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Decision Could Have Wide Impact Upon Marijuana Use By Tenants

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

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

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

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

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100316_photo_vetstein (2)-1Richard D. Vetstein, Esq. is an experience Massachusetts landlord tenant and real estate attorney. If you are concerned or have questions about the new Medical Marijuana Law, please contact him atinfo@vetsteinlawgroup.com.

 

 

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

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

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

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

A mandatory rent escrow law would require any tenant who exercises their right of rent withholding to pay the withheld rent into an escrow account until the unsafe conditions or code violations are repaired. After repairs are done, either the landlord and tenant agree on how the escrowed rent should be divided, or a judge orders a fair settlement. In most cases, the owner will get back most of the withheld escrowed rent. But the most important impact of a mandatory rent escrow law is that those nonpaying tenants who do not escrow can be promptly evicted for nonpayment of rent. Although nonpayment evictions will still take on average three months to resolve, much-longer-delayed evictions and the free rent trick will be stopped.

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

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

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

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mass ibanez titleShould Result In Much-Needed Inventory Boost To Housing Market

Good news to report for property owners saddled with toxic titles resulting from the seminal U.S. Bank v. Ibanez foreclosure ruling. Massachusetts lawmakers are poised to pass into law a new bill aimed at legislatively clearing up all of these defective titles.

By way of background, properties afflicted with Ibanez title defects, in worst cases, cannot be sold or refinanced. And homeowners without title insurance have been compelled to spend thousands in legal fees to clear their titles, while some have not been able to clear their titles at all.

The new legislation, Senate Bill 1987, would render clear and marketable any title affected by a defective foreclosure after 3 years have passed from the foreclosure. Most of these toxic titles were created prior to 2009, so the vast majority of them will be cleared up.

The bill does preserve any existing litigation over the validity of foreclosures. The legislation does not apply if there is an existing legal challenge to the validity of the foreclosure sale in which case record notice must be provided at the registry of deeds. The bill also does not shield liability of foreclosure lenders and attorneys for bad faith and consumer protection violations over faulty foreclosures.

The bill has recently been passed by the Senate and now moves on to the House. Word is that it should pass through the House and on to the Governor’s Desk.

Shrewsbury State Senator Michael Moore and the Massachusetts Land Title Association have sponsored this effort for several years now. I have been supporting this effort as well.

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

(Hat tip to Colleen Sullivan over at Banker and Tradesman for passing along this important information).

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

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

“Venezuela,” she answered.

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

This is Massachusetts, and you know what came next.

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

Seriously?

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

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

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

Appeals Court Uses Some Much Needed Common Sense

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

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

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

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

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CFPB.pngCFPB Issues Long Awaited “Know Before You Owe” Mortgage Disclosures, Replacing Truth in Lending, Good Faith Estimate, and HUD-1 Settlement Statement

As part of a continuing overhaul of the home mortgage market, the Consumer Financial Protection Bureau today issued a final rule to bolster fairness and clarity in residential lending, including requiring a new good faith estimate of costs for homebuyers, Truth in Lending disclosure and a new HUD-1 Settlement Statement.

The new Loan Estimate will replace the current Good Faith Estimate (GFE) and the current Truth in Lending Disclosure (TIL). The new Closing Disclosure will replace the current HUD-1 Settlement Statement. The new forms are embedded below.

The real estate industry will have 20 months to implement the new disclosures, by August 1, 2015. The CFPB website has a summary of the new rules and disclosures here.

Initial Impressions, Did The CFPB Finally Get It Right?

Overall, I would say that the forms are a major improvement over the existing disclosures, especially the Truth in Lending disclosure. I always joke that the Truth in Lending disclosure should be called “Confusion in Lending” (which usually gives the borrower a chuckle) as it’s nearly impossible to explain even for a trained attorney and sophisticated borrower. That may be rectified now with the new forms — although I still may employ the joke!

The new HUD-1 Closing Disclosure is a longer and more involved form, but it basically just reorganizes all of the information now contained in the current 3 page HUD-1 Settlement Statement, and it appears to be easier to read and explain at the closing table.

The CFPB says that the new forms will replace the existing forms, resulting in a decrease in pages to review — which is a minor miracle in and of itself. A common complaint from borrowers is the sheer number of forms and disclosures signed at the closing, so this is welcome news.

3 Business Day Rule May Be Problematic

As Bernie Winne of the Massachusetts Firefighters Credit Union testified at the announcement hearing today in Boston, the new requirement that the Closing Disclosure (new HUD-1) be provided to the borrower within 3 business days of the closing may pose a problem in some transactions and will certainly result in a major adjustment in current practices. There are often last minute changes in closing figures, seller credits, holdbacks, payoffs, etc., which result in last minute changes. Hopefully, the CFPB will realize this in the upcoming implementation period and relax the rules in certain circumstances. There has already been significant chatter on Twitter and the blogosphere about this new requirement.

Another encouraging note was CFPB Director Cordray’s comments today about the agency pushing for more electronic closings. Fannie Mae has done squat to push e-closings, so hopefully CFPB will take the lead in this important area!

Loan Estimate Disclosure

  • The new Loan Estimate will combine the disclosures currently provided in the Good Faith Estimate and the initial Truth in Lending statement.
  • Lenders must provide the Loan Estimate 3 business days after an application is submitted by a consumer, excluding days that the lender is not open (e.g., Saturdays).  However, it is not clear based from materials available thus far when a consumer has submitted sufficient information to constitute an “application.”
  • The Loan Estimate will conveniently provide for the monthly principal and interest payment, projected payments over the term of the loan, estimated taxes and insurance (escrows), estimated closing costs, and cash to close.
  • It will provide for a Rate Lock deadline.
  • The Annual Percentage Rate (APR) appears on page 3, despite requests by consumer advocates that it appear in a prominent location on the first page.  In addition, it appears that the Bureau did not adopt the proposal to revise the APR calculation to include more items in the finance charge and thereby potentially increase the number of loans that would fail the Qualified Mortgage’s points-and-fees test or would be treated as “high cost” or “higher priced.”

