Massachusetts Real Estate Law

50% Discount Off Massachusetts Mid-Year Mortgage Conference on June 23

by Rich Vetstein on June 10, 2016

On June 23, the Warren Group will host its widely attended Midyear Mortgage Update & Conference at the Verve Hotel in Natick, MA. The Midyear Update, for the mortgage and real estate industry, recaps the first 6 months of 2016, in addition to forecasting the remainder of the year.

Featured speakers include Middlesex North Registrar of Deeds Richard (Dick) Howe, Paul T. Pouliot, First Vice President, Mortgage Manager, Federal Home Loan Bank of Boston, Robert Triest, Vice President and Economist, Federal Reserve Bank of Boston, Annie Blatz, President, Massachusetts Association of REALTORS®, and Timothy Warren, Jr., CEO, The Warren Group.

I am honored to be speaking on a panel with Kimberly Allard, former President of the MAR. As a panel speaker, I am able to offer my readers and guests 50% of the admission for an all event pass costing $37.50. You can register by clicking this LINK. Your discount code is: SPEAKERGUESTMA

When:
June 23, 2016
8:00 a.m. – 12:00 p.m.

Where:
The VERVE Crowne Plaza – Natick
1360 Worcester Street
Natick, MA 01760

The full schedule is below:

8:30 AM General Session Speakers

Paul T. Pouliot, First Vice President, Mortgage Manager, Federal Home Loan Bank of Boston
FHLB System Your One stop Shopping Partner for the Secondary Market
Come and listen to what the Federal Home Loan Bank of Boston is doing about providing liquidity for the Housing Finance Industry, new initiatives that will promote job growth and new or enhancements to the Mortgage Partnership Finance program.

Bio: Paul Pouliot joined the Federal Home Loan Bank of Boston in May 2000 as Vice President/Mortgage Manager. In December 2001 he was promoted to First Vice President. Paul has responsibility for the marketing and overall approval process of prospective Participating Financial Institutions (PFIs). He currently serves on the MPF Partnership Committee for the FHLB System. He has dedicated more than 40 years to the mortgage banking industry and holds a Master Certified Mortgage Banker designation from the Mortgage Bankers Association of America. He co-founded Colonial Mortgage, Inc and helped direct its operations until CFX Mortgage (which was subsequently acquired by Peoples Heritage Savings Bank) acquired the company.

Annie Blatz, President, Massachusetts Association of REALTORS®
The Massachusetts Association of REALTORS® is a professional trade association for licensed real estate practitioners and serves in a federated relationship with the state’s 13 local REALTOR® associations. Membership in the organization is voluntary and consists of both residential and commercial agents and brokers as well as industry affiliates. MAR’s membership currently consists of approximately 20,500 real estate licensees, and only MAR members are authorized to use the trademark term, REALTOR®. The state association’s headquarters is located in Waltham, MA

Timothy Warren, Jr., CEO, The Warren Group
As one of New England’s foremost real estate thought leaders, Tim Warren will take you through The Warren Group’s extensive sales and property data. By combining the most up-to-date real estate statistics, framed with an in-depth historical perspective, you will start to see a one-of-a-kind illustration of the current marketplace. Mr. Warren’s session will address pressing questions, including when the significant effects of the foreclosure crisis will subside and how inventory levels will replenish themselves in the coming years.

Bio: Timothy M. Warren Jr., CEO of The Warren Group, is the fourth generation of family ownership and management. A graduate of Bowdoin College, Tim joined the family business in 1973, rose to president in 1988, and CEO in 2004. He has played a vital role in extending the company’s comprehensive real estate database, growing its publishing and events business and expanding public relations efforts.

Mr. Warren is a regularly shares his analysis of real estate issues to major news outlets, including The Boston Globe and Boston Herald; radio stations WBUR and WBZ; and television, including appearances on Fox 25 News, NECN Business, The Chronicle (WCVB) and the Emily Rooney Show (WGBH). Tim serves on the advisory board of the Rappaport Institute for Greater Boston and the Family Business Association Advisory Council.

10:00 AM – 11:00 AM Concurrent Sessions – choose from one of two

Panel 1
Panelists will touch upon cutting edge technology and media, provide legal perspective, discuss life after TRID and pitfalls in your communications. More details coming soon.

Kimberly Allard, Past President of MAR, Century 21
With over 17 Years of Real Estate Experience, Kimberly Allard’s dynamic approach to sharing and presenting information will help refresh your professional development offerings. Kimberly is a very active Selling Broker/Owner and that’s not likely to change. She is excited about taking her 15 years of hospitality management experience, 30 years of training experience and real estate experience and combining it ( with her usual humor) to get your programs on the fast track for success!

Richard Vestein, President, Vestein Law Group, P.C.
Richard D. Vetstein, Esq. is a nationally recognized real estate attorney, helping people buy, sell, and finance real estate. Mr. Vetstein is the past Chair of the Boston Bar Association’s Title & Conveyancing Committee and was also named as one of Inman News’ Most Influential People in Real Estate. Mr. Vetstein has testified before the state legislature on landlord’s rights and title clearance legislation. Mr. Vetstein’s popular Massachusetts Real Estate Law Blog has won several awards including the American Bar Association’s Top Legal “Blawg” award. Mr. Vetstein also gives legal seminars to Realtor and property owner groups across the state. When he is not practicing law, Rich enjoys boxing workouts, arguing politics on Facebook and hanging out with his two kids.

William Pastuszek, Principal, Shepherd Associates, LLC – Real Property Valuation and Consulting
The principal of Shepherd Associates is William J. Pastuszek, Jr., MAI, SRA, MRA. He has been involved in real estate appraising for more than 25 years and is licensed in several New England states. His license number as a Massachusetts General Certified Real Estate Appraiser is #10. Bill has a background in banking and property management/development. His appraisal experience includes residential and commercial practice areas His clientele includes financial institutions, attorneys, accountants, governmental entities, corporations and private individual. He has qualified as an expert witness in many jurisdictions.

Panel 2
Panelists will discuss best practices, how to achieve and sustain grown and provide lenders perspective.
More details coming soon.
Amy Slotnick, Branch Manager, Fairway Independent Mortgage
Amy Slotnick utilizes over 33 years of industry experience in her daily function as Branch Manager and Loan Originator at Fairway Independent Mortgage Corporation. She joined the company in 2007 and quickly became the company’s number one producing loan originator, a title she held for six years. In 2014 Amy became a Branch Manager and over the past two years has grown the office three-fold and added a satellite office in Hingham, MA to her existing branches in Newton and Holden, MA.

Brian Sousa, Chief Lending Officer, Jeanne D’Arc Credit Union
Brian Sousa is Senior Vice President and Chief Lending Officer at Jeanne D’Arc Credit Union, a 1.1 billion dollar organization with over 75,000 members, located in Lowell, MA. Mr. Sousa’s twenty-five years of experience in the lending and real-estate industry crosses retail and wholesale mortgage sales, residential and commercial mortgage appraising, and residential and commercial real-estate sales and leasing. Mr. Sousa was the founder of First Team Mortgage Corporation a Chelmsford, MA organization that he built from the ground up and ran for twelve years. As a well-established mortgage professional, he was hired by the credit union in 2012 as Vice President/Residential Lending to create opportunities and expand its product base. His strong leadership and management skills have led to a 63% increase in the residential loan portfolio and a 25% increase in the total loan portfolio since being named Chief Lending Officer in April of 2015. Brian has always shared the credit union philosophy of people helping people through his community involvement and support of many local charities. He currently serves on the Board of Directors for the Boys and Girls Club of Greater Lowell, the Senior Advisory Board for the Lowell Community Health Center, and is an Advisory Board Member of Catie’s Closet, Inc.

Chip Poli, Owner, Poli Mortgage
Chip has 20 years of experience in the real estate industry and has been consistently ranked in the top 1% of mortgage originators in the country. His expertise is broad-based, with a strong foundation in real estate sales, extensive experience in recruitment and management of highly successful brokers and sales teams, and exemplary leadership abilities which have enabled him to quickly achieve phenomenal success at Poli Mortgage Group, Inc.

11:15 AM General Session Speakers

Geoffrey F. Cooper, Vice President Product Development, Mortgage Guaranty Insurance Corporation (MGIC)

Mortgage Credit Trends in the Post-Crisis Era
It’s been almost 7 years since the end of the Great Recession and the US single-family residential mortgage market’s recovery from the historic foreclosure crisis is almost complete. In this post-crisis era, the US has experienced a slow, rolling economic recovery and a bounce-back in home price growth. What has happened to the state of mortgage credit in this time? MGIC addresses this question, highlighting industry efforts to prudently expand the credit box, and identifying product trends in the market place. MGIC will also explore the fundamentals of mortgage credit risk, revisiting critical risk factors and their interrelation in layer-risk scenarios both pre- and post-crisis.

Bio: Geoffrey F. Cooper is Vice President Product Development at Mortgage Guaranty Insurance Corporation (MGIC). He recently returned to MGIC after serving for six years as Director – Single Family at the Wisconsin Housing and Economic Development Authority (WHEDA), a state HFA. Prior to leaving MGIC to join WHEDA in June 2008, Cooper held several positions over 14 years, most recently servicing as Director – Emerging Markets where he oversaw MGIC’s HFA business initiatives.

Richard P. Howe, Jr., Registry of Deeds – Middlesex North

Electronic Recording in Massachusetts
After a decade of experience with electronic recording which now accounts for 50% of all documents and 65% of all mortgages recorded at the Middlesex North Registry of Deeds, Register of Deeds Richard Howe will review the successes and challenges of electronic recording in Massachusetts and will share plans for the future including electronic recording of registered land, ways in which state and local government might increase efficiency through electronic recording; and the recording of purely electronic documents that never exist on paper.

