Massachusetts Real Estate Law

Why The Big Stink? Restroom Access Legislation Would Give Relief To Bowel Disease Sufferers

by Rich Vetstein on June 16, 2012

in Massachusetts Real Estate Law, Premises Liability, Public Accommodation

Update (8/3/12): Restroom Access Bill Signed Into Law

Retailers Regrettably Opposed to Law For Restroom Access To Crohn’s, Colitis Sufferers

I heard about this bill on the radio yesterday, and at first I was caught up in the bathroom-humor word play by the DJ. But when I did some more research on Crohn’s Disease and asked my Facebook friends about it, this became serious, as it should.

Millions of Americans (including just retired Pats lineman Matt Light: read great ESPN piece) suffer from debilitating Crohn’s disease, ulcerative colitis and other inflammatory bowel diseases. Victims suffer from frequent and sudden bowel movements, diarrhea and excessive urination. For these folks, a walk around Boston can turn literally soiled when shopkeepers close the door on restroom access. This is an all too common reaction by insensitive shopkeepers, and State Rep. Louis Kafka wants to change that.

Rep. Kafka (D-Stoughton) filed the “Restroom Access” bill, which the House initially approved this week, on behalf of a Sharon girl with an intestinal disorder who found herself in uncomfortable situations on shopping trips with her mom. “When the problem arises, they need to get to a bathroom quickly and, in some cases, there are no public restrooms,” he said. ((Note: this bill is completely different from the controversial “Bathroom Bill” giving transgendered persons restroom access.))

The new legislation, if passed, will require Massachusetts retailers and restaurants to open their private bathrooms to sufferers of inflammatory bowel diseases — and fine them $100 if they don’t. The law would apply only to people with Crohn’s disease, ulcerative colitis or any other medical condition requiring immediate access to a bathroom, as well as those who wear ostomy bags.

Retailers Opposed, But Why The Big Stink?

The Restroom Bill is unfortunately causing a major stink with retailers. “Why single out only retailers?” Retailers Association of Massachusetts President Jon Hurst told the Boston Herald, “Why not banks, why not office buildings, why not government buildings? I walk into the State House and see a lot of locked bathrooms.” Donna DePrisco, vice president of Boston’s DePrisco Diamond Jewelers, said legislative action just isn’t necessary.

The bill has been tweaked to address retailers’ concerns. It applies only to stores with at least two people working, so cash registers aren’t left unmanned; it absolves retailers from liability; and the restrooms must be in accessible areas that don’t pose health or safety risks to customers.

Well-known Condominium Attorney Stephen M. Marcus, who suffers himself from Crohn’s Disease and created the charitable foundation, IntestinalFortitude.com, supports the bill and says that

“Access to restrooms issue is a serious one for the 1.4 million Americans with Crohn’s and colitis, mainly teenagers. I’m sure retailers will adjust to this law in the same way condominium and apartment owners adjusted to the rights of persons with disabilities to make reasonable modifications to their property for persons with disabilities.”

Support the Restroom Access Bill!

My personal opinion is that I strongly support this bill. I think retailers’ concerns are way overblown.  Retailers are worried about lawsuits, but the bill provides immunity from liability for slip & falls and injuries. More importantly, allowing restroom access for people who medically need it is basic human decency and common courtesy.

If retailers were really savvy on public relations, they would turn this into a positive by putting a sign or sticker with “Restroom Open” with the familiar purple Crohn’s Disease ribbon. How’s that for a win-win!

For more information about Crohn’s and Colitis Disease, check out www.ccfa.org. To support the Restroom Access Bill, please email or write to Rep. Louis Kafka and reference House Bill 2366.

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Richard D. Vetstein, Esq. is a Massachusetts real estate and land use attorney. Mr. Vetstein frequently advises Massachusetts property owners concerning their legal obligations under various public accommodations laws.

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Spite Fences Make For Bad Neighbors: Massachusetts Fence Law

by Rich Vetstein on June 12, 2012

in Fences, Massachusetts Real Estate Law, Real Estate Litigation, Safety, Trespass

The old Robert Frost poem Mending Wall goes “Good fences make good neighbors.” But a neighbor can quickly turn from good to bad when a they maliciously construct a “spite fence” on the property line. And that includes Sarah Palin who installed this 14 feet monstrous fence at her Wasilla, Alaska home.

What Is An Illegal Spite Fence?

Spite fences are those which neighbors put up extremely close to the other neighbor’s property for the purpose of annoying or inconveniencing the neighbor, and not for any legitimate other reason. In certain circumstances in Massachusetts, courts can rule that certain types of fences are illegal “spite fences,” and order that they be taken down, decreased in height or award damages to the complaining neighbor.

Under the Massachusetts Spite Fence Law (Gen. Laws ch. 49, § 21) ((Interestingly, Massachusetts was one of the first states to enact a spite fence law in 1887)) a fence is an illegal “spite fence” if:

A fence or other structure in the nature of a fence which unnecessarily exceeds six feet in height and is maliciously erected or maintained for the purpose of annoying the owners or occupants of adjoining property….

Whether a fence is an illegal spite fence depends on the circumstances. Usually spite fences are erected where neighbors have been fighting or in a legal dispute of some kind, and the fence is installed as a form of revenge or pay-back. In the vast majority of towns and cities, fences are allowed to be up to 6 feet tall. If the fence in question is over 6 feet tall, and there is evidence that it was installed maliciously, it may be an illegal spite fence.

In a recent dispute on Concord Street in Wilmington (see photo right), a neighbor has installed a very ugly make-shift plywood spite fence with a blue tarp attached. This precipitated a proposal to pass a new fence by-law in Wilmington. I’m not sure of the circumstances surrounding this particular fence, but it is certainly borders on a classic spite fence. In another reported case, the Land Court ordered a neighbor to take down a makeshift fence with spray painted signs and no trespass warnings.

Most folks who erect spite fences will claim the fence is for privacy, but if the home faces an entirely different direction, you can debunk that as a cover for maliciousness. Neighbors may also try to get around the Spite Fence Law by installing a row of trees over 6 feet tall behind the fence. These, too, may be considered illegal.

What Can I Do If My Neighbor Puts Up A Spite Fence?

Under the Spite Fence Law cited above, you can sue your neighbor and ask the court to take down the fence and also seek damages. Under this law and upon a showing of “irreparable harm” the court has the power to impose an injunction ordering that the fence be taken down or reduced to 6 feet tall. Alternatively, the court can award damages.

The difficulty with these cases is that you need to prove you neighbor acted “maliciously” in installing the fence. You will need to marshal evidence to prove that, and that’s where an experienced Massachusetts real estate litigation attorney would add tremendous value. These cases are complex and judges will often require evidentiary hearings before imposing an order taking down a fence. It’s not a “do it yourself” type of situation!

If you are struggling with a boundary line issue or a potential “spite fence,” don’t hesitate to contact me at [email protected]. I have successfully litigated quite a lot of these cases.

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Richard D. Vetstein, Esq. is an experienced Massachusetts real estate litigation attorney. Mr. Vetstein frequently represents Massachusetts residents in contentious boundary line, fence, and adverse possession cases.

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Get Ya Mitts Off My Dish, Mistah Mayah! Boston Mayor Cracks Down On Unsightly Satellite Dishes

by Rich Vetstein on June 2, 2012

in Condominium Law, Landlord Tenant Law, Massachusetts Real Estate Law, Permitting/Zoning, Zoning

Credit: Boston Globe

Mayor Menino Targets Eyesore Satellite Dishes

Consistent with his reputation as the “urban mechanic,” Mayor Thomas M. Menino, along with the City Council, want to pass a new ordinance to clean satellite dish clutter on residential properties in Boston. As reported by the Boston Globe, the proposal would require the removal of all obsolete satellite dishes and ban new installations from facades and other walls facing the street, unless an installer can prove there is no other place to get a signal. Dishes would have to be placed on roofs, in the rear, or on the sides of buildings. East Boston Councilor Salvatore LaMattina, who has spearheaded the effort, says that this ordinance will help “save the character of our neighborhoods.’’

Ordinance May Run Afoul of FCC Rules

The proposed ordinance, however, may face legal challenge by the satellite dish industry and affected satellite subscribers. The Federal Communications Commission (FCC) has ruled that state or local laws are invalid if they unduly impair the right of a subscriber to receive satellite programming on a one meter dish installed on property within owner or renter’s exclusive use or control. For a person living in a multi-dwelling unit, an area such as a balcony, patio or garden not shared with other tenants would be considered property within the individual’s exclusive control. Under the FCC rule, the only two situations where restrictions are permissible is if (1) the restriction is necessary for a clearly defined, legitimate safety objective; or (2) it is necessary to preserve a historic building.