Closing Disclosure

  • The Closing Disclosure will combine the disclosures currently provided in the HUD-1 settlement statement and any revised Truth in Lending statement. It is now a 5 page document compared to the current 3 page document.
  • Critically, the Closing Disclosure must be provided at least 3 business days before the closing. Lenders and closing attorneys will have to adapt to this new requirement as currently we usually get the final HUD approved by the lender 24-48 hours before the closing.
  • Page 1 of the Closing Disclosure carries over much of the Truth in Lending information previously found in the TIL form.
  • Page 2 and 3 replicate the existing HUD-1 Settlement Statement (pages 1 and 2) outlining the fees and closing costs, adjustments, and commissions charged to the buyer and seller. It also contained a more extensive section on Cash to Close which will be helpful to explain.
  • Page 4 contains a nice easy-to-read section on the escrow account which is often challenging to explain to borrowers.
  • The last page is similar to the current page 3 of the HUD-1, providing a quick summary of the loan terms, interest rate, total payments and APR.

CFPB Loan Estimate

CFPB Closing Disclosure

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MA real estate agent independent contractor law

Fate of Long-Standing Massachusetts Brokerage Model Hangs In Balance

As first reported by David Frank in Massachusetts Lawyers Weekly, the critical question of whether real estate agents are governed by the state’s strict independent contractor law, which would entitle agents to minimum wage, overtime and benefits, is headed to the Appeals Court. According to Hillary Schwab, the attorney to a group of real estate agents who filed suit against Jacob Realty in Boston, “this is the first case in Massachusetts where the concept of employment misclassification and the real estate industry have ever been dealt with in the same opinion.” An unfavorable result at the Appeals Court would essentially turn the Massachusetts real estate brokerage model upside-down, as it has historically operated with agents considered independent contractors and paid on a commission-only basis. If brokerages were required to pay their agents minimum and overtime wages and provide all the statutory benefits afforded to employees, the real estate office as we know it would likely cease to exist.

Jacob Realty Agents Required To Adhere to Dress Code, Mandatory Office Hours

The Appeals Court will consider the case of Monell, et al. v. Boston Pads, LLC, (embedded below) brought by a group of disgruntled real estate agents at Jacob Realty. According to Curbed Boston, Jacob Realty is part of a larger network of Boston rental companies (Jacob Realty, NextGen Realty and Boardwalk Properties) with 150 rental agents, making them one of the largest rental offices in Boston.

As is customary in the industry, Jacob Realty classified the agents as independent contractors, paying them on a commission-only basis and making them responsible for payment of their own taxes and monthly desk fees. At the start of their employment, the agents signed non-disclosure, non-solicitation and non-compete agreements. They had to own day planners, obtain a cellphone with a “617” area code, adhere to a dress code, submit to mandatory office hours and to various disciplinary actions if they did not meet their productivity goals.

Lower Court Rules In Favor of Broker

Superior Court Judge Robert Cosgrove issued a ruling on July 15, 2013 that the agents should be considered independent contractors and not employees under the Massachusetts Real Estate Brokerage Act. But Cosgrove said it was difficult to read the brokerage law and independent contractor law consistently. The real estate statute explicitly provides that an agent may either be an employee or an independent contractor, he noted. In the same sentence, the law reiterates that agents must remain under the auspices of a broker. In contrast, the judge wrote, the independent contractor statute requires salespeople to be free from the control and direction of employers in order to be correctly classified as an independent contractor.

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

What’s Next?

The case now heads up to the Massachusetts Appeals Court, and perhaps even the SJC — where the stakes will be much higher. This case is very hard to handicap because, as I said before, the courts as well as state and federal labor agencies have really been cracking down with the independent contractor law in favor of employees. Rest assured, I’ll be monitoring this case. I expect the MAR and GBREB will file friend of the court briefs and take a further appeal if there’s an unfavorable result. There will surely be lobbying efforts at the Legislature to preserve the historical independent contractor brokerage model.

Monell v. Boston Pads

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

Avid readers of this Blog know that I’m a huge Seinfeld fan. One of my favorite episodes was the “Serenity Now” episode where Kramer went a little nutty after being tormented by neighborhood kids, muttering “serenity now, serenity now” outside his toilet papered apartment. (Seinfeld buffs also know this as the episode where George beats Lloyd Braun in a computer sales competition). For your viewing pleasure, I’ve embedded the video below.

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

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

The Master Deed

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

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

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

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

Declaration of Trust and By-Laws

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

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

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

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

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

Annual Budget, Condo Fees and Real Estate Taxes

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

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

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

Unit Floor Plans and Site Plan

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

How Much Does All This Cost?

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

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RDV-profile-picture.jpgRichard D. Vetstein, Esq. is a seasoned Massachusetts condominium conversion attorney. Please contact him at rvetstein@vetsteinlawgroup.com or by phone at 508-620-5352.

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

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

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

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

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

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

 

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HomeTheatreI had a interesting situation come up the other day during a pre-closing walk-through. Unbeknownst to me or the listing agent, the seller had removed wall-mounted speakers from the living room, leaving gaping holes with the built-in surround sound speaker wires hanging out. Needless to say, the buyers were not happy after the walk through. While we were able to amicably resolve the issue at the closing table, it underscored an important, but often overlooked, aspect of the sale process: how to best handle fixtures and built-in items.

What’s A Fixture vs. Removable Personal Property?

From a legal standpoint, when equipment, decorations, or appliances become affixed or fastened to the real estate, it becomes a fixture and is supposed to be transferred as part of the sale, unless there is an agreement providing otherwise. What are some of the factors determining whether something is a fixture?

Method of attachment. Is the item permanently affixed to the wall, ceiling or flooring by using nails, glue, cement, pipes, or screws? Even if you can easily remove it, the method used to attach it might make it a fixture. Examples include built-in surround sound wiring, lighting fixtures, built-in speakers into the wall, custom built-in cabinetry.

Adaptability. If the item becomes an integral part of the home, it cannot be removed. For example, a floating laminate floor is a fixture, even though it is snapped together. Built-in appliances are properly considered fixtures, especially custom items. That includes your Sub Zero refrigerator and Viking Range/Oven specially selected for the gourmet kitchen. Free standing appliances, however, are generally not considered fixtures.

There are, of course, plenty of gray areas with fixtures. Wall mounted flat screen TV’s, surround sound speaker systems, and decorative mirrors are a few coming to mind. These gray areas are the cause of most disputes surrounding fixtures. How do you handle them? Keep reading.