Bio: Richard P. Howe Jr. is the Register of Deeds of the Middlesex North District where he has been a leader in the implementation of new technology and improved customer service. Middlesex North was the first registry of deeds in Massachusetts to fully implement electronic recording which now accounts for nearly 50% of all filings. It was also the first registry to become entirely paperless, with all land records from 1629 to the present available in digital form, both at the registry and online.

Prior to becoming Register of Deeds, Mr. Howe practiced law in Lowell, concentrating in real estate and criminal defense. In the early 1980s, he served as a U.S. Army intelligence officer in West Germany. He holds a BA from Providence College, an MA in History from Salem State, and a JD from Suffolk University Law School.

Richard Howe is the author of Lowell: Images of Modern America and the co-author of Legendary Locals of Lowell. He is the founder and primary author of www.richardhowe.com, a hyper-local blog about the history and politics of Lowell. He lectures frequently on real estate law, Lowell history, and many other topics.

Robert Triest, Vice President and Economist, Federal Reserve Bank of Boston

Regional Economic Update
Dr. Triest will present regional economic trends and discuss recent monetary policy actions.
Bio: Robert K. Triest is a vice president and economist in the research department at the Federal Reserve Bank of Boston, where he leads the macroeconomic applications and policy studies section. Prior to joining the Boston Fed in 1995, Triest was a member of the economics faculties at the University of California, Davis and at The Johns Hopkins University. He has also been a visiting scholar at the Center for Retirement Research at Boston College and has taught in the economics department at M.I.T. and Northeastern University and at the Kennedy School of Government at Harvard University. He currently serves on the Universal Pre-Kindergarten Advisory Committee convened by Mayor Walsh to make recommendations for a strategic framework and action plan to expand pre-kindergarten programs in Boston. Triest’s research has been mainly on topics in labor economics and public sector economics, with recent work focusing on the interaction of economic circumstances and educational outcomes. He earned a B.A. degree in economics from Vassar College and an M.S. and a Ph.D. in economics from the University of Wisconsin at Madison.

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OMG! Text Messages May Form Binding Real Estate Contract, Land Court Rules

by Rich Vetstein on May 8, 2016

in Land Court, Massachusetts Real Estate Law, Offer To Purchase, Purchase and Sale Agreements, Real Estate Litigation, Realtors, Technology

Text Messages Enforceable As Written Contract, Court Rules

With the proliferation of email and texts as the primary method of communications in real estate negotiations, it was just a matter of time before Massachusetts courts were faced with the question of whether and to what extent e-mails and texts can constitute a binding and enforceable agreement to purchase and sell real estate. In a ground-breaking case, Land Court Justice Robert Foster ruled in a case of first impression that text messages may form a binding contract in real estate negotiations–even where a formal offer has not been signed by the seller. This is huge wake up call for the remaining industry people who still believe that electronic communications are not legally binding.

St. John’s Holdings LLC v. Two Electronics, LLC

The case (embedded below) involves a commercial real estate deal between two businesses both represented by commercial real estate brokers for the purchase and sale of an industrial park property in Danvers. Two Electronics, as seller, and St. John’s Holdings, as buyer, negotiated for several weeks exchanging two “Binding Letters of Intent” spelling out all material terms of the proposed purchase of $3.2 Million. Towards the culmination of the negotiations, the real estate brokers exchanged several emails and texts, with the seller’s agent sending an email that his client was “ready to do this,” then a text that —

“[the seller] wants you to sign first, with a check, and then he will sign. Normally, the seller signs last or second. Not trying to be stupid or to the contrary, but that’s the way it normally works. Can Rick sign today and get it to me today? Tim”

The buyer signed four copies of the final Letter of Intent and tendered the deposit check with the buyer broker, after which the buyer’s broker sent the seller’s agent another text — “Tim I have the signed LOI and check. It’s 424 [PM]. Where can I meet you?” Shortly thereafter, the two agents met, and the buyer’s broker tendered the buyer signed Letter of Intent along with the deposit check.

Unbeknownst to the buyer, that same day, the seller had received another offer on the property, and proceeded to sign that offer. The seller then refused to sign the Letter of Intent with St. John’s. St. John’s sued, claiming that the series of letters of intent, emails and text messages constituted a binding and enforceable contract.

Intersection of 17th Century Statute of Frauds with 21st Century Text Messages

In Massachusetts, the Statute of Frauds requires that contracts for the sale of real state must be in writing signed by the party (or agent) to be charged. In the old days of pen and paper, application of the Statute was quite simple. If there wasn’t a written agreement signed in wet, ink signatures, there was no binding contract. With the proliferation of e-mail and text communication, application of the Statute of Frauds has become much more nuanced.

In the case discussed here, Judge Robert Foster noted several recent judicial decisions holding that emails may be binding as well as the Uniform Electronic Transactions Act, under which parties may impliedly consent through their actions to make email and text transmissions binding and enforceable. Emphasizing the fact that the seller’s agent signed his name “Tim” at the end of the critical text message, the judge found that the text message was sufficiently “signed” under the Statute of Frauds to constitute a binding agreement at the culmination of the previous communications and unsigned letters of intent. The judge also found persuasive that the seller’s agent told the buyer’s agent to have the buyer sign the letter of intent first, and that’s exactly what the buyer did. Finding in favor of the buyer, the judge denied the seller’s motion to dismiss and issued a restraining order against the seller’s conveyance of the subject property.

Take Away: IMO, Watch What You Say!

This area of the law is really becoming a dangerous minefield. After the e-mail ruling came out a few years ago, I advised my clients to use the following disclaimer: “Emails sent or received shall neither constitute acceptance of conducting transactions via electronic means nor shall create a binding contract in the absence of a fully signed written agreement.”

The problem, however, with text messages is that they are so short and informal. It’s not practical to use a legal disclaimer on texts, and there’s no technology that I’m aware of that would insert one into every text. You could always start off a negotiation with the caveat that electronic communications will not create a binding contract until a formal offer is executed. Also, it’s always a good idea to end every email/text with “subject to seller/buyer review and approval” when negotiating an offer. But, such boilerplate language can always be waived by subsequent conduct or actions.

This case reminds me of Lomasney’s First Rule of Politics: “Never write if you can speak; never speak if you can nod; never nod if you can wink.” — and by winking that does not mean an emoji. ?

And always take screenshots of important texts…just in case.

This post is sponsored by Brian Cavanaugh, Senior Mortgage Banker, Mortgage Network

St. John’s Holdings LLC v. Two Electronics, LLC by Richard Vetstein

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Landlords Cannot Refuse to Rent to Criminals, Says HUD

by Rich Vetstein on May 3, 2016

in Housing Discrimination, HUD, Landlord Tenant Law, Massachusetts Real Estate Law, Premises Liability, Rental Housing

Widespread Racial Disparities In Criminal Justice System Justifies New Policy

Last week the Obama administration released new controversial Fair Housing guidelines telling the nation’s landlords that it may be discriminatory for them to refuse to rent to those with criminal records. The U.S. Department of Housing and Urban Development (HUD) says refusing to rent based on a criminal record is a form of racial discrimination, due to racial imbalances in the U.S. justice system, despite the fact that criminal history is not a protected class under the federal Fair Housing Act.

“The Fair Housing Act prohibits both intentional housing discrimination and housing practices that have an unjustified discriminatory effect because of race, national origin, or other protected characteristics,” say HUD’s newly-released guidelines. “Because of widespread racial and ethnic disparities in the U.S. criminal justice system, criminal history-based restrictions on access to housing are likely disproportionately to burden African-Americans and Hispanics. While the Act does not prohibit housing providers from appropriately considering criminal history information when making housing decisions, arbitrary and overbroad criminal history-related bans are likely to lack a legally sufficient justification.” About 25 percent of Americans have some kind of criminal record, which can range from felony convictions to arrests that never led to charges.

HUD says that landlords may be allowed to bar those with criminal records, but they will have to prove that such a policy is necessary for protecting the safety of other tenants, and designed to avoid illegal discrimination. The new guidance recommends that landlords consider factors such as the severity of the criminal history and how long ago it occurred.

Practice Pointer: Blanket prohibitions denying applicants with criminal histories will get landlords into major trouble under the new HUD policy.

Evaluating whether the criminal history policy or practice has a discriminatory effect
Evaluating whether the challenged policy or practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest
Evaluating whether there is a less discriminatory alternative

Policy Places Burden On Small Landlords

I’m all for giving people a second chance at life, but the major problem with this policy is that it puts the onus and burden on the small landlord to do the criminal history check and then figure out how severe the offense is and what the underlying circumstances are. Also the policy does not advise a landlord exactly how old a crime is to be considered “too old.”

In Massachusetts, a CORI (Criminal Offender Record Information) report contains only the basic of information of the offense such as the date of arrest/conviction, disposition, court and sentence, if any. There is nothing in the CORI report showing the underlying facts of the crime and it does not include police reports. Thus, for a charge of open and lewd conduct, a landlord does not know whether this is a serious offense or just a college kid urinating in an alley. Under the new HUD policy, landlords now have the burden of playing criminal investigator and assessing whether a crime is not truly serious.

Also, please remember that under the so-called Mrs. Murphy exemption, the federal Fair Housing Act does not apply to owner-occupied rental properties of up to 4 units.

What Now?

So how are landlords going to navigate this new policy? Well, first I would expect that risk-adverse landlords will cut down or stop requesting criminal history information all together. Of course, this puts landlords in a dilemma because they retain a legal duty to keep residents safe, and if they rent out to a known sexual offender, for example, who attacks another resident, they can be sued for millions.

For those who still ask for criminal record information, they will have to offer an applicant the opportunity to explain the circumstances of their arrest/conviction before making a final decision. As with all rental application decisions, it’s best to make the decision rest on financial considerations such as credit, income, and employment.

