Home Loan Bank of Boston, Robert Triest, Vice President and Economist, Federal Reserve Bank of Boston, Annie Blatz, President, Massachusetts Association of REALTORS®, and Timothy Warren, Jr., CEO, The Warren Group.
I am honored to be speaking on a panel with Kimberly Allard, former President of the MAR. As a panel speaker, I am able to offer my readers and guests 50% of the admission for an all event pass costing $37.50. You can register by clicking this LINK. Your discount code is: SPEAKERGUESTMA
When:
June 23, 2016
8:00 a.m. – 12:00 p.m.
Where:
The VERVE Crowne Plaza – Natick
1360 Worcester Street
Natick, MA 01760
The full schedule is below:
8:30 AM General Session Speakers
Paul T. Pouliot, First Vice President, Mortgage Manager, Federal Home Loan Bank of Boston FHLB System Your One stop Shopping Partner for the Secondary Market Come and listen to what the Federal Home Loan Bank of Boston is doing about providing liquidity for the Housing Finance Industry, new initiatives that will promote job growth and new or enhancements to the Mortgage Partnership Finance program.
Bio: Paul Pouliot joined the Federal Home Loan Bank of Boston in May 2000 as Vice President/Mortgage Manager. In December 2001 he was promoted to First Vice President. Paul has responsibility for the marketing and overall approval process of prospective Participating Financial Institutions (PFIs). He currently serves on the MPF Partnership Committee for the FHLB System. He has dedicated more than 40 years to the mortgage banking industry and holds a Master Certified Mortgage Banker designation from the Mortgage Bankers Association of America. He co-founded Colonial Mortgage, Inc and helped direct its operations until CFX Mortgage (which was subsequently acquired by Peoples Heritage Savings Bank) acquired the company.
Annie Blatz, President, Massachusetts Association of REALTORS® The Massachusetts Association of REALTORS® is a professional trade association for licensed real estate practitioners and serves in a federated relationship with the state’s 13 local REALTOR® associations. Membership in the organization is voluntary and consists of both residential and commercial agents and brokers as well as industry affiliates. MAR’s membership currently consists of approximately 20,500 real estate licensees, and only MAR members are authorized to use the trademark term, REALTOR®. The state association’s headquarters is located in Waltham, MA
Timothy Warren, Jr., CEO, The Warren Group As one of New England’s foremost real estate thought leaders, Tim Warren will take you through The Warren Group’s extensive sales and property data. By combining the most up-to-date real estate statistics, framed with an in-depth historical perspective, you will start to see a one-of-a-kind illustration of the current marketplace. Mr. Warren’s session will address pressing questions, including when the significant effects of the foreclosure crisis will subside and how inventory levels will replenish themselves in the coming years.
Bio: Timothy M. Warren Jr., CEO of The Warren Group, is the fourth generation of family ownership and management. A graduate of Bowdoin College, Tim joined the family business in 1973, rose to president in 1988, and CEO in 2004. He has played a vital role in extending the company’s comprehensive real estate database, growing its publishing and events business and expanding public relations efforts.
Mr. Warren is a regularly shares his analysis of real estate issues to major news outlets, including The Boston Globe and Boston Herald; radio stations WBUR and WBZ; and television, including appearances on Fox 25 News, NECN Business, The Chronicle (WCVB) and the Emily Rooney Show (WGBH). Tim serves on the advisory board of the Rappaport Institute for Greater Boston and the Family Business Association Advisory Council.
10:00 AM – 11:00 AM Concurrent Sessions – choose from one of two
Panel 1 Panelists will touch upon cutting edge technology and media, provide legal perspective, discuss life after TRID and pitfalls in your communications.More details coming soon.
Kimberly Allard, Past President of MAR, Century 21 With over 17 Years of Real Estate Experience, Kimberly Allard’s dynamic approach to sharing and presenting information will help refresh your professional development offerings. Kimberly is a very active Selling Broker/Owner and that’s not likely to change. She is excited about taking her 15 years of hospitality management experience, 30 years of training experience and real estate experience and combining it ( with her usual humor) to get your programs on the fast track for success!
Richard Vestein, President, Vestein Law Group, P.C.
Richard D. Vetstein, Esq. is a nationally recognized real estate attorney, helping people buy, sell, and finance real estate. Mr. Vetstein is the past Chair of the Boston Bar Association’s Title & Conveyancing Committee and was also named as one of Inman News’ Most Influential People in Real Estate. Mr. Vetstein has testified before the state legislature on landlord’s rights and title clearance legislation. Mr. Vetstein’s popular Massachusetts Real Estate Law Blog has won several awards including the American Bar Association’s Top Legal “Blawg” award. Mr. Vetstein also gives legal seminars to Realtor and property owner groups across the state. When he is not practicing law, Rich enjoys boxing workouts, arguing politics on Facebook and hanging out with his two kids.
William Pastuszek, Principal, Shepherd Associates, LLC – Real Property Valuation and Consulting The principal of Shepherd Associates is William J. Pastuszek, Jr., MAI, SRA, MRA. He has been involved in real estate appraising for more than 25 years and is licensed in several New England states. His license number as a Massachusetts General Certified Real Estate Appraiser is #10. Bill has a background in banking and property management/development. His appraisal experience includes residential and commercial practice areas His clientele includes financial institutions, attorneys, accountants, governmental entities, corporations and private individual. He has qualified as an expert witness in many jurisdictions.
Panel 2 Panelists will discuss best practices, how to achieve and sustain grown and provide lenders perspective. More details coming soon. Amy Slotnick, Branch Manager, Fairway Independent Mortgage Amy Slotnick utilizes over 33 years of industry experience in her daily function as Branch Manager and Loan Originator at Fairway Independent Mortgage Corporation. She joined the company in 2007 and quickly became the company’s number one producing loan originator, a title she held for six years. In 2014 Amy became a Branch Manager and over the past two years has grown the office three-fold and added a satellite office in Hingham, MA to her existing branches in Newton and Holden, MA.
Brian Sousa, Chief Lending Officer, Jeanne D’Arc Credit Union Brian Sousa is Senior Vice President and Chief Lending Officer at Jeanne D’Arc Credit Union, a 1.1 billion dollar organization with over 75,000 members, located in Lowell, MA. Mr. Sousa’s twenty-five years of experience in the lending and real-estate industry crosses retail and wholesale mortgage sales, residential and commercial mortgage appraising, and residential and commercial real-estate sales and leasing. Mr. Sousa was the founder of First Team Mortgage Corporation a Chelmsford, MA organization that he built from the ground up and ran for twelve years. As a well-established mortgage professional, he was hired by the credit union in 2012 as Vice President/Residential Lending to create opportunities and expand its product base. His strong leadership and management skills have led to a 63% increase in the residential loan portfolio and a 25% increase in the total loan portfolio since being named Chief Lending Officer in April of 2015. Brian has always shared the credit union philosophy of people helping people through his community involvement and support of many local charities. He currently serves on the Board of Directors for the Boys and Girls Club of Greater Lowell, the Senior Advisory Board for the Lowell Community Health Center, and is an Advisory Board Member of Catie’s Closet, Inc.
Chip Poli, Owner, Poli Mortgage Chip has 20 years of experience in the real estate industry and has been consistently ranked in the top 1% of mortgage originators in the country. His expertise is broad-based, with a strong foundation in real estate sales, extensive experience in recruitment and management of highly successful brokers and sales teams, and exemplary leadership abilities which have enabled him to quickly achieve phenomenal success at Poli Mortgage Group, Inc.
11:15 AM General Session Speakers
Geoffrey F. Cooper, Vice President Product Development, Mortgage Guaranty Insurance Corporation (MGIC)
Mortgage Credit Trends in the Post-Crisis Era
It’s been almost 7 years since the end of the Great Recession and the US single-family residential mortgage market’s recovery from the historic foreclosure crisis is almost complete. In this post-crisis era, the US has experienced a slow, rolling economic recovery and a bounce-back in home price growth. What has happened to the state of mortgage credit in this time? MGIC addresses this question, highlighting industry efforts to prudently expand the credit box, and identifying product trends in the market place. MGIC will also explore the fundamentals of mortgage credit risk, revisiting critical risk factors and their interrelation in layer-risk scenarios both pre- and post-crisis.
Bio: Geoffrey F. Cooper is Vice President Product Development at Mortgage Guaranty Insurance Corporation (MGIC). He recently returned to MGIC after serving for six years as Director – Single Family at the Wisconsin Housing and Economic Development Authority (WHEDA), a state HFA. Prior to leaving MGIC to join WHEDA in June 2008, Cooper held several positions over 14 years, most recently servicing as Director – Emerging Markets where he oversaw MGIC’s HFA business initiatives.
