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Housing Court Issues Major Change to Procedures To Tackle Backlog of Cases, and Address Covid-19 Safety Concerns

With the Massachusetts Eviction Moratorium set to expire on October 17, and barring an extension from Gov. Baker or the passage of a new moratorium, the Housing Court is preparing for arguably the most challenging period in its history. Chief Justice Timothy Sullivan has just released a set of new procedural rules to manage all pending and future cases in the “new normal” of a Covid-19 world. The new rules dramatically change how all cases will be heard in the Housing Courts, with the vast majority of hearings being conducted via video-conferencing technology instead of in-person. Facing a backlog of some 20,000 pending eviction cases and an unknown number to be filed once the Moratorium expires, the goals of these new procedures are to: (a) start moving pending eviction cases forward, (b) establish new procedures for the filing and case management of new cases, (c) encourage mediation and private agreements as much as possible to decrease the backlog of cases, and (d) above all, keep litigants and court personnel safe. The new rules also contain a new affidavit requirement under the federal eviction moratorium issued by the Centers for Disease Control. The new rules can be found here: Housing Court Standing Order 6-20: Temporary modifications to court operations based on the coronavirus (COVID-19) pandemic and the expiration of chapter 65 of the acts of 2020 (eviction moratorium).

Housing Court Physically Open for Business, But Most Proceedings Will Be Virtual

The Housing Court will be physically open with limited staff and judges, but the preference will be for cases to be heard virtually. The court is presently using the Zoom platform quite effectively, and I assume it will continue to do so. For self-represented (pro se) parties who may have limited access to technology, the court will assist that person with the video-conferencing technology or offer a “suitable alternative.”

The old “call of the list” on Thursday morning hearing days with hundreds of people packed in hallways and courtrooms will now be a relic of the past, and is suspended indefinitely. Instead, going forward, the clerk’s office will schedule cases and hearings directly with the parties or their lawyers, with the vast majority being on Zoom. This includes mediations. Lawyers are required to continue to E-File new cases and all pleadings.

Rich’s Practice Pointer: However it plays out, it’s a safe bet to say that evicting anyone in Massachusetts going forward could take anywhere from 6-18 months. This makes mediation and private settlement agreements all the more attractive and cost effective for landlords.

Procedures for Pending Summary Process (Eviction) Cases: Two Tiered System

Pending cases will be scheduled for hearing in the order in which they were filed, i.e, earlier filed cases get priority. All tenant motions to vacate a dismissal or default for failure to appear between March 1, 2020 and the expiration of the Moratorium (Oct. 17, 2020) will be automatically granted by the court.

The rules established a new two-tiered system to move cases forward. In Tier I, a housing specialist (who is typically a trained mediator) will schedule the first court event by video conference or telephone call. The purpose of the first event will be to determine the status of the case, whether the CDC federal moratorium applies to the tenant, attempt to mediate/resolve the case, and explore the availability of any housing assistance. If the case does not settle, the housing specialists and the clerk will hold a case management conference to determine the next steps in the case and/or schedule the case for trial. For Tier 2, the clerk will schedule the next court event by written notice. While the rule provides that trials should be held as soon as practical but no sooner than 14 days after the first tier event, I would have to assume that getting a trial date will be several months away, given the huge backlog of cases caused by the Moratorium. The new rules provide that trials will be held by video-conference, with a “small sub-set being held in person,” as determined by the Clerk Magistrate and First Justice.

Procedure for New Summary Process (Eviction) Cases

In a major change from existing practice, new cases will not be automatically scheduled for a trial on the typical Thursday morning schedule. (The rules provide that lawyers should now put “TDB by court” in the Summary Process Complaint where the the trial date would typically be listed.) Instead, the clerk’s office will send out a notice of the first event, but the rules do not say when that will actually be. The clerk will also send out an information sheet with a resources available to assist the parties in resolving the case. Cases will then proceed based on the two-tiered system outlined above.

CDC Eviction Moratorium Affidavit Requirement

The rules provide that all new eviction cases for non-payment of rent must be accompanied by a new affidavit indicating whether the landlord has received a hardship declaration under the CDC Eviction Moratorium. For pending eviction cases, the plaintiff must file the CDC affidavit before the first tier court event. The court is coming up with the new affidavit form which will be available on the court website. I believe that this new requirement will be controversial because it may prejudice landlords since the burden of claiming a Covid-19 related hardship remains with the tenant under the CDC Order.

Executions (Move-Out Orders)

For those housing providers holding an execution for possession (move-out order) which has now expired, they may file a written request or motion for a new execution to issue, but they must file the CDC affidavit with it. These new executions will be issued administratively without a hearing. I would expect that tenants will be filing numerous motions to stay execution based on the Covid-19 pandemic, so we will have to see how the judges handle these.

Emergency and Injunction Proceedings

As it has done throughout the pandemic and Eviction Moratorium, the court will continue scheduling all emergency matters including those for injunctive relief (lockouts, condemnation, no heat, no water/utilties, access) or a motion for stay of execution. These proceedings will be scheduled virtually to the extent possible.

Jury Trials

All parties have a right to a jury trial in the Housing Court. Indeed, this is often used as a weapon by tenant attorneys to delay cases. The new rules provide that in-person jury trials with 6 jurors may resume on October 23, 2020, but I don’t see how this is achievable. I think getting a jury trial date will be many months down the road for most cases.

My Thoughts

Like any major change to court procedures, it will take some time for litigants and court personnel to adapt to these new rules. Over the course of the pandemic, I have participated in several Zoom hearings as well as mediations in the Housing Court, and they have worked out just fine. For the mediations, the housing specialists have used the breakout room feature so parties can discuss matters in private. Trials conducted via Zoom will be a different animal, and lawyers will need to come up with some best practices for them.

Another thing I’m certain of is that it will take longer to move an eviction case through a post-Eviction Moratorium Housing Court. Perhaps many months longer, especially where there’s a jury trial demand. The Court is facing an unprecedented backlog and situation with the pandemic plus the Moratorium, and it will take quite a long time for the court to make a dent in the backlog of cases — plus we don’t know how many new cases are on route. Whatever the actual number, it’s been 6 months since new cases were allowed to be filed. However, I vigorously dispute the narrative put forth by the CityLife/Urbana Vida folks that 100,000 evictions are imminent. That’s just unsubstantiated nonsense. At minimum, the CDC Moratorium may well delay a large number of non-payment cases until it expires on Dec. 31.

If you have any questions concerning an eviction or the Housing Court, please feel free to email me at [email protected].

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Lengthy Extension of Eviction Moratorium Likely Unconstitutional; Calls for Adequate Rental Assistance Funding Go Unheeded

With Gov. Baker signaling he won’t extend the current Eviction Moratorium past Oct. 17, and Federal Judge Mark Wolf’s ruling that an extended moratorium would likely be unconstitutional, state legislators and tenant rights activists are frantically pushing an even more draconian 12+ month extension of the moratorium along with a rent freeze. The wide-ranging proposal branded as the “Housing Stability Act,” is on the fast track to passage, just clearing the Joint Committee on Housing. The new bill coming out of the Joint Committee is H. 5018, and is causing alarm within the real estate community, with the Mass. Association of Realtors and Greater Boston Real Estate Board coming out strongly in opposition to the bill.

12-36 Month Extension of Eviction Moratorium

The new bill would impose a new extended statewide moratorium on all “non-essential” evictions for at least 12 months after the Covid-19 State of Emergency is lifted by the Governor. This will cover 95% of all evictions, with the only exceptions being for serious criminal activity which threatens the safety of others. The State of Emergency, which is tied to federal disaster funding, will surely be in place until an effective Covid vaccine is available and infection levels are close to zero — which could be years away. Thus, the proposed eviction moratorium could be in place for the 18-36+ months or even longer, on top of the existing moratorium which has been in place since April. The new moratorium, unlike other states’ moratoriums, does not require a tenant to demonstrate a Covid-19 hardship.

The new eviction moratorium would be constitutionally suspect based on the 102-page ruling issued in late September by Federal Judge Mark Wolf considering housing providers’ challenge to the original Moratorium. (I am lead counsel in that case). Judge Wolf called into question the constitutionality of a moratorium which extended further past Oct. 17, ruling that: “A public health emergency does not give Governors and other public officials carte blanche to disregard the Constitution for as long as the medical problem persists.” If this new bill is enacted, rest assured it will face a swift and vigorous legal challenge.

Rental Increase Freeze

The bill imposes an across the board rent increase freeze for the next 12-36 months, regardless of whether a tenant is actually impacted by Covid-19. The bill prohibits housing providers from increasing rent payments in excess of the rental amount in place as of March 10, 2020. The rent freeze will be in place for 12 months after the Covid-19 State of Emergency is lifted. Thus, like the new eviction moratorium, the rent freeze could likely be in place for the next 12-36+ months. This will effectively stop landlords from agreeing to defer rent as an accommodation to financial hardship and enter into a payment plan that recovers the deferred rent through a new lease with a higher payment. This provision would also face legal challenge because it substantially impairs existing leases under the federal Contracts Clause.

Just Cause Eviction Protections

The bill also provides for “just cause” eviction protections to tenants. This has been on tenant group’s wish list for some time now, and has been rejected across the board in the last several years. Under the bill, landlords can only evict for “just cause” if:

  • Tenant fails to pay rent (but no requirement to show Covid-19 hardship)
  • The tenant has materially violated an obligation or covenant of the tenancy or occupancy, other than the obligation to surrender possession upon proper notice, and has failed to cure such violation within 30 days after having received written notice thereof from the owner; 
  • The tenant is committing a nuisance in the unit, is permitting a nuisance to exist in the unit, is causing substantial damage to the unit or is creating a substantial interference with the quiet enjoyment of other occupants; 
  • The tenant is using or permitting the unit to be used for any illegal purpose.
  • Owner intends to make personal use of the unit within 180 days, including personal use or use by family member.

With the just cause protections in place, rental property owners would be effectively prohibited from evicting tenants on a “no-fault” basis, such as terminating a tenancy at will, holding over past the lease term, or refusing a rental increase.

Housing Court Exclusive Jurisdiction For Collection of Unpaid Rent

In a first-of-its-kind proposal, the new bill gives the Housing Court exclusive jurisdiction to hear claims to recover unpaid rent. This is clearly intended to frustrate the collection of unpaid rent by housing providers who are able to file small claims in district courts across the state. The Housing Court will already be incredibly backlogged with pending and new eviction cases after the moratorium, and they have little interest in wasting their scarce judicial resources with small collection cases. This provision will essentially make it nearly impossible to collect unpaid rent balances.