Disclose All Exclusions/Inclusions In Listing

The opportunity to address fixtures, inclusions and exclusions starts when the home is listed. As suggested by Sudbury, Mass. Realtor, Gabrielle Daniels, agents should identify all potential fixture issues ahead of time, and disclose them on MLS either as included or excluded in the sale. If the sellers want to take that new Bosch dishwasher with them to their new home, they had better disclose it ahead of time so the buyer knows ahead of time.

Carry Over To The Offer and Purchase & Sale Agreement

Referring to this as the “no-surprise” rule, Metrowest Realtor Jennifer Juliano correctly advises that the same exclusions and inclusions in MLS should be carried over and written into the Offer to Purchase with a reference to the MLS Listing Number, and the purchase and sale agreement. The standard form purchase and sale agreement addresses inclusions and exclusions with even greater detail, tracking the law of fixtures in Massachusetts. Below is the standard language in the Greater Boston Real Estate Board form:

Included in the sale as part of said premises are the buildings, structures, and improvements now thereon, and the fixtures belonging to the SELLER and used in connection therewith, including, if any, all wall-to-wall carpeting, drapery rods, automatic garage doors openers, venetian blinds, window shades, screens, screen doors, storm windows and doors, awnings, shutters, furnaces, heaters, heating equipment, stoves, ranges, oil and gas burners and fixtures appurtenant thereto, hot water heaters, plumbing and bathroom fixtures, garbage disposals, electric and other lighting fixtures, mantels, outside television antennas, fences, gates, trees, shrubs, plants, and ONLY IF BUILT IN, refridgerators, air conditioning equipment, ventilators, dishwashers, washing machines and dryer; and but excluding _______.

As you can see, the standard language provides by default that most commonly understood fixtures are part of the sale, such as furnaces, carpeting, and lighting fixtures. Exclusions must be written into the agreement, or by default they may be considered fixtures and included in the sale.

If items are left unaddressed in the agreements, you’ll have a situation similar to mine with the removal of surround sound speakers and a stressful walk-through. Feel free to post in the comments about your own thorny fixture situation!

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100316_photo_vetstein (2)-1Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney. He can be reached by phone at 508-620-5352 or email at rvetstein@vetsteinlawgroup.com.

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ar123517806003655.jpgIs One Better Than The Other?

The first step in the purchase and sale of real estate in Massachusetts is the execution of an Offer to Purchase. Historically, agents and attorneys have used the Offer to Purchase Real Estate form generated by the Greater Boston Real Estate Board which has been around since the 1960′s. Recently, however, I’ve been seeing an increase in the use of the newer and more modern Massachusetts Association of Realtors Contract to Purchase Real Estate Form #501. I don’t think most Realtors, attorneys and consumers realize that these two forms have some critical differences, depending whether you are representing the buyer or seller. I’m going to outline the differences and similarities in this post.

  MAR GBREB
General Buyer Friendly Seller Friendly
Inspections Built-in, No $ Cap Addendum. Only Serious Issues, $ Cap
Mortgage Contingency Yes Yes
Representations Yes with waiver language No.

 

Buyer or Seller Friendly?

Both the MAR and GBREB offer forms are legally binding contracts to purchase and sale residential property in Massachusetts as I’ve written about here. They both have the basic and critical components for a deal:  identification of the property, price, deposits, good-through date, closing date, “good and clear record and marketable title” language, and P&S deadline, among other provisions.

The GBREB is clearly a more seller-friendly form, while the MAR form is definitely more friendly to buyers with some caveats that I’ll discuss below. Does this mean that if you are a buyer agent, you absolutely have to use the MAR form? No, but it may be a good practice to get into. Some agents are more comfortable with the older GBREB form, and that’s fine. They just should be cognizant of the differences in the two forms and how it may help or hurt their clients.

Inspection Contingencies

The first critical difference in the two forms is the inspection contingency. The MAR form has all inspection related contingencies (home inspection, pest, radon, lead paint, septic, water quality and drainage) built into the form, while the GBREB form uses a separate addendum for each type of inspection. The major difference, however, is what will trigger the buyer’s right to terminate the deal based on an inspection issue. The MAR form is extremely buyer-friendly, providing that the buyer may opt out of the deal merely if any of the inspection results are “not satisfactory.” You can drive a Mack truck through that open-ended language. The MAR form also has some often overlooked waiver language — (1) protecting Realtors from getting sued if the buyer does not conduct inspections, and (2) making it more difficult for a buyer to get out of the deal if she doesn’t provide timely notice of termination based on an inspection issue.

The GBREB form is far less buyer favorable, providing for an opt-out only for “serious structural, mechanical or other defects” the cost to repair of which is a dollar amount to be filled in (usually ranging from $500-$2500).

Mortgage Contingency

Both the MAR and GBREB forms give buyers a standard financing contingency, enabling buyers to obtain a firm loan commitment at “prevailing rates, terms and conditions” by an agreed upon date. The contingency language is almost identical in both forms, so there’s no issue here.

Representations/Acknowledgements

The MAR form has a modern provision confirming that the buyer has received all the various disclosures required by law, including the agency disclosure, laid paint, and Home Inspectors Facts for Consumers brochure. The GBREB does not have this provision. The MAR form also has some very agent-friendly waiver of representation/warranty language in this clause, providing that the buyer is not relying upon any of the Realtor’s representations, MLS or advertisting concerning the legal use, zoning, number of units/rooms, building/sanitary code status of the premises. However, I’m not sure this provision would pass legal muster in light of the recent SJC ruling in DeWolfe v. Hingham Centre holding an agent liable for misrepresentations concerning the zoning classification of property. Nevertheless, Realtors can use all the legal protection they can get in this litigious environment!

 Which Form Is Better?

There is no easy answer to this question. All things being equal, if I’m a buyer agent, I would go with the MAR form. (And buyer agents are typically the ones who are writing up the offers). The MAR form is more buyer-friendly while at the same time gives Realtors way more legal protection than the GBREB form. If I’m representing the seller and have the opportunity to select the offer form, I’ll go with the old-standby GBREB form for the simple reason that it will give the seller some more leverage in case of a home inspection battle. But I would still seriously consider trading up to the MAR form. I’ve embedded both forms below.

Agents, attorneys, readers what are your thoughts? Post in the comments below.

Also, if you are interested in joining the Massachusetts Association of Realtors or the Greater Boston Association of Realtors, click on the respective links. Both are great organizations and extremely helpful to new and established agents alike!