If you need guidance navigating this new policy, feel free to contact me at [email protected].

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Landlord’s Failure To Pay $3.26 Security Deposit Interest Stops Eviction, SJC Rules

by Rich Vetstein on April 28, 2016

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

Landlords Cry Foul Over Ruling

In a ruling which reaffirms Massachusetts’ place as one of the most landlord-unfriendly jurisdictions in the country, the Supreme Judicial Court ruled yesterday that a landlord’s minor security deposit law violation over failing to pay $3.26 in interest can be a complete defense to an eviction case even where the tenant owed thousands in rent. After this ruling, tenants will have another powerful tool to avoid eviction in both no-fault and non-payment cases. A change in this ruling would only come about through legislative action — which is usually a non-starter on Beacon Hill.

Rich’s Legal Advice: I have long advocated to my landlord clients that they NOT take security deposits. This ruling should be the nail in the coffin on that issue.

Garth Meikle v. Patricia Nurse

The Massachusetts Security Deposit Law provides a three month penalty, including payment of the tenant’s legal fees, against landlords who don’t follow its strict requirements. One of the requirements of the Security Deposit Law is that annually the landlord must pay the tenant any accrued interest on the deposit. That’s what got landlord Garth Meikle in trouble with his tenant who was three months behind in rent. Meikle brought a no-fault eviction case in the Housing Court, but the tenant raised the counterclaim and defense that she did not receive interest on the security deposit. Ruling that the landlord’s minor violation of the security deposit was not a complete defense to the eviction, the Housing Court Judge Marylou Muirhead allowed the eviction to proceed, ordering the tenant to pay the past due rent, but deducting the security deposit plus the $3.26 in unpaid interest. However, the tenant, represented by Harvard Legal Aid Bureau, appealed her case all the way up to the Supreme Judicial Court.

Statutory Interpretation

The issue on appeal was the distinction between a counterclaim and a defense for a security deposit violation. Everyone agrees that the tenant can raise a security deposit violation as a counterclaim (entitling the tenant to up to triple damages), but the question was whether such a violation could be a complete defense to an eviction, preventing the landlord from regaining possession of the rental unit. Landlords and yours truly argued that a security deposit is a separate financial matter between the landlord and tenant which has nothing to do about whether the tenant owes rent or the condition of the property.

Justice Geraldine Hines, writing for SJC, disagreed and found that a security deposit violation was within the list of defenses to an eviction. Despite quite unclear and murky statutory language, the justice was persuaded that the Legislature’s historical tightening of penalties and sanctions against landlords was indicative of the legislative intent to include a deposit violation among the list of available defenses to eviction.

So we’ll have to thank the SJC and the Legislature for sticking it to Massachusetts landlords once again. With tenant activist groups pushing “Just Cause Eviction” i.e, rent control and the Legislature’s continual failure to enact any sensible landlord-tenant reform, no wonder Massachusetts has a well-deserved reputation as one of the most tenant-friendly states in the union.

I’ve embedded the opinion below.

Garth Meikle v. Patricia Nurse by Richard Vetstein

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Landlords, Don’t Get Into Hot Water With Your Tenant!

by Rich Vetstein on March 23, 2016

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

Massachusetts Water/Sewer Sub-Metering Law

Many Massachusetts landlords are unaware that before charging tenants for hot water and sewer service, they must comply with the numerous and onerous requirements of the Massachusetts Water Sewer Sub-Metering Law, General Laws chapter 186, chapter 22. These requirements include having separate water meters for each unit, installation of low flow faucets and toilets by a licensed plumber, and certification with the local health board, among other requirements outlined below. Non-compliance with this law may result in a three month rent penalty to the landlord plus payment of the tenant’s attorneys fees.

A landlord can only charge a tenant for water/sewer service under the following conditions:

1. The tenant’s unit must be separately submetered by a separate water meter installed by a licensed plumber. A separate water meter measures the amount of water supplied to a particular unit, and enables the landlord to charge the tenant for the tenant’s own water usage. So, for example, if a building contains 4 dwelling units and a basement where water is utilized for the entire building, a landlord would need to have 5 submeters installed in addition to the primary meter that measures the building’s water use in its entirety. If the building does not have separate meters for each unit, the tenant may not be charged for water service.

2. The tenant’s obligation to pay for water usage must be contained in a signed lease, in an obvious place, and not in the fine print. Each bill for submetered water usage must clearly set forth all charges and all other relevant information, including the current and immediately preceding submeter readings and the date of each such reading, the amount of water consumed since the last reading, the charge per unit of water, the total charge and the payment due date. If the landlord bills the tenant on a monthly basis, payment of the bill by the tenant must be due 15 days after the date the bill is mailed to the tenant, but if the landlord bills the tenant at intervals greater than 1 month, payment of the bill by the tenant is due 30 days after the date the bill is mailed to the tenant.

3. A landlord may not charge the tenant for water supplied through a submeter unless the a licensed plumber has installed fully functional water conservation devices for all faucets, showerheads and water closets/bathrooms in the unit (low-flow shower heads and faucets and low-flush toilets)

4. The landlord must provide a certification under the penalties of perjury, with the board of health or health department, that the appropriate submeters and water conservation devices were installed by a licensed plumber.

5. A landlord cannot charge a tenant for water/sewer service mid-way through a tenancy or lease. A landlord can only charge a tenant for water/sewer upon the start of a new tenancy in the unit; and only if the unit is being occupied for the first time, or if the previous tenant left voluntarily, or was evicted for non-payment of rent or other breach of the lease.

6. A landlord who engages in self-help by willfully failing to furnish water or directly or indirectly interfering with the furnishing by another of water, or transferring responsibility for payment for water to the tenant without their knowledge or consent, is punishable by a fine of not less than $25.00 nor more than $300.00 , or by imprisonment for not more than 6 months and is liable for actual and consequential damages or 3 month’s rent, whichever is greater, and the costs of the action, including a reasonable attorney’s fee.

Given these onerous requirements, my advice to landlords is to never charge the tenant for water/sewer! Just pay the bill and make it “hot water included” in the rent.

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Raucous Boston City Council Hearing On Just Cause Eviction Proposal

by Rich Vetstein on March 15, 2016

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

Hundreds Cram Into City Council To Debate Controversial Petition

Hundreds of tenant activists, small property owners and landlords packed City Hall and poured over into overflow rooms last night as the Boston City Council held its first public hearing on the need for “just cause” eviction legislation, to stem the city’s skyrocketing rents. Harking back to the days of rent control, the proposal would prohibit a landlord from evicting any tenant except for certain “just cause” grounds. These grounds and their related procedural impediments to eviction, would in my opinion, make it nearly impossible (or cost prohibitive) to evict tenants, raise rents and sell occupied rental property in the City of Boston. For more specifics of the proposal, please see my prior post, Boston Tenant Activists Pushing Just Cause Eviction Proposal.

The City Council, led by Councilor Josh Zakim, heard four hours of impassioned testimony from both sides of the issue. Renters say it would create safeguards against eviction; landlords say it would slap them with thinly disguised rent controls.

“Any way you look at it, this is rent control,” Skip Schloming, of the Small Properties Owners Association, said in an interview just before the hearing started.

Lisa Owens Pinto, executive director of City Life/Vida Urbana, for the tenant side told news outlets that “this proposal would just require property owners to provide a good reason to evict someone.” Ms. Owens Pinto said her organization’s measure has three central provisions – landlords must provide a reason for an eviction; if a rent increase is sought, a landlord must first notify the city; once notified, the city must use its resources to contact and advise the affected tenant.

Gilbert Winn, chief executive of Boston-based developer Winn Companies, told the council that a new set of regulations isn’t needed and warned that any changes may have an adverse effect on housing. “You can’t attack the very thing you are trying to protect, which is the rental economy,” Winn said. His company is a major developer of affordable housing projects. Winn, the son of Winn founder Arthur Winn, also claimed the proposal would provide tenants with a potential avenue to avoid living up to their rental agreements. “If a contract between a willing renter and a willing owner cannot be adhered to, and only one party has to adhere to it, then the whole system falls apart,” Winn said.

The proposal has been a moving target. A revised draft of the group’s proposal, originally submitted as a home-rule petition, wasn’t available at the hearing, leaving several councilors perplexed as to why it hadn’t been officially filed. “We’re talking about a specific proposal and I’m finding it hard to follow because we don’t have the draft in front of us,” City Councilor Josh Zakim said about halfway through the four-hour hearing.

Prior to the hearing, tenant advocates agreed to drop one of their most controversial requests: a mandate that rent increases of 5 percent or more be subject to nonbinding mediation. Instead, they are pushing for a rule that would require landlords to notify the city of rent hikes that result in eviction, known as a no-fault notice to quit.

Mayor Marty Walsh had initially signaled support for the measure, but wanted to see how the details would be fleshed out. As they say, the devil is in the details and it’s quite possible this proposal will get significantly watered down during the legislative process, if it survives at all.

The hearing was videotaped and can be viewed on the City’s website here.

Photo credit: New Boston Post photo by Evan Lips

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Realtors Say: Warm Winter To Usher In Hot Spring Real Estate Market

by Rich Vetstein on March 10, 2016

in Massachusetts Property Values, Massachusetts Real Estate Law, Purchase and Sale Agreements, Real Estate Market

Or Will Low Inventory Bring Rain Showers? | The Spring Market 2016 Expert Panel Report

Wow, what a difference a year makes! Last year we had one of the snowiest winters on record and a foot of snow on the ground. This year, we have 70 degree record temps with the Charles Esplanade filled with runners. The winter weather always affects the spring real estate market, and last year the market got started unusually late. So will this year’s warm winter usher in a hot real estate market? Or will the pesky low inventory rain on our parade?