Richard P. Howe, Jr., Registry of Deeds – Middlesex North
Electronic Recording in Massachusetts After a decade of experience with electronic recording which now accounts for 50% of all documents and 65% of all mortgages recorded at the Middlesex North Registry of Deeds, Register of Deeds Richard Howe will review the successes and challenges of electronic recording in Massachusetts and will share plans for the future including electronic recording of registered land, ways in which state and local government might increase efficiency through electronic recording; and the recording of purely electronic documents that never exist on paper.
Bio: Richard P. Howe Jr. is the Register of Deeds of the Middlesex North District where he has been a leader in the implementation of new technology and improved customer service. Middlesex North was the first registry of deeds in Massachusetts to fully implement electronic recording which now accounts for nearly 50% of all filings. It was also the first registry to become entirely paperless, with all land records from 1629 to the present available in digital form, both at the registry and online.
Prior to becoming Register of Deeds, Mr. Howe practiced law in Lowell, concentrating in real estate and criminal defense. In the early 1980s, he served as a U.S. Army intelligence officer in West Germany. He holds a BA from Providence College, an MA in History from Salem State, and a JD from Suffolk University Law School.
Richard Howe is the author of Lowell: Images of Modern America and the co-author of Legendary Locals of Lowell. He is the founder and primary author of www.richardhowe.com, a hyper-local blog about the history and politics of Lowell. He lectures frequently on real estate law, Lowell history, and many other topics.
Robert Triest, Vice President and Economist, Federal Reserve Bank of Boston
Regional Economic Update Dr. Triest will present regional economic trends and discuss recent monetary policy actions. Bio: Robert K. Triest is a vice president and economist in the research department at the Federal Reserve Bank of Boston, where he leads the macroeconomic applications and policy studies section. Prior to joining the Boston Fed in 1995, Triest was a member of the economics faculties at the University of California, Davis and at The Johns Hopkins University. He has also been a visiting scholar at the Center for Retirement Research at Boston College and has taught in the economics department at M.I.T. and Northeastern University and at the Kennedy School of Government at Harvard University. He currently serves on the Universal Pre-Kindergarten Advisory Committee convened by Mayor Walsh to make recommendations for a strategic framework and action plan to expand pre-kindergarten programs in Boston. Triest’s research has been mainly on topics in labor economics and public sector economics, with recent work focusing on the interaction of economic circumstances and educational outcomes. He earned a B.A. degree in economics from Vassar College and an M.S. and a Ph.D. in economics from the University of Wisconsin at Madison.
Text Messages Enforceable As Written Contract, Court Rules
With the proliferation of email and texts as the primary method of communications in real estate negotiations, it was just a matter of time before Massachusetts courts were faced with the question of whether and to what extent e-mails and texts can constitute a binding and enforceable agreement to purchase and sell real estate. In a ground-breaking case, Land Court Justice Robert Foster ruled in a case of first impression that text messages may form a binding contract in real estate negotiations–even where a formal offer has not been signed by the seller. This is huge wake up call for the remaining industry people who still believe that electronic communications are not legally binding.
St. John’s Holdings LLC v. Two Electronics, LLC
The case (embedded below) involves a commercial real estate deal between two businesses both represented by commercial real estate brokers for the purchase and sale of an industrial park property in Danvers. Two Electronics, as seller, and St. John’s Holdings, as buyer, negotiated for several weeks exchanging two “Binding Letters of Intent” spelling out all material terms of the proposed purchase of $3.2 Million. Towards the culmination of the negotiations, the real estate brokers exchanged several emails and texts, with the seller’s agent sending an email that his client was “ready to do this,” then a text that —
“[the seller] wants you to sign first, with a check, and then he will sign. Normally, the seller signs last or second. Not trying to be stupid or to the contrary, but that’s the way it normally works. Can Rick sign today and get it to me today? Tim”
The buyer signed four copies of the final Letter of Intent and tendered the deposit check with the buyer broker, after which the buyer’s broker sent the seller’s agent another text — “Tim I have the signed LOI and check. It’s 424 [PM]. Where can I meet you?” Shortly thereafter, the two agents met, and the buyer’s broker tendered the buyer signed Letter of Intent along with the deposit check.
Unbeknownst to the buyer, that same day, the seller had received another offer on the property, and proceeded to sign that offer. The seller then refused to sign the Letter of Intent with St. John’s. St. John’s sued, claiming that the series of letters of intent, emails and text messages constituted a binding and enforceable contract.
Intersection of 17th Century Statute of Frauds with 21st Century Text Messages
In Massachusetts, the Statute of Frauds requires that contracts for the sale of real state must be in writing signed by the party (or agent) to be charged. In the old days of pen and paper, application of the Statute was quite simple. If there wasn’t a written agreement signed in wet, ink signatures, there was no binding contract. With the proliferation of e-mail and text communication, application of the Statute of Frauds has become much more nuanced.
In the case discussed here, Judge Robert Foster noted several recent judicial decisions holding that emails may be binding as well as the Uniform Electronic Transactions Act, under which parties may impliedly consent through their actions to make email and text transmissions binding and enforceable. Emphasizing the fact that the seller’s agent signed his name “Tim” at the end of the critical text message, the judge found that the text message was sufficiently “signed” under the Statute of Frauds to constitute a binding agreement at the culmination of the previous communications and unsigned letters of intent. The judge also found persuasive that the seller’s agent told the buyer’s agent to have the buyer sign the letter of intent first, and that’s exactly what the buyer did. Finding in favor of the buyer, the judge denied the seller’s motion to dismiss and issued a restraining order against the seller’s conveyance of the subject property.
Take Away: IMO, Watch What You Say!
This area of the law is really becoming a dangerous minefield. After the e-mail ruling came out a few years ago, I advised my clients to use the following disclaimer: “Emails sent or received shall neither constitute acceptance of conducting transactions via electronic means nor shall create a binding contract in the absence of a fully signed written agreement.”
The problem, however, with text messages is that they are so short and informal. It’s not practical to use a legal disclaimer on texts, and there’s no technology that I’m aware of that would insert one into every text. You could always start off a negotiation with the caveat that electronic communications will not create a binding contract until a formal offer is executed. Also, it’s always a good idea to end every email/text with “subject to seller/buyer review and approval” when negotiating an offer. But, such boilerplate language can always be waived by subsequent conduct or actions.
This case reminds me of Lomasney’s First Rule of Politics: “Never write if you can speak; never speak if you can nod; never nod if you can wink.” — and by winking that does not mean an emoji. ?
And always take screenshots of important texts…just in case.
This post is sponsored by Brian Cavanaugh, Senior Mortgage Banker, Mortgage Network
Widespread Racial Disparities In Criminal Justice System Justifies New Policy
Last week the Obama administration released new controversial Fair Housing guidelines telling the nation’s landlords that it may be discriminatory for them to refuse to rent to those with criminal records. The U.S. Department of Housing and Urban Development (HUD) says refusing to rent based on a criminal record is a form of racial discrimination, due to racial imbalances in the U.S. justice system, despite the fact that criminal history is not a protected class under the federal Fair Housing Act.
“The Fair Housing Act prohibits both intentional housing discrimination and housing practices that have an unjustified discriminatory effect because of race, national origin, or other protected characteristics,” say HUD’s newly-released guidelines. “Because of widespread racial and ethnic disparities in the U.S. criminal justice system, criminal history-based restrictions on access to housing are likely disproportionately to burden African-Americans and Hispanics. While the Act does not prohibit housing providers from appropriately considering criminal history information when making housing decisions, arbitrary and overbroad criminal history-related bans are likely to lack a legally sufficient justification.” About 25 percent of Americans have some kind of criminal record, which can range from felony convictions to arrests that never led to charges.
HUD says that landlords may be allowed to bar those with criminal records, but they will have to prove that such a policy is necessary for protecting the safety of other tenants, and designed to avoid illegal discrimination. The new guidance recommends that landlords consider factors such as the severity of the criminal history and how long ago it occurred.
Practice Pointer: Blanket prohibitions denying applicants with criminal histories will get landlords into major trouble under the new HUD policy.
Evaluating whether the criminal history policy or practice has a discriminatory effect
Evaluating whether the challenged policy or practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest
Evaluating whether there is a less discriminatory alternative
Policy Places Burden On Small Landlords
I’m all for giving people a second chance at life, but the major problem with this policy is that it puts the onus and burden on the small landlord to do the criminal history check and then figure out how severe the offense is and what the underlying circumstances are. Also the policy does not advise a landlord exactly how old a crime is to be considered “too old.”
In Massachusetts, a CORI (Criminal Offender Record Information) report contains only the basic of information of the offense such as the date of arrest/conviction, disposition, court and sentence, if any. There is nothing in the CORI report showing the underlying facts of the crime and it does not include police reports. Thus, for a charge of open and lewd conduct, a landlord does not know whether this is a serious offense or just a college kid urinating in an alley. Under the new HUD policy, landlords now have the burden of playing criminal investigator and assessing whether a crime is not truly serious.