A Solution: Building Wide Equipment

Granted, the satellite dishes covering buildings in many neighborhoods isn’t the nicest thing to see. See Cambridge Street in Allston, for example. However, since the proposed ordinance is concerned predominantly with aesthetics and not any legitimate safety concerns, it may not survive judicial review.

The FCC rules do, however, permit and encourage building-wide community satellite facilities so all residents can get a strong signal without cluttering up the facade of a building with a myriad of dishes. Perhaps the Mayor and the City Council can work with the satellite providers on getting funding for this equipment rather than waste taxpayer money defending a questionable ordinance.

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Richard D. Vetstein, Esq. is a Massachusetts real estate and zoning attorney. Mr. Vetstein frequently represents Boston residents and companies in zoning matters before City of Boston zoning and licensing boards.

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Claim Denied! Hidden Water Seepage And Dry Rot Not Covered Under Massachusetts Homeowner’s Insurance Policy

by Rich Vetstein on May 29, 2012

in Insurance, Massachusetts Real Estate Law, Safety

Dry Rot Example

Water Damage Originating From Exterior Of Home = Claim Denied

In one of the more important homeowner’s insurance cases decided in recent memory, the Massachusetts Supreme Judicial Court (SJC) considered what is covered under a standard Massachusetts homeowner’s insurance policy when rain, snow melt and runoff create water damage and dry rot to the inside of a home. The case is Boazova v. Safety Insurance Co., SJC-10908 (May 29, 2012).

The Court ruled there was no coverage under the homeowner’s insurance policy where significant hidden water seepage through foundation cracks caused a kitchen floor to turn into a “spongy and mushy” mess. Under the exclusion for damage caused by “surface water,” the court held, there is no coverage for loss covered by rain, flood waters or runoff originating from outside the home, rather than inside the home, like a burst pipe. This interpretation of the Mass. standard homeowner’s policy is not what most insured expect from their insurance coverage, but unfortunately it puts to rest what most homeowners who have suffered a water damage claim know already:  a water damage claim will likely be denied if the source of water is from the natural accumulation of rain, snow melt or ice seeping into the ground, through a roof, or through the foundation.

Severe Wood Rot Discovered

While undertaking a kitchen renovation project, Ms. Boazova, an Arlington homeowner, discovered severe deterioration of the wooden sill plate that rested on top of the concrete foundation at the base of the home’s rear wall, as well as of the adjoining floor joists and wall studs. The kitchen floor and sub-floor was moist, spongy and falling apart. The homeowner’s expert engineer opined that because the concrete patio was poured directly against the house, water and moisture migrated down from the sill plate, below grade to the foundation, causing the water damage. There was no dispute that the origin of the water infiltration and seepage was from outside elements such as rain, sleet and snow melt. The insurance company denied coverage based on the policy’s exclusion for damage caused by “surface water,” and the homeowner sued.

No Coverage For Damage Caused By “Surface Water”

This case is the first in recent memory where the SJC has considered the interplay between the new Limited Fungi, Wet or Dry Rot, or Bacteria Coverage indorsement, the “hidden seepage” provision and the “anti-concurrent cause” exclusion for “surface water damage” in the standard Massachusetts homeowner’s insurance policy. Making sense of the Massachusetts standard homeowner’s policy coverages and exclusions is a bit like reading Egyptian hieroglyphics. Even the SJC justices had some difficulty, albeit they ultimately sided with the insurance company:

“Although the language of the policy and the indorsement is challenging to even the most careful reader because of the way it connects various coverages, exclusions and exceptions, we conclude that Boazova’s claimed loss — the deterioration and rotting of the wooden sill plat, adjoining floor joists, and wall studs — is excluded from coverage by unambiguous provisions in the policy.”

Take-Away: Exterior Surface Water Cause = Claim Denied

The key point is the Court’s conclusion that the surface water exclusion carried the day. Describing “surface water” as “waters from rain, melting snow, springs or seepage, or floods that lie or flow on the surface of the earth and naturally spread over the ground but to not form a part of a natural watercourse or lake,” the judges ruled that there was no coverage because the property damage was a direct result of rain and snow melt migrating down the foundation into the bellow grade kitchen floor. This covers just about every conceivable flooding scenario.

As far as what homeowner’s can take-away from this decision, well unfortunately they should keep an emergency capital reserve fund ready because any claims made for water damage arising out of exterior conditions will likely be denied. The only type of “flooding” claims which will be covered would be burst pipes and possibly overrun interior sump pumps or perimeter drain systems which cause flooding — and even those will likely involve a battle with the insurance company.

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Richard D. Vetstein, Esq. is an experienced Massachusetts real estate and homeowner’s insurance coverage attorney. For more information, please contact him at 508-620-5352 or [email protected].

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Massachusetts Legislature Set To Make Loan Modifications Part Of Foreclosure Process

by Rich Vetstein on May 24, 2012

in Foreclosure, Massachusetts Real Estate Law, Mortgage Crisis

More Help On The Way For Struggling Homeowners

Additional foreclosure relief is one step closer to becoming law as the Massachusetts House of Representatives recently passed House Bill 4087, “An Act to Prevent Unlawful and Unnecessary Foreclosures.” The bill, sponsored by AG Martha Coakley, mandates that banks and foreclosing lenders enter into mandatory loan modification discussions with borrowers before they can start foreclosure proceedings on residential homeowners.

Lenders May Have To Consider Loan Modifications

The key provision of the bill is the requirement that lenders give borrowers a fair shot at a loan modification. Among the factors that banks must consider before foreclosing is the “borrower’s ability to pay,” a provision that will likely be addressed in future drafts of the legislation, or through regulations developed by the Massachusetts Division of Banks. Under the proposed law, if a modified loan is worth more than the amount the bank expects to recover through foreclosure, the lender must offer that modified loan to the borrower. If it doesn’t, then the lender can continue the foreclosure process.

This bill builds on previous legislation, “An Act Relative to Mortgage Foreclosures,” signed into law in August 2010, which made sweeping changes to Massachusetts foreclosure law. That Act extended the 90-day right-to -cure on foreclosures to 150 days, created new requirements for lenders offering reverse mortgages, established mortgage fraud as a crime, and provided additional protections for tenants living in foreclosed properties.

The bill now moves to the Senate, where it is expected that it will be finalized by the completion of the formal legislative session on July 31, 2012. As always, we’ll keep tabs on these developments.

 

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Why Massachusetts Landlord-Tenant Legal Reform Is Needed Now

by Rich Vetstein on May 10, 2012

in Landlord Tenant Law, Massachusetts Real Estate Law, Real Estate Litigation, Rental Housing

Why Would Anyone Want To Be A Landlord In Massachusetts?

I just settled a very troubling landlord-tenant case which demonstrates everything which is wrong and unfair with Massachusetts landlord-tenant and eviction law from the landlord perspective. This horror story is played out every Thursday in the summary process sessions of District and Housing Courts across the state. The laws which favor tenants so dramatically were passed decades ago in the 1970’s when tenements and slumlords still existed. Those days are long gone, but the outdated laws remain on the books, giving Massachusetts the well-deserved reputation of being one of the most unfriendly places to own investment property. The time has come to restore some semblance of legal balance between small property owners and tenants.

A Familiar Horror Story

The landlord is a 70 year old woman who rented out her family’s old farm house. The tenants lived there under a month-to-month tenancy at will agreement for 6 years without incident. The owner wanted to move back into the home for financial reasons, so she informed the tenants who immediately started threatening to call the board of health. Mind you, the owner had the right to ask the tenants to leave for any reason at all under a 30 day tenancy at will. The owner was forced to serve a 30 day notice to quit which resulted in the tenants’ immediate report to the local board of health and withholding of rent. The owners were cited for several minor code violations which they addressed promptly, but every time the health inspector came out, the tenant “reported” new alleged problems (likely caused intentionally by the tenants), and often did not allow the inspector to gain access. When the owner started an eviction action, and the tenants predictably shot back with a slew of counterclaims. Because the law is so favorable to the tenants, as I will discuss below, the owner was forced to pay the tenants money to get them to move out. Even though the owner felt she addressed all the issues promptly and competently, the existence of any code violation, however minor, rendered her case “dead on arrival” in Housing Court. To get rid of the headaches and potential liability, the landlord had to pay ransom money and waive the unpaid rent.