To answer these questions, I’ve brought in a panel of top Realtors who will give you the report from the trenches, from the City to the ‘burbs. So without further ado, let’s hear from the experts.

The Sudbury & Wayland Real Estate markets are easing into the always anticipated “Spring market.” Like a slow motion game of Dominos, many soon-to-be sellers are waiting for a house they would potentially buy to come on the market before they commit to putting their own homes on. With that, inventory has been low, but is increasing at a steady pace now that it is March and Mother Nature doesn’t seem as eager to make a point as she did last winter. Buyers are actively looking and although not every Open House attendee is a serious buyer, the high numbers of attendees are typically a good indicator of an active market. 2016 is starting to form as a healthy Real Estate market. — Gabrielle Daniels Henken and Carole Daniels — Coldwell Banker, Sudbury. www.LiveInSudburyMA.com

In Cambridge and Somerville, we’re still dealing with the inventory shortage — I don’t think it would be hyperbole to call it a crisis — that we’ve had for the last several years. And although the mild weather has brought buyers out in full force already this year, the listings are just beginning to trickle on, so we’re seeing 9, 10, 20 parties competing for the same home. Hopefully it will be a bit less brutal as we get further into March, but for the foreseeable future, demand will continue to outpace supply here. Lara Gordon–Gibson Sotheby’s Cambridge. www.cambridgeville.com

Dear Sellers, please don’t wait until spring to list your house at the SAME time as everyone else! Inventory is historically low so list now while you can be a real stand out in the market. Chances are you will bear a higher price as well! The Metrowest market is a popular market that’s constantly strong and growing. Due to the fact that we have 3 major highways that touch Metrowest, it is a popular spot for commuters to Boston and Worcester alike. Metrowest real estate is also a great investment! Heidi Zizza, Broker/Owner, mdm Realty, Framingham, MA

High demand, low inventory and continued low rates create a healthy and fiesty market in MetroWest! Investors still have great opportunities with multi-family properties and first time buyers who didn’t take a break this winter were able to achieve their housing goals without busting their budgets. Glad to report that TRID was just a small bump in the road and had far less direct impact on the financing process than expected. Ali Corton, Real Estate Executives Boston West www.liveinframinghamma.com

At the risk of sounding like a broken record, in Winchester, Arlington, Stoneham, Melrose, and the surrounding towns, quality inventory is scarce, and when it hits the market it’s scooped up within days. Buyers must be crystal clear about what they want, and then develop the stamina of a marathoner. They must be willing to brave packed open houses, make rapid decisions about writing offers, endure having 1,2,3,4 great offers rejected before securing a property. Sellers with quality listings are being presented with 10,12,20 offers, all over asking, all waiving contingencies, all with heartfelt letters and photos from buyers who are pulling out all the stops to get a house. As agents in today’s market one of our most important roles is to support our clients, both buyers and sellers, to remain calm and focused during the frenzy of the market. Katherine Waters-Clark, Re/Max-Winchester-Arlington

I work primarily with buyers and in towns from Bolton, Westford to Shrewsbury and even as far as Gardner and Ashburnham, when a house comes on the market and is in good condition it is snapped up quickly with multiple offers. I have had clients submit written letters with their offers to try and help sway a seller to choose them. The rates are still low and the lack of inventory on the market is making a rather difficult market to guide buyers. First time home buyers are overwhelemed with the speed things have to be done to get their offer picked. Sellers are in a good place when it comes to selling a home in this Spring Market. I just did an Open House in Metheun yesterday, I had 16 families come through and today our seller has 3 offers to choose from, this is going to be a great Spring Market. Sherry Stone-Graham,www.baystate-homes.com

The condo market in Metrowest is starving for inventory. I received 8 offers on one unit on Spyglass Hill in Ashland and a couple on a garden style unit. My open houses on Spyglass Hill have had over 25 guests. We desperately need inventory. So many buyers with so few properties is allowing sellers to possibly get more money. It’s a fantastic time to sell. Annie Silverman, Realty Executives Boston West.

I service Franklin and the surrounding area and am also licensed in RI. Right now the inventory is still low so sellers are really getting the activity they desire when priced correctly. My most recent listing had 23 sets of people through and we received 5 offers and most were over asking. Buyers are also fortunate as there was also just a dip in the financing rates. Franklin and most surrounding towns are also eligible for 0% down financing so the time is now to make the most of the Spring Market! Amber Cadaorette, Keller Williams Realty Franklin / Wrentham.ambersoldmyhouse.com

Feel free to offer your comments here or on Facebook! And good luck with your listings or buyers!

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Tales From The Boundary Line Trenches

by Rich Vetstein on January 31, 2016

in Adverse Possession, Boundaries, Deeds, Massachusetts Real Estate Law, Real Estate Litigation

“A picture is worth a thousand words.” – Old Photograph Found In Attic Key to Victory

I handle a fair amount of Massachusetts boundary line and adverse possession disputes. For those who don’t know, adverse possession is a legal doctrine in Massachusetts where one property owner can make a claim of ownership over his neighbor’s land if such use was “open, hostile, adverse, notorious and exclusive” for 20 or more years. These disputes often come up where neighbors don’t know the true location of their property line, and one neighbor puts up a fence, retaining wall or has essentially annexed the land of the other neighbor.

In my most recent case, I am defending a gentleman whose next door neighbor claims adverse possession to an area about 15 feet into my client’s side yard which includes a small portion of the neighbor’s driveway. The dispute arose because my client wanted to put up a 6 foot privacy fence along the lot line. The neighbor sued, asking the court for a preliminary injunction to stop the installation of the fence.

My opponent claimed adverse possession dating back to when he purchased the property in 1985. The first problem I had was that my client bought his property in 2009. Thus, in order to poke holes in the claimed 30 year period, I had to track down the former owners of his property. Luckily, I found them — a charming elderly couple living in Medway. I met them over the weekend and sat down at their kitchen table with the case file and photographs. They said my opponent was a liar and disputed virtually everything he said in his lawsuit.

The elderly man went up to his attic and found several old photographs showing his then young grandchildren playing in the sideyard. That’s the picture in this post. In the background of the photo dating back two decades, you can see a fence in the disputed side yard area. The fence essentially destroyed my opponent’s adverse possession claim because he was physically prevented from using the disputed area, and thus, could not prove 20 years of uninterrupted and adverse use. When I showed the photos to opposing counsel, the response was that his client didn’t remember the fence despite the fact it was there for at least 10 years of his ownership. How convenient!

After working all weekend on the case and armed with the photographs and affidavits from the prior owners, I felt optimistic heading into the injunction hearing before a judge in Norfolk Superior Court. In order to obtain an injunction, the plaintiff is required to show a “likelihood of success on the merits.” The bottom line was that I caught my opponent in a lie, given that he never disclosed the existence of the fence in his original complaint, then came up with the convenient excuse that he didn’t remember it. The judge ruled that the neighbor could not establish adverse possession at this juncture of the case, and denied his motion for an injunction.

As with every adverse possession case, relentless preparation and determination to investigate the history of the property is critical. I was more prepared than my opponent, and that is one of the reasons why I won this round.

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If you are dealing with a Massachusetts boundary or property line dispute involving adverse possession, please contact me at [email protected] or 508-620-5253. I’ve handled scores of these cases successfully through trial and appeal.

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The Force (Of Law) Awakens | Annual Year In Review

by Rich Vetstein on December 27, 2015

in Consumer Financial Protection Bureau, Foreclosure, Landlord Tenant Law, Massachusetts Real Estate Law, Realtors, Rental Housing, Title Insurance, TRID

As with this year’s blockbuster Star Wars — The Force Awakens, my prediction for an active and entertaining 2015 in Massachusetts real estate law has come to fruition. Without further ado and with a Star Wars theme, I present you with the top 5 “episodes” for the last year in Massachusetts real estate law.

I. TRID (Truth in Lending RESPA Integrated Disclosure) Rules

Heralded as the most comprehensive change to real estate closings in the last 20 years, the new TRID rules (Truth in Lending/RESPA Integrated Disclosure) have certainly lived up to their billing. If TRID were a Star Wars character, it would be Kylo Ren of the First Order, smashing and destroying the old way of doing closings with his scarlet cross-guard lightsaber. The new rules went into effect on October 3, and the real estate industry has been, by and large, scrambling to get up to compliance speed with the new regulations. The new “Closing Disclosure” is quite convoluted with far too much information, and also necessitates a separate “seller” closing disclosure. So, the old three page HUD-1 form has turned into two forms with seven pages. That’s the government for you… There is also a 3 day waiting period for closings to be scheduled after the issuance of the new Closing Disclosure. Some lenders have been great getting the “CD” out on time. Some others, not so much. In my estimate, I would say that at least 50% of my transactions have been delayed due to TRID related issues. For 2016, I predict continued delays and compliance issues for the first two quarters of the new year, with things hopefully smoothing out for the spring market. Oh, did I already tell you that I miss the old HUD-1 Settlement Statement already!

II. SJC Rules Real Estate Agents Can Remain Independent Contractors

The summer saw the SJC come down with its long awaited ruling on independent contractor classification in Monell, et al. v. Boston Pads, LLC. After much lobbying from the industry, the Court ruled that Massachusetts real estate and rental agents can remain classified as independent contractors under the state’s real estate licensing and independent contractor law. The ruling keeps the traditional commission-only independent contractor brokerage office model in place, with brokers allowed to classify agents as 1099 independent contractors, without facing liability for not paying them salary, overtime or providing employee benefits. However, like the plot holes in The Force Awakens, the Court left open a few important questions such as whether agents could build a case on other legal theories. In 2016, look for the Legislature to address the murkiness which remains with the law.