Also, please remember that under the so-called Mrs. Murphy exemption, the federal Fair Housing Act does not apply to owner-occupied rental properties of up to 4 units.
What Now?
So how are landlords going to navigate this new policy? Well, first I would expect that risk-adverse landlords will cut down or stop requesting criminal history information all together. Of course, this puts landlords in a dilemma because they retain a legal duty to keep residents safe, and if they rent out to a known sexual offender, for example, who attacks another resident, they can be sued for millions.
For those who still ask for criminal record information, they will have to offer an applicant the opportunity to explain the circumstances of their arrest/conviction before making a final decision. As with all rental application decisions, it’s best to make the decision rest on financial considerations such as credit, income, and employment.
If you need guidance navigating this new policy, feel free to contact me at [email protected].
Or Will Low Inventory Bring Rain Showers? | The Spring Market 2016 Expert Panel Report
Wow, what a difference a year makes! Last year we had one of the snowiest winters on record and a foot of snow on the ground. This year, we have 70 degree record temps with the Charles Esplanade filled with runners. The winter weather always affects the spring real estate market, and last year the market got started unusually late. So will this year’s warm winter usher in a hot real estate market? Or will the pesky low inventory rain on our parade?
To answer these questions, I’ve brought in a panel of top Realtors who will give you the report from the trenches, from the City to the ‘burbs. So without further ado, let’s hear from the experts.
The Sudbury & Wayland Real Estate markets are easing into the always anticipated “Spring market.” Like a slow motion game of Dominos, many soon-to-be sellers are waiting for a house they would potentially buy to come on the market before they commit to putting their own homes on. With that, inventory has been low, but is increasing at a steady pace now that it is March and Mother Nature doesn’t seem as eager to make a point as she did last winter. Buyers are actively looking and although not every Open House attendee is a serious buyer, the high numbers of attendees are typically a good indicator of an active market. 2016 is starting to form as a healthy Real Estate market. — Gabrielle Daniels Henken and Carole Daniels — Coldwell Banker, Sudbury. www.LiveInSudburyMA.com
In Cambridge and Somerville, we’re still dealing with the inventory shortage — I don’t think it would be hyperbole to call it a crisis — that we’ve had for the last several years. And although the mild weather has brought buyers out in full force already this year, the listings are just beginning to trickle on, so we’re seeing 9, 10, 20 parties competing for the same home. Hopefully it will be a bit less brutal as we get further into March, but for the foreseeable future, demand will continue to outpace supply here. Lara Gordon–Gibson Sotheby’s Cambridge. www.cambridgeville.com
Dear Sellers, please don’t wait until spring to list your house at the SAME time as everyone else! Inventory is historically low so list now while you can be a real stand out in the market. Chances are you will bear a higher price as well! The Metrowest market is a popular market that’s constantly strong and growing. Due to the fact that we have 3 major highways that touch Metrowest, it is a popular spot for commuters to Boston and Worcester alike. Metrowest real estate is also a great investment! Heidi Zizza, Broker/Owner, mdm Realty, Framingham, MA
High demand, low inventory and continued low rates create a healthy and fiesty market in MetroWest! Investors still have great opportunities with multi-family properties and first time buyers who didn’t take a break this winter were able to achieve their housing goals without busting their budgets. Glad to report that TRID was just a small bump in the road and had far less direct impact on the financing process than expected. Ali Corton, Real Estate Executives Boston West www.liveinframinghamma.com
At the risk of sounding like a broken record, in Winchester, Arlington, Stoneham, Melrose, and the surrounding towns, quality inventory is scarce, and when it hits the market it’s scooped up within days. Buyers must be crystal clear about what they want, and then develop the stamina of a marathoner. They must be willing to brave packed open houses, make rapid decisions about writing offers, endure having 1,2,3,4 great offers rejected before securing a property. Sellers with quality listings are being presented with 10,12,20 offers, all over asking, all waiving contingencies, all with heartfelt letters and photos from buyers who are pulling out all the stops to get a house. As agents in today’s market one of our most important roles is to support our clients, both buyers and sellers, to remain calm and focused during the frenzy of the market. Katherine Waters-Clark, Re/Max-Winchester-Arlington
I work primarily with buyers and in towns from Bolton, Westford to Shrewsbury and even as far as Gardner and Ashburnham, when a house comes on the market and is in good condition it is snapped up quickly with multiple offers. I have had clients submit written letters with their offers to try and help sway a seller to choose them. The rates are still low and the lack of inventory on the market is making a rather difficult market to guide buyers. First time home buyers are overwhelemed with the speed things have to be done to get their offer picked. Sellers are in a good place when it comes to selling a home in this Spring Market. I just did an Open House in Metheun yesterday, I had 16 families come through and today our seller has 3 offers to choose from, this is going to be a great Spring Market. Sherry Stone-Graham,www.baystate-homes.com
The condo market in Metrowest is starving for inventory. I received 8 offers on one unit on Spyglass Hill in Ashland and a couple on a garden style unit. My open houses on Spyglass Hill have had over 25 guests. We desperately need inventory. So many buyers with so few properties is allowing sellers to possibly get more money. It’s a fantastic time to sell. Annie Silverman, Realty Executives Boston West.
I service Franklin and the surrounding area and am also licensed in RI. Right now the inventory is still low so sellers are really getting the activity they desire when priced correctly. My most recent listing had 23 sets of people through and we received 5 offers and most were over asking. Buyers are also fortunate as there was also just a dip in the financing rates. Franklin and most surrounding towns are also eligible for 0% down financing so the time is now to make the most of the Spring Market! Amber Cadaorette, Keller Williams Realty Franklin / Wrentham.ambersoldmyhouse.com
Feel free to offer your comments here or on Facebook! And good luck with your listings or buyers!
Landlord Stopped From Evicting Tenant Over $3.26 In Interest
Massachusetts has a well-deserved reputation as being a hostile jurisdiction for landlords. With a myriad of tenant favorable laws on the books, the proverbial playing field is often stacked against landlords. Exhibit A is the Security Deposit Law which provides a three month penalty, including payment of the tenant’s legal fees, against landlords who don’t follow its strict requirements.
One of the requirements of the Security Deposit Law is that annually the landlord must pay the tenant any accrued interest on the deposit. That’s what got landlord Garth Meikle in trouble with his tenant who was three months behind in rent.
Garth Meikle v. Patricia Nurse, SJC-11859
Meikle brought an eviction case in the Housing Court, and essentially won with the judge ordering the tenant to pay the past due rent, but deducting the security deposit plus the three dollars and change in interest. However, to the tenant’s rescue came the crusading Harvard law students from Harvard Legal Aid Bureau. Representing her for free, the students have taken her case all the way up to the Supreme Judicial Court. (Why is it that landlords are not offered the same free legal aid?). The tenant posted an appeal bond so she’s allowed to stay in the apartment while paying the rent during the pendency of the case.
The SJC heard arguments this morning with third year Harvard Law student Louis Fisher arguing the case. (Damn lucky kid!).
The Harvard tenant lawyers are advancing the dangerous argument that a landlord who violates the security deposit law — even in the most minor of circumstances — cannot evict a non-paying tenant.
Scary right? If the Court accepts this argument then tenants will have yet another powerful tool to avoid eviction. The Security Deposit Law is so strict that most landlords make minor errors in holding the deposit. That’s why I have advised that landlords don’t even bother taking security deposits in the first place.
You can guess where I stand on the merits of the case. The security deposit is a separate financial matter between the landlord and tenant which has nothing to do about whether the tenant owes rent or the condition of the property. Those are the two primary issues in a non-payment eviction case. You don’t pay the rent without legal defense, you’re out. Period. Compliance with the security deposit law should have no bearing on a non-payment eviction. The Legislature did not intend otherwise, and regardless, that should not be our policy. Enough is enough already.
You know what else bothers me? These legal aid organizations take on these “test cases” to train law students and get them experience. After all when does a law student ever get to argue a SJC case? Is that really fair and just to small unrepresented landlords like Mr. Meikle who told the justices that his son and fiancee were hoping to live in the apartment?
The SJC should come out with a final ruling in the next few months. Check back here for future developments. In the meantime, I will keep on fighting the good fight for landlords.
I will be speaking about Rental Legal Trends and Security Deposits at the monthly Boston Real Estate Investors Association meeting on November 3, 2015 at the Hilton Hotel – Dedham, 25 Allied Drive, Dedham, MA. Time: 5:30PM-9PM.
Agenda below. It is FREE for anyone who mentions my name!
5:30 PM – “Meeting Before The Meeting” – Multifamily Investing with Charles Dobens
7:30 – 8:00 pm – What You Need To Know BEFORE Placing An Offer. Lee Abdella of Walsh Home Inspections will address what you should look for before putting an offer in on a house or before waiting your home inspection!