Lack of Adequate Rental Assistance Funding and State Tax Credits

As I have been screaming from the rooftops since the first moratorium was passed, the fatal flaw with all of these proposals is that they remain unfunded. By my calculations, we need at least $300 Million in rental assistance funding. (Taking 100,000 renters at risk of eviction per tenant groups x $3,000 per tenant). The new bill purports to establish a new “Covid-19 Housing Stability and Recovery Fund” but it does not appropriate ANY funds for it. Proponents of the bill simply say that the federal government must fund rental losses. Without adequate rental assistance funding, the burden of Covid-19 impact will unfairly flow down from tenants to small housing providers who are equally unable to sustain those losses.

The new bill also provides for certain state tax credits for rental losses. However, there is a cumbersome application and approval procedure that housing providers must use to obtain these credits, rather than being able to simply claim the credit on personal tax returns. Landlords who claim tax credits cannot proceed with an eviction. Also, state credits are typically quite low (based on 5% state income) so it would not amount to much benefit to owners.

What’s Next?

This bill now moves to the Joint Committee on Rules where it may be amended. Tenant groups are planning a week long push next week to pass this bill. With over 80 co-sponors, it appears the bill has a strong chance of passing on Beacon Hill. The question will be whether Gov. Baker will sign or veto, and whether the State House can obtain a veto-proof 66% vote.

If you are opposed to this bill, I urge you to email the members of the Rules Committee below, as well as your own state rep and senators.

Email addresses for the Governor and all members of the Rules Committee where HD5018 is now under consideration (copy and paste into your email “TO” line):[email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected][email protected]Donald H. Wong

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The COVID-19 pandemic is not a blank check for the Governor and other elected officials.” — U.S. District Court Judge Mark Wolf Issues Landmark 102-Page Opinion on Constitutionality of Massachusetts Eviction Moratorium; Gov. Baker Signals He Will Allow Moratorium to Expire On Oct. 17

As readers of this blog know, I, along my colleague Jordana Greenman, Esq., are lead counsel for several housing providers in a federal court challenge to the Massachusetts Eviction Moratorium in the case of Baptiste v. Kennealy, United States District Court – Massachusetts, CA 1:20-CV-11335 (MLW). For the past three months, we have been battling with the Attorney General’s Office over the constitutionality of the Moratorium and whether the court should enjoin it. After five days of hearings and thousands of pages of legal briefing, Judge Mark Wolf has issued a landmark 102-page opinion in the case. The opinion is embedded and linked to below.

“A public health emergency does not give Governors and other public officials carte blanche to disregard the Constitution for as long as the medical problem persists.”

In a nutshell, Judge Wolf declined for now to enjoin the Moratorium, reasoning that legislators had a reasonable basis for enacting it as a temporary emergency measure back in April during the beginning of the pandemic. However, and most notably, Judge Wolf expressed serious concerns over the constitutionality of the Moratorium if it is extended past its current expiration date of Oct. 17. Judge Wolf wrote:

“The COVID-19 pandemic is not a blank check for the Governor and other elected officials. Rather, it should be recognized that “a public health emergency does not give Governors and other public officials carte blanche to disregard the Constitution for as long as the medical problem persists. As more medical and scientific evidence becomes available, and as States have time to craft policies in light of that evidence, courts should expect policies that more carefully account for constitutional rights.”

“In other words, in deciding how to exercise their broad discretion in responding to the evolving COVID-19 pandemic, elected officials have a duty to consider the limitations imposed by the Constitution, rather than merely to rely on courts to remedy any violations of it. As Justice Anthony Kennedy has written, “the very fact that an official may have broad discretion . . . makes it all the more imperative for him or her to adhere to the Constitution and to its meaning and promise.” 

Judge Wolf also recognized that the Moratorium imposes a substantial impairment of leases between housing providers and tenants across the state:

“The rights to evict and recover property if a tenant does not pay rent are important elements of the contractual relationship that a lease creates. The Moratorium deprives the landlords of a remedy for a violation of these rights while it is in effect. It does not prevent a landlord from suing a tenant for rent owed. However, that remedy will often be illusory because landlords are unlikely to benefit from money judgments against tenants who are unable to pay rent during the COVID-19 pandemic or who are unwilling to do so. Therefore, the Moratorium materially undermines the contractual bargain.”

Judge Wolf did rule in our favor that the Moratorium Regulations violate the First Amendment as they force housing providers to provide a state mandated missing rent notice which directs tenants to pro-tenant advocacy groups like City Life/Urbana Vida.

Gov. Baker Signals He Will Not Extend Moratorium Past Oct. 17

Echoing many of Judge Wolf’s concerns, and as the Boston Globe reported yesterday, Gov. Baker suggested he won’t extend the moratorium. Instead, he wants to devise a system that protects both renters and landlords. “We would really like to see if we can put a plan together to make sure that we can do, with the courts, what needs to be done to ensure that people are protected with respect to their housing,” Baker said. “But the longer this thing goes on, the deeper the hole gets, not just for tenants but also for landlords, especially small landlords…who . . . have in many cases already run out of rope.”

We would like to think that our lawsuits and Judge Wolf’s ruling will play a significant factor in Gov. Baker’s ultimate decision whether to allow the Moratorium to expire. We want to make clear that our clients, and housing providers across the state, do not want mass evictions during the Covid-19 pandemic. As we have said from the start, if the state had enacted a large rental assistance funding package from the start, we would likely not be in this situation where thousands of private landlords have been forced to subsidized housing for tenants impacted by the pandemic. We are ready, willing and able to work with the courts and tenant groups to put reasonable safeguards in place to assist tenants if the Moratorium is lifted. I cannot stress enough how important rental assistance funding is.

What is Next? CDC Eviction Moratorium In Place Until Dec. 31, Housing Stability Act

Even if the Massachusetts Moratorium expires on Oct. 17, the new CDC federal eviction moratorium will be in place through Dec. 31. However, the CDC order is far narrower than the Massachusetts moratorium. Tenants must affirmative certify under oath they are financially impacted by Covid-19, and it does not apply to expiration of leases, for cause situations (like bad behavior or criminal activity) and to many “no fault” situations. At a recent Bench-Bar conference, several Housing Court judges stated the court will likely allow service of notices to quit and accept eviction filings unless tenants affirmatively raise the CDC order as an affirmative defense to the eviction. Also, the National Apartment Association and a group of housing providers have challenged the CDC Order in Atlanta federal court. We will see how this will play out.

State legislators and tenant activists also continue to advocate for a 12 month extension of the moratorium through the Housing Stability Act, but again, without meaningful rental assistance funding. A few million dollars in RAFT funding will not cut it. We need upwards of $200 million dollars or more in state rental assistance funding, and unfortunately, that is nowhere to be found right now. Based on Judge Wolf’s ruling, I believe the Housing Stability Act’s 12 month eviction moratorium would likely be unconstitutional.

To all of our faithful supporters, donations to our Legal Fund would also be very much appreciated as we put our law practices on hold for several months now while spending hundreds of hours on this case:  Link: https://paypal.me/pools/c/8orbLzpxbY

Judge Mark Wolf Opinion Pre… by Richard Vetstein

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CDC Eviction Moratorium Pushes Boundaries of its Public Health Authority, Raises Other Serious Constitutional Problems

While we have been in federal court arguing the constitutionality of the Massachusetts Eviction Moratorium, the Trump administration’s Centers for Disease Control and Prevention (CDC) just issued an emergency order (embedded below) imposing a nationwide residential eviction moratorium through December 31, 2020. The moratorium, issued under the CDC’s emergency authority to respond to public health crises and without the usual rule-making and public comment process, would cover millions of renters who are unable to pay their rent due to the Covid-19 crisis. The moratorium is scheduled to be effective as of September 4, 2020. Unfortunately, the moratorium does not provide for any rental assistance funding to landlords or tenants, so like the Massachusetts moratorium, private landlords will again shoulder the entire economic burden of rental losses.

Applicability to States With and Without Their Own Eviction Moratoriums

The CDC Eviction Moratorium only applies in states where they do not have an existing residential eviction moratorium, or if they do, where it is less strict than the CDC order. Thus, in Massachusetts, the CDC order would not apply while the current moratorium is in place through October 17, because the Massachusetts moratorium is far stricter than the CDC order. Governor Baker could extend our state moratorium for an additional 90 days, and of course, our challenge to it is still pending in federal court. If Gov. Baker does not extend the state moratorium past Oct. 17 or the federal court strikes it down, this new CDC moratorium would take its place through Dec. 31. The CDC retains the authority to extend the moratorium for any amount of time. Of course, by then there could be someone new in the White House.

Qualifying Process for Tenants

Unlike most other states’ eviction moratoriums, the CDC eviction moratorium requires that tenants take an affirmative step to qualify for protection. Tenants must send their landlord a CDC-approved form in which they certify under oath that they are:

  • Unable to pay rent due to a coronavirus-related job loss or income reduction, or qualified for a direct stimulus payment under the CARES Act or expect to earn less than $99,000 in 2020, or $198,000 if filing a joint tax return. 
  • Have made best efforts to obtain all available government assistance to cover rent;
  • Is unable to pay full rent due to a substantial loss of household income, loss of compensable hours of work or wages, a lay-off, or extraordinary out of pocket medical expenses;
  • Is using best efforts to make timely partial payments of rent that are as close to the full payment as the individual’s circumstances may permit, taking into account other non discretionary expenses; and
  • Eviction would likely render the tenant homeless or force him/her to move into and live in close quarters in a new congregate or shared living setting because the tenant has no other available housing options.
  • Unable to pay rent because of financial hardship due to Covid-19, that they have made your best efforts to make timely partial payments and that they would likely become homeless if evicted.

The order is unclear how all of these certifications will be confirmed for truthfulness. Most likely, state courts will have to establish a process where a landlord can challenge a tenant’s hardship declaration. The order does specifically say that tenants are not relieved of the obligation to pay rent, but the overall intent of the order is to ban evictions for renters who cannot pay their rent.

Scope of Eviction Protection

The CDC eviction moratorium only applies to non-payment of rent situations, as outlined above. It does not apply to the following situations where a tenant engages in:

  • Criminal activity on the premises
  • Threats to the health and safety of other residents
  • Damage or posing an immediate and significant risk of damage to property
  • Violations of building, sanitary and health codes
  • Violating any other lease provision, other than the payment of rent

The order, which is quite poorly drafted, applies to “any action by a landlord, owner of residential property, or other person with a legal right to pursue eviction or possessory action, to remove or cause the removal of a [tenant] from residential property.” Without further definition or clarification, we don’t know whether the CDC order would prohibit notices to quit/vacate, commencing an eviction case, prosecuting an existing eviction case, or just the final judicial act of issuing a move-out order.

Severe Penalties for Non-Compliance

The CDC eviction moratorium also provides for incredibly severe and punitive penalties and even criminal liability for landlords who violated it. Landlords can be fined up to $100,000, or up to $250,000 if the violation results in death. The Department of Justice is also authorized to bring civil and criminal charges against landlords.