III. Gov. Baker Signs Foreclosure Title Clearance Law

If Gov. Charlie Baker were a character out of the Force Awakens, he would be the hotshot Resistance pilot Poe Dameron, swooping down in his X-Wing fighter and saving the day for thousands of Massachusetts homeowners who have been unable to sell or refinance their homes due to foreclosure title defects. After a five year legislative struggle (in which I testified before the Legislature), Gov. Baker signed into law the Act Clearing Title To Foreclosed Properties. The bill will resolve potentially thousands of titles which were rendered defective and un-transferable after the SJC’s landmark ruling in U.S. Bank v. Ibanez. There is a one year waiting period, but after that we should start seeing previously unsellable homes start to come back on the market.

IV. SJC Continues To Scrutinize Foreclosure Compliance

In a major foreclosure decision, the Supreme Judicial Court ruled in Pinti v. Emigrant Mortgage Co. Inc. that a lender’s defective notice of default is grounds to void and nullify a foreclosure sale. This is so even after the property was purchased at auction by a third party without knowledge of the defect. This ruling has resulted in two leading title insurance companies, First American and Fidelity/Chicago, deciding to restrict underwriting title to foreclosed properties

V. Just Cause Eviction Proposal

The upcoming year will see a looming “Resistance” battle between liberal tenant activists and small property owners over a Just Cause Eviction proposal submitted to the Boston City Council. As I’ve written here, the proposal is just a clever re-branding of rent control which was outlawed a decade ago and has been proven not to work by leading economists and city planners. The Just Cause Eviction petition would prohibit a landlord from evicting any tenant except for certain serious “just cause” grounds, making it very difficult and expensive to evict tenants at will or those whose leases have expired. Small property owners claim — and I agree — that the procedural impediments to the Just Cause Eviction proposal are shockingly socialist in nature. Everyone agrees that Boston has a problem creating affordable housing, however, rent control disguised as a just cause eviction proposal is not the answer. It’s not fair to make small property owners to bear the burden of creating affordable housing across the city. That’s the job of the government. Rent control has never been a successful solution to the housing problem. To be continued in Episode VIII…

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I hope everyone has a very happy, healthy and prosperous New Year! –Rich

Photo credit: Lucasfilm, Inc.

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Foreclosure Title Clearance Bill Signed Into Law

by Rich Vetstein on December 1, 2015

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

New Law Will Resolve Thousands of Foreclosure Title Defects In Wake of U.S. Bank v. Ibanez Ruling

After a five year legislative struggle (in which I testified before the Joint Judiciary Committee), I’m very pleased to report that Governor Baker has signed into law the Act Clearing Title To Foreclosed Properties (Senate Bill 2015), embedded below. The bill will resolve potentially thousands of land titles which were rendered defective and un-transferable after the SJC’s landmark ruling in U.S. Bank v. Ibanez. The Ibanez ruling invalidated thousands of foreclosures across the Commonwealth due to lenders’ paperwork errors.

The problem addressed by the legislation is that scores of innocent buyers purchased these foreclosed properties, fixing them up, renting them out, etc., but they were unaware of the title defects — only to discover them once they went to refinance and sell. Title insurance companies have been bogged down trying to solve these defects, and in the meantime, many of these innocent folks are left with homes which cannot be sold or refinanced. The same bill passed the Legislature last year, but former Gov. Patrick, bowing to housing activists, vetoed it with a poison pill. After several amendments addressing housing activists’ concerns, a new bill was again passed, and just signed into law by Gov. Baker on November 25, 2015.

The bill, which is effective on Dec. 31, gives foreclosed owners a three (3) year statute of limitations to file a challenge to a foreclosure, after which the foreclosure is deemed to have been conducted legally. For foreclosures which have already been concluded, the new law has a one year waiting period, so that a defective foreclosure would be considered non-defective on Dec. 31, 2016. The bill does retain a homeowner’s right to seek compensatory and punitive damages for a wrongful foreclosure, provided it is within the statute of limitations. The bill also requires the Attorney General’s Office to spearhead more robust foreclosure prevention solutions with the HomeCorps Program and housing activists groups.

The passage of the bill is fantastic news for both owners and potential buyers/investors of foreclosure properties. There is a shadow inventory of defective title properties which will be able to go on the market.

The bill was sponsored by Millbury Democrat Michael Moore whose office (especially Julie DelSobral) worked tirelessly for the passage of the Act.

MA Act Clearing Title to Foreclosed Properties by Richard Vetstein

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Boston Tenant Activists Pushing “Just Cause” (Rent Control) Eviction Bill

by Rich Vetstein on November 29, 2015

in Landlord Tenant Law, Massachusetts Property Values, Massachusetts Real Estate Law, Rental Housing, Senior Housing

Update: Hearing On Proposal Scheduled for March 14, 2016 at 4PM at Boston City Council Chamber Room

Rent Control Thinly Disguised As “Just Cause” Eviction Proposal

Citing skyrocketing rents and lack of affordable housing, several activist pro-tenant groups in the City of Boston, with the assistance of the Harvard Legal Aid Bureau, have submitted a home-rule petition to the Boston City Council to create a wide-ranging “just cause” eviction protection for all Boston tenants. Harking back to the days of rent control, the petition would prohibit a landlord from evicting any tenant except for certain “just cause” grounds. These grounds and their related procedural impediments to eviction are shockingly socialist in nature, and in practice would make it nearly impossible (or cost prohibitive) to evict tenants, raise rents and sell occupied rental property in the City of Boston. Rental property owner groups are vigorously opposed to this proposal.

“Just Cause” Grounds for Eviction

The petition provides that landlords may only evict tenants for eight (8) specified reasons. The most troubling situations are outlined below.

Non-payment of rent. A tenant’s failure to pay rent must be “habitual” (which is left undefined) and “without legal justification.” Ordinarily, if a tenant fails to pay rent even once, the landlord may terminate the tenancy and evict. Under the just cause standards, the standard is significantly higher. What exactly is “habitual”? Two late payments, three, four? No one knows, but the petition puts the burden of proof on the landlord.
Damage by tenant. In order to evict, the tenant must have “willfully caused substantial damage to the premises beyond normal wear and tear and, after written notice, has refused to cease damaging the premises, or has refused to either make satisfactory correction or to pay the reasonable costs of repairing such damage over a reasonable period of time.” This would make it much more difficult to evict based on damage caused by a tenant.
Disorderly conduct. The tenant has continued, following written notice to cease to be so disorderly as to destroy the peace and quiet of other tenants at the property.
Illegal activity. The tenant has used the rental unit or the common areas of the premises for an illegal purpose including the manufacture, sale, or use of illegal drugs.
Failure to provide access. The tenant has, after written notice to cease, continued to deny landlord access to the unit as required by state law.

Rent Increases and No Fault Evictions

The most fundamental impact of the just cause eviction petition is how it attempts to severely curtail landlords’ legal right to raise rents and file no-fault evictions. Make no mistake about it, the underlying premise of the petition is rent control – to keep rents (even under market) from increasing and stabilizing “affordable housing.”

Resurrecting the old Boston Rent Control Board, landlords are required to participate in a City-approved mediation session with that agency before raising rents or even declining to renew an expired lease. The board is then required to notify all tenant advocacy groups in Boston of the situation. These groups are invited into every eviction or rent increase process. It will be one landlord against many tenants and advocates. There is no stated limit as to how long the mediation process can last, and after which a landlord still must go to Housing Court which can take anywhere from 6-12 months to complete a no-fault eviction under current law. A landlord’s failure to follow these requirements will result in the immediately dismissal of their eviction case and can also subject them to a $1000 fine by the City.

Moreover, in true socialist form, there are also substantial roadblocks to evicting tenants even where the unit will be used for the owner’s own personal residence. Owners are banned from evicting tenants who are 60 years old, disabled or have children in the school system and have lived in the premises for 5 or more years. (Landlords can only end tenancies after the school year is over.) Seeking to turn private properties into government subsidized elderly and disabled housing, the petition thereby creates lifetime tenancies for these classes of renters. This will greatly discourage investment and capital improvements for these properties many of which are double and triple deckers in struggling neighborhoods.

Rent Control Does Not Work

As counsel for landlords across Greater Boston and having testified at the State House in support of various landlord tenant legal reforms, I am strongly opposed to this proposal. This petition is the fourth attempt by Boston tenant advocates to bring back rent control, all of which have failed after voters rejected rent control state-wide in the mid-1990’s. The idea of rent control has been debunked as a failed policy by countless economists, and actually makes affordable housing stock shrink. A restrictive price ceiling reduces the supply of properties on the market. When prices are capped, people have less incentive to fix up and rent out their property, or to build new projects. Slower supply growth actually exacerbates the price crunch. Those landlords who do rent out their properties might not bother to maintain it, since both supply and turnover in the market are limited by rent caps; landlords have little incentive to compete to attract willing tenants. Landlords may also become choosier, and tenants may stay in properties longer than makes sense.

The problem of skyrocketing rents in Boston and affordable housing is complex and certainly worthy of out-of-the-box thinking. As an old city with little if any developable land left, Boston has always dealt with a supply vs. demand problem. Boston developers have long been required to pay into linkage funds designed to promote affordable housing. Mayor Walsh recently announced a plan to build 53,000 new housing units by 2030. The city’s colleges can also do a better job of creating new student housing. But even with all of this centralized planning, the influx of people to the city, drawn by jobs and Boston’s quality of life, have made this problem a very tricky one to solve.

However, rent control disguised as a just cause eviction proposal is not the answer. It’s not fair to make small property owners to bear the burden of creating affordable housing across the city. That’s just flat out Un-American. If we want more affordable housing, create economic incentives to build more, and encourage the City to buy their own properties and create housing. Rent control has never been a successful solution.

If and when the Just Cause Eviction proposal rears its ugly head in the Boston City Council again, email your local city councilor and the Mayor.

A copy of the Just Cause Home Rule Petition can be found below.