8:00 – 9:00 pm – Mass Security Deposit and Rental Law with Richard D. Vetstein Esq.
Scroll Down For My Complimentary TRID Rider and Offer Timeline Cheatsheet
I’ve been doing a lot of speaking, and more importantly, thinking and collaborating with loan officers and Realtors, on the impact of the new TRID (Truth in Lending RESPA/Integrated Disclosure) on Massachusetts residential real estate transactions. I know everyone is pretty much burned out with all this TRID talk, but what I will give you in this post is some hands-on, practical advice (like how to fill out an Offer) and forms to help you navigate TRID — best practices, if you will.
Those who are unfamiliar with TRID, the major change is that the Good Faith Estimate is going away in favor of a new “Loan Estimate” and the HUD-1 Settlement Statement is going away in favor of a new “Closing Disclosure.” TRID provides for specific deadlines as to when the Loan Estimate and Closing Disclosure must be delivered to the borrower. If those deadlines aren’t met, closings can be delayed for up to 7 days. For my comprehensive post on the new rules click here.
Change In Deadlines
The first major impact to real estate transactions will be the length of time to complete a transaction. The general consensus is that post-TRID, 60 day closings (from accepted offer) will be the norm. Will lenders be able to do 45 day closings? Yes, but only if all parties have their act together, and that’s a big “If.” Thirty (30) day closings will be nearly impossible to achieve, in my opinion.
So what does this mean? It means that all deadlines need to be tighter and that items typically left for the week or two prior to closing (like final readings and fuel adjustments) have to be done earlier in the transaction and closing table adjustments will be impossible.
Deadline to Submit Info For Closing Disclosure
One of the most important new dates will be the date on which all parties must provide the information necessary for the Closing Attorney and the lender to prepare the final Closing Disclosure (new HUD-1). TRID requires that the new Closing Disclosure issue to the borrower 3 days prior to closing (if sent electronically) or 7 days prior to closing (if sent by mail). Lenders will require all information necessary to prepare the CD well before this deadline. This will vary by lender anywhere from 10-20 days prior to closing. Also, some lenders intend to issue the Closing Disclosure along with the Loan Commitment. Accordingly, in my opinion the best practice under TRID is to target 20 days prior to closing by which all information needs to be submitted to the closing attorney. All parties should agree to this date in their purchase and sale agreements.
And by all information, what do I mean? See the graphic to the right.
Final Utility Readings and Oil/Fuel Adjustments
Although the TRID rules specifically allow for some last minute changes to the Closing Disclosure without triggering re-disclosure and delay in the closing, most of the lenders which I’ve consulted with do not intend to authorize last minute changes to the Closing Disclosure which might trigger a re-disclosure delay.
Given this, the Mass. Real Estate Bar Association (REBA) has proposed language in its new TRID rider that all utility readings (water, sewer, oil/fuel) be completed and submitted to the closing attorney no later than 10 days prior to closing. The Closing Disclosure shall reflect payment and adjustments as of the reading date except for real estate taxes which shall be adjusted as of the closing date. No further adjustments will be made on the Closing Disclosure, but the parties are free to make their own estimates of utilities as of the closing date.
This is a change to current practice where it’s common that the final readings be done a day or two prior to closing. I’ve spoken to several agents about oil fuel in particular, and they all say they really don’t want to deal with the hassle under TRID, so they will be recommending to their sellers that they simply gift the oil to the buyer.
Opt for Buyer Credits Instead of Seller Repairs
Seller repairs will cause major hassle and potential delays under TRID. Under TRID, all property repairs must be fully disclosed in the purchase and sale agreement and to the lender. No more “side agreements” or “repair agreements” outside the PS Agreement. Most lenders will require an inspection of all repairs prior to closing and some will do the inspection prior to the issuance of the Closing Disclosure. This would also necessitate a much earlier walk-through by the buyer to inspect those repairs. If there are problems with the repairs, or the insistence on a holdback which would be reflected on the Closing Disclosure, this could delay the issuance of the Closing Disclosure, and therefore delay the closing.
Accordingly, the general consensus is that it will be much cleaner under TRID to forgo seller repairs and instead have the seller agree to a closing cost credit to the buyer. This will eliminate the lender inspection, additional walkthrough and potential of delays.
Also, a quick word about holdbacks at closing. We are not sure how lenders will handle holdbacks at the closing but many of us are of the opinion that lenders will not allow a holdback unless it’s disclosed on the Closing Disclosure. So that effectively means no closing table holdback agreements unless you want your closing delayed to re-issue the Closing Disclosure.
Use a TRID Rider/Addendum for all Offers
MAR, GBREB and REBA have all come out with their own TRID riders. In my opinion, the MAR/GBREB riders don’t sufficiently protect buyers from delays and they fail to address utility/fuel adjustments. The REBA rider is better, but could still use some improvement. So naturally I’ve drafted my own rider (and TRID timeline cheatsheet) which is embedded below. Feel free to use it to help you fill out offers. Whatever rider/addendum you chose, just use something, otherwise your buyer will be at risk of losing their deposit over TRID delays.
Recommend Attorneys Who Specialize In Conveyancing/Closings
Residential real estate closing work was already complicated and highly regulated. In a TRID world, the pitfalls for the inexperienced and non-specialists will be myriad. Now more than ever, Realtors and loan officers should partner with experienced attorneys who specialize in residential closings and are TRID ready and compliant. Do not allow your clients to use their cousin who is a lawyer and knows very little about real estate. It could be disastrous for you and your transaction.
If you have any questions about TRID, Offers, Purchase and Sale Agreements, Riders, etc., please feel free to contact me at [email protected] or 508-620-5352. I would be happy to help you navigate the TRID maze.
MAR and GBREB Release New TRID Addendum In Advance Of Oct. 3 Start Date
In anticipation of the upcoming October 3 start date for the new CFPB-TRID Rules (TILA-RESPA Integrated Disclosure), the Massachusetts Association of Realtors is advocating that several changes in existing practice be adopted as part of the MAR standard form purchase and sale agreement between buyer and seller. The changes, incorporated into a new Integrated Disclosure Addendum-Mortgage (embedded below and available to all MAR members by clicking here), will account for the risk of potential delays resulting from the new TRID rules, as well as impose a requirement on all parties to expedite providing information necessary to generate the new Closing Disclosure. For a comprehensive review of the TRID rules, click here.
Under TRID, there will be a new settlement statement called a Closing Disclosure, which must be issued to the borrower at least 3 days prior to closing. If that does not occur, the closing will be delayed for up to 7 days. Lenders are requiring that the information contained in the Closing Disclosure (fees, closing costs, taxes, insurance, escrows, credits, etc.) be finalized no less than 7-14 days prior to closing, to give them enough time to generate the new Closing Disclosure in a timely fashion. As with any major regulatory change such as this, we can expect delays and speed bumps for closings occurring after Oct. 3.
The new MAR Addendum attempts to allocate risk and responsibility by providing that:
The buyer provides the seller with the name of the lender’s attorney as soon as practicable and no less than 14 days prior to closing
No fewer than 7 days prior to closing, the Seller and Buyer must provide all adjustments and figures (water/sewer, condo fees, taxes, oil in tank, etc.) necessary to prepare the Closing Disclosure. *I would change this to 14-20 days prior to closing.
The closing can be extended up to 3 business days in case of a TRID related delay. *I would change this to 8 days.
No party can sue each other for TRID related delays
Practice Pointer: I do not think the MAR form goes far enough to account for the potential delays arising out of TRID. For example, if the lender does not use e-sign technology the Closing Disclosure would have to be mailed, and the closing would be delayed for 7 days, not 3 days. Moreover, lenders are advising me that they want all Closing Disclosure information in by 20 days pre-closing, so they can turn around the loan commitment and Closing Disclosure at the same time and have a buffer in case of last minute changes. Most importantly, please use some form of TRID addendum to your Offers. Do not wait for the P&S.
Note that the Greater Boston Real Estate Board standard form purchase and sale agreement is still in wide use. The GBREB has released their own version of the TRID rider, available here.
Major Change To Current Practices | Expect Delays and Bumpy Road Starting Oct. 3
I just finished yet another closing where a national lender issued the closing documents the morning of the closing, and worse, issued a revised TIL (Truth in Lending) disclosure during the middle of the closing! Under the new TILA-RESPA Integrated Disclosure Rules (TRID) set to start on October 3, this too-common practice would have resulted in a closing delay of up to 7 days, to the dismay of everyone in the transaction.