Legal and Constitutional Problems

While I have not yet done a deep dive into the legality of the CDC eviction moratorium, having just fully briefed the federal court on the constitutionality of the Massachusetts eviction moratorium, many of the same problems are clearly present here. There would be an argument that the CDC moratorium constitutes a “taking” of rental owner’s property in violation of the Fifth Amendment, a substantial impairment of leases under the Contracts Clause, a violation of the right to petition and access courts under the First Amendment, and a ban on commercial speech under the First Amendment. There also appear to be substantial problems with the CDC’s authority to issue such a sweeping economic regulation under its public health authority, as well as its by-passing of the usual administrative rule making procedures under the federal Administrative Procedures Act.

As we told Judge Mark Wolf yesterday the CDC eviction moratorium has no impact whatsoever on our legal challenge to the Massachusetts eviction moratorium. However, we are looking into challenging the CDC order here in Massachusetts.

If you are a landlord and receive a hardship form from a tenant under the new CDC order, please contact me via email at [email protected].

CDC Eviction Moratorium Emergency Order Federal Register by Richard Vetstein on Scribd

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Federal Court Judge Mark Wolf (Boston Globe Staff photo by Ted Fitzgerald)

Suffolk Superior Court Justice Paul Wilson Leaves Moratorium In Place, But Federal Judge Mark Wolf To Hear Arguments on Federal Constitutionality Next Tuesday

For those following the state and federal lawsuits against the Eviction Moratorium (where I am lead counsel), it was a roller-coaster week. While we were arguing the case in federal court on Wednesday, Suffolk Superior Court Justice Paul Wilson released his ruling declining to issue an injunction against the Eviction Moratorium. (See below). We were of course disappointed in the decision, however, it will have no impact on the federal case. This is because we removed all of the federal constitutional claims (First Amendment, Right to Petition, Takings and Contracts Clause) to federal court earlier. The state court case only dealt with state constitutional issues. In any event, we are considering an appeal of Judge Wilson’s ruling as we feel he gave the state too much deference and there may have been some incorrect legal analysis.

In the federal court case, Judge Wolf rejected the Attorney General’s argument that he abstain from hearing the case in light of the pending state court case, reasoning that a federal court is duty-bound to hear the constitutionality of the law. Judge Wolf also raised the possibility of the Attorney General engaging in settlement discussions with us or agreeing to mediation. My comment was of course we would consider that but the AG has always been fighting this tooth and nail and that hasn’t changed. The AG attorney confirmed that. Judge Wolf also made an interesting comment about the state’s successful pandemic response — essentially that while a Moratorium may have been reasonable back in April, it may not be so reasonable now since Massachusetts has done so well against the virus.

Interesting comments as we head into a week of hearings on whether the landlords are entitled to a preliminary injunction stopping enforcement of the Act, starting Tuesday, Sept. 1 at 130pm. Mark your calendars! It will be publicly available. Sign up form below:

Access to the hearing will be made available to the media and public. In order to gain access to the hearing, you must sign up at the following address: https://public.mad.uscourts.gov/seating-signup.html.

Anyways, this case has been quite the interesting ride. The good news is that we are still in this fight, and very much so! Thank you again for all your support. Funding link for donations to legal fees is here: https://paypal.me/pools/c/8orbLzpxbY

Matorin v. Commonwealth of Massachusetts Decision on Preliminary Injunction by Richard Vetstein on Scribd

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“You Can’t Evict Me So I’m Not Paying Shit.” — Tenant Tells Jonathan DaPonte, a Fall River Housing Provider and Former Iraq Combat Veteran.

Jonathan DaPonte, Iraq Combat Veteran and Small Landlord

For those following our federal and state lawsuits challenging the Massachusetts Eviction Moratorium Act, I have some important updates for you.

In the federal case (Baptiste v. EOHED, USDC, CA 1:20-cv-11335), we have added Governor Baker as a defendant, and are seeking that the court order him to rescind his recent extension of the Moratorium through Oct. 17, as well as enjoin him from any future extensions.

We have also added a new plaintiff, Jonathan DaPonte, a former combat veteran in Operation Iraqi Freedom. DaPonte is a small landlord in Fall River, who works as a local funeral director. His tenant has not paid him thousands of dollars in rent since April, telling him “you can’t evict me so I am not paying shit.” The tenant is still working, has no Covid-19 related hardship, and like many tenants across the state, is taking advantage of the Moratorium to get out of paying rent, as we claim in our lawsuit. A husband and father of two small kids, Mr. DaPonte has been picking up extra hours at his funeral director job, in order to cover his rental losses due to the Moratorium. These stories are playing out across Massachusetts. Jon, like so many other housing providers, are being forced by the state to provide free rental housing to their tenants. The Moratorium has been a disaster and completely unfair for housing providers across the state. A link to our new Amended Complaint is below.

The Attorney General has been fighting us tooth and nail, filing hundreds of pages of legal briefs and a motion to dismiss the case, arguing that the state enjoys “sovereign immunity” against any lawsuits. We have filed an opposition to that motion. Earlier in the case, we were successful in persuading Judge Wolf to deny four tenant groups, including City Life/Urbana Vida’s attempt to directly intervene in the case and file friend of the court briefs.

We just got word today that Judge Wolf will conduct a hearing in the case on August 24, 2020 at 10am! We aren’t sure if it will be live-streamed or not, but we’ll let you know here.

In the state case pending in Suffolk Superior Court, we had a three hour hearing on July 30th (blog post here), and are waiting for Judge Wilson to rule on the case, hopefully soon!

We appreciate everyone’s donations and hope to see them keep coming. For those wishing to donate online, the link is  https://paypal.me/pools/c/8orbLzpxbY

Many thanks, Richard Vetstein, Esq. & Jordana Greenman, Esq.

First Amended Complaint, Federal Challenge to Massachusetts Eviction Moratorium by Richard Vetstein on Scribd

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HUD Director Dr. Ben Carson

Federal COVID-19 CARES Act Eviction and Foreclosure Moratorium Extended Another Two Months

HUD Secretary Ben Carson announced yesterday that federal housing agencies have extended the CARES Act eviction and foreclosure moratoriums through August 31 for tenants and homeowners with Fannie Mae, FHA, VA, USDA-insured single-family mortgages. The current moratorium was set to expire on June 30.  “While the economic recovery is already underway, many American families still need more time and assistance to regain their financial footing,” said HUD Secretary Ben Carson. “Our foreclosure and eviction extension means that these families will not have to worry about losing their home as they work to recover from the financial impacts of COVID-19.”

The CARES Act eviction moratorium applies to approximately 28% of all rental properties in the United States. It prohibits the eviction of tenants residing in any single-family or multifamily property financed by federally backed mortgages (Fannie Mae, Freddie, FHA, VA, USDA loans) and renters living in federally assisted housing (Section 8).

Overlap With Massachusetts Eviction Moratorium Act

For Massachusetts rental property owners, the state already has a statewide eviction and foreclosure moratorium in place until August 19, 2020 which covers virtually every residential rental eviction situation. The Massachusetts Moratorium does not have any distinctions between federal insured or non-insured mortgages; rather, it covers the type of eviction, i.e, “non-essential” vs. “essential” evictions. Gov. Baker may extend the state Moratorium for unlimited 90 day increments. The general consensus in the rental housing community is that Baker will extend the Moratorium through the end of 2020. However, led by yours truly, two landlords have filed a legal challenge to the Moratorium with the Supreme Judicial Court, which is pending. If the Massachusetts Eviction Moratorium is struck down, the CARES Act Moratorium will still be in place, at least through Aug. 31. That could be extended as well, however.

There are several databases and search websites to see if your rental property has a federally backed mortgage subject to the CARES Act —

NHLP has created a searchable database of multifamily projects subject to federal eviction moratoriums, https://nlihc.org/federal-moratoriums?ct=t%28update_041720%29

Foreclosure Protections Under CARES Act

The CARES Act provides foreclosure protections for borrowers with property secured by federally backed mortgage loans. Borrowers who affirm they are experiencing a COVID-19 related hardship can request a forbearance from their loan servicer of up to 180 days, which can be extended for an additional period of up to 180 days. Except with respect to a vacant or abandoned property, servicers may not initiate a foreclosure, move for judgment, or order a sale, or execute a foreclosure-related eviction or foreclosure sale until August 30, 2020.

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State Rep. Mike Connolly (D-Cambridge)

Self-Proclaimed “Socialist” State Rep. Sponsors Rent Control and Tenant Protection Bills; Measures Pass Important Committee

After passing the nation’s strongest COVID-19 Eviction Moratorium, a group of far left legislators are now using the Coronavirus public health crisis to push many more controversial measures, including Rent Control and Just Cause Evictions. The Legislature’s Joint Committee on Housing voted last week to recommend passage of two measures that would let cities and towns impose rent control and other tenant protections, effectively undoing a 1994 ballot measure that banned rent control in Massachusetts.

One bill (H.B. 3924), sponsored by self-proclaimed socialist Rep. Mike Connolly of Cambridge (pictured left), would establish a new “Tenant Protection Act,” enabling towns and cities to restore local rent control boards. However, this measure goes much further, seeking to adopt a radical wish list of tenant protection proposals previously rejected over the last several years. These include new “anti-displacement zones,” stricter condominium conversion rules with mandatory tenant relocation payments, a broad just-cause eviction statute (which the Legislature previously rejected a year ago), mandatory rent deposit installment plans, and other tenant-favorable provisions.

The other bill (H.B. 1319) would cap rent increases at the annual change in the Consumer Price Index (CPI) or 5%, whichever is less. The only exception to this would be for owner-occupied units of three-family homes or less with a Sec. 8 or other federal/state subsidized tenant.

As I’ve written here before, Rent Control is an experiment tried and failed many times before, and universally rejected by economists. The great thing about the 1994 vote banning rent control is we now have empirical data and a reliable study from prominent economists which has compared the Cambridge housing market during rent control vs. after rent control. We also have data and a similar study out of San Francisco. Both studies (and others from the past) have found that rent control did not work at all, and actually had the exact opposite effect — contributing to gentrification, displacement of tenants and income inequality.

The bills’ fate is far from clear. Lawmakers have a host of issues on the agenda before their formal session ends in July, and have been voting remotely, which has slowed the legislative process. Baker signaled his opposition to the bill when it was first filed last year, saying it would hinder construction of new housing, though he has said little about it lately.

Rental property owners should email their representatives to reject House Bill 3924 and House Bill 1319.

