Massachusetts Real Estate Law

Tax Reform Alert: IRS Issues Guidance On Pre-Paying Real Estate Taxes Before Year-End

by Rich Vetstein on December 28, 2017

in Massachusetts Real Estate Law, Real Estate Taxes

Taxpayers Rushing To Claim Deductibility Of Real Estate Taxes — Prepayment Should Be OK 

As I wrote in my overview of the recently signed Tax Cuts & Jobs Act of 2017 (Tax Reform Act), for 2018, Massachusetts property owners will only be allowed to deduct $10,000 of real estate taxes and state income taxes. As a result, taxpayers have been rushing to pre-pay their real estate tax bills before year-end, in order to claim full deductibility on their 2017 tax returns.

The IRS has just issued an Advisory: Prepaid Real Property Taxes May Be Deductible in 2017 if Assessed and Paid in 2017.  The Advisory states:

The IRS has received a number of questions from the tax community concerning the deductibility of prepaid real property taxes. In general, whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018. A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.

I’ve spent this morning attempting to break this down as it applies to the complex byzantine world of Massachusetts real estate property taxes.

The Massachusetts real estate tax system operate on the Fiscal Year system, running from July 1 through the following June 30. January 1 is the property tax assessment date for each fiscal year. We are now in the middle of Fiscal Year 2018 which ends on June 30, 2018. The 2018 fiscal tax bill is based on the property value assessment as of January 1, 2017. Taxpayers receive four (4) bills per year, due on August 1, November 1, February 1, and May 1. The first two quarterly bills are typically “estimates” with the subsequent two quarterly bills “actual” bills.

With respect to the Tax Reform Plan, taxpayers are attempting to pay their fiscal year 2018 third and fourth quarter bills (due 2/1/18 and 5/1/18) prior to year-end.

My assessment is that this (paying 3rd and 4th quarter tax bills before year-end) should be acceptable under the IRS Guidance because the tax obligation was “assessed” as of January 1, 2017, i.e, prior to Jan. 1, 2018. On the other hand, real estate taxes due after May 1, 2018 will likely not qualify for deductibility — even if paid in 2017.

Many tax collector offices are only accepting pre-payments on or before December 29th, so hurry up and pay!

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Tax Cuts and Job Act of 2017 Impact On Massachusetts Real Estate

by Rich Vetstein on December 20, 2017

in Commercial Real Estate, Landlord Tenant Law, Leasing, Massachusetts Real Estate Law, Mortgages, Real Estate Taxes, Refinances, Rental Housing, Taxes


Tax Reform Act Not Nearly As Bad As Feared For Massachusetts Homeowners

With Paul Ryan and Mitch McConnell and their minions burning the midnight legislative oil, the Tax Cuts and Jobs Act of 2017 is set to pass with President Trump’s signature before Christmas. (Updated: President Trump signed the bill into law on Dec. 22).  Everyone is asking me the same question. How will the biggest change in US tax policy in 30 years affect the Massachusetts real estate market and homeowners? There’s been a ton of commentary that the Act is the second coming of the Apocalypse for the real estate market, but I’m not convinced. While I do have many concerns with the overall bill (bloating the deficit, etc.), my opinion is that it will be a small net positive for the real estate industry.

(Disclaimer: I am neither a tax attorney nor a CPA, and I don’t play one on TV, so consult your own tax professional for any tax advice).

Capital Gain Exclusion on Sale of Primary Residence – No Change 

Excellent news here. The long-standing rule has been that the gain (increase in value) of the sale of a primary residence is non-taxable up to $250,000 for a single person and up to $500,000 for a married couple, if you occupied the home for 2 out of the last 5 years. This provision has been a huge incentive for home sales for many years. In prior GOP tax reform bill drafts, the exemption was increased so that owners needed to reside in the home for 5 out of the 8 years preceding the sale. The National Association of Realtors argued that this change would have resulted in a 10% drop in home sales. In response to the NAR’s intense lobbying, the final bill does not include any changes to the capital gains exclusion.

So the current rule stays in place – you can exclude up to $250,000 as a single filer and $500,000 for joint married filer in capital gain on the sale of your primary residence if you lived there for 2 out of the last 5 years. This is really great news for the Massachusetts real estate market.

SALT – Real Estate Taxes and State Income Taxes — $10,000 Cap

This change is a “loss” to homeowners, especially those with high value properties and in wealthy towns. Currently, all real estate taxes paid in Massachusetts are 100% tax deductible if you itemize your deductions. In Massachusetts, those real estate tax bills can be quite large.

Under the Act, there is now a deductibility cap of $10,000 — which includes not only local real estate taxes but all state and local income taxes. This will be a huge hit to taxpayers in wealthy towns with high real estate tax bills. Going forward, taxpayers will only be allowed to deduct $10,000 of all real estate taxes and state/local income taxes. This is definitely a major “loss” for Massachusetts homeowners, especially those in towns with high real estate taxes. This change, however, may be offset by the increase in the standard deduction ($12,000 for single, $24,000 for married) and the boost in child tax credits, but if you live in Weston or Boston, for example, this is likely going to hurt.

Tax Tip:  If your real estate tax bill is over $10,000, consider pre-paying your real estate tax bill before 12/31/17, so you can still deduct it. According to the Boston Globe, most town assessors around the state are accepting such payments. Update (12/28/17): The IRS has issued a Formal Advisory on Real Estate Tax Pre-Payments. Click to read my full review here.

Mortgage Interest Deduction – Deductible Up to $750,000. No Deductions For HELOC/Vacation Homes 

Again, due to the NAR’s strong lobbying efforts, the GOP kept the mortgage interest deduction intact for the most part, but with caps, and equity lines and second mortgages losing their deductibility. I would say this is a net “win” for homeowners. Starting in 2018, homeowners can keep the mortgage interest deduction on a loan of up to $750,000, down from the current law’s limit of $1 million.

Individuals who take out home equity (HELOC) loans, however, will no longer be able to deduct that interest under the new bill. The same is true for second mortgages and vacation homes. No more interest deductions for those. So this change may impact the vacation home market, particular down the Cape and Islands. However, a rental property owner could offset this loss by renting out the home for a few weeks, per the new benefits for rental housing discussed below.

Importantly, these new rules only apply to new mortgages applied for after Jan. 1, 2018. Existing mortgages incurred on or before Dec. 15, 2017 will remain fully tax deductible. There is some IRS guidance on these new rules, so consult your CPA.

Rental Property Owners/Landlords — Thumbs Up! 

As Bloomberg News reports, the Tax Reform Act will be very good for rental property owners and landlords if they do business via pass-through entities — real estate investment trusts, partnerships, limited liability companies, and S corporations — all of which are set to get big tax breaks in the Act. Under the new rules, all pass through income for qualified entities will enjoy a 20% deduction on the owner’s individual 1040 return. For landlords who have greater than $157,500 (single) or $315,000 (married filing jointly) in qualified taxable income, they can select an alternative deduction of (i) the greater of 50% of all W–2 wages, or (ii) the sum of 25% of the W–2 wages plus 2.5% of the unadjusted basis immediately after acquisition of all qualified property.

Attorney’s Advice: I’ve always counseled clients to set up an LLC to hold title to rental property, both from a liability and tax planning standpoint. With the Tax Reform Act giving even greater benefit to pass-through entities, it makes even more sense to set up that LLC. If you need assistance setting up an LLC, please email me at [email protected].

Also for depreciation rules, the depreciable life term has been reduced — from 27.5 years to 25 years for residential property and from 39 years to 25 years for nonresidential property. In addition, while most other businesses will find their interest deduction limited under the Senate bill, that limitation doesn’t apply to landlords, who can continue to deduct their mortgage interest in full.