Unfortunately, this story is all too common in Massachusetts eviction courts, and something has to be done.

A Legal Minefield For Landlords

For landlords, navigating Massachusetts landlord-tenant law is like walking barefoot through a IED-filled field in Afghanistan. At some point, you’ll likely blow off a leg. Allow me to outline just a sampling of these laws and the penalties for landlords’ non-compliance:

  • Breach of implied warranty of habitability:  The first thing a savvy tenant will do after receiving an eviction notice is call the board of health to get the owner cited for code violations. Any violation, however minor, effectively enables the tenant to live rent-free during the case by withholding rent, and the owner will be compelled to make the necessary repairs while the eviction is pending. There have been many instances where tenants have intentionally inflicted property damage to claim code violations.  Other penalties:  reduction or elimination of rent owed; tenant cannot be evicted; triple damages; payment of tenant’s attorneys’ fees.
  • Breach of quiet enjoyment: This is another tenant favorite claim. It used to be for when slumlords would shut off utilities to tenants, but that rarely happens anymore. I’ve seen this used when tenants are “inconvenienced” by landlords’ repeated attempts to access the premises to make repairs. Penalties:  tenant gets to stay in possession; up to 3 months’ rent or actual damages, whichever is more; payment of tenant attorneys’ fees.
  • Retaliation:  Even if the landlord can evict a tenant at will for any reason, the landlord cannot “retaliate” against them if they make any complaints about property conditions. This is why tenants will immediately start squawking about property issues when faced with eviction, because the retaliation law will protect them even though they are not entitled to lifetime occupancy.  Penalties:  tenant gets possession; up to 3 month’s rent in damages; payment of tenants’ attorneys’ fees.
  • Security deposit/last month’s rent violations: Oh, where do I start on this one. As I’ve written about extensively here, Massachusetts landlords need a Master’s degree in Accounting to comply with the Security Deposit law and all of its procedural traps. From giving a special receipt and statement of condition, to putting the money in a special separate account, to paying interest every year, even one minor slip up will subject the landlord to mandatory triple damages and payment of tenants’ attorneys’ fees. This can torpedo an eviction case from the get-go.
  • Consumer Protection/Chapter 93A:  If all these minefields weren’t bad enough, at the end of the day, tenants are allowed to claim that any of the above warrants an award of triple damages and attorneys’ fees under the Mass. Consumer Protection Act.

Time for Meaningful Legal Reform

As I mentioned earlier, the vast majority of the laws protecting tenants were passed in the 1970’s when rental housing was far more problematic than it is now in 2012. Due to political pressure from tenant activists and liberal groups, lawmakers have been reluctant to level the playing field. Unfortunately, these draconian laws disproportionately hurt the small property owners who own 80% of the rental stock in Massachusetts. Laws which make investing and managing rental property hurt the economy and result in higher rents. There are several bills pending at the State House which will provide landlords with more incentive to own rental property in Massachusetts. The most sensible proposal is the much-awaited rent escrow law.

A.      Rent Escrow

Massachusetts is one of the minority of states which does not have some form of rent escrow law. The need for one is absolutely critical because without it landlords incur large losses when the tenant’s defensive claims of “bad conditions” turn out to be minor, nonexistent or, worse yet, the result of intentionally inflicted damage to the property by the tenant in order to live rent-free.

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

B.      Security Deposit Reform

Presently, the security deposit law provides mandatory triple damages and payment of tenants’ attorneys’ fees for a violation however minor. The law should be reformed to provide a safe-harbor and discretionary penalties for when landlords make a good faith effort to comply but get caught up in the procedural mess, like for example if they put the deposit in a savings account instead of a special deposit account.

C.      Remove Automatic Possession For Tenants

Presently, the law is drafted so that if a tenant prevails on any number of claims for property conditions, etc., they most likely cannot be evicted. This is especially unfair in the tenancy at will context where the landlord does not need any reason to evict a tenant. The result is that tenants get free passes and occupancy for life as long as they can dig up a counterclaim or two. This needs to be changed.

What Property Owners Can Do: Lobby and Speak Out

The tenant community, backed by well-funded public interest legal services groups, have a strong lobby at the Legislature and love to portray these issues as a form of “class warfare.” In the end, however, everyone gets hurt, because if it’s more expensive to own rental property in Massachusetts, those costs will be passed on to tenants.

Property owners should support the lobbying efforts of the Massachusetts Rental Housing Association and their local chapter. The Small Property Owners Association has a good page on how to lobby your local elected officials. Here is a list of all pending rent escrow and landlord-tenant reform bills up at the State House. Senate Bill 779 is the major piece of legislation to bring up.

Visit your local legislator’s office during office hours and speak to them (or their aids) about your concerns on the issues. In many cases, they won’t know about the bills and you will have to educate them. Send letters and emails to your legislators identifying the bill numbers and explaining why you support or do not support these bills. Go to fund raisers for your Representatives and Senators. Let them know that you vote and that you want your vote to count!

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Richard D. Vetstein, Esq. is an experienced Massachusetts real estate and eviction attorney. For more information, please contact him at 508-620-5352 or [email protected].

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REBA Sues To Stop Illegal “Witness-Only” Residential Closings

by Rich Vetstein on May 2, 2012

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

Bar Assn. Lawsuit Targets Kentucky Based Settlement Service Company Employing Local Contract Attorneys

As first reported today by Massachusetts Lawyers Weekly, the bar association for Massachusetts real estate attorneys (REBA) has filed a lawsuit against National Loan Closers, Inc., a Kentucky closing services company, and a Holyoke attorney for allegedly conducting illegal “witness-only” real estate closings. REBA was behind last year’s landmark Supreme Judicial Court ruling in REBA v. National Real Estate Information Services, which held that Massachusetts attorneys are legally required to oversee all residential real estate closings in Massachusetts.

REBA’s suit against National Loan Closers is notable because NLC is alleged to have side-swiped the REBA v. NREIS court ruling by contracting with local attorneys to attend real estate closings. According to the suit, NLC’s model is for these contract attorneys to act similarly to the robo-signers who sign foreclosure documents, as they are simply there to witness and notarize documents and are contractually prohibited from giving legal advice to the parties at closing. Thus, this model runs afoul of the REBA ruling’s mandate that attorneys “substantially participate” in the closing process by reviewing the title and ensuring that title passes legally.

REBA argues, and I agree, that such closings put home buyers and mortgage lenders at risk, erode the public’s confidence in the state’s recording and registration system, and deprive the Massachusetts Interest on Lawyer Trust Accounts program — IOLTA — of thousands of dollars of revenue.

No home buyer wants to close on the single biggest purchase of their life with a contract attorney who knows nothing about the transaction and cannot answer the most basic of legal questions. In the standard model, a supervisory Massachusetts attorney will examine the title and certify under state law that the title is good, clear and marketable, and often that same attorney (or a junior associate with full familiarity with the file and title) will be the closing attorney.

The complaint filed in The Real Estate Bar Association for Massachusetts, Inc. v. National Loan Closers Inc., et al. can be found by clicking here.

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Court Considers Protections Of New Massachusetts Homestead Protection Act, And Questions Still Remain

by Rich Vetstein on May 1, 2012

in Homestead, Massachusetts Real Estate Law

First Reported Case Considering Scope Of New Massachusetts Homestead Law

Advice To Homeowners: Get Your Homestead Declaration Recorded ASAP

One of the benefits of the new Homestead Protection Act signed into law last year is that homeowners can use homestead protections against many more creditors. Under the old homestead law, debts which arose prior to the recording of a homestead declaration were not affected at all by the homestead protection. For example, if a homeowner recorded a homestead declaration on January 1, 2005, but owed a debt to a contractor which arose on December 31, 2004, the contractor could still pursue the full amount.

Under the new homestead law, however, a homeowner is protected from a pre-existing debt (except mortgages) unless a creditor files an attachment or lien prior to the recording of the homestead declaration or if the contractor obtains a court execution “based upon fraud, mistake, duress, undue influence or lack of capacity.” The new Homestead Act is simply much more favorable to homeowners because most creditors do not file liens fast enough and most consumer debts are not the product of fraud, mistake, duress, etc.