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Rental Property Owners File Emergency Petition with Massachusetts Supreme Judicial Court Asserting COVID-19 Eviction Moratorium Act Is Unconstitutional

Attorney Richard D. Vetstein and his colleague, Jordana Roubicek Greenman, Esq., have filed an Emergency Petition with the Supreme Judicial Court on behalf of two local rental property owners challenging the constitutionality of the recently passed, Act Providing For a Moratorium On Evictions and Foreclosures During the COVID-19 Emergency and the its regulations. A copy of the Petition can be viewed below.

One of the plaintiffs is a elderly woman on a fixed income whose tenant owes her over $6,000 in back rent and told her “The Governor says I don’t have to pay my rent anymore.” She risks bankruptcy and foreclosure if something isn’t done. The other plaintiff has a non-payment eviction in progress in Worcester Housing Court, and is owed several months of rent with no likelihood of any payment while the Act suspends his case.

As outlined in the Petition, the Eviction Moratorium Act imposes an unprecedented and indefinite shutdown of virtually every future and pending eviction case in the state, as well as prohibiting landlords from even issuing notices to quit.  The Petitioners, two local rental property owners saddled with non-paying tenants whom they cannot evict, claim irreparable harm on behalf of themselves and all other similarly situated rental property owners across the state.  The Petitioners assert the Act is an unconstitutional infringement on their constitutional right to access the courts and right to petition. They also claim the Act is an unconstitutional interference by the Legislature on the core functions of the courts.  Further, the Act operates as a “taking” without just compensation because it forces rental property owners to house non-paying tenants without any recourse.  Lastly, the Petitioners argue the Act violates the U.S. Constitution’s Contracts Clause as it unconstitutionally impairs their lease agreements.

 The operation of the Act obligates rental property owners to pay their own mortgages, real estate taxes, insurance, and water/sewer used by non-paying tenants, and to maintain their properties and comply with the state sanitary code, while being effectively deprived of the revenue required to do those things.  Given the unpredictable nature of the COVID-19 pandemic, this one-sided obligation and burden will continue indefinitely and quite possibly into 2021.  Many small rental property owners, especially those on fixed income, rely on rents to afford to live in their own homes.

The Supreme Judicial Court is expected to take up the case next week, and will hopefully schedule it for hearing. I will provide you with updates of course.

We are also still seeking donations to the cause. To contribute please click our secure Paypal link: https://paypal.me/pools/c/8orbLzpxbY.

Matorin v Chief Justice, SJ… by Richard Vetstein on Scribd

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Unprecedented, Sweeping Prohibition on Residential and Commercial Evictions Enacted Without Corresponding Mortgage and Tax Relief to Property Owners

Updated (5/31/20): Legal Challenge Against Eviction Moratorium Filed In SJC

In an unprecedented, sweeping, and likely unconstitutional move, the Massachusetts Legislature has passed, and Governor Charlie Baker has just signed into law An Act Providing For a Moratorium On Evictions and Foreclosures During the COVID-19 Emergency (House Bill 4647), a statewide moratorium on the vast majority all evictions and foreclosures in Massachusetts during the COVID-19 Emergency — and possibly well beyond. The new law is in effect until 45 days after the Coronavirus (COVID-19) Emergency is lifted by Gov. Baker, or four (4) months, whichever is earliest, however, Gov. Baker is permitted to extend the law for 90 day increments.

Sweeping Eviction (Summary Process) Emergency Coronavirus (COVID-19) Relief

The Eviction Moratorium covers 90% of all evictions (summary process), including non-payment and no-fault evictions, both residential and commercial. The only exception is if a tenant is engaged in criminal activity or a lease violation which impacts the health and safety of other residents or first responders. Under the Act, Housing and District Courts will not even accept new eviction filings. Eviction cases which are already pending in court are effectively suspended until the law expires. (Under previous Housing Court orders, all evictions have been stayed until May 4). Eviction move-out orders are also suspended. All court deadlines and statutes of limitations are suspended.

Further, Landlords are prohibited from issuing notices to quit or terminating a lease. Late fees for unpaid rent are also banned. Landlords are also barred from reporting delinquencies to credit reporting agencies if the tenant provides documentation of financial hardship related to the COVID-19 crisis. Throwing a bone to landlords, the Act allows them to use last month deposits to pay for mortgage and property expenses, but they must account for the deposit at the end of the tenancy. (I don’t see any benefit there at all). The Act does not suspend the obligation to pay one’s rent.

Small Business Impacts

As stated above, the eviction moratorium also applies to certain “small business” commercial spaces. Small businesses are defined as any in-state for-profit and non-profit business with less than 150 full-time equivalent employees. It does not apply to chains or businesses operating multi-state, multi-nationally, or publicly traded companies. Commercial landlords may, however, issue payment default notices and notices to quit.

Foreclosure Relief

Under the Act, all residential property foreclosure proceedings are prohibited and suspended. The Act appears not to give foreclosure relief to investment or rental property owners, and that is one of the glaring inequities as discussed below. Lenders are banned from sending foreclosure notices, filing Land Court Servicemembers proceedings, conducting foreclosure auctions, or otherwise engaging in any foreclosure related action under state law. The Act also requires banks to grant up to 180 days of mortgage forbearance to homeowners who have been hurt by the coronavirus crisis. However, the forebearance will be added to the end of the term of the loan. The foreclosure relief part of the law expires 45 days after the Covid Emergency is lifted, or 4 months, whichever is sooner, but the Governor may issue 90 day extensions. The Act does not suspend the obligation to pay one’s mortgage.

Analysis: Potentially Devastating Impact to Small Property Owners, Potential Unconstitutionality of Law

Let me just say that I have compassion for everyone suffering through this pandemic. I have friends who are Covid-19 positive. My business is down, as are my colleagues and friends. I’m actually in favor of widespread financial relief for anyone who has been financially impacted by this crisis.

However, as I have pointed out from the very beginning of this debate on evictions, the flaw with this bill is that it does not provide for corresponding meaningful mortgage, foreclosure and real estate tax relief to rental property owners. It only goes one way. There’s no doubt that many tenants are in dire financial straights, but without providing similar relief to small landlords, they will be bearing the financial brunt of this crisis. And that’s simply unfair.

This Act will likely result in widespread suspension of rent payments by tenants because there is now no enforcement mechanisms for landlords and very little if any financial repercussions. Activists are already calling for rent strikes. As Gregory Vasil, CEO of the Greater Boston Real Estate Board, correctly stated to Bisnow, “the bottom line is, if you are an owner on the commercial or residential side, you likely won’t be getting rent until sometime in the third quarter or fourth quarter of 2020. If you end up in legal proceedings against a tenant, you very likely aren’t going to be getting rent until sometime in 2021.”

Aside from the financial considerations, there are also a number of constitutional and legal flaws with the law under the Massachusetts State Constitution, including violating the right to access courts, the Equal Protection Clause, usurping the exclusive role of the judiciary, violating the Takings Clause, and other major problems. We have not seen this type of sweeping restriction on property owner rights since the days of rent control. State legislators are essentially telling Housing Court judges how to do their job. Judges are already well-equipped to deal with this crisis, and have been doing so admirably. Shutting down the courthouse doors to only landlords and lenders while keeping it open to everyone else smacks of unfair and unequal treatment. I think this Act has a high chance of being struck down by the Supreme Judicial Court.

With the backing of MassLandlords, our statewide trade association, a group of talented attorneys including myself are exploring a legal challenge to the Act. If you are interested in donating or participating in the case, please contact me at [email protected]. We have set up a secure Paypal funding link for any donations here: https://paypal.me/pools/c/8orbLzpxbY.

The Act is embedded below (House Bill 4647).

Massachusetts Act Providing… by Richard Vetstein on Scribd

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COVID-19 Impacts: Eviction Moratorium Proposals, Tenant Payment Issues, Housing Court Delays, Stay at Home Order, and Move-In Delays

I’ve written two posts here and here about the Coronavirus (COVID-19) Global Pandemic, both focused primarily on impacts to real estate transactions and closings. Along with my colleague and fellow landlord-tenant attorney, Jordana Greenman, Esq., we want to now discuss the impact on rental housing, evictions and landlord-tenant relationships.

The number of reported cases are exploding and events are changing daily, even hourly. I first wrote about the Coronavirus (COVID-19) global pandemic on March 10, about two weeks ago. As of that writing (data as of March 9), there were 729 reported cases in the US, with 27 deaths. As of today March 27, Johns Hopkins is reporting that the United States has surpassed China with over 86,000 confirmed cases and over 1,300 deaths. With the well publicized testing delays, the real number of cases is likely far higher. Unfortunately, Massachusetts has not been spared, with over 2,400 reported cases, including over 140 Boston city hospital workers.

Gov. Baker has ordered the shutdown of all schools and day-cares through May 6, closed down restaurants and bars, and banned gatherings over 25 people. Last week, all Trial Courthouses were shut down for two full days. They have re-opened, but not to the public and with very limited availability for hearing cases (other than true emergencies). On Monday March 23, Gov. Baker issued a “stay at home” advisory, essentially closing down all “non-essential” businesses.

Of course, the big problem for the rental housing industry is the economy has gone into the tank. Experts predict that unemployment will rise to Great Depression levels. The stock market has lost some 30% of its value. When people have lost their jobs and lost their savings, they can’t pay the mortgage or the rent.

Legislation for Eviction Moratorium

In Boston, Mayor Marty Walsh has announced a voluntary eviction moratorium agreement with the city’s largest landlords including Trinity Financial, Winn Residential and the Community Builders, which manage hundreds of apartments in Boston. On Beacon Hill, legislators have filed a bill calling for a state-wide moratorium on evictions during the pendency of the COVID-19 State of Emergency. At the federal level, HUD has suspended all evictions for FHA insured single family residences. It’s unclear whether this also applies to HUD Section 8 rental subsidy participants. Lastly, Attorney General Maura Healy just implemented new regulations prohibiting consumer debt collection activities for a 90 day period, however, landlord-tenant payments are excluded from the regulation.

The problem with these legislative efforts, of course, is that there needs to be a corresponding moratorium on the payment of mortgages, real estate taxes and property expenses for rental property owners, otherwise small landlords will shoulder an enormous amount of the financial burden during this crisis. “If renters don’t have money to pay rent, landlords don’t have money, either,” Doug Quattrochi, executive director of the group MassLandlords told the Boston Globe recently. “That’s money that pays plumbers and electricians and mortgage bills. If they’re a senior on a fixed income, it might be how they buy food.”

Gov. Charlie Baker indicated during his last press conference that he was not at a point where he would impose such a moratorium. Thus, as of now, a moratorium on rental payments in Massachusetts is unlikely, but of course, that could change, and such change would disproportionately affect the small landlords.