The new TRID rules are game-changing regulations which threaten to disrupt and delay closings across the country. The new rules, already pushed back once due to industry outcry, go into effect in about 60 days on Oct. 3. I am very worried that lenders, Realtors and closing attorneys are not at all prepared for one of the most significant changes in how we do business. Experts are predicting that closings will be delayed, 60 day loan approvals will be the new normal, and new forms will bewilder buyers. “Expect a one- to two-week delay in closings,” said Ken Trepeta, director of real estate services of the government affairs branch for the National Association of Realtors, when describing the impact of TRID.
Currently, we are finishing one of the strongest spring markets in a decade, but I’m quite concerned that come Fall, the new TRID rules will put the fall market into an ice bath. The best thing that every real estate professional can do is get educated and get prepared now for these changes. August is typically a slow month, so use it to get ready. My team will be doing a roadshow Powerpoint seminar to any local real estate office to explain the new changes. Contact me at [email protected] for more info.
New Closing Disclosure Replacing the HUD-1 Settlement Statement: 3 Day Rule
Under TRID, there will be a new settlement statement called a Closing Disclosure, which must be issued to the borrower at least 3 days prior to closing. If that does not occur, the closing will be delayed for up to 7 days. We are hearing that lenders will require that the information contained in the Closing Disclosure (all fees, closing costs, taxes, insurance, escrows, credits, etc.) be finalized as early as 20 days prior to closing, to give them enough time to generate the new Closing Disclosure in a timely fashion and to account for delays.
What does that mean for us professionals? It means that everything will need to be pushed up and done faster than before. That goes for titles, CPL’s, broker commission statements, invoices for repairs, insurance binders, condo fees, recording fees, title insurance, everything. And it means we can all expect delays as everyone adjusts to the new timetables and rules.
Lenders will require the new Closing Disclosure (embedded below) be signed by the borrower at closing. However, although the Closing Disclosure was intended to replace the current HUD-1 Settlement Statement, the geniuses at CPFB neglected to put a signature line for the sellers on the new Closing Disclosure. I’m not making this up. And we are no longer supposed to use the “old” HUD-1 Settlement Statement. Thus, our title insurance companies are telling us that there may be three settlement statements signed at closing: a Closing Disclosure for the buyer, a Closing Disclosure for the seller, and a combined Closing Disclosure. ALTA has created a new Combined Settlement Statement which can be found here.
Bank of America was asked whether it would require the use of the ALTA model forms, and it stated in a June 9 memo that it prefers the ALTA model if a closing attorney chooses to use a settlement statement to supplement the Closing Disclosure (CD), but specified that the settlement statement figures must reconcile to the CD and a copy of the settlement statement must be provided to the bank. The bank also stated that all revisions to fees and costs will require bank approval and an amended CD. In other words, closing attorneys will not be allowed to revise fees and costs by simply supplementing the CD with a settlement statement.
60 Day Approvals/Closings The New Normal?
With any historic change to how lenders disclose fees and approve loans, there’s going to be a steep learning curve — and delays. You can count on that. Industry insiders say the days of 30 and even 45 day loan approvals may be over, at least temporarily. Sixty (60) day approvals may be the new normal, and agents should build the longer timeframe into their offers and purchase and sale agreements and educate their buyers and sellers accordingly.
Repairs and Walk-Throughs
Since lenders will require all fees and credits finalized 7-10 days prior to closing, this will significantly impact how we handle repairs and credits. Agreed upon repairs also affect how the appraisal is conducted which will further impact the timelines. Experts are suggesting that Realtors consider doing walk-throughs at least 14-21 days prior to closing instead of the typical day before or day of walkthrough, because all repair issues and credits should be set in stone at least 7-10 days prior to closing and changes in fees and credits on the day of closing will not be permitted by the lender. Some experts are even saying that agents should do two walkthroughs, one within the TRID timelines and one immediately prior to closing. Also, under TRID paid outside closing (POC) items will be discouraged by lenders.
Take-away: Realtors should be warned that repairs contained in the purchase and sale agreement will have the potential to delay closings under the TRID rules. Ensure that any repairs are completed 14-21 days prior to closing. Better yet, don’t have the seller make repairs at all; use closing cost credits instead.
No More Back to Back Closings?
Due to the high potential for delays caused by TRID, back-to-back or piggyback closings may be a thing of the past, at least for now. A delay with a closing obviously has a domino effect on a back to back closing. The best practice, at least for the first few months of the new TRID era, is to schedule closings at least 3 days apart. Seller/buyers will have to prepare for this reality with bridge loans, use and occupancy agreements, or temporarily staying with your nearest relatives.
Partner with Trusted and Verified Providers
Now more than ever, Realtors are going to want to partner with lenders and closing attorneys who have been vetted and verified as fully compliant with the TRID rules, so there will be minimal disruption and delay on their transactions. Realtors and loan officers should ask their closing attorneys whether they are compliant with the ALTA (American Land Title Association) Best Practices, which is quickly becoming the standard for TRID compliance. Under the ALTA Best Practices, the attorney will have passed an intensive initial due-diligence screening, a third-party internal audit, background and credit check, extensive review of applicant’s experience, business model and policy loss history, and licensing verification. The closing attorney should also have secure document encryption capabilities and privacy/technology policies in place. My office has been vetted and verified by Stewart Title which has a comprehensive website on the TRID rules. If your buyer wants to use his personal attorney who does not specialize in real estate, explain to him or her why that is a mistake which could ultimately delay the closing.
Bumpy Road Ahead?
In my opinion, the TRID rules are the biggest change to the industry in 20 years, and will be much more difficult to implement than the new GFE and 3 page HUD of several years ago. As discussed above, my team will be doing a roadshow Powerpoint seminar to any local real estate office to explain the new changes. Contact me at [email protected] to schedule your complementary seminar.
Predictions On the Spring Real Estate Market from a Panel of Local Experts
“There’s no curb appeal if there’s no curb!” — Rona Fischman, 4 Buyers Real Estate
We are less than a week away from March, which usually signals the beginning of the frenzied spring real estate market in Massachusetts. However, unless you’ve been hibernating with the bears up in Maine, there’s a slight problem. We have snow. Lots. Of. Darn. Snow. The winter has wrecked havoc with everything, and that includes the real estate market.
Boston Magazine is bullish on the spring market, but what do the real experts think? I put the questions to my network of experienced local Realtors and mortgage professionals. I asked them if the snow will push back the traditional start of the spring market? What are inventory levels in your area? Do you have sellers waiting for better weather before they list? Are buyers waiting or are they trudging thru the snow to view listings? Do your see the spring as a buyer or seller market? Loan officers, where do you see rates and products this spring?
Here’s what they said, and don’t forget to clink their websites for more info.