501 – Contract to Purchase Real Estate (c) 2012 – ID-WATERMARK

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539w-1.jpgRuling Calls Into Question Boston Ordinance Prohibiting 5 or More Students In One Unit

Those screams you are hearing now on Comm. Ave. aren’t the students. They are the landlords who are undoubtedly rejoicing upon news that the Supreme Judicial Court just issued a major ruling in how student rentals occupancy limits  – indeed all rentals — will be treated by housing inspectors and licensing authorities. This is an important decision which may have far-ranging implications across the state and not just to student housing.

The closely watched case is City of Worcester v. College Hill Properties (download link to case herewhere the SJC has held that renting to 4 or more students in one apartment unit of a two and three family home is not a “lodging house” requiring a special license under the Massachusetts lodging housing law, provided that the apartment meets all other sanitary and building code square footage occupancy thresholds. The state code requires 150 s.f. of living space for the first occupancy and 100 s.f. for each additional person (3 occupants = 350 s.f. of living space), and 70 s.f. of bedroom space for the 1st person, plus 50 s.f. for additional person (120 s.f. for 2 persons in one bedroom). This decision applies state-wide and to every type of rental housing, including multi-families, buildings and townhouses.

The timing of the ruling is interesting in light of the recent fatal fire involving an overcrowded student apartment house in Allston and Mayor Menino’s recent rental property registration and inspection rules.

Court’s Reasoning: Apartments ≠ Lodging Houses

For history buffs, the opinion is fun to read as it traces the Lodging House Law back to the days of brothels, houses of ill-repute and tenements. Using a common-sense analysis, Justice Lenk reasoned that lodging houses, which are essentially temporary rentals of rooms without such amenities as a separate kitchens and bathrooms, are quite different from the modern day apartment units with its more expensive amenities. The court ruled that if an apartment satisfies the state sanitary and building code provisions for the amount of living/sleeping space, utilities, egress, etc., then it would be not be deemed a lodging house despite the number of unrelated occupants.

City of Boston Undergrad Student Rule On the Chopping Block?

In the City of Boston, a new zoning ordinance went into effect in 2008 prohibiting 5 or more undergraduate students from living in one apartment unit. I think it’s a fair statement to say that the College Hill ruling effectively overrules this ordinance.

The other impact of this ruling is we should see an push for even more increased density in apartment rental housing which is exactly what Mayor Menino and the City of Boston doesn’t want.

More Press Coverage:  Banker & Tradesman, Boston Globe, Worcester Telegram

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Richard D. Vetstein is an experienced Greater Boston landlord tenant attorney who represents rental property owners throughout Boston and Massachusetts. You can contact him at 508-620-5352 or at info@vetsteinlawgroup.com.

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2691601505_c65b897bcc.jpgYou have been eagerly awaiting the closing of your new construction home, but alas, the builder has not been able to complete the landscaping, walkway and driveway by the closing and there is a two page punch-list of other incomplete work. You have already hired a moving company and packed all of your family’s stuff. Anxious thoughts race through your mind…Can we close on time? What will my lender do about the incomplete work? Should I be in panic mode?

Throw Me An Escrow Holdback Agreement!

In this situation, your closing attorney should recommend an escrow holdback agreement which, if approved by your lender, will enable the transaction to close as scheduled. The parties will sign a standard escrow holdback agreement at closing, with an agreed upon portion of the seller sale proceeds held in escrow (usually by the closing attorney) pending completion of the unfinished work. Escrow holdbacks are fairly common in Massachusetts real estate practice. They can be used to address all types of situations which would otherwise delay a closing: approval of a new septic system, unfinished construction/repair work, missing mortgage discharges and title issues, or any other obligation the seller should have completed for the closing.

Lender Approval Often Required

If you are using conventional mortgage financing, you will usually need to get your lender’s approval of the escrow holdback agreement, and it must be shown on the HUD-1 Settlement Statement. Some lenders and some loan programs will not allow an escrow holdback, so your closing may have to be pushed back. For incomplete new construction work, some lenders will require an inspection before allowing for the release of the escrowed funds, and they will typically require that 1.5 times the cost of the work be placed in escrow.

Builders Playing Hardball

Recently, I’ve seen some new construction builders refuse to agree to any escrow holdbacks in their purchase and sale agreements. This is ridiculous in my opinion, and should not be agreed to. Rarely does a new construction building complete a project without some unfinished work or punch list items. I typically counter with a language allowing an escrow holdback if the buyer’s lender insists upon it.

For these situations, “money talks”, and withholding seller funds is often the only way to ensure that the seller does what he or she has agreed to do.

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RDV-profile-picture-larger-150x150.jpgRichard D. Vetstein, Esq. is an experienced Massachusetts real estate closing attorney. If you have any questions about the Massachusetts closing process or escrow holdback agreements, please contact him at info@vetsteinlawgroup.com or 508-620-5352.

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New Online System Enables Landlords To Screen Tenants for Prior Evictions/Problems

After years of lobbying from rental housing groups, the Massachusetts Housing Court has finally announced a powerful new and free tool for tenant screening:  public internet access to all Summary Process, Small Claims, Civil and Supplementary Process case types. Case information can be accessed via the Trial Court’s eAccess internet site at www.masscourts.org.

The site allows users to conduct searches by case type, case number or case name. Users can find detailed instructions on the Housing Court page of the Trial Court’s website. Electronic access to all publicly available case types also continues to be available at public access computers at the five Housing Court divisions and at courthouses throughout the state.

This new system will enable landlords to research whether a potential or current tenant has been a party to a previous eviction, small claims or related housing case. Obviously, a rental applicant with a lengthy eviction history would not be a good candidate for rental housing.

I would caution landlords that despite whatever information may be gleaned from the new system, the fair housing and discrimination laws still remain in place. Under Massachusetts law, a landlord cannot refuse to rent to a tenant on the basis of the tenant’s race, color, national origin, ancestry, gender, sexual orientation, age, marital status, religion, military/veteran status, disability, receipt of public assistance, and children (except for an owner occupied two family dwelling).

Denial of rental applications must be based on non-discriminatory reasons, and a lengthy eviction history where the tenant was found liable for nonpayment or other serious violations of a lease would arguably qualify as such.

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RDV-profile-picture-larger-150x150.jpgRichard D. Vetstein, Esq. is an experienced Massachusetts landlord tenant and eviction attorney. You can contact him at info@vetsteinlawgroup.com or 508-620-5352.