Housing Court COVID-19 Response

Practically speaking however, there exists a de facto moratorium on evictions because the statewide Housing Court has deferred hearing eviction cases through April 21. Under two new Standing Orders, all Housing Courts are closed to the public through at least until April 6, 2020, and are hearing only emergency matters. All evictions (summary process) are impacted by the order, and are currently on hold until April 21, 2020. A party may seek to advance their case upon a showing of “good cause,” but my feeling is that those will be quite rare. “Emergency matters” include the following circumstances: applications for injunctive relief, temporary restraining orders where a complaint involves a lockout, condemnation, no heat, no water, and/or no utilities; conduct and or conditions endangering the health safety and welfare of residential occupants and others; stay of levy on an execution; or where access is required to address an emergency (e.g., burst water pipe, gas fumes, etc.).

We want to highlight the likely scenario that once this crisis (hopefully) ends, the Housing Court will be swamped with cases in Spring/Summer 2020. On average, the Boston Housing Court itself receives hundreds of new eviction cases weekly. The COVID-19 postponement is sure to result in a huge backlog of eviction cases for many months to come and even more crowding in the courthouses.

Legal Guidance: Advice to landlords dealing with tenants who cannot pay rent — You have to take a wait and see approach. Legally, you are still allowed to issue a 14 day notice to quit for non-payment of rent. You are also allowed to file an eviction complaint in the Housing Court. But you will likely not get in front of a judge until sometime in May, and possibly longer. So, it’s a good idea to go ahead and have an attorney send out the notice to quit and get the summary process complaint filed, and then you’ll have to wait in line and see what happens. We do not yet know the order in which cases will be scheduled or if those filed during this time will be given priority.

Stay At Home Order: Impact on Rental Agent Activities

Gov. Baker’s Stay at Home guidance/order appears to apply to real estate and rental agent activities. They are not specifically mentioned as one of the enumerated “essential” businesses, and their activities do involve much inter-personal contact in the ordinary course of business. Boston Mayor Marty Walsh has issued a formal letter advising rental agents not to hold showings of occupied rental units. He also issued guidance that any prospective tenants who are sick should not be allowed to view a unit in person, and added that open houses should not be used to market properties that are for rent or for sale. Anecdotally, I’m hearing that some (but not all) rental agencies are shutting down operations and many are simply working remotely.

Legal Guidance: showing rental properties live in person is a violation of the Stay At Home Order, and incongruent with the public health policy behind it. Rental agents should instead use virtual showing technology, FaceTime and Zoom to replicate in person showings. Moreover, holding in person showings could lead to someone getting infected with COVID-19, then a big lawsuit against the rental agent. We don’t want to see that either.

Move-in Delays

Many tenants are scheduled to move in the coming months and, while moving companies have been deemed “essential” under the Stay at Home Order, many people may feel safer staying in place than moving to an unknown locations. Landlords and tenants should be encouraged to work together in the event of delays.

We have created a COVID-19 Lease Rider addressing the issue of move-in delays during this crisis. While it may be tempting for a landlord to keep a prepaid first month’s rent, last month’s rent and security deposit in the event a tenant either cannot move or feels unsafe doing so, this may open landlords up to liability and legal claims are sure to ensue. We encourage the parties to work together and be flexible. 

For current occupancies, landlords should remind their tenants to keep the apartments clean and sanitary. Most importantly, during tenant turnovers, landlords should hire a sanitization company (e.g., Service Master) to clean and disinfect units prior to a new occupancy.

Conclusion

Our collective appreciation goes out to the many health care and public service employees working to help combat this epidemic. The Massachusetts’s official COVID-19 website contains the most up-to-date information. We are also available to consult regarding your current or pending landlord-tenant needs.

Feel free to email Rich at [email protected] or Jordana at [email protected].

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Legislation Would Temporarily Allow Video-Conferencing Technology For Attorney Notaries

Update: 4/23/20 — The bill (now Senate Bill 2645), has passed both Senate and the House, and will soon be on the way to the Governor’s desk where he is expected to sign the bill. Click here for my new post: Legislature Passes Remote Virtual Notarization Act for COVID-19 Emergency.

Update: 4/22/20 — The Senate has passed a new revised version of the Bill, now it moves on to the House where it is expected to pass.

The real estate legal community, including yours truly, have been working and lobbying tirelessly to address the various impacts of the Coronavirus (COVID-19) Crisis on real estate transactions and closings. One of the first solutions we proposed is legislation allowing for remote or virtual notarizations of deeds, mortgages and other closing documents so that buyers and sellers can sign documents in the safety of their own homes on their computers. Due to the COVID-19 crisis, many folks are subject to the Governor’s Stay At Home Order or don’t feel safe traveling outside to an attorneys’ office for a real estate closing. Meanwhile, while the economy heads towards a recession, real estate is one of the few assets with available equity for consumers.

Under our proposed legislation, An Act Relative To Remote Notarization During COVID-19 State of Emergency (S.D. 2882), a licensed Massachusetts attorney may notarize legal documents using video-conferencing technology. There is a two-step process laid out in the legislation to complete the notarization process where the signer shows the attorney his/her state issued identification, sends the original signed documents back to the attorney, and then verifies the authenticity of the signed documents. Once that process is complete, the attorney can stamp the documents as notarized and must also complete and sign an affidavit attesting that all requirements have been met. Those notarized documents may then be recorded with the Registry of Deeds as valid, legal and binding recordable instruments. Additionally, the two video-conferences must be recorded and kept on file for 10 years. The bill would only be in effect during the COVID-19 State of Emergency.

The bill has widespread industry support from the Real Estate Bar Association (including the Probate Section), the Massachusetts Bar Association, the Massachusetts Association of Realtors and Greater Boston Real Estate Board. Twenty three (23) states have now passed remote notarization bills, including just recently due to the COVID19 crisis, including New York State, Vermont, Connecticut, Florida, Virginia, Texas, and Nevada. Moreover, a nationwide bill has been proposed by the American Land Title Association.

There are a number of technology companies that offer end-to-end remote notarization systems and are approved by national title insurance companies and lenders. They include:

To our real estate partners and colleagues, WE NEED YOUR HELP NOW! We need you to email or call your State Rep. and Senator and tell them you support our proposed legislation, An Act Relative To Remote Notarization During COVID-19 State of Emergency (S.D. 2882). To search for your state legislator, please click here.

Thank you! I will keep you posted as to developments and hopefully passage of the bill. Also many thanks to Attorneys Kosta and Nik Ligris on spearheading the bill!

Massachusetts Act relative to remote notarization during COVID-19 state of emergency. by Richard Vetstein on Scribd

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Significant Impacts Hitting: Registry and Court Closures, Closing and Financing Delays, Social Distancing, School Closings, Quarantine Potential

As I was writing this post tonight, Gov. Baker ordered the shutdown of all schools through April 6, closed down restaurants and bars, and is banning gatherings over 25 people. Also announced tonight is the shut down of all Trial Court facilities on March 16 and March 17, which includes the Cambridge and Suffolk (Boston) Registries of Deeds. We are now hitting the tipping point, and going forward there will be substantial impacts on the real estate and legal industry.

I first wrote about the Coronavirus (COVID-19) global pandemic five days ago. Seems like an eternity ago. As of that writing (data as of March 9), there were 729 reported cases in the US, with 27 deaths. As of tonight March 15, cases have over quintupled with Johns Hopkins reporting 3,722 confirmed cases and 61 deaths. With the well publicized testing delays, the real number of cases are likely far higher.

Registry of Deeds Impacts

As mentioned above, Gov. Baker just ordered the closure of all Trial Court facilities for Monday March 16 and Tuesday March 17. Both Cambridge and Suffolk (Boston) Registries are housed in Trial Court facilities so they will be closed for those two days. I spoke to Maria Curtatone, Registrar of Deeds for Cambridge Middlesex South, and she indicated that this may well be the precursor to widespread shutdown of all registries of deeds and courts throughout the state. We will await further announcements on that.

Update (3/17/20) — Suffolk and Cambridge are closed to the public until at least April 6. Currently, they are both still processing electronic recordings for recorded land. All Land Court recordings and plans must be sent in by overnight or regular mail.

We have just received a chart below showing current Registry status:

I remain concerned, however, that all Registries will be forced to shut down and will not offer in person, mail or electronic recordings. If that occurs, we will see a potentially catastrophic impact to real estate in Massachusetts. Title insurance companies have assured its attorney agents that they will offer “gap coverage” in case recordings are delayed. This coverage offers insurance coverage between the time of the physical closing and the time of actual recording of documents at the registry. However, it remains to be seen how this will play out. Will mortgage payoffs still be processed even though deeds will not be recorded? Will sellers allow buyers to get keys and move into homes if deeds aren’t recorded and their sale proceeds are held in escrow? We will need to work through these issues.

I am also concerned if COVID-19 starts hitting closing attorney offices. If a lawyer or staff member is infected, it could result in the quarantine of their entire office, essentially shutting it down for some time.

COVID-19 Contingency Provision

In my previous post, I discussed a new COVID-19 Impact Clause for Offers Purchase and Sale Agreements. (Sample language below). It is imperative that these clauses are used in both Offers and PSA’s. It’s also very important that all parties and their attorneys work together cooperatively throughout this crisis, acknowledging that there will likely be substantial impacts and delays. The goal, as always, is to get to the closing and complete the deal, by any means necessary.

COVID-19 Impact Provision. The Time for Performance may be extended by either Party by written notice for an Excused Delay which materially affects the Party’s ability to close or obtain financing. As used herein an Excused Delay shall mean a delay caused by an Act of God, declared state of emergency or public health emergency, pandemic (specifically including Covid-19), government mandated quarantine, war, acts of terrorism, and/or order of government or civil or military authorities. Notwithstanding anything to the contrary contained in this Agreement, if the Time for Performance is extended, and if BUYER’S mortgage commitment or rate lock would expire prior to the expiration of said extension, then such extension shall continue, at BUYER’S option, only until the date of expiration of BUYER’S mortgage commitment or rate lock.  BUYER may elect, at its sole option, to obtain an extension of its mortgage commitment or rate lock. Notwithstanding the foregoing, said Extension shall not exceed [insert number of days].

Virtual and Remote Closings

Another impact that we are already seeing is that parties to the real estate transaction are afraid of traveling outside their homes right now (or even being visited at home) and being in contact with other people, especially those who are high risk. My colleagues and I are working on an emergency executive order for Gov. Baker to sign which would temporarily authorize remote or virtual closings using such technology as Zoom and Docusign.