There are other rules also favoring rental property owners, so definitely consult your CPA to prepare for 2018.

Thoughts and Comments?

As an attorney who has handled thousands of residential purchases and refinance loans, I’ve never been one to ascribe to the notion that the tax code has a ultimate determinative effect on whether a buyer is going to purchase a home or not. I’ve always believed that tax implications are one factor out of many in the home buying and selling equation. In my opinion, income, job security and consumer confidence play a larger role. I would doubt that the young couple searching for a starter home in Medway is going to say “geez, now that the SALT deduction is limited to $10k, let’s scrap this whole home buying idea.” If people have decided they want to buy a house, they will usually do so.

Overall, I think the Tax Cuts and Jobs Act of 2017 will have a net positive effect on the national and Massachusetts real estate market, despite the SALT cap and changes to HELOC/second mortgage deductibility. I’m hopeful that the increase in standard deductions and child tax credits will offset the mortgage deductibility and real estate tax changes. The no-change to the capital gain rules was critical and we have the NAR to thank for that. That was a game changer. And lastly, the rental and investment property market will get a big boost.

Rick Moore, Senior Mortgage Advisor with Zenith Mortgage Advisors in Holliston, is one local loan officer who is happy with the Tax Reform Act, both personally and professionally. “I think it’s a historic day, and I’m happy to have the extra money for some home improvement projects. Overall, if the economy will get a boost as expected by the administration, then that’s good for me as a loan officer. I’m looking forward to a very prosperous 2018!”

I do, however, worry about the addition of some 1.5 Trillion to the federal deficit as a result of the tax reform act. This is never good for long term stability of the economy and the housing market. It’s probably a safe bet to say that interest rates are going to rise to keep inflation at bay. I’m concerned that in exchange for some short term gain, we may be setting ourselves up for some long term pain. Only time will tell, but I hope Rick is right!

Feel free to post your comments below and on Facebook.

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Surviving Wife Not Liable For Mortgage Debt On Marital Home, Appeals Court Rules

by Rich Vetstein on November 15, 2017

in Closings, Massachusetts Real Estate Law, Mortgages, Title Defects, Title Insurance

Court Shoots Down Lender’s Attempt to Expand Doctrine of Equitable Subrogation

In the interesting case of Wells Fargo Bank v. Comeau (Nov. 15, 2017), Justice Peter Agnes of the Appeals Court has held that a surviving wife is not financially responsible for paying back a refinanced mortgage where the wife neither signed the promissory note nor the refinance mortgage, even though she originally held title to the home as a married couple (tenants by the entirety) and signed the original mortgage on the property. In so ruling, Judge Agnes rejected Wells Fargo’s argument to expand the doctrine of equitable subrogation to cover a situation such as this.

Parties to Deed Must Match Up With Mortgage!

Nancy and William Comeau owned their Haverhill home jointly in the traditional Massachusetts form of ownership called “tenancy by the entirety” where title passes automatically to the surviving spouse upon death of a spouse. When the couple purchased the home, they both signed a first mortgage to Haverhill Cooperative Savings Bank. It appears that Nancy was not an applicant for the loan because she did not sign the promissory note. However, the cardinal rule is that the parties to the deed must match the parties to the mortgage, otherwise there will be problems (foreshadowing what happened in this case).

When the couple went to refinance the Haverhill Savings loan with Wells Fargo, only William, the husband, signed the note and mortgage. Big mistake! Since Nancy, the wife, remained on the title as a joint owner, she should have signed the mortgage as well. After the refinancing, William unfortunately dies. His estate is probated, but Wells Fargo makes another mistake and fails to file a claim within the one year probate statute of limitations.

Lender Goes To Court

In an attempt to get Nancy to pay up on the mortgage, Wells Fargo went to Superior Court and made the creative argument that the wife should be responsible under the little known legal doctrine of equitable subrogation which gives courts equitable power to reform mortgages, to restore once-extinguished mortgages, and to adjust priorities among existing mortgages where it is fair and just to do so. Wells lost in Superior Court. On appeal, Justice Agnes agreed, ruling that this case was not appropriate for the equitable subrogation remedy, thereby leaving Wells Fargo with a total loss on its mortgage debt. Judge Agnes reasoned that the situation was entirely of Wells Fargo’s making, and that it had the opportunity to have Nancy sign the mortgage or make a claim against William’s estate, but it failed to do so.

Having handled many title insurance claims in my prior practice, we often used equitable subrogation in cases where a title examiner missed a mortgage in connection with a refinance. Those types of human error would allow for equitable subrogation, however, this case would not, as Judge Agnes correctly ruled in my opinion.

This case is a good example why closing attorneys should always have both married spouses execute the mortgage even if one spouse is not on the loan.

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SJC Clarifies Security Deposit Liability For Move Out Damage

by Rich Vetstein on November 5, 2017

in Housing Court, Landlord Tenant Law, Leasing, Massachusetts Real Estate Law, Rental Housing

No Triple Damages Although Landlord Failed To Provided Sworn Statement of Itemized Damage at Move Out

When a tenant leaves damage to a rental unit at move out, the Massachusetts Security Deposit Law allows a landlord to deduct the cost of repairs from the security deposit, provided the landlord issues a sworn statement of itemized damage along with repair estimates within 30 days of the move out. I’ve seen many landlords attempt to comply with the law only to be on the receiving end of a Chapter 93A letter from a tenant attorney demanding triple damages for messing up this requirement. This is one of many reasons why I advise my landlord clients to decline taking a security deposit from tenants.

Last week, the Supreme Judicial Court had the opportunity to clarify this particular provision of the law in the class action case of Phillips v. Equity Residential Management LLC. In this case, Equity Residential, attempted to deduct $968.08 in carpet and other cleaning charges from a tenant’s security deposit. However, Equity failed to provide the required itemized statement sworn under the pains and penalties of perjury. The tenant filed a class action seeking return of the deposit, triple damages, and attorneys’ fees under the statute.

I won’t bore you with all the technicalities of the Court’s ruling, but the SJC came down on the landlord’s side on this case, holding that while the landlord mistakenly failed to provide the sworn statement the law was clear that this is not one of the situations where triple damages is the proper remedy. (Equity did have to return the tenant’s security deposit in full). Yes, I know a rare victory for property owners in Massachusetts…

Again, while this case came out on the landlord’s side, it demonstrates the risks involved in failing to comply strictly with the Massachusetts Security Deposit Law. As a reminder, if a landlord is claiming that a tenant caused damage at the end of the tenancy and wants to deduct it from the deposit, it must provide within thirty days “an itemized list of damages, sworn to by the lessor or his agent under pains and penalties of perjury, itemizing in precise detail the nature of the damage and of the repairs necessary to correct such damage, and written evidence, such as estimates, bills, invoices or receipts, indicating the actual or estimated cost thereof.” The law also requires that landlord provide a “statement of condition” at the beginning of the tenancy, so that damage can be verified. Only then will a landlord be allowed to deduct repair costs from a security deposit.

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Richard D. Vetstein, Esq. is an experienced Massachusetts residential landlord – tenant attorney. You can contact him at [email protected].

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DPH Proposes Changes To State Sanitary Code

by Rich Vetstein on October 26, 2017

in Housing Court, Landlord Tenant Law, Massachusetts Real Estate Law, Rental Housing, Safety

Changes Catching Landlords By Surprise

Without much publicity or property owner input, the Massachusetts Department of Public Health has rolled out proposed revisions to the State Sanitary Code which provides minimum standards of habitability for all rental housing units across the state. There are some significant changes which will definitely impact both small and large property owners/landlords.