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Massachusetts real estate closing attorneyExpands Realtors’ Disclosure Liability and Invalidates Exculpatory Clause In Standard Form Purchase and Sale Agreement

It’s been a very tough week for Boston, to say the least. (Please consider donating to the One Boston Fund over here —>).

Unfortunately I have some more bad news for Massachusetts real estate agents, as the Supreme Judicial Court recently ruled against a Realtor for failing to properly verify a representation made on MLS concerning a listing’s zoning classification. The closely watched case is DeWolfe v. Hingham Centre Ltd. (SJC-11168) (embedded below).

Zoned For Business or Residential?

The lawsuit was brought by a buyer of a hair salon business who relied upon what turned out to be erroneous information supplied by the listing agent (through information provided by the seller). The broker represented on the Multiple Listing Service (MLS) and newspaper advertising that the property was zoning “Business B,” which allowed a hair salon. Further, the broker placed at the property copies of pages from the town’s zoning by-law that listed hair salons as “Permitted Business Uses” in the Business B District. The property was not, in fact, zoned for business use; it was zoned residential, thereby prohibiting the hair salon the buyer wanted to open at the property. The buyer sued for misrepresentation and violations of the Consumer Protection Act, Chapter 93A.

Ruling: Realtors Have Duty to Exercise “Reasonable Care” In Making Zoning Representations

In an unanimous opinion by Justice Barbara Lenk, the SJC stated that while a real estate broker may ordinarily rely upon information provided by his client, where such reliance is unreasonable in the circumstances, an agent has a duty to independently investigate the information before conveying it to a prospective buyer.

The court ultimately held that all Massachusetts real estate agents have a duty to exercise reasonable care in making representations as to a property’s zoning designation.

Here, the owner testified that he told the real estate broker that the property was zoned “Residential Business B.”  The experienced broker apparently knew that there was no such zoning district in Norwell, and instead advertised the property as zoned “Business B.”  In addition, the broker was aware of no prior business use of the property, and had observed houses – not businesses – adjoining the property on either side.  Based on these facts, the SJC concluded that a jury could find that the broker was on notice that the information provided by the owner was unreliable, and acted unreasonably in representing the property as zoned “Business B” without conducting any further investigation.

Exculpatory Clause in Standard Form P&S Not Applicable

The SJC also rejected the broker’s argument that the exculpatory clause in the standard form purchase and sale agreement barred the buyer’s claims. The familiar contract language provides:

The BUYER acknowledges that the BUYER has not been influenced to enter into this transaction nor has he relied upon any warranties or representations not set forth or incorporated in this agreement or previously made in writing, except for the following additional warranties and representations, if any, made by either the SELLER or the Broker(s): NONE.

The justices held that, under the confusing, double-negative language quoted above, a buyer can rely on prior written representations that are not set forth or incorporated in the agreement. Therefore, the agreement did not protect the broker from liability arising from the written misrepresentations in the newspaper ad, the MLS listing, and the inapplicable zoning by-law placed at the property.

The SJC has sent the case back to the trial court for a possible jury trial or, most likely, towards settlement. And hopefully the Greater Boston Real Estate Board is re-drafting its poorly worded exculpatory clause.

Advice For Realtors Going Forward

  • Do NOT say or write anything on MLS or anywhere else concerning a property’s zoning status. Make the buyer conduct his/her own independent research.
  • If your MLS requires input of zoning status, put the zoning with the following disclaimer:  *subject to buyer verification
  • Never trust your client when it comes to information concerning the property. I hate to say this, but when it comes to disclosures, it’s true.
  • Always independently verify information about the property from available public sources. Here, the agent could have simply gone down to the town planning office to verify whether the property was zoned commercial or residential.

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RDV-profile-picture-larger-150x150.jpgRichard D. Vetstein, Esq. is a Massachusetts attorney with substantial experience in real estate disclosure litigation brought by buyers against Realtors. Please contact him at info@vetsteinlawgroup.com or 508-620-5352.

 

Dewolfe v. Hingham Center

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Lara Gordon, Coldwell Banker

Put Your Best Offer Forward & Get Pre-Approved Beforehand, Advise Local Experts

Well, it’s official now. With buyers back in droves, an abnormally low inventory of good properties, and bidding wars popping up all over the place, the Greater Boston real estate market has now made full circle into a seller’s market. As the Boston Globe recently wrote, the market is “desperately seeking sellers.”

images-11For prospective buyers in a seller’s market, the strategies to succeed and find your dream home are very different from just a year or two ago. To help you navigate these unfamiliar waters, I’ve asked Cambridge-Somerville Realtor, Lara Gordon of Coldwell Banker, and Brian Cavanaugh, Senior Mortgage Banker at RMS Mortgage, to join me in this “round-table” discussion about how buyers can succeed in a seller’s market. Lara and Brian were both featured in this month’s Boston Magazine Best Places to Live 2013.

Q: Laura, what are you seeing out there on the streets in terms of inventory, pricing, and respective bargaining power between buyers and sellers? Has the tide really shifted back to sellers?

A: (Lara Gordon) Yes—in a very big way. When sellers have 5-10 offers to choose from, which is typical for most listings in Cambridge & Somerville right now, they are really setting the terms, and some buyers are willing to accommodate just about any request they make, from waiving the inspection to offering a sale-and-lease-back if the seller needs time to find a new place. My listing at 27 Osgood Street, Unit 7 in Somerville (pictures to the right) is a good example — 6 bids.

Q:  Lara, I’m hearing about bidding wars on well-priced, good condition properties. What are you seeing out there, and what’s your best advice on getting that winning bid?

A: (Lara Gordon) I always tell my buyer clients this: if you know you’re going into a multiple offer situation, you should put your best foot forward from the start. Some people feel nervous about coming in high on their offer, thinking they need to leave some room to come up during negotiations, but that is a mistake. If a seller receives one offer that is significantly stronger than the others, they may well accept it without going back for a “best and final” round.

lr-mls

And again, price is just one aspect of the offer, so have a good pre-approval from a respected lender, do the best you can with the downpayment, be willing to work with sellers’ preferred dates, and make sure your agent is “selling” you as a knowledgeable buyer, reasonable to deal with, and committed to seeing the transaction through.

Q:  What do buyers need to do in terms of making their best and most competitive offer? Are we back to buyer’s writing a personal appeal to sellers and that sort of thing? 