“I’m seeing a very sluggish start to 2015. Snow, cold temps, ice dams and the general malaise that’s set in on our region are all factors. I hear buyers are getting preapprovals and a few select properties have received multiple offers. But, overall it’s been slow and until sellers get houses prepped for market the buyers will wait on the sidelines.” — Ali Corton, Realty Executives Boston West, Framingham
“Inventory is definitely down here in Cambridge & Somerville — today we have just 31 active singles/condos/multis in Cambridge, compared with 46 last year on 2/26. In Somerville, we have 27 active listings today, compared with 40 last year. Granted, even those 2014 figures are really pathetic, as we’ve been dealing with extremely low inventory for the past several years, but this year is an extreme case. Funny thing is, those agents who are putting their sellers’ homes on the market are seeing plenty of traffic at open houses and showings, receiving multiple offers, and getting record-high prices, so I don’t know why anyone is hesitating to list.” — Lara Gordon, Coldwell Banker, Cambridge/Somerville
“The market in Sudbury is certainly slower than a typical winter market, but there are plenty of buyers hoping to take advantage of low rates and opportunities with motivated sellers. Like with any market, homes in popular price points that are prepared and priced right, are selling quickly and in some cases, resulting in multiple offers. Buyers aren’t as hesitant to go through the process now as Sellers are. Sellers are hesitant for many reasons, lack of curb appeal – which in many cases, great curb appeal adds value to the house, the thought of buyers trudging through their houses with snow on shoes (even though it’s always requested to remove shoes), ice dam damage, the thought of moving when the desire to hibernate is much more appealing and last but certainly not least, the liability involved in having a house on the market when snow/ice/icicles can potentially cause harm can be scary for homeowners. The Spring market should be strong, with plenty of pent up demand and after the winter of ’15, more city buyers looking for a beautiful garage with a nice house attached!” — Gabrielle and Carole Daniels, Coldwell Banker Sudbury
“Definitely slower right now than usual. The market reports are quiet. I think everyone is tired of the snow and I have properties with ice dams affecting closing dates etc… I think Spring is going to POP everyone is going to be excited about warm wetaher but expect some wet basements….The market is just stagnant. Sellers want to sell but feel as if their home is not ready to be shown. Buyers jump on MLS everyday looking for new listings but slim pickings. If we could only get them all on the same page.” Heidi Zizza and Amy Uliss, mdm Realty, Framingham
“Inventory in the Somerville-Cambridge metro area has been low for two years. This February, it was very low. I am anticipating another seller’s market, but less drastically uneven in 2015, compared to 2014 and 2013. This winter is likely to push people to move. I anticipate that people who planned a move in the next 2-4 years may jump sooner. City dwellers who struggled to park and find places to pile snow are anxious for off-street parking and some land. Over-housed suburban residents will sell to right-size into managed condos (where someone else hounds the plow guy to get there.) Retirees may head for warmer climes sooner. We all complain; home owners can do something about it. I suspect that inventory levels will become more even by late spring. Sellers will delay putting their houses on the market until after the snow is melted and their roof and ceiling damage is repaired. I have heard of two transactions that fell through because of ceiling leaks. There could be more stories about this, since so many houses have sprung leaks.” — Rona Fischman, 4 Buyers Real Estate Cambridge
“Will there ever be a better time to buy a home? Mortgage rates are very close to 2 year lows today, and I expect them to stay down in this range thru 2015. I think we see the 30 year fixed traded in the 3.75% to 4.25% for most of 2015. This is still at a historical low at 4.25%. Continued economic weakness overseas, Banks/Lenders closing loans quicker and lowering their fees contribute to low mortgage rates all year folks!” — Brian Cavanaugh, RMS Mortgage Boston
“I have a few buyers and we have been walking thru knee deep and higher snow just to see some of these homes, agent’s don’t shovel thier listings nor do their sellers. I had one agent tell me the door would be open only to get there and walk through waste deep snow to find the door was locked and we could’nt see the house. I have buyers looking but the lack of good homes currently on the market is frustrating.” Sherry Stone-Graham, Touchstone Partners, Chelmsford
“Even though we’ve had a “delayed winter” by having bulk snowstorms pretty much all at once instead of spread out throughout the last few months, it has slowed the market down in Southborough and Westborough although it hasn’t halted it entirely. There are 25 houses in varying price bands in my hometown of Southborough to choose from, with about 20% of them being in the over $900,000 range and just about 16% being in the $350-400,000 band. Despite the snow and the varying inconveniences that come along with it, over the last 45 days there were still 11 houses that are pending sale, which in my opinion still a positive sign. Interestingly enough, in neighboring Westborough, although the population exceeds that of Southborough and the snowfall hasn’t been much different, there are currently only 13 houses actively for sale, although the same 45 day period there were 15 pending sales. The majority of the active Westborough listings are in the $1M+ range, with the second highest in the $700-800k range. Ten of those pending sales ranged from the $200,000-400,000 price point, which may show that there is a definite need for inventory in those price bands to balance out the market.” — Jennifer Juliano, Keller Williams, Southborough-Westborough
“With Janet Yellin’s recent speech, we may see rates start to step up by June, 2015. Just recently the international and domestic markets played theme park as they see-sawed back and forth causing rates to jump between about 3/8 over the last 3 months. However, in comparison to 1 year ago today, rates are still about 1% lower. So, bring on the inventory consumers.” — Jeff Chalmers, Guaranteed Rate, Norfolk
“My sellers in Winchester, Arlington, Woburn, Stoneham, and Melrose are waiting until the snow is more manageable. Homeowners are extremely preoccupied (and rightly so) with protecting their current homes. The more immediate demand is for ice dam removal!” — Katherine Waters-Clark, Arlington
“There were a few days where it was impossible to show in Boston. Otherwise things haven’t really slowed too much! In addition The Spring market seems to be beginning early as I am seeing more and more listings hitting the market. All in all the Boston real estate market remains extremely strong!” — Craig Anne Lake, Luxury Residential Group LLC, Boston
“Bristol, Plymouth and Norfolk counties, lots of buyer calls and showing through the snow. Open houses averaging 3-4 families, inventory extremely low, prices going up, new construction permitted but held back from snow, sellers asking me to call back in March/April to list. My prediction is a sellers market first half of year then based on inventory to demand we will see if it equals out. Right now we are doing print materials, polishing off the listing and buyer presentations and balancing with rest and entertainment because April 1 st the flood gates are going to open and you better be rested and in shape to work extremely hard building your inventory and business to bring you through next winter with no worries. REST, AIM. FIRE!” — Dan Gouveia, Keller-Williams, SouthCoast
“I am in the Franklin area and the snow has definitely pushed back potential sellers, but the buyers are out there! They are looking, going to Open Houses and acting now while rates are low and PMI just went down as well. My advice would be to clean off that snow and get your house on the market now while inventory is low.” — Amber Cadorette, Keller-Williams Franklin
“I agree, buyers are definately out going to open houses even with the record breaking temps and snowfall! I think the prediction that interest rates will be increasing next year has a lot to do with it. Personally, I don’t feel sellers are waiting for spring to list their homes. I listed two properties today (Northbridge) and will be listing another (Needham) next week.” — Anita Bertone, Keller-Williams Wrentham
“Buyers are swarming anything new to the market priced well – I have had multiple offers on my recent listings. The snow is NOT stopping the buyers so sellers should not wait till Spring when inventory will be better which usually lessens the value of their home. Supply and Demand…Little Supply + High Demand = More $$$ in Seller’s pockets!” — Anne Silverman, Realty Executives Boston West
Thank you to all the contributors to this post, especially Gabrielle Daniels who came up with the creative title! I’m sure this will be a much-read and much-shared article in the coming months. Let’s hope that this Ice Age ends soon and we can start buying and selling homes!
Law Catching Up With Popular Airbnb Room Rental Website
With the promise of relatively easy money, Airbnb (Air Bed & Breakfast) is making innkeepers of many Greater Boston homeowners who are taking advantage of the popular website’s rental listing service. For those who don’t know already, Airbnb is a website where you can rent out one or more rooms in your home, condo or apartment for a nightly, weekly or monthly fee. But with some homeowners earning upwards of $20,000/year on rental income, Airbnb raises a multitude of thorny legal issues in Massachusetts, including whether an innkeeper or rooming house license is required, whether it violates condominium rules and regulations, and whether guests qualify as tenants. For example, in a recent case, a Back Bay condominium fined a unit owner over $9000 for unlawfully renting his unit out through Airbnb in violation of the condominium rules.
According to a recent Boston Globe article, Airbnb’s website currently lists nearly 3,500 properties for rent in the Boston area — a 63% increase since July 2013. Some of the lodging arrangements offered cost less than $50 per night and involve little more than a bed, a key, and zero conversation. Others offer entire homes, bed-and-breakfast-intensity chitchat, and prices that can top $800 per night. Aspiring innkeepers are everywhere, from Dorchester to Revere, Boston to Somerville, advertising “treetop views,” “steps to the T,” “cozy penthouses,” even “lovely puppies.”
But with success has come negative attention from cities and towns that want to tax the lodging arrangements as they do hotels, from landlords with leases that prohibiting sublets, and from neighbors who don’t want strangers traipsing through buildings. There are also some horror stories popping up with Airbnb guests turning into squatters and refusing to leave. In New York City, the Attorney General is waging a publicized legal fight to get Airbnb host names and recover unpaid hotel taxes. Last year, a group of Brookline residents dropped a dime on a local homeowner who rented out rooms to foreign exchange students via Airbnb. According to Brookline Building Commissioner Dan Bennett, an owner may rent up to two rooms to two lodgers as of right, as long as there are no separate cooking facilities. If an owner wants to have another lodger, they would require relief from the Zoning Board of Appeals.
Licensing and Registration Requirements
From a legal perspective, there is no doubt that Massachusetts municipalities will eventually be considering whether Airbnb qualifies as a rooming or lodging house, bed and breakfast or hotel for purposes of both regulation and taxation. Hey, you think cities will pass up a golden opportunity to increase tax revenue? No way.
The state Executive Office of Health and Human Services recently opined in a memo that lodging of this type is subject to local licensure as a bed and breakfast. For now, the City of Boston Inspectional Services Department has issued a temporary policy that they will not issue citations to homeowners while an internal group works on recommendations. A city policy is expected this fall, and as yet, no per-bed fee rate has been set.
The Licensing Board for the City of Boston requires a lodging house license if lodgings are rented to four or more persons not within the second degree of kindred to the person conducting the lodging. This license is an annual requirement and a lodging house is further required to keep, in permanent form, a register of the true name and residence of occupants for a period of one year. Lodging house license may require upgrades with smoke detectors and fire prevention systems which may be cost prohibitive for any Airbnb host.
The Boston Inspectional Services Department requires that a property be registered if it is to be occupied without the owner of the property present. This registration is done on an annual basis and inspection of the property is required on a five (5) year cycle by the Inspectional Services Department. This regulation applies to “a non-owner occupied room or group of related rooms within a dwelling used or intended for use by one family or household for living, sleeping, cooking and eating.” More information is available here.