Integrated Pest Management Plan
The proposed rules requires that any rental property with 4 or more units implement an Integrated Pest Management Plan with pest inspections conducted at least every 4 months. Owners are required to maintain a record documenting the following activities conducted within the residence including inspection results, complaints filed by occupants, the date, location, product name, and name of any person applying pesticides, and modifications to the original IPM plan, all of which should be available upon request by the board of health.

Mold, Mold, Mold
DPH is on a mission to eradicate mold in rental housing. The new rules place landlords responsible to remove all possible signs of mold in apartments as well as any areas of “chronic dampness.” As every landlords knows, tenants are often the ones who cause mold growth by not using proper ventilation or having poor hygiene. Boards of health are now authorized to conduct mold-specific inspections and conduct air quality tests.

Bathroom Exhaust Fans

The new rules require exhaust fans in every bathroom whether or not there is a window. Previously, landlords did not have to install a fan if there was a bathroom window.

Central Heating Systems

Property owners are required to provide a “central heating system” for all units. Fireplaces, woodstoves, pellet stoves, portable electric space heaters and unvented propane or natural gas-fired space heaters will not meet the requirements of this new standard. This will impact rental housing in the outer counties. Also prohibited from use in any residence are (1) any portable space heater, parlor heater, cabinet heater, or room heater that has a barometric fed fuel control and a fuel supply tank located less than 42 inches from the center of the burner, (2) heating appliances adapted for burning propane, kerosene, range oil or number one fuel oil, and (3) Portable wick type space heaters.

Code Violations/Tenant Remedies

Of course, any violations of the State Sanitary Code entitles tenants to withhold rent under state law. There can also be Chapter 93A/Consumer Protection liability which carries the prospect of triple damages and payment of tenant attorneys’ fees. Code violations can severely de-rail any eviction action so landlords must ensure that any code violations are quickly and properly addressed. Without the passage of a rent escrow law, landlords remain at risk of tenant abuses of the rent withholding statute.

The proposed revisions to the State Sanitary Code, 105 CMR 410 can be downloaded here.

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Land Court Dismisses Foreclosure Challenge Under New Title Clearing Act

by Rich Vetstein on August 21, 2017

in Foreclosure, Land Court, Massachusetts Real Estate Law, Mortgage Crisis, Mortgages, Real Estate Litigation, Real Estate Market, Title Defects, Title Insurance

Kenney v. Brown:  First Reported Decision Under Act Clearing Title to Foreclosed Properties

In a ruling applauded by the conveyancing bar and title underwriters, Land Court Justice Robert Foster has dismissed a borrower’s challenge to a 2007 foreclosure sale even though the borrowers recorded an affidavit reflecting the alleged title defect within the time period set by the Act. This is the first court ruling that I am aware of interpreting the new Act Clearing Title to Foreclosed Properties.

The Title Clearing Act, now codified in Mass. General Laws Chapter 244, section 15,was enacted by Gov. Baker last year in an effort to minimize the impact of several troublesome SJC rulings which cast doubt on titles coming out of foreclosures, including the seminal case of U.S. Bank v. Ibanez. The Act establishes a three-year deadline to bring a legal challenge to a foreclosure. To timely bring a challenge, an aggrieved homeowner must file lawsuit challenging the validity of the foreclosure sale, and must also record a copy of the lawsuit in the registry of deeds before the limitations period expires.

The plaintiffs argued that even though the Act expressly calls for the timely filing of a copy of the complaint challenging a foreclosure sale with the Registry of Deeds, the timely recording of their affidavit provided sufficient notice of their claim to satisfy the intent of the statute.

But Judge Robert B. Foster found the plain language of §15 controlled. “The language of the Statute is conjunctive,” Foster ruled. “It requires both the commencement of an action in court and the recording of the complaint or pleading with the registry before the deadline. The recording requirement is not surplusage. It is not simply a notice provision, but rather an additional requirement necessary to file a timely suit.”

Because the plaintiffs failed to comply with §15’s requirement to record their amended complaint within one year of the effective date of the act, Dec. 31, 2016, the judge concluded that their wrongful foreclosure claims were barred.

This is a great ruling for the conveyancing bar. Judge Foster’s decision furthers the underlying purpose of the statute to provide clarity of title in the wake of the foreclosure crisis and the Supreme Judicial Court’s 2011 decisions on wrongful foreclosure in Bevilacqua v. Rodriguez and U.S. Bank National Association v. Ibanez. The whole purpose of the act is to slowly clear away these defective foreclosure titles. It was also important for Judge Foster to clarify that so-called “5B affidavits” do not satisfy the act’s recording requirements. I have seen an increased prevalence of borrowers and attorneys recording bogus 5B affidavits in an attempt to cloud titles and shake down third party buyers and title insurance companies.

The 23 page court opinion can be read below.

Kenney v. Brown (Mass. Land Court) by Richard Vetstein on Scribd

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A Path to Electronic Notary Acknowledgements

by Rich Vetstein on August 7, 2017

in Closings, Deeds, Electronic Closings, Massachusetts Real Estate Law, Notary Public, Technology

COVID-19 Update (3/25/20): Emergency Legislation Filed To Allow for Remote Notarizations

By Richard P. Howe, Jr., Registrar, Middlesex North Registry of Deeds

As young people who have known nothing but digital commerce enter the home ownership market, the conveyancing community in Massachusetts will face increased pressure to leave paper behind in favor of purely electronic closings. The statutory basis for this technological transition has been in place since 2004 with the adoption of MGL c.110G, the Massachusetts Uniform Electronic Transactions Act. Since then, all registries of deeds in the commonwealth have implemented electronic recording systems. Still, some uncertainly remains, especially regarding acknowledgements.

Earlier this year I wrote about electronic acknowledgement statutes in other jurisdictions in “Remote electronic acknowledgments,” published in the March 2017 edition of REBA News. In the same article, I explained why registries of deeds in Massachusetts should record documents electronically acknowledged outside of Massachusetts, but not record those electronically acknowledgement within Massachusetts. The primary basis for that opinion was that Massachusetts law requires a notary to affix a notary stamp to an acknowledgement, and that our law provides no electronic equivalent of that notary stamp.

With the demand for electronic acknowledgements looming but not yet fully upon us, now is the time to amend our notary statute to accommodate new technological practices. The starting point for such an amendment should be a shared understanding of the purpose of an acknowledgement, particularly with regard to real estate documents.

In colonial Massachusetts, registries of deeds and the requirement that real estate documents be acknowledged arose simultaneously. The purpose of the registry was to provide a public record of who owned what land as a means of curtailing secret sales that muddled ownership and created uncertainty in real estate transactions. The purpose of requiring deeds to be acknowledged before recording was meant to curtail fraud, either in the guise of a forged signature or of an actual signature that was later denied by its maker.

Conceived in the seventeenth century, the rationale for these rules, and the rules themselves, persist today. Registries of deeds perform the same core function of making public real estate ownership records, using new technology to do it.

So what is the core function of an acknowledgement? Primarily, it is to assure the public that the person who signed a document is who he or she purports to be. In Massachusetts, a notary does this by personally witnessing the signing of the document while positively identifying the person who signed it. The notary attests to this by signing the acknowledgement clause, printing his name and the expiration date of his notary commission underneath his signature, and then affixing his notary stamp to the document.

MGLc.222, s.8 requires a notary stamp to include “the notary public’s name exactly as indicated on the commission; the words ‘notary public’ and ‘Commonwealth of Massachusetts’ or ‘Massachusetts’; the expiration date of the commission in the following words: ‘My commission expires _____’; and a facsimile seal of the commonwealth.”

Not to minimize the importance of the facsimile seal of the commonwealth, but I am not sure how including that on an inked stamp that anyone, anywhere may purchase in any name from multiple vendors adds appreciably to the authenticity of a document or the signature upon it. To me, the basic reason for requiring a notary to include identifying information such as a printed name and a commission expiration date in the acknowledgement clause is to help identify and locate the notary if questions arise about the document.