Bad Facts Make Bad Law

A recent Superior Court decision in the case of Tewhey v. Bodkins (embedded below) is one of the first reported decisions interpreting the scope of pre-existing debt protection under the new Homestead Act, and illustrates that some confusion remains as to what it does and doesn’t cover. Unfortunately, this case is a classic example of the saying that “bad facts make bad law.”

In Tewhey, the parties were attorney and his former client who obtained a default judgment against the attorney for professional malpractice in her divorce. (It appears that the attorney did not bother to defend the case at all). In 2010, the client recorded on the title to the attorney’s residence a court execution for just short of $50,000. However, 9 months earlier, the attorney’s wife, who owned the property jointly, recorded a homestead declaration.

Under the new Homestead Act, since the wife recorded the homestead before the client recorded the court execution, the client was seemingly out of luck. Well, not so fast said Superior Court Judge Edward P. Leibensperger. No doubt recognizing that the client would get the short end of the homestead stick, the judge ultimately ruled that the client’s claim fell under the exception of a claim based upon “fraud, mistake, duress, undue influence or lack of capacity,” and thus, the client could proceed against the attorney’s property.

In my opinion, the judge misread the statutory language because legal malpractice is a tort and is not covered under the exclusion. We will see what the Appeals Court says as the case is now on appeal.

Take-Aways

As for take-aways, the case illustrates two important things. First, homeowners should get their homestead declarations recorded ASAP, before creditors take legal action. For most consumer debt such as credit cards, this will give you the maximum $500,000 protection. Second and likewise, for creditors, you need to get liens filed on debtor’s property ASAP before they record homestead protection, otherwise you’ll likely get the short end of the homestead stick.

If you need a homestead declaration prepared and recorded, my office will do it for a nominal fee. Please contact us at [email protected].

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Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney. They can be reached by email at [email protected] or 508-620-5352.

Tewhey Decision

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Massachusetts High Court To Weigh In On Important Realtor MLS Disclosure Case

by Rich Vetstein on April 26, 2012

in Commercial Real Estate, Disclosures, Massachusetts Real Estate Law, Realtors, Zoning


Realtor Held Liable For Erroneous MLS Information

The Massachusetts Supreme Judicial Court has agreed to hear the case of DeWolfe v. Hingham Centre Ltd. which will consider two very important issues for the real estate community, especially agents. The first issue is the scope of a real estate agent’s duty to disclose and independently verify property information posted on the Multiple Listing Service (MLS). The second issue is 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 case was originally decided by the Appeals Court, and I wrote a full post about it here. The original opinion can be read here.

In summary, the real estate agent, relying on what turned out to be erroneous information supplied by his client, listed a Norwell property on Multiple Listing Service (MLS) and newspaper advertising as “zoned Business B.” 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. Despite the general disclaimer on the MLS system and in the purchase and sale agreement, the Appeals Court held that the Realtor could be held liable for misrepresentation and Chapter 93A violations due to providing this erroneous information.

This will be a very important case for the real estate brokerage industry, and we will be monitoring it. Oral arguments are expected to be held in late summer or early fall, with a final ruling coming a few months thereafter.

In the meantime, my advice remains the same:

  • Do not make any representations concerning zoning. Advise the buyer to go to the town/city planner or hire an attorney for a zoning opinion.
  • Never trust your client. 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. (The buyer or his attorney could have done so as well—this was a complete failure on all sides).
  • When it comes to zoning, which can be complex and variable, think twice before making blanket statements. Better to be 100% sure before going on record about whether certain uses are permissible. You can always get a zoning opinion from a local attorney.

*Hat tip to a new real estate blog on the scene, Disgruntled Neighbors by Attorney Andrew Goldstein, for bringing this to my attention.

~Rich

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Back-Up Offers & Bidding Wars: Should Agents Or Sellers Be Concerned With Legal Liability?

by Rich Vetstein on April 26, 2012

in Disclosures, Massachusetts Real Estate Law, Offer To Purchase, Real Estate Litigation, Real Estate Marketing, Realtors

Are There Liability Concerns For Accepting Back Up Offers?

My colleague Rona Fischman at the Boston.com Real Estate Now Blog had an intriguing question on the legalities surrounding accepting back-up offers. This question is especially timely with the rise of bidding wars in the Greater Boston real estate market. Rona asks:

I have been told that a back up offer cannot be presented to a seller because it is inducement to interfere with a contract in place (the accepted offer.) I have also been told that a back up offer must be presented, forthwith, like any other offer. Since I never list property, I don’t know which one is true. Can you give a legal and practical explanation for the blog?

Answer:  I do not believe that merely soliciting and presenting a back-up offer can give rise to a legal claim for interference with contractual relations as long as the seller does not break the existing contract with the buyer. Moreover, I believe that real estate agents have a legal and ethical obligation to present to their seller clients all offers made on the property, but it is the seller’s preference whether or not to solicit back up offers once he has already accepted an offer.

What Is a Back-Up Offer?

For those who do not know, a back-up offer is an offer made after the seller has already accepted and signed an offer to purchase with a buyer, in the hopes that the first offer will fall through and the seller will select the back-up offer. It is the seller’s decision whether to accept back-up offers at all. Back-up offers are common in bidding wars where there is frenzied competition for a well-priced property. Most buyers who submit a back-up offer will continue with their home search because the probability that their back-up offer is ultimately accepted is usually a long-shot.

Unlawful Interference with Contract?

Rona is worried that accepting back-up offers could expose an agent to liability for interfering with an existing contract. I don’t think she has much to worry about unless the seller tries to cancel the existing deal without legal right.

In the real estate context, the requirements to make out a valid claim for unlawful “interference with contractual relations” are the following:

  • There must be an accepted and signed offer to purchase between the buyer and seller which is sufficient to form an enforceable contract under Massachusetts law;
  • The competing buyer (making the back-up offer) must have knowledge of the contract;
  • The competing buyer must have intentionally induced or persuaded the seller not to perform its contractual obligations, i.e, not proceed with the transaction;
  • The interference was improper in motive or means; and
  • The plaintiff was legally harmed.

Under this legal definition, there is liability only where the seller unlawfully breaks the existing offer/contract with the first buyer. As a general matter, merely submitting a back-up offer (and not formally accepting it) will not support a legal claim because there has been no breach of the first contract.

A thornier question is what happens if the seller tries to wriggle his way out of the first offer in favor of a better offer? Those are the situations which often result in litigation and the filing of a lis pendens. I would advise any seller and their agent to consult an attorney before they try to break an offer or purchase and sale agreement with a buyer. On the other hand, if a buyer loses his financing and cannot proceed with the transaction, and therefore has defaulted on his contractual obligations, then it may be clear to accept a back up offer. It is always the prudent course to obtain a release and waiver from the first buyer before dealing with a back-up offer. I cannot stress this enough.

What Are Realtors’ Legal & Ethical Duties With Back-up Offers?

There are no specific legal rules surrounding back-up offers. The regulations governing real estate agents in Massachusetts provide that “All offers submitted to brokers or salespeople to purchase or rent real property that they have a right to sell or rent shall be conveyed forthwith to the owner of such real property.” If a listing agent is a Realtor©, they have an additional ethical obligation to “continue to submit to the seller all offers and counter-offers until closing … unless the seller has waived this obligation in writing.”

Back-up offers are on a slightly different footing than offers made while the property is still actively listed. I would say that if a prospective buyer makes an unsolicited back-up offer, that offer must be conveyed to the seller regardless of whether or not she has decided to accept back-up offers. The agent should not make the decision to decline an offer for the client. The seller may, of course, decide to not solicit back-up offers or to solicit them. Such a decision should be noted on the MLS. It’s always the client’s prerogative to solicit back-up offers. For agents, the safe practice is always to convey any offer which comes in, and to have the seller state in writing that she is refusing to accept back-up offers.

If you have any “war stories,” questions, or comments, please post them in the comment section below.

_______________________________________________________

Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney. They can be reached by email at [email protected] or 508-620-5352.

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Move It Or Lose It! Freddie Mac and Fannie Mae Tell Banks To Speed Up Short Sale Decisions

by Rich Vetstein on April 18, 2012

in Condominium Law, Foreclosure, Massachusetts Real Estate Law, Short Sales

Lenders Given 30 Days For Short Sale Decisions

Well, someone in government has been listening to the chorus of complaints about lenders taking too long to make short sale decisions. In a *rare* move of federal government housing competence, the Federal Housing Finance Agency has instructed Fannie Mae and Freddie Mac to impose new guidelines which should accelerate short sale decisions. The new rules require that short sale lenders make a decision on a short sale within 30 days of a complete application, and if more time is needed, they must give weekly status updates. This will make short sale agents, sellers and buyers much happier. The new requirements go into effect June 15.