A: (Lara Gordon) Some buyers do write letters to sellers, but it’s the list agent’s job to keep them focused on the strengths of the respective offers, so an emotional appeal really only gets a buyer so far. Buyers really need to put their best foot forward. This starts with price, downpayment, a solid pre-approval from a respected lender, tight contingency dates and as much as possible accommodating the sellers’ preferred timeframe for closing. Beyond that, list agents and sellers are looking for a deal that will proceed smoothly and will “stick” through closing, so buyers’ agents really need to “sell” their clients as educated on the market, realistic about the home inspection and committed to seeing the deal through.

Q:  Brian, I hear that buyers are coming to you at all hours and weekends for pre-approvals. When buyers come to you for mortgage approval, what sort of documentation should they have ready to go and how quickly can you close loans these days?

ex-mlsA: (Cavanaugh). Well, I’ll start off by staying that the pendulum has definitely swung around. When the market favored buyers, you would go look for houses, get an offer accepted then go to your mortgage banker for an approval. Now it’s the other way around. You need a mortgager approval in hand when you are out looking for homes. And that means from the start you need a very firm grasp on exactly what you can afford, how much to put down, etc. You need to work with a mortgage banker with a strong grasp of Fannie and Freddie guidelines.

As for the paperwork, you need 2 years of tax return and W2′s, 30 days of pay-stubs, one year of bank statements, statements for your 401ks, IRAs, and investment accounts. A lot of first time buyers use gifts of downpayment from their parents, which are particularly tricky. I tell them to get those monies into your account ASAP. You will need a gift letter executed by all parties involved and verification of funds.

Currently, we can close a single family loan in 45 days, and a condo purchase in about 60 days, since condo mortgages require more extensive FNMA approval.

Q:  How much are sellers looking at buyers’ financing? Are cash buyers winning out over financed buyers? What are the ways to ensure a seller that a financed buyer is of no greater risk that a cash buyer?

A: (Lara Gordon) Cash is definitely an advantage in that it takes one element of risk out of the equation. For sellers in a rush to close, a cash deal is also appealing because it can close a lot faster than when a lender is involved. But if timing isn’t a big deal and there are good comps for the property, there’s no reason a seller shouldn’t consider a good offer from a buyer who will finance. Of course, the size of the downpayment has become increasingly important as bidding wars drive prices up and appraisals become a concern.

Q: How are you dealing with contingencies in a seller’s market? Are buyers waiving inspection or even financing?
A: (Lara Gordon) There are certainly buyers out there waiving both financing and inspection contingencies, but it’s not always a good idea. While it’s fine for buyers to waive the financing contingency if they’re prepared to pay cash, I personally, would never advise someone to forego a home inspection. The key is to approach it as educational and a way out in case of a major issue, and not as a tool for renegotiating the price.

A: (Vetstein) I’m going to weigh in on this topic as it deals with legal issues. I would STRONGLY advise a financed buyer to resist the temptation to waive the financing contingency in the hope that it will make an offer more attractive. In this day and age of strict underwriting and frequent delays, this is simply a recipe for losing your deposit. I don’t care if a handful of lenders have told you that your file is a slam dunk — you could get laid off a few weeks before close and you’d be DOA for the closing. Same goes for the inspection contingency. Sellers know that buyers want to check the home’s bones beforehand. Trust me, it will cost you a lot more money down the line if you wind up buying equivalent of the “Money Pit.” Tightening the deadlines, that’s fine. Waiving them, that’s just asinine.

A: (Cavanaugh) I would echo Rich’s sentiments. In this day and age of tight lending guidelines, I would hate to see a buyer lose his deposit because he was under the assumption that he could qualify for a mortgage he really couldn’t qualify for. Again, talk to your mortgage banker before you make the offer.

Q: Last question guys. I always recommend that my buyers use a Realtor. But please tell the readers exactly why having a Realtor can greatly increase your chances of succeeding in a seller’s market?

A: (Lara Gordon) I’m glad you asked this question, Rich, because some people think that they will do better if they go directly to the list agent, but given the nature of the market right now, it just doesn’t make sense to try to go it alone.

A: (Cavanaugh). When my borrower works with a Realtor, it always makes the transaction run smoothly. I operate under a “team” concept with the agents, so I’m used to constant contact with both the buyer and listing agent to ensure we get access for the appraisal and all the documentation in place for the loan commitment and closing. When there’s a team of professionals involved in a transaction, it’s a win-win for everyone.

A: (Vetstein) A low inventory/seller’s market is precisely why you want a Realtor who knows the market inside out and can be your salesperson/spokesperson on your side. In a market where perception is everything, I think it’s fair to say that a listing agent/seller will take you more seriously if you are working with a top notch Realtor, rather than sauntering solo into an open house in your Bean duck boots. Not to mention that the buyer does not typically pay an agent commission in Massachusetts. Also, selfishly, working with a client with a Realtor is less stressful for the attorney.

Q: Lara and Brian, any final words of wisdom as we head full bore into the busy spring market?

A: (Lara Gordon) I guess I’d just like to acknowledge that this is a tough market for buyers, and I totally understand the stress and frustration many people are feeling. In an ideal world, you’d find a great house, take some time to think things over, maybe visit a few times, then make a fair offer in a non-competitive situation, and you’d have a new home. But buyers need to accept the reality of the market we’re in: we’ve got low inventory and high demand, and you won’t necessarily get the first house you bid on. Maybe not even the second or third. But if you are qualified financially, have realistic expectations, are patient and persistent, and know how to play the game, you will ultimately find a home.

A: (Cavanaugh). I would urge would-be buyers to talk to a mortgage banker as early as possible in the process. We still have near all time mortgage interest rates. Affordability may never be as good as now, so hang in there in terms of bidding wars and a seller’s market. RMS Mortgage is well known brand and people either know me by reputation or have worked with me. So you have some instant credibility with the listing agent who can vouch for a smooth and successful transaction, and that’s very important in this seller’s market.

Thank you to Brian Cavanaugh and Lara Gordon for a great round-table discussion! Lara can be reached at lara.gordon@nemoves.com or 617-245-3939. Lara blogs at Cambridegville. Brian can be reached at brian.cavanaugh@rmsmortgage.com and 617-771-5021. Brian blogs at Smarterborrowing.com.