For more information on this please read my new post, Massachusetts Remote Notarization Bill Filed in Legislature

Court Closings

Update (3/17/20): The Supreme Judicial Court today ordered that, because of the public health emergency arising from the COVID-19 pandemic, beginning tomorrow (March 18, 2020) and until at least April 6, 2020, the only matters that will be heard in-person in Massachusetts state courthouses are emergency matters that cannot be held by videoconference or telephone. Each of the seven Trial Court departments, in new standing orders to be issued today, will define emergency matters for their departments.  As a result of the SJC order, courthouses will be closed to the public except to conduct emergency hearings that cannot be resolved through a videoconference or telephonic hearing.  Clerk’s offices shall remain open to the public to accept pleadings and other documents in emergency matters only.  All trials in both criminal and civil cases scheduled to commence in Massachusetts state courts between today and April 17, 2020, are continued to a date no earlier than April 21, 2020, unless the trial is a civil case where the parties and the court agree that the case can be decided without the need for in-person appearance in court. Where a jury trial has commenced, the trial will end based on the manifest necessity arising from the pandemic and a new trial may commence after the public health emergency ends. Courts, to the best of their ability, will attempt to address matters that can be resolved or advanced without in-person proceedings through communication by telephone, videoconferencing, email, or other comparable means.

A link to the SJC Order OE-144 is here.

In addition to the closings on March 16-17, the Massachusetts Court System announced over the weekend major “triage” changes reducing the number of persons entering state courthouses. These rules are effective Wednesday March 18, 2020. A link to all of the new changes can be found here — Court System Response to COVID-19. A summary of each court and respective changes are as follows:

Superior Court — All jury trials postponed until April 22. Motions handled by individual judges with preference for telephonic hearing and postponement where necessary to limit number of people entering courtroom. Emergency matters may proceed normally. The new Standing Order 2-20 can be found here.

Housing Court — All cases including evictions (except emergencies) postponed until after April 22. Matters may be heard earlier upon a showing of good cause. New Housing Court Standing Order is here.

Probate and Family Court — Trials postponed until May 1. Motions and pre-trials heard telephonically or postponed until after May 1. Modification complaints won’t be heard until after May 1. New Probate and Family Court Standing Order 1-20 is here.

District Court — No jury trials until after April 21. All criminal appearances rescheduled for 60 days, and no earlier than May 4. Arraignments and Bench trials may proceed. The new District Court Standing Order is here.

Land Court — All trials postponed until after April 21. All other motions and proceedings shall be held telephonically at judge’s discretion. Registration of title documents should not be done in person. Mail or email is now preferred. (Not sure how that will work). New Land Court Standing Order 2-20 is here.

Appeals Court — Oral argument for March will be telephonic.

Supreme Judicial Court — Please see the Court’s website.

As you can glean from the changes, virtually all trials are being pushed out through the end of April. Motion hearings are court specific with telephonic hearings being substituted for in-person hearings. Of course, if the courts are all shut down, all bets are off. With no staff, the courts will not even be able to handle new filings. The system would just stop in its tracks, except for the most emergency of matters.

Lender/Financing Delays

This week we will see if there are any major disruptions to lenders’ ability to provide financing. I am seeing some smaller mortgage companies moving to remote employee staffing. I’m also hearing about appraisal delays. If there are government employee impacts such as at the IRS for processing tax transcripts, there could be delays with underwriting. I think it’s inevitable that we will be seeing lender delays moving forward.

Municipal Closings

I am also hearing of closings of municipal departments, which may affect the availability of final water/sewer readings and possibly smoke detector certificates. Title 5 inspections could also be impacted.

25 Person Social Gathering Restriction

New restrictions on crowd sizes that Gov. Charlie Baker issued on Sunday, March 15, could upend open houses. The restrictions banned gatherings of 25 or more people. Brokers seemed to anticipate a possible drop-off in attendance, even before Baker’s restrictions and despite strong numbers the past couple of weeks. “Next week may be a different story,” Jason Gell, a Keller Williams broker and president of the Greater Boston Association of Realtors, said on March 12. “Unfortunately, any decline in open houses or listings is likely to make the conditions for buyers even more difficult.”

Social Distancing, School Closures and Possible Lockdown

The impacts of COVID-19 are manifesting not necessarily in the actual infection and sickness of patients (which I’m not discounting at all) but all the measures we are taking to “flatten the curve.” I want to urge all my readers that COVID-19 could wind up being the worst global pandemic since the Spanish Flu and should be taken as seriously as life and death. If you can work from home, do that and don’t go into the office. If you can arrange for remote employee access, please do that. Take advantage of technologies like Zoom, Docusign and Dotloop. Please keep your kids at home. No playdates, family gatherings or hang-outs. They say we are only 2 weeks behind Italy and you see what’s going on there. Stay safe! More updates to follow as I get them.

-Rich

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Potential Impacts: Registry of Deeds Closings, Financing Delays, New Covid-19 PSA Clause, Housing Market Slow Down?

The Coronavirus (COVID-19) is a highly infectious respiratory virus, which originated in Wuhan, China, and has spread across the globe, wreaking havoc on financial markets, public health systems, schools, universities, and daily lives. As of March 9, there are 729 reported cases in the US, with 27 deaths. Here in Massachusetts, as of March 9, there are 41 cases with no reported deaths. Infectious disease experts predict that the virus will continue spreading across the United States, affecting just about every aspect of our lives.

Update (3/17/20): Registry and Court Closings

Update (3/27/20): Impact on Rental Housing

Update (3/26/20): Remote Notarization Legislation

Here in Massachusetts, we are beginning to see significant impacts. Harvard University just cancelled all classes in favor of online instructions. Mayor Walsh has cancelled the St. Patrick’s Day parade. Some schools are closing temporarily and cancelling events. Companies are cancelling conferences and restricting travel. And of course, the stock market has dropped precipitously.

Likewise, in the real estate industry we are starting to see impacts as well. Despite the COVID fear factor, most agents are still reporting robust attendance at open houses and market activity, as confirmed by Curbed Boston. However, that may soon change as the virus gets increasingly widespread and the impacts to the financial markets begin to set in. I’m going to outline some potential impacts going forward, and I’ll update this post as developments emerge.

Registry of Deeds and Court Closings

Update (3/13/20): Suffolk and Salem Registry have shut down public closings. Only title examiners and attorneys are allowed access. They are still recording documents.

We are starting to see court and government building closings in other states. Federal courts in New York’s Southern District, including Manhattan, are restricting entry. No one will be allowed in who traveled within the past 14 days to China, South Korea, Japan, Italy or Iran, or who had close contact with someone who has. Trials have been postponed in Seattle and Tacoma courts.

No closings have been announced here in Massachusetts, but it’s a possibility. Virus impacts may result in Registries of Deeds and the Land Court being forced to closed or operate with a skeleton staff.

Fortunately, we have electronic recording capabilities here in Massachusetts. If the registries are closed, hopefully they will still allow for e-recording which should enable closings to keep on track. However, registry staff must still examine each electronically recorded document so there still could be impacts. We don’t know the fully extent of the impacts, if any.

Lender/Financing Delays

I have not yet heard of any major disruptions to lenders’ ability to provide financing. However, it’s not out of the realm of reason if companies are requiring their employees to work from home, etc. Further, if there are government employee impacts such as at the IRS for processing tax transcripts, there could be delays with underwriting. The same is true if appraisers cannot get out into the field and do their reports. I’ve already heard of at least one lender asking an attorney for a COVID-19 delay provision in a purchase and sale agreement, which brings me to the next topic…

COVID-19 Delay Clause In Purchase and Sales Agreement

Due to the various impacts and possibilities for delays as outlined above, we are already seeing requests for language dealing with the Coronavirus in purchase and sales agreements. As just mentioned, there may be lender delays affecting a buyer’s ability to obtain timely financing due to virus impacts. Buyers and sellers may be subject to quarantines, or if they are traveling, they may be stuck in a public health purgatory like the Princess Cruise ship. If Registries are closed and no e-recording is allowed, then closings will need to be cancelled or rescheduled. My colleagues and I are working on a new COVID-19 clause that will balance all of these concerns.

Our draft provision (subject to change) is as follows:

COVID-19 Impacts. The Time for Performance may be extended by either Party by written notice for an Excused Delay which materially affects the Party’s ability to close or obtain financing. As used herein an Excused Delay shall mean a delay caused by an Act of God, declared state of emergency or public health emergency, pandemic (specifically including Covid-19), government mandated quarantine, war, acts of terrorism, and/or order of government or civil or military authorities. Notwithstanding anything to the contrary contained in this Agreement, if the Time for Performance is extended, and if BUYER’S mortgage commitment or rate lock would expire prior to the expiration of said extension, then such extension shall continue, at BUYER’S option, only until the date of expiration of BUYER’S mortgage commitment or rate lock.  BUYER may elect, at its sole option, to obtain an extension of its mortgage commitment or rate lock. Notwithstanding the foregoing, said Extension shall not exceed [insert number of days].

Impact On The Real Estate Market

If you’re in the market for a house, all this uncertainty might have you worried about the housing market. Will it suffer a swoon similar to Wall Street? There are a few ways the virus could affect the housing market that you should be aware of. However, I think we can breath a sigh of relief, because a housing catastrophe on the scale of the 2008 financial crisis is almost certainly not going to happen.

The good news is that mortgage interest rates are still at historic lows. However, I’m also hearing that a lot of lenders are at full capacity with demand for both refinances and purchases so rates may be heading up in the very near future.

I think as we are heading towards a global recession and the continuing daily life impacts of the virus, we are going to see a slowing down of the real estate market in general. Uncertainty is the hobgoblin of the home buyer. Indeed, this is exactly what Lawrence Yun, Chief Economist at the National Assoc. of Realtors is saying:

I hope I’m wrong. Comment below or shoot me a line ([email protected]) and tell me what you’re seeing out there. I’ll keep you posted with any developments.

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Allen Seymour – Arraignment Brookline District Court

Summary Judgment Ruling In Favor of Forgery Victim Allows Case to Proceed to Trial

As I’ve written here, I have been representing three victims in a brazen and complex real estate forgery scam. The ringleader was Allen Seymour of Oxford, who used forged deeds, fake notary stamps and driver’s licenses to sell properties out from under homeowners, flipping their properties to wealthy investors, and pocketing the cash. Seymour targeted properties in Cambridge, Brookline, and Somerville. By accounts, he made off with over $2M in illicit sale proceeds. Seymour also worked with a group of accomplices including a Newton police lieutenant. The cases have been featured in several Fox News 25 segments. While Seymour remains in jail awaiting trial on 22 felony indictments, the civil cases have been ongoing for almost two years, and are heading towards trial.

I just received the first major court ruling in the cases from Superior Court Justice Douglas Wilkins. The ruling is noteworthy because it appears to be the first time a Massachusetts judge has issued a written decision dealing with the unique type of forgery that occurred in this case.