However, how much of an impact this will have on national short sales remains to be seen. Freddie Mac has jurisdiction over a small percentage of short sales, mostly HAFA short sales as well as a limited number of traditional short sales, totaling about 45,000 last year. (Bank of America did over 150,000 short sales last year, by comparison). This is certainly a step in the right direction, and hopefully will lead to more regulatory pressure on the big banks to speed up short sales.

I asked expert short sale negotiator, Andrew Coppo of Greater Boston Short Sales, for some commentary on this news, and he has a more tempered reaction:

It is no secret that both lenders and loan servicers have made continued efforts during recent months to vastly improve their short sale approval time-frames. As someone who exclusively negotiates short sales, I think it is important to note that the new Freddie Mac regulations don’t include any penalties or sanctions for loan servicers or lenders who fail to comply. What’s more, the new rules appear to only require short sale lenders to “make a decision on a short sale within 30 days of a complete application, otherwise they need to send weekly updates.” Most lenders will simply comply with the new requirements by sending out a weekly letter stating that the file is incomplete and request more short sale documents from the homeowner (most lenders already do this). Lenders could also comply with the new rules by simply making an unreasonably high counter-offer. What most people fail to realize is that most lenders, such as Bank of America, Chase, Wells Fargo, and GMAC all utilize an automated short sale processing software, known as Equator, that enables them to approve a short sale in as little as 30 days. The majority of short sales that take more than 60 days to get approved do so because the person submitting the paperwork fails to submit a complete package or the lender “loses” a portion of the submitted paperwork. While the new guidelines are a step in the right direction, without any sanctions or penalties I don’t see them having much of an effect on the time in which the lenders and loan servicers process short sale requests. 

The text of the press release (which can be read in full here) is below:

In an effort to make the short sale process more transparent, Freddie Mac (OTC: FMCC) is updating its timelines and also requiring servicers to provide weekly updates when decisions take more than 30 days after the receipt of a complete application for a short sale under the Obama Administration’s Home Affordable Foreclosure Alternative (HAFA) initiative or Freddie Mac’s traditional requirements. All decisions must be made within 60-days.  Today’s announcement marks the newest part of the Servicing Alignment Initiative (SAI) Freddie Mac and Fannie Mae launched in 2011 at the direction of their regulator, the Federal Housing Finance Agency, to set consistent servicing and delinquency management requirements. Last year Freddie Mac completed 45,623 short sales, a 140 percent increase since the housing crisis began.

News Facts

  • Freddie Mac’s new short sale timelines require servicers to make a decision within 30 days of receiving either 1) an offer on a property  under Freddie Mac’s traditional short sale program or 2) a completed Borrower Response Package (BRP) requesting consideration for a short sale under HAFA or Freddie Mac’s traditional short sale program.  (BRPs are standardized assistance applications developed as part of the Servicing Alignment Initiative.)
  • If more than 30 days are needed, borrowers must receive weekly status updates and a decision no later than 60 days from the date the complete BRP is received.  This will help servicers who may need more time to obtain a broker price opinion or a private mortgage insurer’s approval on a BRP or property offer.
  • In the event a servicer makes a counteroffer, the borrower is expected to respond within five business days. The servicer must then respond within 10 business days of receiving the borrower’s response.
  • Freddie Mac will use the new timelines to evaluate servicer compliance with the SAI and its own servicing requirements.
  • Freddie Mac completed 45,623 short sales in 2011, a 140 percent increase since 2009.  Overall, Freddie Mac has also helped more than 615,000 distressed borrowers avoid foreclosure since the housing crisis began.

____________________________________________________

Richard Vetstein, Esq. is an experienced Massachusetts short sale attorney. For more information, please contact him at info@vetsteinlawgroup or 508-620-5352.

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Everything You Wanted To Know About Massachusetts Easements, But Were Afraid To Ask

by Rich Vetstein on April 18, 2012

in Easements, Massachusetts Property Values, Massachusetts Real Estate Law, Title Defects

Utility, Gas Pipeline, Access, Drainage & Prescriptive Easements, and More!

When you are considering purchasing a home in Massachusetts, the property may have the benefit or burden of an easement. Most easements and restrictions are quite “harmless” and standard, however, some can have a major impact on future expansion possibilities and the right to use portions of the property. In this post, I’m going to go through the most common types of easements and how they can affect the value and use of your property.

What Is An Easement?

In plain English, an easement is a right that another person or company has to use your property. They don’t own your property, but the easement gives them the legal right to use your property as specified in the easement instrument. The property that enjoys the benefit of the easement is sometimes referred to as the “dominant estate,” and the property over, under, or through which the easement runs is sometimes referred to as the “servient estate.” Easements are usually recorded in the registry of deeds, but sometimes they can arise from “implication” or “by necessity.” I’ll explain those later.

Utility Easements

The most common types of easements in Massachusetts are utility easements for such things as overhead and underground power lines, cable lines, gas lines, and water mains. These easements allow the utility companies to use portions of residential property to provide their respective utility services. Sometimes, the easements will show up on a plot plan or survey, and some will be found recorded in the title, usually when the lot was first laid out. The majority of these easements do not materially affect the use and expansion of your property, however, the one type of easement to take note of are high pressure gas line easements.  For obvious safety reasons, these easements usually carry with them strict restrictions on what can be built on or near them. Here is a good article on gas pipeline easements, albeit from Pennsylvania, but the law is generally the same here.

Driveway or Access Easements

Another common type of easements that are found in Massachusetts are access easements for driveways and the like. Properties with shared driveways will often have easements enabling such sharing– or they should! These easements should also provide for common maintenance and upkeep responsibilities and expense. Other types of access easements include walking and bike paths and beach access – very common down the Cape and on the Islands.

Drainage Easements

Another common type of easements are drainage easements which are typical for newer subdivisions. Drainage easements allow for one lot to drain its storm water onto another or into a detention pond.

Prescriptive Easements

If you have heard of adverse possession, then you know what a prescriptive easement is all about. An easement by prescription is an easement acquired through adverse possession – which is the hostile adverse use of someone else’s property for 20 or more continuous years. Prescriptive easements arise where people have acted as though an easement has existed but there is no instrument of easement recorded at the registry of deeds. For example, a prescriptive easement can arise if a neighbor’s family has used a walking path on the neighbor’s property for over 20 years. twenty years. I’ve written extensively on adverse possession in this post.

Easements by Implication and by Necessity

An easement by implication is found in the law when there is no recorded easement, but where the circumstances show an easement was intended to exist. It usually exists where there is common ownership of a lot, the seller conveys a portion of the land under current ownership, and both parties intended to create an easement at the time of conveyance. If someone claims an easement by implication which negatively affects one’s property, the owner’s title insurance policy, if any, will typically cover that situation. Easements by necessity occur when a property is sold in a land-locked configuration without any legal access. An easement is therefore created “by necessity” to prevent the land-locking. An adverse easement by necessity would also be covered by an owner’s title insurance policy.

________________________________________________________

Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney. They can be reached by email at [email protected] or 508-620-5352.

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Driveways, Drainage, and Dirt Paths, Oh My! Massachusetts Easements Explained

by Rich Vetstein on April 17, 2012

in Easements, Massachusetts Property Values, Massachusetts Real Estate Law, Permitting/Zoning, Premises Liability, Safety, Title Defects, Title Insurance

When you are considering purchasing a home in Massachusetts, the property may have the benefit or burden of an easement. Most easements and restrictions are quite “harmless” and standard, however, some can have a major impact on future expansion possibilities and the right to use portions of the property. In this post, I’m going to go through the most common types of easements and how they can affect property.

What Is An Easement?

In plain English, an easement is a right that another person or company has to use your property. They don’t own your property, but the easement gives them the legal right to use your property as specified in the easement instrument. The property that enjoys the benefit of the easement is sometimes referred to as the “dominant estate,” and the property over, under, or through which the easement runs is sometimes referred to as the “servient estate.” Easements are usually recorded in the registry of deeds, but sometimes they can arise from “implication” or “by necessity.” I’ll explain those later.