While the notary stamp does require those two bits of information, so does the notary clause itself, which seems to make the notary stamp superfluous. Perhaps it would be more useful to assign each notary public a unique identifying number, much like an attorney’s BBO number, and require that number to be included in the acknowledgement clause in lieu of a stamp. Such a unique number would expedite the identification of the notary and his whereabouts. It would also be easy and inexpensive to implement, both on paper and in electronic form.

In reviewing electronic acknowledgement statutes already adopted elsewhere, it seems that many states have created a dual commission regime, one for regular notaries, the other for electronic notaries. Other places require notaries to invest in sophisticated (and presumably expensive) technology that renders the electronic document being acknowledged tamper-proof. Perhaps the tasks assigned notaries in other jurisdictions are more complex than those in Massachusetts, but both of these practices – a dual commission system and requiring sophisticated software of electronic notaries – greatly exceed anything now required or expected of notaries in this commonwealth.

In crafting rules for electronic acknowledgements in Massachusetts, we should strive to duplicate the functions now being performed by our notaries while allowing those functions to be performed on tablets and computer screens, not just on paper. Complex and expensive systems are not needed to do this, and such additional requirements would needlessly delay our ability to keep pace with the evolving expectations of those we serve.

Dick Howe has served as register of deeds in the Middlesex North Registry since 1995.  He is a frequent commentator on land records issues and real estate news.  Dick can be contacted by email at [email protected]. 

Reprinted with permission from the REBA Blog.

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Appeals Court Upholds MERS Mortgage Assignment System

by Rich Vetstein on July 25, 2017

in Fannie Mae, Foreclosure, Massachusetts Real Estate Law, Mortgage Crisis, Mortgages, Title Defects, Title Insurance

Strawbridge v. Bank of NY Mellon:  Appeals Court Justice Peter Agnes Gives Judicial Blessing to MERS Assignment System, Rejects Other Foreclosure Challenges

The most recent foreclosure case heard by a Massachusetts appellate court should allow title underwriters and foreclosing lenders to sleep better at night. In Strawbridge v. Bank of NY Mellon, No. 16-P-1244, embedded below, Appeals Court Justice Peter Agnes upheld the MERS system of holding and assigning mortgages in Massachusetts as a “nominee.” Judge Agnes also ruled that the borrower lacked standing to raise defects in the pooling and servicing agreement by which the bank created a securitized mortgage trust, because she is not a party to that intra-lender agreement. This ruling should simultaneously benefit the housing market, while taking away a major weapon for foreclosure defense attorneys.

The case was brought by well-respected foreclosure defense attorney Glenn Russell, Esq. who represented the borrower, Sandra Strawbridge. Attorney Russell’s cases are typically on the cutting edge of foreclosure defense law, and thus, should always be read with interest.

Foreclosure Challenge

Strawbridge challenged the foreclosure on the grounds that the Bank did not comply with Massachusetts foreclosure law after the SJC’s decision in Eaton v. FNMA which held that a foreclosing lender must establish it holds both the promissory note and the mortgage. (Title companies have issued comprehensive underwriting guidelines after the Eaton ruling). Strawbridge also claimed that MERS’s assignment of her mortgage to the Bank was void because the assignment occurred after a date established in the pooling service agreement (PSA) of the securitzed trust.

Countrywide-MERS Assignment System

In 2007, Strawbridge obtained a $370,000 mortgage from Countrywide Home Loans. The mortgage designated Mortgage Electronic Systems, Inc. (MERS) as the nominee for Countrywide. In 2009, Strawbridge defaulted on her note by failing to keep up with her mortgage payments. In February, 2010, MERS assigned Strawbridge’s mortgage to Bank of New York Mellon which held the mortgage as part of a securitized trust. A MERS “Assistant Secretary and Vice President” executed the assignment, which was notarized and recorded at the appropriate registry of deeds. Later, in March, 2015, a “Second Assistant Vice President” at the Bank’s loan servicer executed an “Affidavit Regarding Note Secured by Mortgage Being Foreclosed.” That affidavit states that the Bank is the holder of the note. In addition, in April, 2015, the Bank’s loan servicer executed a “Certificate Relative to Foreclosing Mortgagee’s Right to Foreclose Pursuant to 209 C.M.R. 18.21A(2)(c),” which certified that the Bank is the “holder of the Mortgage” and “the holder of the Note or is authorized agent of the Note holder with the specific authority to enforce payment and pursue foreclosure of the Mortgage on behalf of such Note holder.” Finally, in July, 2015, the Bank sent Strawbridge a notice of foreclosure sale, informing her that a foreclosure sale would take place in August. The borrower challenged the sale in the Superior Court which ruled against her.

Appellate Rulings

On appeal, Judge Agnes ruled that “MERS’s nominee status does not preclude it from validly assigning the mortgage, or does it limit MERS’s power to exercise a right of [foreclosure] sale.” The Court also rejected the borrower’s argument that the Bank is required to provide a complete chain of assignments of the mortgage, opting instead to hold the Bank to a less onerous standard of merely producing a single assignment directly from MERS, the last holder of record. Lastly, the judge ruled that the borrower lacked standing to raise defects in the pooling and servicing agreement because she is not a party to that intra-lender agreement.

Take Aways

The impact of this decision is a reaffirmation that the MERS system of assigning mortgages remains legal and binding in Massachusetts. MERS mortgages account for the vast majority of conventional mortgage financing in Massachusetts. This ruling will also make it more difficult for distressed homeowners to challenge foreclosures, clearing the way for banks to sell REO property. I spoke to Attorney Russell about the case, and he indicated that he is considering taking an appeal up to the Supreme Judicial Court. So this may not be the last word on the matter.

Strawbridge v. Bank of NY Mellon by Richard Vetstein on Scribd

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Mass. Lawmakers: Tax and Regulate Airbnb Rentals

by Rich Vetstein on June 27, 2017

in Condominium Law, Landlord Tenant Law, Leasing, Massachusetts Real Estate Law, Real Estate Market, Rental Housing, Technology

Proposal: 5%-10% Tax, Plus Comprehensive Regulations

Like Uber and Lyft, is the law finally catching up with the new economy-disrupting technologies for the real estate industry like Airbnb? The answer is yes if Massachusetts legislators have their way. Today, Massachusetts House legislators are holding a hearing on a new bill which would tax and regulate Airbnb and other short term rentals. The proposal is House Bill 3454 (click to read). The proposal would impose a new excise tax between 5% – 10% on short term rentals, depending on whether the host rents his/her own residence, is a “commercial host,” or the rental is professionally managed.

According to a recent Boston Globe article, Airbnb, the largest of such rental sites, reports that it logged about 592,000 guests in Massachusetts last year. Had those stays been subject to the state’s hotel tax rate of 5.7%, that would have added an estimated $15 million to the Commonwealth’s coffers. The availability of such easy tax revenue may be too much for legislators to pass up this year, although a similar effort failed at the last minute last year.

Airbnb is happily sharing these calculations because it wants to be taxed, and this week it’s airing a new TV commercialabout the issue. Now don’t think for a second that this is some kind of benevolent new-economy thing. Guests, not Airbnb, pay the tax! Taxation is also a form of legitimization for these online portals.

The House proposal would also establish a comprehensive regulatory and safety scheme on Airbnb rentals, similar to that imposed on bed and breakfasts and other small local lodging facilities. Local towns and cities would be permitted to restrict certain types of short term rentals, the number of rental days allowed, require business licenses and a housing registry, and make the host obtain liability insurance of at least $1M in coverage. Violations of the new law carry a stiff fine of up to $1000/day for the illegal rental period.