The Deed Forgery Scam

Forged Deed First Page
Forged Deed Second Page

The facts of the case are pretty surreal. My client is the owner of a three family property in Brookline, assessed at $1.5 Million. He was behind on his mortgage, and Seymour (using the alias “Rich Chase”) approached him with a foreclosure rescue scheme. Seymour had him sign a mortgage payoff authorization form which contained a separate signature page with a notary block – which would be used later to perpetrate the fraudulent scam. Ordinarily, mortgage payoff authorizations are not notarized. Behind my client’s back, Seymour took the notarized signature page of the payoff form and attached it to a quitclaim deed and recorded it with the registry of deeds. This deed “sold” the property from my client to Seymour’s accomplice for some 30% of its value, at $480,000. While this was happening, Seymour orchestrated a flip of the property for $750,000 to an LLC owned by Fred Starikov, the owner of City Realty in Boston. Starikov’s LLC then took out a $850,000 mortgage on the property from Bee Investments LLC. Seymour then made off with the sale proceeds, and tried to flee the country with a duffle bag of cash and a trash bag filled with Oxycontin. Fortunately, he was caught in South Carolina by the FBI, and brought back to Massachusetts to face multiple felony charges.

Lawsuit Asserts Claims for Forgery and Fraud

On behalf of the victim, I brought claims for quiet title and fraud, asserting that the quitclaim deed was a forgery. Under Massachusetts law, a forgery of a deed conveys no title. It is null and void, and title reverts back to the original owner as if the forgery never occurred. This is very important in these cases, because a forgery would also avoid the defense asserted by Starikov and his lender being a “bona fide good faith” purchase or lender. This defense, if successful, could allow them to keep title to the property. Starikov and his lender also asserted a claim for “equitable subrogation.” This theory is used to enable a lender to seek repayment of monies paid out in the transaction (typically mortgage proceeds) on the theory of unjust enrichment and mistake.

What is a Forgery?

Starikov and his lender filed a motion for summary judgment to dismiss the case prior to trial, arguing that the deed wasn’t a forgery because my client’s signature was “genuine” and on the deed itself, and asserting the good faith and equitable subrogation defenses. In what appears to be a case of first impression, Justice Wilkins held that the transfer of an altered signature page onto a deed was in fact a forgery under the common law definition. As he wrote in his decision:

Red Flags: Good Faith and Equitable Subrogation

Judge Wilkins also rejected the good faith purchaser and equitable subrogation defenses. As I argued, the judge recognized that there were several “red flags” with the deed and the purchase and sale agreement (which was also forged) which could have put a closing attorney on notice of the irregularities in the transaction. These red flags are properly considered at trial, the judge ruled.

What’s Next?

Overall, I’m very pleased with Judge Wilkin’s ruling. He understood the issues, and provided some much needed justice for my client. So now the case will proceed to trial (or settlement). I will keep you appraised of any further developments. I’ve embedded the entire opinion below for your reading pleasure.

Nelson v. Chandler Cazenove LLC (Middlesex Mass. Superior Court) Jan. 23, 2020 by Richard Vetstein on Scribd

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Parties Who Negotiated Past Purchase and Sale Agreement Deadline Waived It, Court Rules

The Massachusetts Appeals Court just came down with a ruling which should be a cautionary tale to everyone in the residential real estate business. It’s an interesting fact pattern, but not necessarily unusual. For those with short attention spans, the Court held that the standard deadline to execute the purchase and sale agreement is not necessarily a hard deadline. Rather, the deadline can be waived by the parties if they negotiate beyond the date, even without a formal extension in place. The Court also held that where the property is owned by several individuals, even if only one of those individuals sign the offer, this is not necessarily fatal to the deal.

Ferguson v. Maxim, Mass. Appeals Court, 18-P-1081 (Nov. 6, 2019)

In the case, the buyer, David Ferguson, and the seller, Joyce Maxim, signed the standard form Offer to Purchase put out by the Massachusetts Association of Realtors for the sale of residential property in Leominster. (For my post comparing the MAR form with the Greater Boston Real Estate Board, click here). It turns out that title to the property was actually held by a group of five individuals including Maxim, but we will get to that in a few. As is standard, the Offer provided that the parties would enter into a standard form purchase and sale agreement by a specific deadline. However, the seller’s attorney did not sent out a draft PSA until after the deadline, and negotiations continued well past the deadline without any issue raised by the parties or their attorneys. Both attorneys had suggested formalizing an extension of the PSA deadline at various times, but a formal extension agreement was never signed. At some point the seller’s attorney tried to cease the negotiations acknowledging that “we are well beyond our [PSA] date.” A week later, the buyer’s attorney tried to resurrect negotiations and save the deal. Further negotiations ensued between the parties, but they were abruptly stopped by the seller’s attorney who stated that the deal was for all intents and purposes dead.

Mr. Ferguson, the buyer, was naturally upset, and sued, seeking an order of “specific performance” to enforce the deal, based on well established law that an offer to purchase is a legally binding contract for the sale of real estate. (Read the case if you want to learn about various procedural issues that arose in the case with respect to the buyer’s obtaining a lis pendens and the seller’s special motion to dismiss under the lis pendens law.).

Two Important Take-Aways

The important take-aways from the ruling were twofold. First, the Court ruled that the typical deadline to execute the purchase and sale agreement is not always a hard deadline. Some people may be surprised to here that, but under Massachusetts law, a deadline in any contract can be “waived” by the parties words, actions, or conduct. Here, the Court said that a waiver of the deadline could be found where the seller’s attorney didn’t provide the draft PSA until after the deadline and the parties freely negotiated well past the deadline, even without a formal extension in place. Second, the Court also held that where the property is owned by several individuals, only having one of those individuals sign the offer is not necessarily fatal to the deal. If there is evidence that the signatory had apparently authority to sign for the others, or that the sellers ratified the offer, then the contract could be enforced. So now the buyer’s case will continue on for trial. Interestingly, during the pendency of the case, the sellers sold the property to another party. If the buyer is successfully, that new buyer is going to be very unhappy because his transfer will be voided! He may want to lawyer up himself.

Let’s Play Monday Morning Quarterback!

Now, what could have been done differently in this case to avoid the bad result for the seller? For starters, the seller’s attorney should have delivered the draft PSA on time. Once the parties started negotiations after the PSA deadline, they were in “no man’s zone” and that can only come back to hurt the sellers. Deadlines need to be taken very seriously, and sharp lawyers will always send out emails or other written reminders of them, and reserve their rights to terminate an agreement if the parties blow past a deadline without a written extension in place. The buyer’s attorney played this correctly, and didn’t push on the deadline issue because the law would favor his client on the waiver issue (which it ultimately did).

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Benefits and Affordability Of Owner’s Title Insurance Coverage Praised In Widely Read Article

When my friend Jim Morrison, formerly of Banker and Tradesman and now a freelance real estate reporter, contacted me about an article on owner’s title insurance, I was rather surprised. After all, title insurance isn’t the most “sexy” of real estate topics. However, I did have a whole bunch of horror stories to tell Jim about what happens when buyers don’t elect to get owner’s title insurance coverage. I told Jim the stories and, as always, recounted how I got owner’s title insurance on my own house purchases, even though I was pretty certain the title was clean. The article would be posted on Boston.com, Jim said. Sound great, Jim, thanks for letting me comment, I said.

Well, Jim wrote a fantastic article. And what do you know, but the article was so widely read and shared that the Globe decided to put it in the Boston Sunday Globe Magazine with yours truly featured in the inset! I was thrilled — not only for the good press, but more importantly, to spread the word that owner’s title insurance is a “must-have” for every buyer and a good deal financially.

You can find a link to the article here: What Is Title Insurance, and Why Do You Need It? It is really one of the best articles on owner’s title insurance that I’ve seen in a long time. For all my fellow law colleagues, real estate agents, and mortgage professionals, it’s a great piece to share on your social media feed and client newsletters!

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Rent Escrow Orders Upheld by Supreme Judicial Court

by Rich Vetstein on September 16, 2019

Huge Victory for Landlords and Property Managers

Today, in Davis v. Comerford, Justice Scott Kafker of the Massachusetts Supreme Judicial Court issued the first appellate decision confirming that Housing Court and District Court judges have the legal authority to issue rent escrow orders in favor of landlords while eviction cases are pending. The hard working folks at MassLandlords, who filed a friend of the court brief in the case, and I have been working very hard to get this much needed ruling and guidance from our appellate courts on rent escrow orders. It finally came today.

For those who don’t know, a rent escrow order is an order issue by a Housing or District Court judge in an eviction case requiring the tenant to continue to pay rent (also called use and occupancy) during the pendency of the case which can drag on for many months. It seems like common sense, and several housing court judges do issue them, but up until now, there has never been a formal ruling by a Massachusetts appellate court that rent escrow orders were legal. The district courts, however, in my experience, have traditionally been unwilling to grant these orders.

Davis v. Comerford: Seminal Ruling on Rent Escrow Orders

In the Davis v. Comerford, the Southeastern Housing Court in Brockton issued a rent escrow order in a case where the tenant also claimed various housing code violations and security deposit violations. Arguing that the judge did not properly consider tenant’s counterclaims, he appealed the rent escrow order.

The SJC took the unusual step of transferring the case to its full court panel, using it as an opportunity to consider the legality of rent escrow orders in general, and the various factors that lower court judges should consider in making these orders. First, the Court confirmed what we landlord attorneys have been arguing for years — that rent escrow orders are fully within the statutory umbra and equitable powers of the Housing and District Courts, and should be issued on a case-by-case basis. Second, the Appeals Court held that a tenant’s counterclaims for code violations, property conditions and other defenses are relevant in the calculation of any rent escrow order. Third and lastly, the Court set forth a framework for lower courts to use in considering rent escrow orders, which I will outline below.

Factors for Judges to Consider in Issuing Rent Escrow Orders

  • A landlord must file a written motion for rent escrow. A hearing must be held on the motion, and the judge should issue written findings supporting his/her ruling.
  • A judge should consider the time delay expected before trial or final resolution, noting that a request for a jury trial will typically delay the case substantially.
  • A judge should consider the amount of rent due, whether the landlord has received full or partial payments, and (critically) the amount of the landlord’s mortgage and property expenses and whether there is a threat of foreclosure to the landlord.
  • The tenant’s counterclaims and defenses (and the merits of each) should be considered, especially any code violation/property condition claims which would result in a reduced fair rental amount.
  • A judge should consider whether the tenant had to pay out of pocket for any repairs under the repair and deduct law.
  • The tenant’s own financial situation is also relevant, as well as whether they have a lawyer or are proceeding on their own (pro se).
  • Rent escrow payments may be placed into court, into the tenant’s attorneys account, into a landlord attorney’s account, or if warranted, paid directly to the landlord

This is a great ruling by the SJC, and will be very helpful to both the landlord and tenant bar as cases move forward in our Housing and District Courts. I was also able to discuss this case with Attorney Arthur Doubleday, who represented the tenant. He said: “I am happy with the decision because it gives clarity and a road map through which Judges can now deny or allow use and occupancy orders.  Whereas before, use and occupancy orders were Judge specific, hopefully soon we will begin to see uniformity and in how these orders are denied or allowed. The requirement for an evidentiary hearing and a written finding after such hearing will let both tenants and landlords give their reasons as to why a use and occupancy order should or should not be made. That said, I am fearful that landlords will prevail in their request for use and occupancy orders even when there are poor living conditions for the tenants who may not know how to advocate for themselves in court.” I do agree with much of what Attorney Doubleday says, however, I’m confident that our Housing Court judges are up to the task in considering all the various factors which go into a rent escrow request.