Utility Easements

The most common types of easements in Massachusetts are utility easements for such things as overhead and underground power lines, cable lines, gas lines, and water mains. These easements allow the utility companies to use portions of residential property to provide their respective utility services. Sometimes, the easements will show up on a plot plan or survey, and some will be found recorded in the title, usually when the lot was first laid out. The majority of these easements do not materially affect the use and expansion of your property, however, the one type of easement to take note of are high pressure gas line easements.  For obvious safety reasons, these easements usually carry with them strict restrictions on what can be built on or near them.

Driveway or Access Easements

Another common type of easements that are found in Massachusetts are access easements for driveways and the like. Properties with shared driveways will often have easements enabling such sharing– or they should! These easements should also provide for common maintenance and upkeep responsibilities and expense. Other types of access easements include walking and bike paths and beach access – very common down the Cape and on the Islands.

Drainage Easements

Another common type of easements are drainage easements which are typical for newer subdivisions. Drainage easements allow for one lot to drain its storm water onto another or into a detention pond.

Prescriptive Easements

If you have heard of adverse possession, then you know what a prescriptive easement is all about. An easement by prescription is an easement acquired through adverse possession – which is the hostile adverse use of someone else’s property for 20 or more continuous years. Prescriptive easements arise where people have acted as though an easement has existed but there is no instrument of easement recorded at the registry of deeds. For example, a prescriptive easement can arise if a neighbor’s family has used a walking path on the neighbor’s property for over 20 years. twenty years. I’ve written extensively on adverse possession in this post.

Easements by Implication and by Necessity

An easement by implication is found in the law when there is no recorded easement, but where the circumstances show an easement was intended to exist. It usually exists where there is common ownership of a lot, the seller conveys a portion of the land under current ownership, and both parties intended to create an easement at the time of conveyance. If someone claims an easement by implication which negatively affects one’s property, the owner’s title insurance policy, if any, will typically cover that situation. Easements by necessity occur when a property is sold in a land-locked configuration without any legal access. An easement is therefore created “by necessity” to prevent the land-locking. An adverse easement by necessity would also be covered by an owner’s title insurance policy.

________________________________________________________

Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney. They can be reached by email at [email protected] or 508-620-5352.

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Massachusetts Appeals Court Drops The Eviction Hammer On Post-Foreclosure Squatters

by Rich Vetstein on April 10, 2012

in Foreclosure, Landlord Tenant Law, Massachusetts Property Values, Massachusetts Real Estate Law, Mortgage Crisis

Common Eviction Defenses Ruled Unavailable To Squatters Who Lived Rent/Mortgage Free For 3 Years

In a April 10, 2012 ruling, the Massachusetts Appeals Court just made it easier for foreclosing banks to evict squatters of foreclosed properties. This is one of the few pro-bank Massachusetts decisions coming out of the foreclosure crisis, and should help speed up the disposition and sale of foreclosure and REO properties which, in turn, should help the housing market.

The case is Deutsche Bank v. Gabriel, and can be downloaded here. The defendants were all members of a single family living  at 195-197 Callender Street in Dorchester for over 28 years. In 2009, the property went into foreclosure, and Deutsche Bank acquired title by foreclosure deed. As has become common in neighborhoods throughout Boston, the foreclosed upon family refused to leave, and Deutsche Bank brought eviction proceedings against them.

The family fought the eviction tooth-and-nail, and asserted the very common statutory defense based on poor property conditions. This defense, if successful, can prevent a landlord from recovering possession. Aside from irony that the family had been living at the premises for 28 years and was therefore the clear cause of any bad property conditions, the Appeals Court held that the family were squatters (and not tenants) with no legal entitlement to raise this defense. Barring another appeal, the court cleared the way for the eviction, some 6 years after the foreclosure and presumably with the tenants living rent and mortgage free the entire time.

With the housing market turning around, this decision is some long-awaited good news for those dealing with REO and foreclosed properties. Squatting tenants will be easier to evict and properties should be back on the market faster. Bad news for those fighting foreclosure, but good news for the real estate market.

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Richard D. Vetstein, Esq. is an experienced Massachusetts real estate and eviction attorney. For more information, please contact him at 508-620-5352 or [email protected].

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Boston Magazine Selects Us As A “Real Estate Blog Worth Reading”

by Rich Vetstein on April 9, 2012

in Massachusetts Real Estate Law

Marc and I are very humbled and honored to have been selected by Boston Magazine as one of their Top 5 Real Estate Blogs Worth Reading (click for article). We got a little write up which was amusing (and kind of a back-handed compliment and knock on our site design).

Be warned: the look of this one will probably bum you out after scrolling through the nicer-looking blogs above. But I include this one because it is filled with rich, expert content from two well-known Boston-area real estate attorneys. Blogs with stock photos usually send me clicking away instantly, but as an agent, I find the content compelling and valuable. Here is a great one on legal issues surrounding bidding wars (which are back, baby!)

Well, no one ever said lawyers were known for their design taste (although I think our site is smartly designed!). Seriously, it was nice to have been recognized. This will be our 4th year writing the blog, so this award is especially cool. Thanks to all our loyal readers, commentators, contributors, sponsors, and to our families who have put up with many nights writing blog posts!

And while Boston Magazine has their own Top 5 blog list, here is our own Top 5 List of “Real Estate Blogs Worth Reading”:

Live In Sudbury, Mass. (A blog all about my hometown, Sudbury, Mass.)

MetroWest Homes and Living (all about Metrowest MA real estate by a long-standing local independent agency)

Living in Weston Wellesley (a talented up-and-comer Traci Shulkin. What out for her!)

SmarterBorrowing.com (One of the best mortgage bankers around, Brian Cavanaugh)

Massachusetts Mortgage Blog (Another fantastic senior mortgage guy, David Gaffin. Extremely knowledgeable)

ModernMass.com (very cool blog showcasing modern architectural styles throughout Greater Boston)

L’Chaim!

–Rich and Marc

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Massachusetts Real Estate Tax Payments And Mortgage Escrows Explained

by Rich Vetstein on April 5, 2012

in Closings, Massachusetts Real Estate Law, Mortgages, Real Estate Taxes

Massachusetts Real Estate Taxes

The Massachusetts closing attorney is responsible for verifying the correct amount of real estate taxes assessed against the property, collecting sufficient amounts to pay for any outstanding and/or upcoming tax bills, and to adjust between buyer and seller any payments already made by the seller. The way in which Massachusetts real estate tax bills are due and payable, however, often creates confusion for parties at the closing.

For most Massachusetts cities and towns, real estate tax bills are mailed and taxes are collected on a quarterly basis. The fiscal year for property tax is July 1 to June 30. The schedule of mailings, due dates, and the three months each payment covers is outlined on the following chart:

Quarter    Mailed By  Due Date    Payment is For
1st June 30 Aug 1 July, Aug. Sept.
2d Sept. 30 Nov. 1 Oct., Nov, Dec.
3rd Dec. 31 Feb. 1 Jan, Feb., March
4th March 31 May 1 April, May, June

 

 

 

 

The confusion is caused because most folks are not aware that the tax bill which is due on Aug. 1 covers taxes due for the preceding month of July and the following month of September.

So, if you are closing on March 1 and the seller has already paid the tax bill due on Feb. 1, the buyer will be responsible for an adjustment due the seller for the 31 days of March.

Now, here’s the kicker. As part of the mortgage escrow account requirement, explained below, the lender will most likely require the borrower to pay the real estate taxes due May 1 in advance, thereby requiring the borrower to bring a lot more to closing than he or she was expecting. The lender wants to ensure that all real estate taxes are paid in advance so no tax lien gets filed on the property. This is very common, but not often explained by the loan officer ahead of time, thereby falling on the closing attorney to break the “bad news.”

Mortgage Escrows

All lenders are now requiring that borrowers establish an escrow account for the payment of real estate taxes, homeowner’s insurance, and mortgage insurance (if lower than 20% down payment). The escrow account is like an insurance policy to ensure that real estate taxes, insurance and PMI is paid by the homeowner. The escrow account will typically be funded with up to 3-4 months of payments in advance, paid at closing. Some lenders will allow for a waiver of the escrow account, but often with an increase in the interest rate.

____________________________________

Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney. They can be reached by email at [email protected] or 508-620-5352.

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Because I Said So! Satisfying Rigorous Loan Documentation Requirements Key To Mortgage Approval

by Rich Vetstein on March 28, 2012

in Fannie Mae, FHA, Massachusetts Real Estate Law, Mortgages

Borrowers, Shut Up, Listen, And Do What Your Lender Asks–Even If It’s The Third Time They’ve Asked For The Same Documentation!