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mortgage-interest-deductionBoon for Massachusetts Homeowners

More good news for Massachusetts homeowners coming out of Congress’ late night passing of the Fiscal Cliff Bill. The mortgage interest tax deduction — which was reportedly on the Congressional chopping block — was untouched by Congress, leaving it in place. This is huge for the middle class, and especially for house-poor Massachusetts homeowners who tend to have larger mortgages than the rest of the country.

Congress also extended the tax deduction for private mortgage insurance (PMI) payments through December 31, 2013. Homeowners who were not able to put 20% down must typically pay for private mortgage insurance which protects lenders in case of a borrower default. PMI payments remain tax deductible for 2013 under the Fiscal Cliff bill, providing another tax break for Massachusetts homeowners.

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100316_photo_vetstein (2)Richard D. Vetstein, Esq. is a Massachusetts real estate attorney who writes frequently about new legislation concerning the real estate industry. He can be reached at info@vetsteinlawgroup.com.

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Massachusetts-Short-SalesIt’s a Done Deal: Tax Forgiveness for Short Sales, Loan Modifications Remains In Effect Through End of 2013

Well, that didn’t take very long. Within 24 hours of the Senate’s late-night New Year’s Eve passing of the “Fiscal Cliff” bill, House Republicans caved, and passed the Senate version of the Fiscal Cliff bill, which extends the Mortgage Debt Relief Act of 2007 through the balance of 2013.

As originally reported by the National Association of Realtors, short sale agents and sellers should breath a sigh of relief due to the extension. This will extend mortgage debt forgiveness relief for home owners or sellers who have a portion of their mortgage debt forgiven by their lender, typically in a short sale, loan modification or deed in lieu transaction. Without the extension, any debt forgiven would have been taxable. For distressed households this would have added insult to injury and resulted in a large tax bill.

Also, Congress retained the mortgage-interest tax deduction and the PMI tax deduction. Overall, a very good result for the real estate industry!

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RDV-profile-picture-larger-150x150.jpgRichard D. Vetstein, Esq. is a Massachusetts real estate attorney who writes frequently about new legislation concerning the real estate industry. He can be reached at info@vetsteinlawgroup.com.

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Ice slip drink

Blizzard Warning Issued For 2/7/13

This post will provide you with frequently asked questions concerning Massachusetts snow and ice removal law.

I am a homeowner and rental property owner. Am I legally required to clear snow and ice after a storm?

The law now in Massachusetts is that all Massachusetts property owners and landlords are legally responsible for the removal of snow and ice from their property. In 2010, the Massachusetts Supreme Judicial Court overruled 125 years of legal precedent which protected property owners from “natural accumulations of ice and snow,” and announced this new rule. My prior post on the case can be read here. The rule applies across the board, to homeowners, landlords, commercial business owners, restaurants, everyone.

I am a landlord. How long do I have to shovel snow and ice on my rental property?

There is no clear cut answer to this question, and juries and courts will ultimately decide what is reasonable. The City of Boston’s policy is to give businesses 3 hours to clean snow, and 6 hours to residents. My advice is to shovel and treat snow and ice early and often. Even a thin coating of black ice can cause someone to slip and fall and seriously hurt themselves. (Admit it if you’ve dumped on your rear end like I have!). If you are an out-of-town landlord, you must hire someone to shovel your snow.

My lease states that the tenant is responsible for snow shoveling. Will that protect me from liability?

Probably not. A person who is injured due to untreated snow or ice will likely sue both the property owner and the tenant. The property owner must ultimately ensure that the property is safe for visitors. The landlord may bring a claim for contribution/indemnification against the tenant.

L_ice_meltI live in Boston, and I heard I have to shovel the public sidewalk in front of my house after a storm. Is that true?

Yes. On top of their added responsibilities, property owners in several Massachusetts communities, including Boston, Cambridge, Newton, Lynn, and Worcester, are required by local ordinances to clear municipal sidewalks in front of their residences or businesses. The City of Boston mandates clean sidewalks within 6 hours of a storm; Worcester is 12 hours.

Will my homeowner’s or CGL insurance policy cover any injuries from slip and fall on snow/ice?

Yes, usually. The standard Massachusetts homeowners insurance policy and commercial general liability insurance policy (CGL) will have liability coverage for slip and falls on property. Make sure you have ample liability coverage of at least $500,000 to 1 Million. (You can never have enough insurance!). As with any insurance question, it’s best to contact your personal insurance agent.

If you have additional questions, please ask them in the comment forms below!

Resources: City of Cambridge Snow Removal Policy, City of Boston Know Snow Fact Page

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RDV-profile-picture-larger-150x150.jpgRichard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney who advises property owners and landlords as to liability issues. Please contact him at 508-620-5352 or at info@vetsteinlawgroup.com.

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2011-20121I always look forward to recapping the year that was, and bringing out the crystal ball to predict the year ahead. This year, like years prior, was an active year for Massachusetts real estate law, with several important court rulings, legislative developments, and emerging legal trends. The year 2013 is expected to be just as busy.

Eaton v. Fannie Mae and Fannie Mae v. Hendricks Foreclosure Rulings

Another year, another pair of huge foreclosure rulings by the Massachusetts Supreme Judicial Court. On June 22, 2012, in Eaton v. Federal Nat’l Mortgage Ass’n, the SJC held that lenders must establish they hold both the promissory note and the mortgage in order to lawfully foreclose. This posed major problem for the vast majority of conventional mortgages which lenders securitized and sold off on the secondary mortgage market, thereby splitting the note and mortgage among various securitized trusts and mortgage servicers. Responding to pleas from the real estate bar, the SJC declined to apply its ruling retroactively, thereby averting the Apocalyptic scenario where thousands of foreclosure titles would have been called into question. My prior post on the Eaton ruling can be read here.

The FNMA v. Hendricks case had the potential to change Massachusetts foreclosure practice, but the SJC rejected the challenge. The court upheld the validity of the long-standing Massachusetts statutory form foreclosure affidavit which provided that the foreclosing lender has complied with the foreclosure laws,rejecting the borrower’s claim that the affidavit was essentially robo-signed.

New Medical Marijuana Law Has Landlords, Municipalities Smoking Mad

Burned up Massachusetts landlords and anti-pot local pols are still fuming with concern over the state’s newly passed but hazy medicinal marijuana law. The law — rolling out Jan. 1 — mandates the opening of at least 35 medicinal marijuana dispensaries, and grants users the right to grow a two-month supply of marijuana at home if they cannot get to a dispensary because they are too sick or too broke. The new law also potentially opens landlords up to federal prosecution for violating the federal controlled substances laws. Many towns and cities are contemplating banning dispensaries or passing zoning by-laws regulating their locations. My prior post on the new marijuana law can be read here.