If you have any questions about this court ruling or rent escrow orders in general, please reach out to me at [email protected].

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Rent Control Rears Its Ugly Head Once Again

by Rich Vetstein on March 29, 2019

Recent Studies of Cambridge and San Francisco Prove It Not Only Doesn’t Work But Results In Gentrification, Displacement and Higher Rents

Rent control. Like a diseased zombie rising again from the dead after 25 years. Banned statewide by a voter referendum in 1994 and widely proven ineffective and counter-productive by economists, the debate over rental control is back in Massachusetts. As reported in the Boston Globe, a group of liberal urban lawmakers are readying legislation which would effectively override the 1994 voter ballot question, and allow cities and towns to impose rent control as a mechanism to curb rent increases and encourage affordable housing.

I’m all for a robust, healthy debate, so allow me to weigh in. The great thing about the 1994 vote banning rent control is we now have empirical data and a reliable study from prominent economists which has compared the Cambridge housing market during rent control vs. after rent control. We also have data and a similar study out of San Francisco. Both studies (and others from the past) have found that rent control did not work at all, and actually had the exact opposite effect — contributing to gentrification, displacement of tenants and income inequality.

Are rent control advocates and politicians aware of all this economic literature? I don’t know, but I do know that human beings are emotional creatures, and the debate over rent control has become very emotional. In fact, it reminds me of the climate change debate, but this time rent control advocates are behaving like climate change deniers. Faced with overwhelming evidence that rent control doesn’t work, these advocates continue to push the idea in a knee-jerk emotional reaction to the affordable housing crisis and high rent prices.

Study of Effect of Rent Control In Cambridge Market

Economists Autor, Palmer, and Pathak (2014), studied the effect of rent control on the Cambridge market. From December 1970 through 1994, all rental units in Cambridge built prior to 1969 were regulated by a rent control ordinance that placed strict caps on rent increases and tightly restricted the removal of units from the rental stock. The legislative intent of the rent control ordinance was to provide affordable rental housing, and at the eve of rent control’s elimination in 1994, controlled units typically rented at 40-plus percent below the price of nearby non-controlled properties. 

The economists found that newly decontrolled properties’ market values increased by 45%. In addition to these direct effects of rent decontrol, the economists concluded that removing rent control had substantial beneficial indirect effects on neighboring properties, boosting their values too. Post-decontrol price appreciation was significantly greater at properties that had a larger fraction of formerly controlled neighbors: residential properties at the 75th percentile of rent control exposure gained approximately 13% more in property value following decontrol than did properties at the 25th percentile of exposure. This differential appreciation of properties in rent control–intensive locations was equally pronounced among decontrolled and never-controlled units, suggesting that the effect of rent control had been to reduce the whole neighborhood’s desirability.

The economic magnitude of the effect of rent control removal on the value of Cambridge’s housing stock was large, boosting property values by $2.0 billion between 1994 and 2004. (And of course, that huge increase in property value translated to massive real estate tax revenue for the city). Of this total effect, only $300 million is accounted for by the direct effect of decontrol on formerly controlled units, while $1.7 billion is due to the indirect effect. These estimates imply that more than half of the capitalized cost of rent control was borne by owners of never-controlled properties. The economists ultimately concluded that rent controlled properties create substantial negative externalities on the nearby housing market, lowering the amenity value of these neighborhoods and making them less desirable places to live. In short, the policy imposed $2.0 billion in costs to local property owners, but only $300 million of that cost was transferred to renters in rent-controlled apartments.

To summarize in plain English, the economists concluded that rent control is a really bad idea, both in concept and in actual practice.

San Francisco: Another Failed Experiment

Economists came to the same conclusions when studying rent control in San Francisco. Its rent control law was different than Massachusetts’. It applied to buildings with five or more apartments and regulated rent increases, linked to the CPI, within a tenancy, but no price regulation between tenants. New construction was also exempt.

Economists Diamond, McQuade, and Qian (2018), concluded that San Francisco’s rent control ordinance encouraged condo conversions resulting in more owner occupied units (and less rental units) while encouraging rent controlled owners to defer maintenance and upkeep. As the economists found “it appears rent control has actually contributed to the gentrification of San Francisco, the exact opposite of the policy’s intended goal. Indeed, by simultaneously bringing in higher income residents and preventing displacement of minorities, rent control has contributed to widening income inequality of the city.”

Rent Control Just Doesn’t Work

In addition to the Cambridge and SF studies, there are many other articles by economists critical of rent control. The Urban Institute concluded that [g]iven the current research, there seems to be little one can say in favor of rent control.” Lisa Sturtevant, Ph.D. recently surveyed 30 different peer reviewed rent control studies, concluding that rent control decreased the supply of available rental housing, does a poor job in targeting benefits and generally leads to higher rents in the uncontrolled market.

As these studies show, rent control in the long-run decreases affordability, fuels gentrification, and creates negative externalities on the surrounding neighborhood. When the government forces landlords to provide insurance to tenants against rent increases, it will ultimately be counterproductive. There are better ideas to address the affordable housing problem than rent control. We can do much better than this outdated, tired idea.

For a good summary of why rent control doesn’t work, check out the Masslandlords.net page on Rent Control.

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Accurate Court Data Shows The “Eviction Crisis” Is A Fallacy

You may have noticed the featured article in Sunday’s Boston Globe Magazine on the supposed “eviction crisis” in Massachusetts. Titled “As rents soar in Boston, low-income tenants try to stave off eviction,” investigative reporter Jenifer McKim cited inaccurate court statistics to create the false narrative that thousands of innocent tenants are being thrown out on the street by greedy landlords. Using this fallacy, McKim then advocates for a new legislative proposal giving all tenants (but not landlords) a “Right to Counsel” i.e, free legal representation courtesy of the Massachusetts taxpayer. I’m not a fan of the term “fake news,” but it is really justified here. Where do I begin?

McKim first claims that “eviction initiations in Massachusetts spiked in 2008, following the Great Recession. Each year since then, landlords have sued about 40,000 heads of household across the state seeking to evict them, according to data gathered by the New England Center for Investigative Reporting.”

Well, she’s totally wrong and does not know how to read court statistics. Take Fiscal Year 2018 for example. Housing Court publicly available data shows 29,684 summary process cases filed. Summary process is how Massachusetts defines an eviction case. There were about 10,000 other types of cases filed in Housing Court (code violations, search warrants, small claims and civil money actions) but those are not evictions. So she’s already off by 10,000 cases or 25% of her cited data. To the extent she’s using district court filings, one would have to determine whether those were residential or commercial. Commercial evictions are always filed in the district court. Making that important distinction would entail physically reviewing each case file which she didn’t do. So you can’t reasonably rely on that data either.

Second, one would also have to account for Housing Court’s recent expansion to statewide jurisdiction which has increased its filings while district court filings are down. Actually as you can see from the PDF linked above, summary process filings in Housing Court were trending down and level from ’14 to ’15, to ’16 and to ’17, but then slightly up for ’18 (by only 6% or so) because of the statewide jurisdiction enactment. Eviction filings in District Court were down about 10% in 2018. So McKim is being intellectually dishonest if she’s attributing the slight bump in Housing Court filings in ’18 as some sort of trend of increased evictions. The overall trend has been down and level, as you can see below in the chart I quickly created. Sure doesn’t look like a crisis to me…

Then McKim makes the most egregious inaccurate statement: “The state doesn’t track how many of these have resulted in actual evictions, but the Eviction Lab at Princeton University found that in 2016, there were roughly 15,708 forced removals in Massachusetts — an average of nearly 43 a day. That’s about double the number of evictions in 2005, before the housing bubble burst…”

This is another totally bogus statistic. She’s right, the state does not track the number forced removals (accurately called a levy on an execution for possession). Researching that would entail physically reviewing every single eviction case in the state — 6 separate Housing Court divisions and in our roughly 80 district courts. Did Princeton University send a small army of interns checking every case file for 2016? That’s the only way they could accurately conclude that there were 15,708 “forced removals,” however they are defining that. So I was curious and did some research. After some digging I found the Princeton Eviction Lab’s Report on Methodology, and no surprise, their researchers relied on online available statistics, and as McKim acknowledged, you cannot see if there was a forced move out from the basic online data. I can tell you that in my 20 years of experience handling thousands of evictions, forced move outs are around 1-2% of all cases. It is the rare exception indeed because it costs landlords no less than $3,000 for movers and storage costs. The vast majority of cases are either default no-shows or negotiated move out agreements.

So the truth is that there is nowhere near 43 forced removals per day in Massachusetts, as McKim claims. Not. Even. Close.

Also, the number of evictions has not “doubled” since 2005, as McKim states. In 2005, there were approximately 30,000 total eviction cases filed (and this includes commercial cases which cannot be carved out without reviewing the case files). In 2018, there were about 40,000 total cases filed (again, this includes commercial cases). So McKim is off by 20,000 cases. And of course, the vast majority of all eviction cases are resolved amicably between the parties, without the need for a forced move out. I find it incredulous that highly regarded Boston Globe investigative reporters would be so sloppy with these critical statistics which are publicly available online.

Lastly, Ms. McKim interviewed me for a solid hour on this story, but only used a small snippet of my extensive commentary on the issue, pertaining to how I’ve been physically threatened by tenants in Housing Court. Yes unfortunately this is true. But I’ve been practicing in the Housing Courts for 20 years now and I gave her a small treatise of information which she ignored for her article. Ms. McKim also extensively interviewed Doug Quattroci, the Executive Director of the largest trade association for landlords, MassLandlords.net. Mr. Quattroci has led our lobbying efforts to level the playing field for landlords and offered extensive data on the topics Ms. McKim was writing about. None of Mr. Quatrocci’s comments made it into the article. Contrast that with paragraph upon paragraph dedicated to the tenant side of the story. I e-mailed Ms. McKim about all of these inaccuracies and her response was “feel free to write a letter to the editor.” I gave her an “LOL” on that one!

Ms. McKim’s article was certainly not fair and balanced, in my humble opinion. I guess we can’t expect that from the Boston Globe these days, can we? How sad.

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