Boston Just Cause Ordinance Draft Sept 2015

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SJC Hears Important Security Deposit Case

by Rich Vetstein on November 5, 2015

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

Updated (4/27/16): SJC Rules That Security Deposit Violation Is Full Defense to Eviction

Landlord Stopped From Evicting Tenant Over $3.26 In Interest

Massachusetts has a well-deserved reputation as being a hostile jurisdiction for landlords. With a myriad of tenant favorable laws on the books, the proverbial playing field is often stacked against landlords. Exhibit A is the Security Deposit Law which provides a three month penalty, including payment of the tenant’s legal fees, against landlords who don’t follow its strict requirements.

One of the requirements of the Security Deposit Law is that annually the landlord must pay the tenant any accrued interest on the deposit. That’s what got landlord Garth Meikle in trouble with his tenant who was three months behind in rent.

Garth Meikle v. Patricia Nurse, SJC-11859

Meikle brought an eviction case in the Housing Court, and essentially won with the judge ordering the tenant to pay the past due rent, but deducting the security deposit plus the three dollars and change in interest. However, to the tenant’s rescue came the crusading Harvard law students from Harvard Legal Aid Bureau. Representing her for free, the students have taken her case all the way up to the Supreme Judicial Court. (Why is it that landlords are not offered the same free legal aid?). The tenant posted an appeal bond so she’s allowed to stay in the apartment while paying the rent during the pendency of the case.

The SJC heard arguments this morning with third year Harvard Law student Louis Fisher arguing the case. (Damn lucky kid!).

The Harvard tenant lawyers are advancing the dangerous argument that a landlord who violates the security deposit law — even in the most minor of circumstances — cannot evict a non-paying tenant.

Scary right? If the Court accepts this argument then tenants will have yet another powerful tool to avoid eviction. The Security Deposit Law is so strict that most landlords make minor errors in holding the deposit. That’s why I have advised that landlords don’t even bother taking security deposits in the first place.

You can guess where I stand on the merits of the case. The security deposit is a separate financial matter between the landlord and tenant which has nothing to do about whether the tenant owes rent or the condition of the property. Those are the two primary issues in a non-payment eviction case. You don’t pay the rent without legal defense, you’re out. Period. Compliance with the security deposit law should have no bearing on a non-payment eviction. The Legislature did not intend otherwise, and regardless, that should not be our policy. Enough is enough already.

You know what else bothers me? These legal aid organizations take on these “test cases” to train law students and get them experience. After all when does a law student ever get to argue a SJC case? Is that really fair and just to small unrepresented landlords like Mr. Meikle who told the justices that his son and fiancee were hoping to live in the apartment?

The SJC should come out with a final ruling in the next few months. Check back here for future developments. In the meantime, I will keep on fighting the good fight for landlords.

Case Link: Garth Meikle v. Patricia Nurse SJC-11859

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Best Practices In A New TRID World

by Rich Vetstein on October 18, 2015

in Closings, Massachusetts Real Estate Law, Offer To Purchase, Purchase and Sale Agreements, TRID, Truth in Lending

Scroll Down For My Complimentary TRID Rider and Offer Timeline Cheatsheet

I’ve been doing a lot of speaking, and more importantly, thinking and collaborating with loan officers and Realtors, on the impact of the new TRID (Truth in Lending RESPA/Integrated Disclosure) on Massachusetts residential real estate transactions. I know everyone is pretty much burned out with all this TRID talk, but what I will give you in this post is some hands-on, practical advice (like how to fill out an Offer) and forms to help you navigate TRID — best practices, if you will.

Those who are unfamiliar with TRID, the major change is that the Good Faith Estimate is going away in favor of a new “Loan Estimate” and the HUD-1 Settlement Statement is going away in favor of a new “Closing Disclosure.” TRID provides for specific deadlines as to when the Loan Estimate and Closing Disclosure must be delivered to the borrower. If those deadlines aren’t met, closings can be delayed for up to 7 days. For my comprehensive post on the new rules click here.

Change In Deadlines

The first major impact to real estate transactions will be the length of time to complete a transaction. The general consensus is that post-TRID, 60 day closings (from accepted offer) will be the norm. Will lenders be able to do 45 day closings? Yes, but only if all parties have their act together, and that’s a big “If.” Thirty (30) day closings will be nearly impossible to achieve, in my opinion.

So what does this mean? It means that all deadlines need to be tighter and that items typically left for the week or two prior to closing (like final readings and fuel adjustments) have to be done earlier in the transaction and closing table adjustments will be impossible.

Deadline to Submit Info For Closing Disclosure

One of the most important new dates will be the date on which all parties must provide the information necessary for the Closing Attorney and the lender to prepare the final Closing Disclosure (new HUD-1). TRID requires that the new Closing Disclosure issue to the borrower 3 days prior to closing (if sent electronically) or 7 days prior to closing (if sent by mail). Lenders will require all information necessary to prepare the CD well before this deadline. This will vary by lender anywhere from 10-20 days prior to closing. Also, some lenders intend to issue the Closing Disclosure along with the Loan Commitment. Accordingly, in my opinion the best practice under TRID is to target 20 days prior to closing by which all information needs to be submitted to the closing attorney. All parties should agree to this date in their purchase and sale agreements.

And by all information, what do I mean? See the graphic to the right.

Final Utility Readings and Oil/Fuel Adjustments

Although the TRID rules specifically allow for some last minute changes to the Closing Disclosure without triggering re-disclosure and delay in the closing, most of the lenders which I’ve consulted with do not intend to authorize last minute changes to the Closing Disclosure which might trigger a re-disclosure delay.

Given this, the Mass. Real Estate Bar Association (REBA) has proposed language in its new TRID rider that all utility readings (water, sewer, oil/fuel) be completed and submitted to the closing attorney no later than 10 days prior to closing. The Closing Disclosure shall reflect payment and adjustments as of the reading date except for real estate taxes which shall be adjusted as of the closing date. No further adjustments will be made on the Closing Disclosure, but the parties are free to make their own estimates of utilities as of the closing date.

This is a change to current practice where it’s common that the final readings be done a day or two prior to closing. I’ve spoken to several agents about oil fuel in particular, and they all say they really don’t want to deal with the hassle under TRID, so they will be recommending to their sellers that they simply gift the oil to the buyer.

Opt for Buyer Credits Instead of Seller Repairs

Seller repairs will cause major hassle and potential delays under TRID. Under TRID, all property repairs must be fully disclosed in the purchase and sale agreement and to the lender. No more “side agreements” or “repair agreements” outside the PS Agreement. Most lenders will require an inspection of all repairs prior to closing and some will do the inspection prior to the issuance of the Closing Disclosure. This would also necessitate a much earlier walk-through by the buyer to inspect those repairs. If there are problems with the repairs, or the insistence on a holdback which would be reflected on the Closing Disclosure, this could delay the issuance of the Closing Disclosure, and therefore delay the closing.

Accordingly, the general consensus is that it will be much cleaner under TRID to forgo seller repairs and instead have the seller agree to a closing cost credit to the buyer. This will eliminate the lender inspection, additional walkthrough and potential of delays.

Also, a quick word about holdbacks at closing. We are not sure how lenders will handle holdbacks at the closing but many of us are of the opinion that lenders will not allow a holdback unless it’s disclosed on the Closing Disclosure. So that effectively means no closing table holdback agreements unless you want your closing delayed to re-issue the Closing Disclosure.

Use a TRID Rider/Addendum for all Offers

MAR, GBREB and REBA have all come out with their own TRID riders. In my opinion, the MAR/GBREB riders don’t sufficiently protect buyers from delays and they fail to address utility/fuel adjustments. The REBA rider is better, but could still use some improvement. So naturally I’ve drafted my own rider (and TRID timeline cheatsheet) which is embedded below. Feel free to use it to help you fill out offers. Whatever rider/addendum you chose, just use something, otherwise your buyer will be at risk of losing their deposit over TRID delays.

Recommend Attorneys Who Specialize In Conveyancing/Closings

Residential real estate closing work was already complicated and highly regulated. In a TRID world, the pitfalls for the inexperienced and non-specialists will be myriad. Now more than ever, Realtors and loan officers should partner with experienced attorneys who specialize in residential closings and are TRID ready and compliant. Do not allow your clients to use their cousin who is a lawyer and knows very little about real estate. It could be disastrous for you and your transaction.

If you have any questions about TRID, Offers, Purchase and Sale Agreements, Riders, etc., please feel free to contact me at [email protected] or 508-620-5352. I would be happy to help you navigate the TRID maze.

TRID – Massachusetts Offer to Purchase Timeline and Addendum by Richard Vetstein

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TRID Rules Prompt Changes To Mass. Standard Form Purchase and Sale Agreement

by Rich Vetstein on September 28, 2015

in Closings, Consumer Financial Protection Bureau, Massachusetts Real Estate Law, TRID, Truth in Lending

MAR and GBREB Release New TRID Addendum In Advance Of Oct. 3 Start Date

In anticipation of the upcoming October 3 start date for the new CFPB-TRID Rules (TILA-RESPA Integrated Disclosure), the Massachusetts Association of Realtors is advocating that several changes in existing practice be adopted as part of the MAR standard form purchase and sale agreement between buyer and seller. The changes, incorporated into a new Integrated Disclosure Addendum-Mortgage (embedded below and available to all MAR members by clicking here), will account for the risk of potential delays resulting from the new TRID rules, as well as impose a requirement on all parties to expedite providing information necessary to generate the new Closing Disclosure. For a comprehensive review of the TRID rules, click here.