The proposal has received much attention in recent months as hearings have been held across the state. The Massachusetts Association of Realtors has come out in opposition to the bill, as with many Airbnb hosts who rely on this source of additional income.

I will keep up with developments, so check back here from time to time.

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The Massachusetts Quiet Title Action: A Remedy Of Last Resort To Resolve Complex Title Defects

by Rich Vetstein on March 30, 2017

in Massachusetts Real Estate Law

When All Else Fails, Quiet Title

Quiet title cases are lawsuits typically brought in the Land Court in order to resolve complex title defects — often as a last resort for property owners when conveyancing attorneys and title insurance companies cannot cure title issues using traditional methods. Usually quiet title cases involve missing interests in the chain of title such as unknown heirs or relatives of the property owner who cannot be found. Other times they can involve easements, missing mortgage discharges, or adverse possession. The statute governing quiet title actions is M.G.L. chapter 240, section 6.

The Curious Case of the Two Sisters

Let me give you an example of one of my recent quiet title cases. My client, “Mr. Jones,” is trying to sell his childhood home in Cambridge where his mother lived. The mother recently passed away. Unknown to everyone, title to the property was originally held by the mother and her sister back in 1947, but the deed mistakenly referred to them as a married couple. As a result of this drafting error and the age of the deed, they are considered tenants in common, so when the sister died, her interest went to her family (rather than to her sister, the surviving joint owner). When my client’s mother died, he only inherited a 1/2 interest in the property, with the other half following the sister’s heirs. Murphy’s Law — the sister has no known heirs. She had no children, her husband passed away, and no probate or will can be found for either of them. Oh, and the sister and her husband lived in Queens, NY all their lives! So I’ve brought a quiet title action in the Land Court to have the judge decree that my client is the rightful owner of the property. We have published a legal notice in the local Queens, NY newspaper and will need to file affidavits demonstrating that my client’s side of the family owned and cared for the property for decades.

Cost and Time

Quiet title actions are not for the faint of heart or inexperienced attorneys. Only a handful of lawyers in Massachusetts do these on a regular basis, and I happen to be one of them. Fortunately, the Land Court judges are very experienced with the subject matter and quite helpful in guiding attorneys along in the process. It can take up to 6 months to get a final judgment in a quiet title case. If it is a contested case, throw that out of the window. In terms of cost, it is not cheap. A client can expect to pay at least $5,000 in legal fees and expenses. But the alternative is not being able to sell the property, so it’s usually money well spent!

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If you need assistance with a potential Massachusetts Quiet Title Case, please email me at [email protected] or call me at 508-620-5352.

 

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Act Clearing Titles To Foreclosed Properties Now Effective

by Rich Vetstein on January 2, 2017

in Closings, Deeds, Foreclosure, Land Court, Massachusetts Real Estate Law, Mortgage Crisis, Mortgages, Title Defects, Title Insurance

Foreclosure2-300x225.jpgMany Titles Automatically Cleared As Of Dec. 31, 2016

While 2016 may have been a tough year for some, the new year brings some relief to those affected by foreclosure related title defects. For some homeowners saddled with bad titles due to improper foreclosures, when the Times Square ball dropped, their titles defects magically disappeared under The Act Clearing Title to Foreclosed Properties. They are now free to sell or refinance after waiting many years in most cases.

The Act, now codified in Mass. General Laws Chapter 244, section 15, was enacted by Gov. Charlie Baker last year in an effort to minimize the impact of several troublesome SJC rulings which cast doubt on titles coming out of foreclosures, including the seminal case of U.S. Bank v. Ibanez. The Act, which I testified in support of at the State House, establishes a new three year statute of limitations for challenging foreclosures and clears titles with foreclosures conducted prior to Dec. 31, 2013, unless the homeowner brought a lawsuit and records it with the Registry of Deeds.

Practice Pointer: Under the Act, any defective title stemming from a foreclosure completed prior to Dec. 31, 2013 is now cured, provided there is no legal challenge filed and complaint recorded with the Registry of Deeds and no other statutory exemption applies. Speak to your title underwriter or consult an attorney for guidance.

Covered Time Period

The Act establishes a three-year statute of limitations period to bring a challenge to a foreclosure. To timely bring a challenge, an aggrieved homeowner must file lawsuit challenging the validity of the foreclosure sale, and must also record a copy of the lawsuit in the registry of deeds before the limitations period expires. The Act reaffirms the mortgagee affidavit requirements of the foreclosure law, including the provision that the recording of a valid affidavit is “evidence that the power of sale was duly executed.”  The Act also provides that after three years from the date that the foreclosing lender records a validly executed affidavit, the affidavit serves as “conclusive evidence” that the power of sale was duly executed.

Retroactive Application

The Act applies retroactively. To address constitutionality concerns, for mortgagee affidavits recorded prior to December 31, 2015, the statute of limitations period is the longer of the full three-year period or one year from the effective date of the Act, December 31, 2015. Thus, by the terms of the Act, for all foreclosures completed prior to December 31, 2013, the deadline to assert and record a challenge was December 31, 2016. For foreclosures completed between January 1, 2014 and December 31, 2015, the three year statute of limitations runs from the date of the foreclosure.

No Relief to REO/Fannie Mae Owned Properties, But….

The Act does not apply to mortgagees, noteholders, servicers, their affiliates, or government entities like the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) that continue to hold title to properties following foreclosure sales. The Act only applies “arm’s length third party purchasers for value,” defined as a party who either (1) purchased the property directly at the foreclosure sale, or (2) purchased the property from the bank or another entity at some point after the foreclosure sale, to the extent the power of sale was not duly exercised.” While foreclosing parties, noteholders, and mortgagees will not benefit directly from the Act on properties that they own or service, they will benefit from the resolution of title disputes, the insurability of properties they formerly owned or foreclosed, and the validity of mortgages that they currently service.

Broader Applicability?

The Legislature clearly intended for the Act to resolve title defects arising out of the Ibanez case. But the Act, as drafted, is not limited to just Ibanez defects. It could also be applied to defects arising out of other SJC rulings, including Eaton (promissory note status), Pinti (cure notice) and Schumacher (cure notice).  Because the Act is retroactive and silent as to what specific title issues it resolves, a recorded mortgagee affidavit could cure many other issues aside from Ibanez issues. We will see how title underwriters and the courts apply the Act in the months to come. As always, the best practice is to get your title underwriter’s opinion in an email and place in your file.

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Massachusetts Recreational Marijuana Law: Best Practices For Landlords

by Rich Vetstein on December 15, 2016

in Landlord Tenant Law, Massachusetts Real Estate Law, Medical Marijuana, Recreational Marijuana, Rental Housing

marijuana-growing-green-rush-1217.jpgProperty Owners Should Get New Marijuana Policies and Lease Riders In Place Now

On December 15, 2016, the recreational use of marijuana became legal in the Commonwealth of Massachusetts, after voters approved Ballot Question 4 The Regulation and Taxation of Marijuana Act. Driving down the Pike this morning on my way to Boston Housing Court, I did not see any “Cheech and Chong” scenes in vehicles. That said, the new law will no doubt affect the legal relationship between landlords and tenants and will likely result in disputes as to what can and cannot be done with respect to cultivating, growing and using marijuana in and around rental property.

What is Legal and Illegal Generally?