When I was a kid, my dad would often answer my questions with “because I said so,” and it would drive me crazy! Now it’s prudent advice to borrowers says Mark Greene at Forbes.com. Mr. Greene recently wrote one of the best articles I’ve seen in a long time about the current state of mortgage underwriting. It’s called The Perfect Loan File (click for link). It’s a must read for consumers and real estate professionals alike.

The point Mr. Greene makes so well is that lenders are going absolutely nutty over borrower financial documentation to create a “put-back” immune loan file. (A put-back is when Fannie Mae or Freddie Mac make lenders buy back bad loans). Mr. Greene tells to borrowers to give their lender everything they ask for even if they want to stick needles in their eyeballs, and don’t talk back. I will just highlight some gems from the article:

When I was a kid, my father occasionally issued directives that I naturally thought were superfluous, and when asked why I needed to do whatever it was he wanted me to do, his answer was often: “Because I said so.” This never seemed to address my query but always left me without a retort, and I would usually comply. This is exactly what consumers should do during the mortgage approval process. When your lender requests what seems to be over-documentation and you wonder why you need it, accept the simple edict – “because I said so.” You will find the mortgage approval process much less frustrating.

Every nook and cranny of your financial life has to be corroborated, double- and triple-checked, and reviewed again before closing. This way, if the originating lender has created a loan file that is exactly consistent with published underwriting guidelines and has documented while adhering to those guidelines, the chances are that your loan will not be subject to repurchase.

It all comes down to your proof. If the lender asks for a specific document, give them exactly what they are asking for, not what “should be OK,” – because it won’t be.  This is where the approval process tends to go off the rails, when the lender asks for specific documentation and the borrower supplies something else. Here, too, is where both sides get frustrated. So if the lender asks for a bank statement and there are 5 pages for that bank statement, send them all 5 pages, and not just the summary. If you send them the summary page and they ask again, don’t complain that the lender keeps asking for the same thing when you never sent it in the first place. This may sound elementary, but the vast majority of mortgage approval process woes stem from scenarios just like this.

So when your loan officer or underwriter responds to another one of your questions with “because I said so,” do him or her a favor and do it.  Your loan approval will go a lot smoother and quickly if you do.

Borrowers, agents, and loan officers, feel free to share your thoughts and advice on this article!

~Rich

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Bidding Wars Are Back In Greater Boston! Legal And Strategic Guidance For Massachusetts Buyers & Sellers

by Rich Vetstein on March 24, 2012

in Condominium Law, Disclosures, Massachusetts Property Values, Massachusetts Real Estate Law, Offer To Purchase, Real Estate Marketing, Realtors

I cannot believe I’m writing this post, but yes it’s true, the real estate market in Greater Boston, Massachusetts has now come full circle and bidding wars are back. Don’t believe me? Just read this Boston Globe article from today.

Now that bidding wars are back, buyers and sellers have questions, so we’ll try to answer them here. I’ve also asked a few local real estate agents to offer their expertise as well.

What Are The Legal Issues Surrounding Bidding Wars?

A bidding war arises when there are several competing offers for a listing at the same time. There are really no hard and fast legal rules with bidding wars. Contrary to popular belief, a private seller in Massachusetts is not legally obligated to accept the highest offer made during a bidding war. A seller can be as financial prudent or as irrationally arbitrary as she wants in deciding which offer to accept. A seller may decide to forgo the highest offer in favor of a lower offer due such factors as the financial strength of the buyer (i.e., a cash buyer), because the buyer waived inspections, or simply because the buyer wrote the sellers a lovely letter about how wonderful their home is! (Read on for one agent’s advice on letter writing).

Legally, an offer is simply an invitation to negotiate, and provides a buyer with zero legal rights to the property. An offer does not create a legally enforceable contract — unless it is accepted and signed by the seller.

For real estate agents involved in bidding wars, they have an ethical and fiduciary duty to get the highest and best offer for their sellers. There is nothing illegal about a seller or their agent creating a bidding war, so as to pit one bidder against each other. A listing agent is doing a good job for their client in creating such a market for a property. Ethically, a real estate agent must be truthful and honest when communicating with all prospective buyers and cannot make any material misrepresentations, such as lie about an offering price. Agents must present all offers to their clients, however, the ultimate decision to accept an offer always remains with the seller.

There are different ways to manage a bidding war, and again, there are no special legalities for it. Some agents will set a date by which all preliminary bids have to be in. If there are only two bidders, an agent can go back to the lowest bidder and ask if he or she would like to re-bid. An agent can continue that process until one of the bidders backs out. If there are more than two bidders, some agents will set a second round of bidding with a minimum price of the highest bid in the preliminary round. If no one bids in the second round, the agent can return to that high bid. Bidding wars are fast moving, so buyers need to be able to react quickly.

Generally, disgruntled buyers who lose out on bidding wars do not have a legal leg to stand on — unless their offer was accepted and signed by the seller or there is clear proof an agent lied about something important. That is why making your offer stand out in a bidding war is so important.

Buyers: How To Make Your Offer Stand Out In A Crowd

In a bidding war, buyers ask how can they maximize their chance to be the offer the seller accepts? Gabrielle Daniels, of Coldwell Banker Sudbury, offers this great advice on her blog, LiveInSudburyMa.com:

  • Make your offer STRONG. If you know that there are other offers on the property, make your offer financially strong as possible. If you believe the house is worth asking price, offer asking price. Forget about the TV shows that tell you to offer 90 percent of asking. That is ridiculous – UNLESS that is what the house is worth. Every situation is different. Every house is worth something different. There are no “general rules” about what to offer.
  • Be prepared. Have your pre-approval ready. Sign all of the paperwork related to the offer (seller’s disclosure, lead paint transfer, etc.) Write a check, leave a check with your agent. It is better than a faxed copy of the check. Don’t leave any loose ends.
  • Show some love to the house (and the seller). Write a letter to the sellers, tell them why you love the house and why you are the best buyer for the house. Sure, this is a business transaction, but it is one of the most personal business transactions in which you will be involved. Your real estate agent should be able to help you with this.

For more great tips for buyers involved in a bidding war, read Gabrielle’s post, Multiple Thoughts On Multiple Offers.

Sellers, How Can You Take Advantage of Bidding Wars

For sellers in a bidding war market, it all comes down to pricing, as Heidi Zizza of mdm Realty in Framingham explains on her blog, MetrowestHomesandLife.com:

I had a house listing in Natick this past year. The house valued out to around $620,000. We could have gone to market at $629,900 or $639,900 and had many showings that eventually would land us an offer around $610,000 or so. We figured that at that price it would take the average days on market which was (if memory serves correctly) close to 90 days. We decided to go to market at $599,900. The house got so much attention we had a HUGE turnout at the first showing/Open House and had 4 offers by that evening all competing and all over asking. The highest bid was $620,000 and we sold the property in one day. You too can do the same thing. Market your house at a price that is so attractive you will be best in show. Your buyers will let you know it, and you will definitely get an offer, maybe even several!

For those of us in the real estate business who have weathered the storm of the last 4-5 years, this is “all good” as we say! The more bidding wars, the better!

__________________________________________________

Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney. They can be reached by email at [email protected] or 508-620-5352.

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Cash Is Just As Good As Money: Massachusetts Cash Real Estate Purchase Advisory

by Rich Vetstein on March 21, 2012

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

Tips For Massachusetts Real Estate Cash Buyers & Sellers

As Yogi Berra once humorously said, “cash is just as good as money.”

This is especially true in real estate transactions where a cash buyer is often perceived as better and less risky than a mortgage financed buyer. (Please note that we often encourage buyers to obtain a conventional mortgage where possible given the federal tax benefits through the mortgage interest deduction and also because of the low interest rates available).

What Is A Cash Buyer?

The term cash buyer means a buyer who plans to buy real estate without using a mortgage. The term can also apply to a buyer who plans on using a mortgage, but doesn’t plan on using a mortgage contingency with the purchase contract. (This carries significant financial risk, which we typically do not recommend except for rare instances).

Cash Deals On The Rise In Mass. and U.S.

Massachusetts cash real estate transactions have risen considerably in the last few years, as reported by the Boston Globe. Cash sales accounted for a surprising 34% of all Massachusetts residential real estate transactions in 2011, according to data provided by the Warren Group. According to the Globe, cash buyers include baby boomers downsizing to Boston condominiums with profits from the sales of their suburban houses, well-off parents purchasing homes for college-age children, and investors seeking discounted properties they can rent or sell. They are turning to cash for various reasons, including tighter lending guidelines that have made mortgages less attractive, dwindling bank financing for investment properties, and a volatile stock market that has sent people looking for other places to put their money.