In the suburbs, Airbnb may also run afoul of zoning by-laws which regulate whether a home is a single family or multi-family dwelling.
Taxes. The City of Boston excise and convention center taxes (together known as room occupancy taxes) may apply to an Airbnb listing. Refer to the Massachusetts Room Occupancy Tax Guide for more details. In addition, the Massachusetts excise tax may also apply. Refer to Section 64G(3) of the State Tax Code.
Guests Considered Legal Tenants?
Airbnb offers rentals for a daily, weekly or monthly charge. Whether a guest would be considered a legal tenant entitled to the vast protections under Mass. law depends primarily on the length of the tenancy. Under state law, if the premises is deemed a rooming house or lodging house, a rental for three consecutive months constitutes a tenancy at will which can only be terminated with a rental period notice of at least 30 days. Occupancy of a dwelling unit within a rooming house or lodging house for more than 30 consecutive days and less than three consecutive months may be terminated only by seven (7) days notice in writing by the operator of the rooming house or lodging house to the occupant. A daily rental is a grey area and would likely be considered a mere license. However, in all instances, the host must use court eviction proceedings to evict the guest, and cannot resort to self-help such as changing the locks, lest they be subject to liability.
Apartments
If you have the chutzpah of renting out a room in your leased apartment via Airbnb, the rental will likely violate your lease’s provision against sub-leasing and your landlord will not be happy. Most standard form apartment leases provide that any sub-lease must have the written consent of the landlord so the landlord can control who occupies the unit. Most landlords I know will not approve of an Airbnb rental situation, unless they are getting income and are assured of the security and safety of the situation. Renting out your apartment through Airbnb can violate your lease and subject you to a quick exist via eviction. From one legal question and answer website, tenants are already facing eviction for using Airbnb.
Condominiums
If you are renting out a room in your condo, Airbnb rentals may also conflict with condominium rules and regulations, many of which prohibit short term rentals, business use of units, or both. I highly doubt your condominium association and fellow unit owners would be happy if a unit were turned into a revolving door of bed and breakfast guests. Most condominium documents provide for rules governing the type and length of rentals of units. Unit owners who violate these rules can be subject to fines, penalties and court action. These cases should be popping up more and more.
Mortgage and Homeowner Insurance Policy Ramifications
Most conventional single family and condominium Fannie Mae compliant mortgages contain a provision where the owner agrees that the mortgaged property will remain the borrower’s principal place of residence and not an investment property. Investment property mortgage typically carry a higher interest rate and are sold in a different category in the secondary mortgage market. Homeowners who make a practice of using Airbnb may unknowingly be violating their mortgage agreements by converting the property into in essence a rental property. The same holds true for a standard homeowner’s insurance policy. Turning your home into a bed and breakfast certainly raises a host of new risks for both the homeowner and the insurance company underwriting those risks. If there is an unfortunate accident involving an Airbnb guest, watch out because the insurance company could deny the claim due to converting the character of the insured property into a rental property.
What’s Next?
Airbnb is certainly a game-changing technology in the rental space. As is common with any new distruptive technology the law is just catching up. But the law will catch up and Airbnb hosts and guest must pay attention and comply with whatever regulations and law that are passed. Check back here for more developments as I will be monitoring the situation.
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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If you need assistance drafting and serving a notice to quit and evicting a tenant, please contact Attorney Richard Vetstein via email at [email protected] or telephone at 508-620-5352.
Attorney’s Obnoxious Conduct At Closing Factor in Large Award
Every now and then I have a contentious deal where I should be wearing a black and white referee’s shirt instead of a shirt and tie. I’m usually successful in getting everyone to calm down and close the transaction. The case of KGM Custom Home Builders v. Prosky (embedded below) recently decided by the Massachusetts Supreme Judicial Courtis an example of how really bad behavior at a real estate closing can get a party into big legal trouble.
45 Acres in Mansfield for Sale
The Prosky family of Mansfield entered into an agreement to sell 45 acres of developable land to KGM Custom Builders. The sale price was linked to the number of buildable lots that KGM could permit. After spending over $300,000 in 5 years including weathering an appeal, KGM was able to obtain permits for 60 residential units. However, the Proskys received a better offer for the land and a dispute over calculation over the purchase price arose. Nevertheless, KGM was not willing to back down, and scheduled a closing. Repudiating the contract, the Prosky’s attorney informed KGM that it should calculate the liquidated damages provision in the contract because the sellers were not going to sell.
Closing Shenanigans
A closing was nevertheless scheduled at which the Prosky’s attorney showed up with a professional videographer as “defense strategy.” The parties’ attorneys started yelling at each other, and KGM’s attorney shut off all electricity to the building, but the videographer was able to tape with battery power. KGM’s attorney demanded that the Prosky’s attorney produce the closing documents he was supposed to have drafted. The Prosky’s attorney waived the documents in the air, and when the buyer’s attorney went to grab them, he pulled them back and asked if could read them from 2 feet away. KGM, with funds on hand, was ready, willing and able to close, and took the Prosky’s attorney’s antics at the closing as not engaging in good faith, and walked out. At the end of the closing, one of the sellers asked the videographer, “can you explain to me what just happened”? (I would love to see this videotape!).
Anticipatory Repudiation, Breach of Good Faith and Fair Deal, or Both?
Naturally, KGM sued the sellers. The trial judge ruled the sellers had engaged in anticipatory repudiation but he calculated the sales price in favor of the sellers at over $1M, giving the buyer the option of going forward with the deal or taking the liquidated damages because the buyers had also breached the covenant of good faith and fair dealing with their attorney’s antics at the closing. The buyer elected damages, and the judge awarded nearly $500,000 in permitting costs and attorneys’ fees. The sellers weren’t happy with this, so they appealed.
On appeal at the SJC, the legal issue was whether the law allowed the trial judge to provide the buyer with this favorable election of remedies. With few exceptions, outside of the commercial law context, Massachusetts has not generally recognized the doctrine of anticipatory repudiation, which permits a party to a contract to bring an action for damages prior to the time performance is due if the other party repudiates. One such exception occurs where a seller of land informs the “holder of an enforceable option” to purchase that he plans to sell the land to a third party. The high court ruled that this case fit within this exception and upheld the award of damages to the buyer. Naturally, the court seemed particularly upset about the behavior of the seller’s attorney at the closing. In fairness, the SJC did slash the attorneys’ fee award by $120,000, but with statutory interest accruing for several years now, the end result will likely be the same — the sellers are out a lot of cash.
Fortunately, these types of antics are very much the exception rather than the rule at Massachusetts closings. There is really no excuse for this type of unprofessional behavior at a closing, no matter how contentious the dispute. If a party is going to elect to terminate a deal, go ahead and do it without the theatrics. After all, what you say and do at a real estate closing may come back to bite you and your client.
Fraught with liability and danger, the Massachusetts Lead Paint Law is always a hot topic for Massachusetts residential real estate professionals.
The overriding policy of the Mass. Lead Paint Law is to encourage full disclosure of all lead paint related issues and give buyers the opportunity to test for lead paint before they purchase a home with lead paint. Unlike rental properties, however, there is no obligation on the seller to de-lead prior to a private sale. But common sense dictates that a lead-free house may be more valuable and marketable, and this is particularly true for multi-family properties where tenants with children under six years of age may in any event trigger the de-leading requirements of the law.
Further, penalties for non-compliance with the disclosure requirements are quite stiff. Sellers and real estate agents that do not meet the requirements can face a civil penalty of up to $1,000 under state law and a civil penalty of up to $10,000 and possible criminal sanctions under federal law for each violation. In addition, a real estate agent who does not meet requirements may be liable under the Massachusetts Consumer Protection Act, which provides up to triple damages.
What lead paint disclosures does a listing agent have to provide?
Whenever an owner of a home built before 1978 sells, the listing agent must provide the (1) the “Property Transfer Notification Certification”, and (2) all 10 pages of the Department of Public Health’s “Childhood Lead Poisoning Prevention Program ‘CLPPP’ Property Transfer Lead Paint Notification.” Most agents only use the one page form, and that’s a “no-no.”
Practice tip: It is a good idea to combine the two forms as one document in DotLoop (or other transactional software system) or on the MLS when the listing agent is providing these to the Buyer.
Can the Buyer sign the Property Transfer Notification Certification form before the Seller?
No. It is invalid. The Property Transfer Notification Certification (“Property Transfer Form”) must be completed and signed by the Seller before the Buyer can sign. The Buyer’s signature acknowledges they are in receipt of the disclosure. Thus, the Buyer cannot be in receipt of the disclosure until the Seller first completes the form.
Practice tip: If the listing agent is slow to send the Property Transfer Form, then the buyer’s agent should document the requests by email. In addition, the buyer’s agent should email the listing agent’s broker to request the timely receipt of the Property Transfer Form.