  • Adults (21 or over) may possess up to 10 ounces of marijuana in their primary residence. A person may cultivate up to 6 marijuana plants for personal use, and up to 12 plants per household are allowed if more than one adult lives on the premises. Marijuana growing at home must be done discreetly and securely. Marijuana plants cannot be plainly visible from the street or any public area and must be cultivated someplace where there is a security device.
  • Outside the home, adults 21 or over can possess up to 1 ounce of marijuana.
  • Recreational marijuana cannot be sold in any form in Massachusetts without a retail license. A Cannabis Control Commission, yet to be named, will be responsible for issuing retail licenses.
  • Marijuana cannot be possessed, purchased, grown or used by anyone under age 21 (unless they have a valid medical marijuana permit), and it’s against the law to give away marijuana to someone under 21.
  • Using marijuana is illegal in any public place. You can’t, for example, walk down the street smoking a joint the way you would a cigarette. It’s also illegal to use marijuana in any place where tobacco is banned.
  • Possession of any amount of marijuana remains illegal on school grounds, public housing, and government buildings.

Can Tenants Use or Cultivate Marijuana In Rental Property?

The key provision in the Act provides that it is illegal to:

“prevent a person from prohibiting or otherwise regulating the consumption, display, production, processing, manufacture or sale of marijuana and marijuana accessories on or in property the person owns, occupies or manages, except that a lease agreement shall not prohibit a tenant from consuming marijuana by means other than smoking on or in property in which the tenant resides unless failing to do so would cause the landlord to violate a federal law or regulation.”

As I read the new law, landlords have the ability through a lease agreement to regulate the smoking and cultivation of marijuana in rental property, except that landlords cannot prohibit the consumption of marijuana edibles or any other form of non-smoking consumption.

New Marijuana Lease Addendums Should Be Implemented

Now, here’s the rub. Most current leases in effect right now do not have specific provisions dealing with marijuana use. Some leases have anti-smoking and nuisance provisions, which would arguably prohibit pot smoking, but it’s not clear whether that would apply to the discreet growing of marijuana. Under general contract law, there must be some additional legal consideration to significantly amend a lease agreement and curtail a tenant’s rights. Thus, there is a question as to whether existing lease provision would apply to the tenant use/growing of marijuana. Courts will have to decide these issues going forward. I would imagine that most landlords would not want to take on the risk of hundreds of tenants each growing 12 marijuana plants in their apartments. As I explain below, it is incumbent upon landlords to get marijuana policies and lease riders in place now and going forward on new leases. 

Practice Pointer:  If you are a landlord and you want to have a strict marijuana use policy, you must act now and have your tenants sign a new lease addendum for recreational marijuana use. The addendum should, among other things, provide that smoking and growing of marijuana is strictly prohibited, while consumption of edibles is allowed, provided that it does not create a nuisance. There should also be indemnification language in the rider as well. My office can assist you with drafting a marijuana lease rider.

e-cigarettes-being-used-by-teenagers-for-vaping-marijuana-pot-weedVaping = Smoking?

Marijuana consumption technology has come a long way since your college dorm room. I’ve been told that many serious users use vaping technology which heats and vaporizes buds, giving the user a much cleaner and less toxic high. A question which may come up is whether vaping is equivalent to smoking. Not being an expert on marijuana technology, I will leave that to the experts. My brief Google research says that vaping does still produce a slight odor of marijuana but far less than traditional smoking of a joint or pipe. I think it will all depend on how vaping impacts neighbors in an apartment building.

Utility/Water Usage

If a tenant begins growing and cultivating up to 12 marijuana plants as allowed under the new law, how will that affect utility and water usage? Under the State Sanitary Code, the landlord is obligated to pay for electricity and gas in each dwelling unit unless it is separately metered and there is a written document that provides for payment by the tenant. See 105 Code Mass. Regs. § 410.354. Concerning billing a tenant for water use, under the Tenant Metering Law, a landlord can only bill the tenant water usage if he satisfies many onerous requirements such as getting local certification and installing low flow faucets and shower heads. If you allow growing of marijuana in your rental property, make sure that the tenant does not hose you with a huge water/electric bill. Again, your new marijuana lease rider should address this issue, among other items.

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100316_photo_vetstein-2-150x150.pngIf you need assistance with creating a new Massachusetts Marijuana Lease Addendum/Rider, please contact me at [email protected] or 508-620-5352, and we would be happy to create a customized one for you!

 

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Breaking: Boston Mayor Walsh Files Just Cause Eviction Home Rule Petition

by Rich Vetstein on December 5, 2016

in Affordable Housing/40B, Housing Court, Landlord Tenant Law, Leasing, Massachusetts Real Estate Law, Rental Housing

A Step Back To Rent Control Or Solution To The Affordable Housing Crisis?

Citing skyrocketing rents and lack of affordable housing — and over the vociferous objections of property owners — Boston Mayor Marty Walsh has sided with pro-tenant groups and has formally submitted a home-rule petition to the Boston City Council to create wide-ranging “just cause” eviction protections for all Boston tenants. Harking back to the days of rent control, the petition, named the Jim Brooks Community Stabilization Act after a recently deceased Roxbury housing advocate, prohibits virtually all no-fault evictions in favor of evictions only for certain enumerated “just cause” grounds. The law also requires landlords to file a notice of termination with the newly formed Office of Housing Stability prior to starting an eviction. In a state which is already extremely pro-tenant, this new law will make evicting tenants even more difficult and cost prohibitive, and may also affect owners’ rights to raise rents and sell rental property in the City of Boston.

“Just Cause” Grounds for Eviction

The petition (embedded below) provides that landlords may only evict tenants for nine (9) specified reasons:

  • Non-payment of rent.
  • Violations of lease provisions
  • Nuisance/damage to unit
  • Illegal activity such as drug use
  • Refusal to agree to lease extension or renewal
  • Failure to provide access.
  • Subtenant not approved by landlord
  • Landlord requires premises for housing for family member
  • Post-foreclosure and occupant refuses to pay fair market rent

Middle Ground?

It’s not all bad news for property owners, however. The Walsh bill is a compromise from what tenant groups had pressed for. They wanted to require landlords to submit to mediation for rent hikes of more than 5%, but were not able to get support for it among city council members. Tenant groups also pushed for prohibitions on evicting elderly or disabled tenants and long term renters with children in the school system. The Mayor rejected those ideas as well.

Additionally, not all landlords are covered by the new law. Exempt are owners of 6 or fewer residential rental units, owner-occupants of multi-family dwellings, and Section 8/federally subsidized housing.

Landlord groups, meanwhile, remain skeptical of Walsh’s proposal. State law already has strong tenant protections, Greg Vasil, chief executive of the Greater Boston Real Estate Board told the Boston Globe. Adding more will only subject building owners to even-more-drawn-out legal fights with tenants, he said. And, Vasil added, Walsh’s restrictions may deter developers from building more apartments in Boston, which has been a top priority for the mayor, who has pledged to add 53,000 units by 2030 and combat high housing costs. “This would make it more difficult to develop housing for the middle of the market,” Vasil said. “We’ve been making good progress and I’d hate to see anything happen to that.”

Because the bill is a Home Rule Petition, it must be approved by the City Council then the entire State Legislature. The bill may also face court challenges because it fundamentally alters existing private contracts and the very nature of a tenancy at will relationship. If the petition becomes law, evictions in Boston will become even harder and more expensive.

Readers, what are your thoughts on this important development? Post below in the comments.

Boston Just Cause Eviction Home Rule Petition by Richard Vetstein on Scribd

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Vote Robert Jubinville for Governor’s Council

by Rich Vetstein on November 2, 2016

in Massachusetts Real Estate Law

2669371_origI rarely get into politics on this Blog, but I have to make an exception for my colleague Attorney Robert Jubinville who is running for reelection for Governor’s Council in District 2 which covers Milton, Sharon and a good part of Metro South. The Governor’s Council is a little known political body, but it has a very important job — confirmation of all judicial nominations.