Frequently Asked Questions For Cash Transactions

If you are a cash buyer, or considering selling to one, you may ask whether the transaction will proceed the same way as in a mortgage based transaction and whether there are any other special considerations involved. The short answer is that the transaction, for the most part, will proceed in the same manner, and often with a shorter time-frame than a mortgage financed deal, but there are a few special considerations that a cash buyer needs to be aware of, which I’ll outline below.

Do I Need A Real Estate Agent?

Absolutely. A cash buyer needs a real estate agent for the same reasons a financed buyer needs one. Those reasons include market knowledge and savvy; skilled negotiation; being a critical liaison between the parties; and keeping the transaction and all the players on target for a successful closing. Plus, as with all transactions in Massachusetts, including cash, the seller, not the buyer, pays for the real estate commission.

Do I Need A Real Estate Attorney?

Yes, it’s not only the smart choice but it’s the law. Massachusetts law now provides that only licensed attorneys can conduct real estate closings. In mortgage backed transactions, the lender will assign a closing attorney (who is often the same attorney working for the buyer) to close the transaction. With a cash transaction, however, there’s no lender, and thus, no lender appointed closing attorney to rely on. So a cash buyer must select his or her own attorney to close the transaction.

A cash buyer’s attorney will act as the closing attorney and legal “quarterback” on the deal, having the ultimate responsibility for the vast majority of legal work on the transaction. Here is an outline of all the responsibilities which will fall upon the attorney for a cash buyer:

  • Reviewing and editing the draft Purchase and Sale Agreement (“P&S”)
  • Drafting a “Rider” to the P&S to provide additional protections to the Buyer
  • Negotiating the P&S with the Seller’s attorney
  • Keeping the Buyer updated throughout the negotiations
  • Advising the Buyer about the provisions in the P&S
  • For condominiums, reviewing the condominium documents, including the Master Deed, the Declaration of Trust, and the Operating Budget
  • Conducting a 50 year title exam;
  • Ordering the Municipal Lien Certificate and Seller’s Payoff Statement(s)
  • Reviewing the 6(d) Certificate, Smoke Cert and Unit Deed
  • Preparing the HUD Settlement Statement
  • Procuring an Owner’s Policy of Title Insurance and Declaration of Homestead
  • Preparing Documents for Closing
  • Conducting the Closing;
  • Receiving and Disbursing Funds at Closing
  • Conducting final title run-down then recording the Deed, MLC and Homestead.
  • Post closing issues: mortgage discharge tracking, payment of outstanding real estate taxes

Without an attorney, the cash buyer is simply lost. I would never recommend that the buyer hire the same attorney who is representing the seller. Not only is this a huge conflict of interest, but the seller’s attorney allegiance will rest with the seller, not the buyer.

Do I Need Title Insurance?

As we always recommend, yes! There are two types of title insurance policies: lender’s and owner’s. In a cash transaction, there will be no lender’s policy, and the owner should always opt to obtain an owner’s  owner’s title insurance policy. We’ve written extensively about owner’s title insurance here. It’s especially important in this day of paperwork irregularities with mortgage assignments and discharges, robo-signing, and botched foreclosures.

When Do I Need That Cash Again?

As with all transactions in Massachusetts, a cash buyer will put down between $500 – $1,000 with the Offer and 5% of the purchase price with the signing of the purchase and sale agreement. With no mortgage lender involved, the cash buyer must realize that at the closing they must have liquid funds for the remaining “cash to close” (usually hundreds of thousands) in the form of a cashier’s check or bank check at the closing. Accordingly, the cash buyer must make all investment withdrawals, transfers and receipt of gift funds well in advance of the closing date. Since cash deals proceed much quicker than financed deals, my advice to cash buyers is to have all necessary cash in hand and in a no-risk account when the purchase and sale agreement is signed. Don’t stick your cash in some stock fund which crashes weeks before the closing.

What Happens If I Have Second Thoughts or Don’t Have Enough Cash To Close?

This is where the cash buyer is at more risk than the mortgage financed buyer who has the benefit of a mortgage contingency. If the mortgage buyer cannot obtain financing within the agreed upon deadline, he can opt out of the deal with no penalty. By contrast, after signing the standard purchase and sale agreement, the cash buyer is locked in to going forward with the deal with little, if any, wiggle room to get out. Generally, if the cash buyer has to default, he will lose his deposit (5% of the purchase price). So for any cash buyer, make sure you don’t get any buyer’s remorse!

Best of luck on your Massachusetts cash real estate purchase…

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Richard D. Vetstein, Esq. and Marc Canner, Esq. are experienced Massachusetts real estate cash buyer’s attorneys. They can be reached by email at [email protected] or 508-620-5352.

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What The Boston Zoning Board of Appeals Grants, The Courts Taketh Away

by Rich Vetstein on March 18, 2012

in Construction Law, Home Improvement, Massachusetts Real Estate Law, Permitting/Zoning, Real Estate Marketing, Zoning

Sheppard v. Zoning Board of Appeals of Boston: Appeals Court Overturns Variances, But Does Not Order Tear-Down Of South Boston Rehab Project

Disabled Southie homeowner Robert McGarrell wanted to improve his living situation. McGarrell, who suffered chronic emphysema, planned to rehab his dilapidated bungalow style house with a new townhouse style open floor plan enabling him to get around better with his oxygen tank. After discovering that the foundation was crumbling, he had no choice but to do a full gut rehab.

Abutter Alison Sheppard complained about the perceived impacts of the new house. The front of the new home was 4 feet closer to the front property line, and it extended approximately 4 feet deeper into the lot, bringing it closer to Sheppard’s three-decker house. The proposed house was also larger in mass, having a full second story (under a flat roof) over virtually its entire footprint (with a basement floor opening up to the back yard, as before).

In 1998, McGarrell went to the Boston Zoning Board of Appeals and they told him he needed 5 variances. After revising his design to address some of Sheppard’s concerns, the board granted the variances. Unhappy, Ms. Sheppard appealed to Superior Court.

Approval of Variances Always At Risk of Appeal

The result of this case will not surprise anyone who has experience with Boston zoning and permitting. The Boston Zoning Board of Appeals can be fairly liberal in doling out variances, however, the law says they should be rarely granted only in unique circumstances. I would say 80% of all variances issued by the board are susceptible to reversal on appeal, and the Appeals Court ruled McGarrell’s variances were no different.

The City of Boston has its own special zoning code which is both similar and different from the state-wide zoning code known as Chapter 40A. To obtain a variance, a Boston applicant must show 3 things:

  • Special and peculiar circumstances or conditions of the land or building such as exceptional narrowness, shallowness,  shape of the lot, or exceptional topographical conditions, and that failing to grant zoning relief would deprive the applicant of the reasonable use of such land or structure;
  • For reasons of practical difficulty and demonstrable and substantial hardship, the granting of the variance is necessary for the reasonable use of the land or structure and that the variance is the minimum variance that will accomplish this purpose;
  • Granting of the variance will be in harmony with the general purpose and intent of the zoning code, and will not be injurious to the neighborhood or otherwise detrimental to the public welfare.

The Appeals Court ruled that neither McGarrell’s rectangular lot nor dilapidated home was peculiar in any way to those in the neighborhood. The Court also held that McGarrell could have constructed a smaller home on the existing footprint, and that he could not expand his home vertically “as of right.”

Remedy: Second Chance

For McGarrell, the court left the door open for his new home to stand. Usually, in the case of construction built at the risk of permits being overturned, the court will order the new structure torn down, as in the recently publicized Marblehead mansion. Since the board supported McGarrell’s improvement of a dilapidated structure, the court allowed McGarrell to proceed on an alternative path under another section of the zoning code. The case will go back to the board for further findings, and this 14 year legal odyssey will go on.

Lesson: Get Neighborhood Support Early

The lesson here, as with any Boston zoning matter, is to get the support of the abutters and neighbors as early in the process as possible. Sometimes it’s not always possible, so you have to litigate.

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Richard D. Vetstein is an experienced Boston zoning, variance and permitting attorney who has substantial experience with variance and special permit applications before the City of Boston Zoning Board of Appeals and in Superior Court. Please contact him via email ([email protected]) or tel: 508-620-5352.

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