539wApartment Rental Occupancy Limits

In 2013, the SJC will consider the Worcester College Hill case which will significantly impact landlords renting apartments to students and in other multi-family situations. The question is whether renting to 4 or more unrelated persons in one apartment unit requires a special “lodging house” license which would, in most cases, make it cost-prohibitive to rent to more than 3 unrelated persons. (Lodging houses require a built-in fire sprinkler system, for example). The SJC will hear oral arguments in the case on January 7, 2013.

Foreclosure Prevention Act Passed

On August 3, 2012, Governor Deval Patrick signed the Foreclosure Prevention Act. The new law requires that lenders offer loan modifications on certain mortgage loans before foreclosing. Unfortunately, the law did not fix the problem with existing title defects resulting from the U.S. Bank v. Ibanez case in 2010. (Sen. Moore’s office plans to re-introduce Senate Bill 830 in 2013). My prior post on the new law can be read here.

SJC To Consider Realtor’s Liability for Erroneous MLS Info

Sometime in 2013, the SJC will issue a very important opinion in the controversial DeWolfe v. Hingham Centre Ltd. disclosure case where a Realtor was held liable for failing to verify the zoning of a listing on the Multiple Listing Service. The Court will also consider whether the exculpatory clause found in the Greater Boston Real Estate Board’s standard form purchase and sale agreement legally prohibits a buyer’s misrepresentation claim against the real estate agent. The Massachusetts Association of Realtors and the Greater Boston Real Estate Board have filed friend of the court briefs urging the SJC to limit Realtors’ disclosure obligations in the case. My prior post on the case can be read here.

Good Faith Estimate, TIL, and HUD-1 Settlement Statement To Change Dramatically

In the second major overhaul of closing disclosures in three years, the Consumer Financial Protection Bureau will be rolling out in 2013 a new “Lending Estimate” and “Closing Estimate” which will replace the current Good Faith Estimate, Truth in Lending Disclosure, and HUD-1 Settlement Statement. The changes are part of the Dodd-Frank Act, and has the lending and title insurance industries scrambling to figure out who should be ultimately responsible for the accuracy of closing fees and other logistics in delivering these new disclosures. My prior posts on the topic can be read here.

mw_1011_FISCAL_CLIFF_620x350Fiscal Cliff Anxiety Syndrome

The Year In Review would not be complete without mention of the dreaded Fiscal Cliff. As of this writing, President Obama and the House (which even rejected its own Speaker Boehner’s last proposal) have been unable to work out a deal to resolve the more than $500 billion in tax increases and across-the-board spending cuts scheduled to take effect after Jan. 1, 2013. If there is no deal, and the country goes over the fiscal cliff, the consensus is that it will have quite a negative effect on the economy and the real estate market in particular.

Upcoming Event! On January 8, 2013, we are sponsoring a breakfast seminar with veteran real estate journalist Scott Van Voorhis, who will offer his predictions on 2013. Please email me to sign up. The Facebook Event invitation is here. The venue is Avita in Needham, 880 Greendale Ave., Needham, MA.

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Richard D. Vetstein is an experienced Massachusetts real estate attorney who hopes the White House and Congress can get their acts together and pass a compromise bill to avoid the Fiscal Cliff.

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Concern Over 60 Day Supply Provision & Federal Ban On Pot

Burned up Massachusetts landlords are fuming with concern over the state’s newly passed but hazy medicinal marijuana law. The law — rolling out Jan. 1 — grants medical marijuana users the right to grow a two-month supply of weed at home if they cannot get to a marijuana dispensary because they are too sick or too broke. The new law also potentially opens landlords up to federal prosecution for violating the federal controlled substances laws.

Skip Schloming, executive director of the state’s Small Property Owners Association, expressed deep concern about the 60-day supply provision:

“You could have as many as 24 plants that are 6 feet tall,” Schloming told the Herald. “And that could cause all sorts of property damage, from water damage, to mold and humidity, to wiring issues that could cause a fire. … This has the potential to be a disaster.”

The SPOA called for a 6 month delay in implementing the law.

I hate to be a “buzz kill” for medical marijuana users, but I believe the landlords have a legitimate gripe. In the landlord-tenant context, landlords own the property and remain primarily responsible for what goes on in their apartment buildings. I’m no weed expert, but imagine a small studio apartment loaded with a veritable jungle of pot plants — a prospect which would frighten any residential landlord for a number of reasons.

First, a medical marijuana grower could be targeted for burglarization. If they are truly sick and broke enough to qualify as home growers, then they would be equally vulnerable to pot bandits stealing their stash.

Second, maintaining marijuana cultivation requires specialized equipment not necessarily compatible with close-knit apartment living. I did some research, and found this website dedicated to hydroponic growing equipment. Growing marijuana plants is fairly sophisticated. Growers need to monitor pH and moisture levels, carbon dioxide outputs and germination of seeds. Failure of this equipment could conceivably cause mold, mildew and other damage to interior units.

Bay State landlords are also concerned about running afoul of federal drug laws as marijuana remains a federally prohibited controlled substance. Landlords are begging Beacon Hill lawmakers to give them the right to refuse to rent to tenants who grow pot for medical use over fears their property could be seized. As reported in the Boston Herald, commercial and residential landlords are right to worry, drug forfeiture attorneys say, because landlords can be charged as conspirators if their tenants are targeted by the feds.

No matter landlords’ concerns, medical marijuana is here to stay in Massachusetts. It will be up to the state Department of Public Health — the same agency rocked by the highly publicized state crime lab fiasco — to enact sensible rules and regulations governing medical marijuana. Let’s hope that the DPH considers the practicalities and logistics for marijuana growing in tight-knit apartment buildings. Strict rules on home growing eligibility are a must. Same for the approval of safe, tested growing equipment. Immunizing landlords from liability for medical marijuana growing or use by tenants would be another good idea.

We will see how it all plays out on Beacon Hill…

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Richard D. Vetstein, Esq. is a Massachusetts real estate attorney who handles landlord-tenant matters and evictions throughout the state. He can be reached at info@vetsteinlawgroup.com.

 

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