Under TRID, there will be a new settlement statement called a Closing Disclosure, which must be issued to the borrower at least 3 days prior to closing. If that does not occur, the closing will be delayed for up to 7 days. Lenders are requiring that the information contained in the Closing Disclosure (fees, closing costs, taxes, insurance, escrows, credits, etc.) be finalized no less than 7-14 days prior to closing, to give them enough time to generate the new Closing Disclosure in a timely fashion. As with any major regulatory change such as this, we can expect delays and speed bumps for closings occurring after Oct. 3.

The new MAR Addendum attempts to allocate risk and responsibility by providing that:

The buyer provides the seller with the name of the lender’s attorney as soon as practicable and no less than 14 days prior to closing
No fewer than 7 days prior to closing, the Seller and Buyer must provide all adjustments and figures (water/sewer, condo fees, taxes, oil in tank, etc.) necessary to prepare the Closing Disclosure. *I would change this to 14-20 days prior to closing.
The closing can be extended up to 3 business days in case of a TRID related delay. *I would change this to 8 days.
No party can sue each other for TRID related delays

Practice Pointer: I do not think the MAR form goes far enough to account for the potential delays arising out of TRID. For example, if the lender does not use e-sign technology the Closing Disclosure would have to be mailed, and the closing would be delayed for 7 days, not 3 days. Moreover, lenders are advising me that they want all Closing Disclosure information in by 20 days pre-closing, so they can turn around the loan commitment and Closing Disclosure at the same time and have a buffer in case of last minute changes. Most importantly, please use some form of TRID addendum to your Offers. Do not wait for the P&S.

Please click here for my customized TRID Addendum and TRID Offer Timeline

Note that the Greater Boston Real Estate Board standard form purchase and sale agreement is still in wide use. The GBREB has released their own version of the TRID rider, available here.

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New Judicial Appointments At The Land Court

by Rich Vetstein on September 22, 2015

in Land Court, Massachusetts Real Estate Law

Cape Cod Attorney Jennifer Roberts and Boston Attorney Howard Speicher Add Expertise At The Land Court

The Land Court is Massachusetts’ specialized court dealing with all things real estate and title. Established in 1898 and staffed with seven judges, the Land Court is the smallest of all the Massachusetts trial courts, but for real estate practitioners, it is the most important court in the state. Its judges, all of whom were practicing real estate attorneys, are widely regarded as experts in the intricacies of Massachusetts real estate law. The last year has seen a new justice appointed and another one on the way.

Recently nominated by Gov. Baker is Cape Cod attorney Jennifer S.D. Roberts. Ms. Roberts is Of Counsel at Orleans based firm of La Tanzi, Spaulding & Landreth, P.C., and has more than 30 years experience in civil litigation at both the trial and appellate level in construction, real estate, condominium, small business and probate litigation. Ms. Roberts also serves on the board of directors of Cape Cod Healthcare, Inc., the Cape Cod Foundation, and is the past president of the Barnstable County Bar Association. I don’t know Ms. Roberts personally, but judging by her resume and Cape Cod experience (see, e.g, the Cape Wind dispute), she seems like another fine choice for the Court. She appears to be the first woman from the Cape to be appointed to the Court. Roberts’ appointment must be approved by the Governor’s Council in the coming months.

Former Boston attorney, Howard P. Speicher, was confirmed last Fall, and now has almost one year on the Land Court bench. Judge Speicher previously practiced for 30 years at the Boston law firm of Davis, Malm & D’Agostine, P.C., where he focused on zoning, land use and permitting matters, and real estate transactions. Judge Speicher began his career with the City of Boston Law Department. Before becoming a judge, I met Mr. Speicher a few times at his firm and at bar events, and he’s very smart and generally a nice guy. I have not appeared before him yet at the court. I know he has deep knowledge of the complex maze of Boston Zoning which will be an asset to the court and to practitioners alike.

I’ll be keeping tabs on Ms. Roberts’ confirmation at the Governor’s Council which can sometimes be an unpredictable place for judicial nominees.

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Landlord Not Liable For Shooting Death At Rental Property

by Rich Vetstein on September 16, 2015

in Insurance, Landlord Tenant Law, Leasing, Massachusetts Real Estate Law, Premises Liability, Rental Housing, Safety

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

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

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

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

Landlord Sued For Wrongful Death

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

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

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

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

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

_____________________________________________________

If you are a rental property owner and would like advice concerning your leases or would like to discuss setting up an LLC, please contact me at [email protected] or 508-620-5352. I would be happy to help you in any way.

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Title Insurance Companies Balk At Insuring Foreclosed Properties

by Rich Vetstein on September 3, 2015

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

Policy Changes Make It Harder To Insure Foreclosed/REO Properties

In the aftermath of the Supreme Judicial Court’s July 17th ruling in Pinti v. Emigrant Mortgage Company, which voided a foreclosure over a defective notice of default, two leading title insurance companies — First American Title and Fidelity/Chicago — have announced that they will be significantly changing the manner in which they underwrite foreclosed properties. These new policies will make it much harder to insure foreclosed properties, and may dramatically affect the sale and marketability of foreclosed/REO/bank owned properties.

The most drastic change comes from First American, which has the largest market share in Massachusetts. Under FATICO’s new policy (embedded below), lenders must obtain a judicial decree that the foreclosure was conducted in compliance with the Pinti ruling. (This applies only to foreclosures conducted after July 17, 2015). Because Massachusetts is a non-judicial foreclosure state (i.e, lenders do not need a judge’s approval to foreclose except for confirmation that the borrower is not in the active military), getting court approval for a foreclosure will require either a Superior Court or Housing Court action and will be expensive, lengthy and burdensome for lenders.

Fidelity/Chicago’s new policy requires closing attorneys to “verify that any preforeclosure default notices were sent by the foreclosing Mortgagee on or before July 17 [and] verify that the attorney for the foreclosing Mortgagee has included a statement to that effect in a recorded Affidavit that is part of the foreclosure documentation.” Closing attorneys must also “determine that the mortgagors, or any parties claiming under them, are no longer in possession of the premises or otherwise asserting any rights.”

The question is whether the other title insurance companies will follow suit. As of this writing, Stewart, CATIC, Old Republic and Westcor have not adopted a new foreclosure underwriting policy. I will monitor if that changes.

Act Clearing Title To Foreclosed Properties

These underwriting changes only underscore the importance of the Legislature passing the Act Clearing Title to Foreclosed Properties, Senate Bill 1981. The bill would protect arm’s length third party purchasers for value, and those claiming under them, who purchase at the foreclosure sale or in a subsequent REO transaction. It is the result of years of negotiation, and represents an honest effort to balance the interests of third party purchasers with mortgagors who legitimately believe they have been wrongfully foreclosed upon. Lenders who have conducted defective foreclosures would remain liable to the mortgagors. This is the same bill that was passed by both branches of the legislature at the end of the legislative session last fall, but was sent back with poison pill amendments by Governor Patrick and died. The bill should be voted on by the Senate soon after Labor Day. If passed, it will be considered by the House shortly afterward.

First American Mass. Foreclosure Policy

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SJC Voids Foreclosure Over Defective Notice of Default

by Rich Vetstein on August 6, 2015

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

Ruling Enables Foreclosed Owner to Live in Premises For Over 6 Years, Leaving New Owner with Defective Title

In a decision which could affect how title examiners and title insurance companies underwrite title to foreclosed properties, the Supreme Judicial Court has ruled that a lender’s defective notice of default is grounds to void and nullify a foreclosure sale — even after the property was purchased at auction by a third party without knowledge of the problem. The decision is Pinti v. Emigrant Mortgage Co. Inc. (SJC-July 17, 2015).

The defective aspect of the default notice was relatively minor. The notice was required to say that the borrower had the right to bring “a court action” to challenge the default or foreclosure. The actual notice instead referenced a “lawsuit for foreclosure and sale.” The problem is that in Massachusetts there is really no such thing as a lawsuit for foreclosure, because we are a non-judicial foreclosure state. In order to challenge a foreclosure, a borrower must bring an injunction proceeding in Superior Court. Over this minor discrepancy, the Court throw out a 3 year old foreclosure, leaving the subsequent buyer with defective title.

“This ruling is yet another reason why it’s absolutely critical to obtain owner’s title insurance for any home purchase–especially a foreclosure property.”

This ruling had a disastrous impact on the foreclosing lender and the buyer of the property at foreclosure (and his title insurance company, presumably). The borrower, who was represented by Greater Boston Legal Services, stopped paying her mortgage six years ago in 2009, and the lender foreclosed in 2012. A third party purchased the property (with the borrower in occupancy) shortly thereafter, then commenced eviction proceedings. It appears that the borrower has been able to live in the premises for the entirety of the litigation, presumably mortgage payment free. After this ruling, the lender will need to re-start foreclosure proceedings from square one.

Change In Title Exam Practices?

In a typical title examination involving a previously foreclosed property, the examiner and attorney will only look at the foreclosure notices and “green cards” — the certified mail foreclosure notices. In light of this ruling, the examiner may be required to look back even further to the default notices sent by the lender (which are not recorded with the registry of deeds) and ensure compliance with the mortgage and loan documents. Attorneys should consult their title companies for guidance on this ruling. (The ruling’s effect is prospective only; a title insurance company that I work with has already stated that they will not be changing their underwriting standards after Pinti).

Effect On Foreclosures

The SJC’s reasoning for requiring strict compliance with the default notice provisions in the mortgage was based on the fact that Massachusetts uses a non-judicial foreclosure process. That is, lenders do not need a judge’s approval to start foreclosure (with the except that they need Land Court approval that the borrower is not in the armed services). Accordingly, even the most hyper-technical defect in a default notice by the lender could render a foreclosure void.

Following a long series of pro-borrower rulings starting with the historic U.S. v. Ibanez decision, the SJC’s decision in this case is yet another cautionary tale to lenders that they must dot their “i’s” and cross their “t’s” before conducting a valid foreclosure sale.