What disclosures and acknowledgements have to be completed on the Property Transfer Form?
All disclosures and acknowledgements have to be accurately completed, including the Seller’s Disclosure, the Purchaser’s or Lessee Purchaser’s Acknowledgement and the Agent’s Acknowledgement. Agents should be aware that HUD and the EPA have audited broker’s files in the past and have at times found them deficient from a compliance standpoint. Thus, it is critical to accurately fill out the form.
Practice tip: Make sure that the Property Transfer Form includes the property address. The older form, “CLPPP form 94-3 dated 6/30/94” does not include a line for the address. Both agents working on the transaction should sign the form.
Does a listing agent have to provide a Property Transfer Form for a property built after 1978?
No. The lead paint law only applies to homes built before 1978. Therefore, testing for lead-based paint is not required.
Practice tip: If the listing agent provides a Property Transfer Form for a home built after 1978, neither the buyer nor the buyer’s agent has to sign the form.
Does a Seller have to accept an offer from a Buyer who is requesting lead paint testing?
A property owner or real estate agent cannot sidestep the lead paint law simply by refusing to sell or rent to families with young children. The purpose of the lead paint law it to protect the health of children and pregnant women. An owner cannot refuse to sell or refuse to renew the lease of a pregnant woman or a family with young children just because a property may contain lead hazards that they do not want to spend the money to remove. 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. A case in point: a Boston area landlord was recently hit with a $75,000 penalty by the Mass. Attorney General’s office for lead paint violations.
What is required to obtain a Certificate of Compliance?
Owners of homes built before 1978 where children under six live should have the property inspected by a licensed lead inspector. Typically, an inspector will look to remove peeling, chipping or flaking paint. A full list of surfaces to be deleaded is available in the CLPPP form.
Practice tip: To contact a licensed lead inspector, click this link.
Does a listing agent need to disclose a Letter of Interim Control?
Yes. A Letter of Interim Control is only valid for one year. Thus, if a home built before 1978 that has a Letter of Interim control but does not have a Certificate of Compliance, then the agent needs to Disclose the Interim Letter of Control and the seller should likely engage a professional to determine what work is needed to bring the property into compliance.
What is the contractors’ role in the lead removal process on home improvement projects?
In a previous article, I noted that new regulations went into effect in 2010 that cover paid renovators who work in pre-1978 housing and child-occupied facilities, including renovation contractors, maintenance workers in multi-family homes, painters and other specialty trades. These regulations provide that most home improvement projects on homes built before 1978 require certified lead paint removal project contractors to follow strict lead paint removal precautions. Nothing in these new rules requires owners to evaluate existing properties for lead or to have existing lead removed.
Are there lead paint removal tax credits and loans available?
There are a number of lead paint removal no and low cost loans available. MassHousing, for example, has a “Get the Lead Out” Lead Paint Removal loan program for income eligible owners or tenants.
In addition, Massachusetts has a tax credit of up to $1,500 for each unit deleaded.
If an agent has a buyer purchasing a home built before 1978, should the agent request lead removal be done before the closing or after the closing?
If making these strategic decisions, we recommend that you consult a real estate attorney in order to be in full compliance with lead paint laws.
At closing, should a Buyer sign the form in the closing package that says he or she agrees to indemnify the lender for all lead paint issues?
Yes. The form typically contained in most lender closing packages states that the Buyer agrees to indemnify and hold the lender harmless in the event of any non-compliance with lead paint laws. The lender won’t close unless the disclosure form is signed.
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Richard Vetstein and Marc Canner are Massachusetts real estate attorneys. Rich can be reached at [email protected] and Marc at [email protected]
Reviewing this blog, it occurred to me that I’ve never written about real estate agency and designations, which is one of the more confusing aspects of real estate broker agency law. Personally, I think that all the recent disclosure forms and regulations imposed by the Mass. Board of Real Estate, while well-intended, have made this area unnecessarily complicated. I’ll try to explain broker agency in plain English.
The Massachusetts real estate brokerage industry is highly regulated by both state law and regulations, as well as local and national codes of ethics. Under state regulation, once you sit down with a Massachusetts real estate agent to discuss a specific property, the agent should give you a form called the Massachusetts Mandatory Licensee Consumer Relationship Disclosure. The disclosure form describes the five types of agency relationships between and among buyer, seller, and agent:
Seller’s Agent – This is typically known as a listing agent. The real estate agent represents only the seller, not the buyer. The listing agent owes the seller undivided loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality and accountability. However, a listing agent must disclose all known material defects in the real estate to buyers.
Open Houses: Open houses are often the cause of disputes as to agency and commissions. Under Mass. regulations, at any open house the listing agent must conspicuously post and/or provide written materials explaining to attendees the relationship they may have with the agent conducting the open house. If a buyer is working with an agent (but the agent is not present at the open house) it’s a good idea to write the name of the agent’s name and leave the agent’s card at the sign-in, otherwise the listing agent could be considered the procuring cause of the buyer which could cause a dispute down the road.
Buyer’s Agent – A buyer’s agent works for the buyer only. The agent owes the buyer undivided loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality and accountability. Like a listing agent, a buyer’s agent must disclose any known material defects in the real estate. Some agents are exclusive buyer agent’s and do not take on listings. An advantage of using a buyer’s agent is that you can be assured the agent will work only for you, the buyer, and will have no relationship with the listing agent’s office, as is common with designated and dual agencies described below.
Designated Seller’s and Buyer’s Agent – This type of agency occurs when a listing agent refers an agent working in the same office to represent the buyer. So, two agents in the same office are representing both sides of the transaction. The happens a lot when an unrepresented buyer is introduced to the property at an open house, and the listing agent will refer the buyers to a fellow agent in her office. This is usually the smart and prudent choice to avoid the conflicts inherent in being a dual agent representing both buyer and seller, discussed below. Both buyer or seller must agree to a designated agent agency in writing. The designated agent owes her client the same duties and obligations discussed above.
Dual Agent – A dual agent represents both sides of the transaction — buyer and seller –but can be a risky proposition. The upside for the agent is that he or she keeps the entire commission, but the agency can be fraught with potential conflicts of interest. Dual agency is allowed only with the express and informed consent of both the seller and the buyer. Written consent to dual agency must be obtained by the real estate agent prior to the execution of an offer to purchase a specific property. A dual agent shall be neutral with regard to any conflicting interest of the seller and buyer.
Non-Agent Facilitator – This is the rarest of all agencies. When a real estate agent works as a facilitator that agent assists the seller and buyer in reaching an agreement but does not represent either the seller or buyer in the transaction.
What is a “broker” vs. a “salesperson”? Under the Massachusetts regulations governing real estate agents, a real estate broker runs the real estate office and is the broker of record, overseeing the transactions of all salespersons (agents). A broker must complete 40 additional hours of education and must work for a broker for at least three (3) years before they can move on to licensure as brokers. A broker is responsible for accepting and escrowing all funds, such as a deposit placed on the purchase of a home, and for finalizing transactions. A real estate broker must supervise any transactions conducted by a salesperson. Every local real estate office, even the large ones like RE/MAX, Century 21 and Coldwell-Banker, will have a broker/office manager in charge of the office. The small, independent real estate offices are typically operated by a single broker, with perhaps a handful of salespeople.
A real estate salesperson is what most folks consider real estate agents. When a person first passes their real estate exam, they become a “salesperson.” A salesperson must be affiliated with, and work under, a broker, either as an employee or as an independent contractor, under the supervision of the broker. A salesperson can not operate his own real estate business. A salesperson also has no authority or control over escrow funds.
What Is A Realtor®? A Realtor is a real estate broker or salesperson who is a member of the National Association of Realtors and has agreed to conduct herself under the comprehensive NAR Code of Ethics. Not all real estate agents are Realtors. Membership in the NAR gives a Realtor full access to the entire Multiple Listing Service providing a national database of all sold and listed properties. Realtors can also file complaints against each other and the organization accepts complaints from consumers. Complaints can affect membership status and fines can be levied against agents who are found guilty of wrongdoing by a multi-member panel of their peers. The NAR does not have the ability to suspend a real estate licenses–that action can only be accomplished by the Mass. Board of Real Estate.
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Richard D. Vetstein, Esq. is a Massachusetts real estate attorney with over 15 years of experience. If you have any questions regarding real estate agency, please contact him at [email protected] or 508-620-5352.
Richard D. Vetstein, Esq. is regarded as one of the leading real estate attorneys in Massachusetts. With over 25 years in practice, he is a four time winner of the "Top Lawyer" award by Boston Magazine, a "Super Lawyer" designation from Thompson/West, 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.
Guaranteed Rate, Norfolk
h usually lessens the value of their home. Supply and Demand…Little Supply + High Demand = More $$$ in Seller’s pockets!” — 