Bob Jubinville is one of the preeminent criminal defense lawyers in the state, with over 30 years of experience in the courtroom. A former State Police trooper, he is also the father of two adult daughters — one is a lawyer, the other a probation officer. He lives and works in his home office in East Milton Square on Adams Street next to the post office.

With all that real life experience, Bob has a keen eye as to which candidate would make a good judge.

Perhaps most impressive is Bob’s long standing advocacy on behalf of those suffering from addiction, particularly the heroin crisis ripping our communities apart. Bob has already ensured that our future judges have a working knowledge of addiction science and treatment and will allow people suffering from addiction to have access to treatment as opposed to incarceration.

For more info on Bob, here is a Boston.com article.

If your ballot shows Robert Jubinville for Governor’s Council, please consider voting for him.

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Federal Appeals Court Shoots Down CFPB: Structure Ruled Unconstitutional

by Rich Vetstein on October 12, 2016

in Massachusetts Real Estate Law

Mortgage Lender Wins Stunning Ruling Challenging $103 Million Fine

Characterizing Director Richard Cordray of the Consumer Financial Protection Bureau as the “single most powerful official in the entire U.S. Government, other than the President,” a federal appeals court ruled yesterday in the case of PHH Corporation v. CFPB, that the CFPB’s organizational structure and authority to impose fines violates the due process provisions of the U.S. Constitution. The surprising 101-page ruling called into question the Director’s authority to impose certain fines and the agency’s authority to enact rules and regulations, although future appeals are likely. The agency, the pet project of Sen. Elizabeth Warren, has long been criticized by the banking industry and congressional Republicans as wielding too much power.

PHH, a mortgage lender, made national headlines when it challenged Director Cordray’s decision to tack on a $103 million increase to a $6 million fine initially levied against PHH for allegedly illegally referring consumers to mortgage insurers in exchange for kickbacks in violation of the Real Estate Settlement Procedures Act. The case was one of the first times that a company fought back against the CFPB, the governmental agency championed by Elizabeth Warren and congressional liberals after the Bush era financial crisis and the Dodd-Frank Act.

In a unanimous decision, a three judge panel of the federal appeals court governing Washington D.C. ruled that the CFPB’s current structure allows the director to wield far too much power, more than any other agency in the entire U.S government. “Because the Director alone heads the agency without Presidential supervision, and in light of the CFPB’s broad authority over the U.S. economy, the Director enjoys significantly more unilateral power than any single member of any other independent agency,” the judges reasoned.

The fallout remains unclear, but certainly this ruling gives opponents of the CFPB heavy ammunition to challenge the agency on its decisions and rule-making authority. The Mortgage Bankers Association welcomed the decision and the clarification the decision presents for RESPA. “MBA is gratified that the court has issued an extremely thoughtful opinion.  It addresses all of the key issues raised by the PHH case, including the proper interpretation of the Real Estate Settlement Procedures Act, the need for due process including reasonable statutes of limitations and the very constitutionality of the CFPB itself,” MBA President and CEO David Stevens said.

The National Association of Realtors also welcomed the decision’s clarity surrounding marketing service agreements, which are clearly a target of the CFPB. “Today’s decision offers much-needed clarity on the legality of marketing service agreements, and makes clear that MSAs are compliant with RESPA provided that payment for goods and services actually furnished or performed are made at fair market,” said NAR President Tom Salomone. “We’re hopeful this will address any uncertainty moving forward and offer a clear road ahead for any of our members who have entered into MSAs with settlement service providers,” Salomone continued. “We will continue to monitor this case and the further appeals that are likely, and continue to communicate to Realtors on what this means for them and their business.”

I have been a vocal critic of the CFPB’s massive revision to the closing and settlement disclosure statements which went into effect last year. While there is no indication that the new Closing Disclosure and Loan Estimate will go away, this ruling will hopefully make the agency think twice about going over the top with future rules and regulations.

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Selling The “Brady Bunch” House With Realtor Matt Cuddy

by Rich Vetstein on October 7, 2016

in Massachusetts Real Estate Law, Real Estate Marketing

sub-buzz-16144-1472602162-11970’s Groovy, Retro Framingham Home Proves to be Tough Sell

File this post under “Just For Fun.” Most Realtors have stories about trying to sell that outdated, 1970’s style home. Well, last night, I ran into Framingham Realtor Matt Cuddy who told me the amazing story of his now famous listing at 3 Hickey Drive, Framingham, MA.

This home is a preserved time capsule of the 1970’s, complete with shag rugs, a lime green kitchen, vintage, 1970s built-in Thermador can opener, a built-in, stainless steel toaster that magically pops out from the wall, and an authentic, 1970s 8-track that’s built into the wall. All this home needs is John Travolta to walk through the door doing The Hustle!

To say that marketing this home is a challenge would be a huge understatement. But Matt has done a job which would make Mike and Carol Brady proud. Matt has gotten free press coverage in the Boston Magazine, Good Morning America, the Boston Globe, and even millennial favorite Buzzfeed. Despite receiving countless inquiries and over 4 million clicks on the various articles, a buyer has remained elusive for this groovy property.

Matt has even been exploring creative ideas such as selling or leasing the home to movie production companies for shoots. My own personal idea was to convert the home into a music studio!

This home is a great example of how Realtors are often faced with challenging homes to market and must come up with innovative solutions to find buyers.

If you have any good stories of your own, feel free to post them in the comment section below! And check out these groovy shindigs!

sub-buzz-19914-1472602157-1

sub-buzz-23363-1472602161-4

 

sub-buzz-22993-1472602152-1

sub-buzz-14038-1472602300-2

All photographs courtesy of Matt Cuddy – Century 21

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Attorney Affidavit Approved To Cure Defective Mortgage Notary Acknowledgment

by Rich Vetstein on September 23, 2016

in Closings, Massachusetts Real Estate Law, Mortgages, Title Defects, Title Insurance

notary-public

SJC Decision Provides Clarity to Title Attorneys

Now that the summer is over, it’s time to get back to blogging! During the quiet summer months, the Supreme Judicial Court issued an important decision for real estate attorneys and the title community in Bank of America v. Casey (June 16, 2016) (link to case). The SJC confirmed that a statutory curative attorney’s affidavit may be recorded with the registry of deeds correcting a defective notary acknowledgment on a mortgage which otherwise could have invalidated the instrument. This is a very helpful decision, and should result in more titles (and properties) being cleared and sold.

Defective Notary Acknowledgment

In 2005, Alvaro and Lisa Pereira refinanced their New Bedford property with Bank of America, N.A. The Pereiras individually initialed the bottom of each page of the mortgage agreement except the signature page, on which the full signature of each appears. Attorney Raymond J. Quintin, the closing attorney, also signed this page, as the notary to the Pereiras’ execution of the mortgage. The mortgage agreement contains a certificate of acknowledgment (acknowledgment) on a separate page. The Pereiras individually initialed the acknowledgment page at the bottom, but the acknowledgment itself is blank in the space designated for the names of the persons appearing before the notary public, and the Pereiras’ names do not appear elsewhere on the page. Quintin notarized the acknowledgment, affixing his signature and his notary public seal. 

Seven years later (which is unexplained in the ruling), Attorney Quintin signed and recorded an “Attorney’s Affidavit, M.G.L. Ch. 183, Sec. 5B” stating that he properly witnessed the Pereiras signing the mortgage and that “through inadvertence, the names of the parties executing this mortgage, Lisa M. Pereira and Alvaro M. Pereira, were omitted from the notary clause.” Parenthetically, these curative affidavits are quite common in the industry.

Approximately six months later, Mr. Pereira filed for bankruptcy and sought to be released from responsibility under the mortgage on the ground that the mortgage contained a material defect — the omission of the mortgagors’ names from the acknowledgment.