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TRID Rules Expected To Delay and Disrupt Closings

by Rich Vetstein on July 31, 2015

in Closings, Consumer Financial Protection Bureau, Fannie Mae, FHA, Massachusetts Real Estate Law, Purchase and Sale Agreements, Real Estate Taxes, Realtors, RESPA, TRID, Truth in Lending

Major Change To Current Practices | Expect Delays and Bumpy Road Starting Oct. 3

I just finished yet another closing where a national lender issued the closing documents the morning of the closing, and worse, issued a revised TIL (Truth in Lending) disclosure during the middle of the closing! Under the new TILA-RESPA Integrated Disclosure Rules (TRID) set to start on October 3, this too-common practice would have resulted in a closing delay of up to 7 days, to the dismay of everyone in the transaction.

The new TRID rules are game-changing regulations which threaten to disrupt and delay closings across the country. The new rules, already pushed back once due to industry outcry, go into effect in about 60 days on Oct. 3. I am very worried that lenders, Realtors and closing attorneys are not at all prepared for one of the most significant changes in how we do business. Experts are predicting that closings will be delayed, 60 day loan approvals will be the new normal, and new forms will bewilder buyers. “Expect a one- to two-week delay in closings,” said Ken Trepeta, director of real estate services of the government affairs branch for the National Association of Realtors, when describing the impact of TRID.

Check out my latest article: Best Practices In A New TRID World

Currently, we are finishing one of the strongest spring markets in a decade, but I’m quite concerned that come Fall, the new TRID rules will put the fall market into an ice bath. The best thing that every real estate professional can do is get educated and get prepared now for these changes. August is typically a slow month, so use it to get ready. My team will be doing a roadshow Powerpoint seminar to any local real estate office to explain the new changes. Contact me at [email protected] for more info.

New Closing Disclosure Replacing the HUD-1 Settlement Statement: 3 Day Rule

Under TRID, there will be a new settlement statement called a Closing Disclosure, which must be issued to the borrower at least 3 days prior to closing. If that does not occur, the closing will be delayed for up to 7 days. We are hearing that lenders will require that the information contained in the Closing Disclosure (all fees, closing costs, taxes, insurance, escrows, credits, etc.) be finalized as early as 20 days prior to closing, to give them enough time to generate the new Closing Disclosure in a timely fashion and to account for delays.

What does that mean for us professionals? It means that everything will need to be pushed up and done faster than before. That goes for titles, CPL’s, broker commission statements, invoices for repairs, insurance binders, condo fees, recording fees, title insurance, everything. And it means we can all expect delays as everyone adjusts to the new timetables and rules.

Practice Pointer: Click here to get my new TRID addendum/rider.

What Forms Will Be Signed At Closing?

Lenders will require the new Closing Disclosure (embedded below) be signed by the borrower at closing. However, although the Closing Disclosure was intended to replace the current HUD-1 Settlement Statement, the geniuses at CPFB neglected to put a signature line for the sellers on the new Closing Disclosure. I’m not making this up. And we are no longer supposed to use the “old” HUD-1 Settlement Statement. Thus, our title insurance companies are telling us that there may be three settlement statements signed at closing: a Closing Disclosure for the buyer, a Closing Disclosure for the seller, and a combined Closing Disclosure. ALTA has created a new Combined Settlement Statement which can be found here.

Bank of America was asked whether it would require the use of the ALTA model forms, and it stated in a June 9 memo that it prefers the ALTA model if a closing attorney chooses to use a settlement statement to supplement the Closing Disclosure (CD), but specified that the settlement statement figures must reconcile to the CD and a copy of the settlement statement must be provided to the bank. The bank also stated that all revisions to fees and costs will require bank approval and an amended CD. In other words, closing attorneys will not be allowed to revise fees and costs by simply supplementing the CD with a settlement statement.

60 Day Approvals/Closings The New Normal?

With any historic change to how lenders disclose fees and approve loans, there’s going to be a steep learning curve — and delays. You can count on that. Industry insiders say the days of 30 and even 45 day loan approvals may be over, at least temporarily. Sixty (60) day approvals may be the new normal, and agents should build the longer timeframe into their offers and purchase and sale agreements and educate their buyers and sellers accordingly.

Repairs and Walk-Throughs

Since lenders will require all fees and credits finalized 7-10 days prior to closing, this will significantly impact how we handle repairs and credits. Agreed upon repairs also affect how the appraisal is conducted which will further impact the timelines. Experts are suggesting that Realtors consider doing walk-throughs at least 14-21 days prior to closing instead of the typical day before or day of walkthrough, because all repair issues and credits should be set in stone at least 7-10 days prior to closing and changes in fees and credits on the day of closing will not be permitted by the lender. Some experts are even saying that agents should do two walkthroughs, one within the TRID timelines and one immediately prior to closing. Also, under TRID paid outside closing (POC) items will be discouraged by lenders.

Take-away: Realtors should be warned that repairs contained in the purchase and sale agreement will have the potential to delay closings under the TRID rules. Ensure that any repairs are completed 14-21 days prior to closing. Better yet, don’t have the seller make repairs at all; use closing cost credits instead.

No More Back to Back Closings?

Due to the high potential for delays caused by TRID, back-to-back or piggyback closings may be a thing of the past, at least for now. A delay with a closing obviously has a domino effect on a back to back closing. The best practice, at least for the first few months of the new TRID era, is to schedule closings at least 3 days apart. Seller/buyers will have to prepare for this reality with bridge loans, use and occupancy agreements, or temporarily staying with your nearest relatives.

Partner with Trusted and Verified Providers

Now more than ever, Realtors are going to want to partner with lenders and closing attorneys who have been vetted and verified as fully compliant with the TRID rules, so there will be minimal disruption and delay on their transactions. Realtors and loan officers should ask their closing attorneys whether they are compliant with the ALTA (American Land Title Association) Best Practices, which is quickly becoming the standard for TRID compliance. Under the ALTA Best Practices, the attorney will have passed an intensive initial due-diligence screening, a third-party internal audit, background and credit check, extensive review of applicant’s experience, business model and policy loss history, and licensing verification. The closing attorney should also have secure document encryption capabilities and privacy/technology policies in place. My office has been vetted and verified by Stewart Title which has a comprehensive website on the TRID rules. If your buyer wants to use his personal attorney who does not specialize in real estate, explain to him or her why that is a mistake which could ultimately delay the closing.

Bumpy Road Ahead?

In my opinion, the TRID rules are the biggest change to the industry in 20 years, and will be much more difficult to implement than the new GFE and 3 page HUD of several years ago. As discussed above, my team will be doing a roadshow Powerpoint seminar to any local real estate office to explain the new changes. Contact me at [email protected] to schedule your complementary seminar.

More information:

Mass. Ass’n of Realtors Webinar on TRID with Ruth Dilingham, Special Counsel
National Ass’n of Realtors Webinar with Phil Schulman
Old Republic Title FAQ on TRID
CFPB Monitor TRID FAQ
CFPB Webinar Rebroadcast May 2015

CFPB Closing Disclosure by Richard Vetstein

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SCOTUS Recognizes Disparate Impact Liability Under Fair Housing Act, But With Limitations

by Rich Vetstein on July 9, 2015

in Massachusetts Real Estate Law

Fair Housing Advocates Get Major Victory at U.S. Supreme Court

While everyone in America was focused on the U.S. Supreme Court’s historic marriage equality ruling, at the end of its Term, the Court also issued an important opinion under federal Fair Housing law. In a 5-4 margin, the Court upheld the application of “disparate impact” theory of liability under the Fair Housing Act (“FHA”) in Texas Department of Housing & Community Affairs v. The Inclusive Communities Project, Inc.

What is disparate impact theory you ask? Good question. In a disparate-impact claim, someone who alleges housing discrimination may establish liability, without proof of intentional discrimination, if an identified rental practice has a disproportionate effect on certain groups of individuals (i.e, minorities) and if the practice is not grounded in sound business considerations. Ok, now what does that mean in plain English?

Here’s an example. Let’s say you own several apartment buildings, and an upset tenant says that based on statistics for the last 5 years, you have evicted 75% more black tenants than white tenants, while the rate of nonpayment between racial classes have remain about the same. That’s a disparate impact claim. Surprising to most folks is that under a disparate impact theory, the claimant need not show some type of “smoking gun” evidence of direct racial discrimination, like something Donald Sterling would say, such as “we don’t like to rent to black folks.” If the claimant can back up his theory with statistical evidence, then he or she will have their day in court.

While accepting disparate impact as a viable Fair Housing claim, the Supreme Court imposed important limitations on the application of the theory “to protect potential defendants against abusive disparate-impact claims.” In particular, the Court held that a racial imbalance, without more, cannot sustain a claim, and directed lower courts to “examine with care” the claims at the pleadings stage. The Court emphasized the plaintiff’s burden to establish a “robust” causal connection between the challenged practice and the alleged disparities. Further, a defendant’s justification is “not contrary to the disparate-impact requirement, unless … artificial, arbitrary, and unnecessary.” Finally, “remedial orders” must “concentrate on the elimination of the offending practice” through “race-neutral means.”

Despite the limitation, this is a big win for fair housing advocates. Sec. 8 tenants, the MCAD and EEOC will have another powerful legal theory to use to crack down on discrimiminatory rental practices. Moreover, in the wake of the ruling, HUD just announced its the long-awaited Affirmatively Furthering Fair Housing (AFFH) rule, which will provide maps and data on historic segregation that cities will need to use to assess their progress in reducing segregation, increasing housing choice and promoting inclusivity.

The lesson to take back from this ruling is to ensure you have policies in place to treat every applicant and tenant the same way across the board. The existence of written procedures, policies and manuals are helpful in defense of these types of claims. Saying you follow “Equal Housing Opportunity” is one thing; you have do actually do it.

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