SJC–Attorney Affidavits Pursuant to G.L. c. 183, sec. 5B May Cure Defective Notary Acknowledgment

The Court first went over the general rule that a defective notary acknowledgment is usually grounds to void any recordable instrument altogether. Mass. General Laws chapter 183 section 5B provides a cure to this problem by providing that “an affidavit made by a person claiming to have personal knowledge of the facts therein stated and containing a certificate by an attorney at law that the facts stated in the affidavit are relevant to the title to certain land and will be of benefit and assistance in clarifying the chain of title may be filed for record and shall be recorded in the registry of deeds where the land or any part thereof lies.”

The Court then ruled that the curative affidavit recorded by the closing attorney cured the defect and validated the mortgage. The Court said the attorney’s affidavit must comply with the formal requirements of § 5B, attests to facts that clarify the chain of title by supplying information omitted from the originally recorded acknowledgement, and references the previously recorded mortgage. As long as it does that, the problem is solved.

This isn’t a “sexy” opinion, but it is nevertheless important to the real estate bar and community.

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Fines Coming For “No More Than Four” Boston Student Housing Rule Violations?

by Rich Vetstein on August 25, 2016

in Housing Discrimination, Landlord Tenant Law, Leasing, Massachusetts Real Estate Law, Rental Housing

IMG_0105

Rule Prohibits No More Than 4 Undergraduate Students Per Rental Unit

With thousands of college students set to invade Boston in the next week, the Chief of Boston’s Inspectional Services Department is letting local landlords know that he intends to enforce an eight year old ordinance barring no more than four undergraduate students from living together in off-campus apartments and houses.

Feeling pressure from local residents and in reaction to the tragic death of 22-year-old Boston University senior Binland Lee, who got trapped in an overcrowded Allston apartment house, ISD Chief William Christopher has had enough, saying “we’ve found a way to make this punitive, and we think this will take it to another level.” City officials want landlords to report the number of undergraduates living in each unit. Landlords would report that information when they register each unit annually, which is a requirement the city established in 2013.

Mr. Christopher and I discussed the “No More Than 4” rule on the WHGH-PBS Greater Boston show this week. The video of the show can be seen below. I have always had major problems with this rule, both its legality and on a public policy level. The state sanitary and building codes provide maximum occupancy levels based on the square footage of the unit, as the Supreme Judicial Court held a few years ago striking down a similar action by Worcester Housing officials. The city should enforce the rules already on the books rather than painting all undergraduate students as potential troublemakers or artificially creating more demand which increases rents. If ISD starts fining landlords, look for the no more than 4 rule to face a legal challenge which could be successful.

 

 

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Realtors Successfully Lobby Against Mandatory Home Energy Labeling Law

by Rich Vetstein on August 2, 2016

in Disclosures, Environmental Law, Home Inspections, Massachusetts Real Estate Law

Energy Audit

Energy Savings Law Would Have Required Energy Score On Homes for Sale

The 22,000-member Massachusetts Association of Realtors® (MAR) has successfully lobbied against a controversial provision within proposed energy saving legislation which would impose a new government energy inspection and labeling system on every home listed for sale. The Realtor group argued that one of the unintended consequences of the proposed labeling law is the negative impacts on Massachusetts’ old housing stock. Realtors assert that this especially would hurt low- and moderate-income communities where the homeowners cannot afford to make upgrades. The ratings could cause depressed values of those older homes as well, agents argued.

As reported on their Facebook page, MAR said that on July 31, legislators removed this language before releasing an updated version of the bill.

“Realtors® support energy efficiency and voluntary home improvement programs like Mass Save, which we already pay for through our utility bills. But if these mandatory energy inspections become law, the bill causes more harm than good,” said 2016 MAR President Annie Blatz, branch executive at Kinlin Grover Real Estate on Cape Cod. “This comes down to the unintended consequences of trying to mandate a one-size-fits-all approach. It will hurt the housing market for all homeowners, especially those low-income homeowners with older homes who can’t afford to improve their score prior to selling their home.”

“The idea that requiring a government energy label on your home is the same as a miles-per-gallon (MPG) rating on a new car that comes off an assembly line by the millions is a poor comparison,” said Blatz. “Every home is different and our Massachusetts housing stock generally is older, which makes that argument even weaker. Especially hard-hit will be homeowners who can’t afford to make upgrades, especially during such a complicated process as a home sale. Entire older communities could be stigmatized and lose value.”

From a market perspective, the bill as drafted would have further complicated an already complex process of buying and selling a home. Requiring an energy audit prior to listing a home will lead to home buying delays. Currently, the Massachusetts housing market is starved for homes for sale and Realtors feel that this bill would put one more roadblock in the way of needed inventory reaching the market. In addition, a home inspection is customarily not performed until the buyer is under contract to purchase a home.

 

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Appealing Chapter 40B Affordable Housing Permits Just Got A Lot Harder

by Rich Vetstein on July 18, 2016

in Affordable Housing/40B, Massachusetts Real Estate Law, Rental Housing, Zoning

AR-160427630Eisai, Inc. v. Housing Appeals Committee: Master Plan Conflict Does Not Trump Need For Affordable Housing

Chapter 40B — the state’s so-called “anti-snob” affordable housing law — has pitted developers vs. towns and neighbors in contentious fights over affordable housing projects. It’s one of the most controversial laws in the state, with opponents seeking to reform or repeal the law in recent years. In my home town of Sudbury, for example, there are “Oppose Sudbury Station” signs all over town, in opposition to a planned 200+ unit development in the middle of the historic town center.

While battles rage on the local level, Massachusetts courts have been rather tough on 40B opponents and boards who oppose projects. Last month, in another setback to Chapter 40B opponents, the Massachusetts Appeals Court in Eisai, Inc. v. Housing Appeals Committee (June 20, 2016), allowed a controversial Andover 40B project to proceed over the local ZBA’s denial of the permit on grounds that the town master plan is a local concern that trumps the need for affordable housing.

In the Eisai case, an Andover developer filed a 40B Comprehensive Permit application to build a 248-rental-unit project within an existing office and industrial park. The local zoning board of appeals denied the application on the ground that the “proposed project is inconsistent with decades of municipal planning, economic development strategies, and planning with owners and tenants of the abutting industrial properties[,] . . . most notably, the rezoning of the locus and abutting properties to accommodate and develop a modern, competitive, and viable industrial park and industrial center.” On appeal by the developer, the state Housing Appeals Committee, a state agency which hears appeals of 40B permits, reversed and ordered the local board to issue the Comprehensive Permit. The case was further appealed to the Superior Court, which upheld the permit, then to the state Appeals Court.

The important aspect of the appellate ruling was the Court’s endorsement of a new reformulated four factor test announced by the HAC under which the ZBA must offer more evidence of local concerns to outweigh the regional need for affordable housing. On its face, the reformulated test requires boards to provide a greater amount of more specific, higher quality information in order to tip the scale in favor of upholding the master plan and denying a 40B project.

Project opponents must now demonstrate the following:

  1. The extent to which the proposed housing is in conflict with or undermines the specific planning interest.
  2. The importance of the specific planning interest, under the facts presented, measured, to the extent possible, in quantitative terms . . . .
  3. The quality . . . of the overall master plan (or other planning documents or efforts) and the extent to which it has been implemented. A very significant component of the master plan is the housing element of that plan (or any separate affordable housing plan). The housing element must not only promote affordable housing, but to be given significant weight, the Board must also show to what extent it is an effective planning tool. . . .
  4. The amount [and type] of affordable housing that has resulted from affordable housing planning.

Faced with the new, reformulated test, my prediction is that local boards and 40B opponents are going to have a much tougher time opposing 40B projects.

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