New Law Will Resolve Thousands of Foreclosure Title Defects In Wake of U.S. Bank v. Ibanez Ruling
After a five year legislative struggle (in which I testified before the Joint Judiciary Committee), I’m very pleased to report that Governor Baker has signed into law the Act Clearing Title To Foreclosed Properties (Senate Bill 2015), embedded below. The bill will resolve potentially thousands of land titles which were rendered defective and un-transferable after the SJC’s landmark ruling in U.S. Bank v. Ibanez. The Ibanez ruling invalidated thousands of foreclosures across the Commonwealth due to lenders’ paperwork errors.
The problem addressed by the legislation is that scores of innocent buyers purchased these foreclosed properties, fixing them up, renting them out, etc., but they were unaware of the title defects — only to discover them once they went to refinance and sell. Title insurance companies have been bogged down trying to solve these defects, and in the meantime, many of these innocent folks are left with homes which cannot be sold or refinanced. The same bill passed the Legislature last year, but former Gov. Patrick, bowing to housing activists, vetoed it with a poison pill. After several amendments addressing housing activists’ concerns, a new bill was again passed, and just signed into law by Gov. Baker on November 25, 2015.
The bill, which is effective on Dec. 31, gives foreclosed owners a three (3) year statute of limitations to file a challenge to a foreclosure, after which the foreclosure is deemed to have been conducted legally. For foreclosures which have already been concluded, the new law has a one year waiting period, so that a defective foreclosure would be considered non-defective on Dec. 31, 2016. The bill does retain a homeowner’s right to seek compensatory and punitive damages for a wrongful foreclosure, provided it is within the statute of limitations. The bill also requires the Attorney General’s Office to spearhead more robust foreclosure prevention solutions with the HomeCorps Program and housing activists groups.
The passage of the bill is fantastic news for both owners and potential buyers/investors of foreclosure properties. There is a shadow inventory of defective title properties which will be able to go on the market.
The bill was sponsored by Millbury Democrat Michael Moore whose office (especially Julie DelSobral) worked tirelessly for the passage of the Act.
Rent Control Thinly Disguised As “Just Cause” Eviction Proposal
Citing skyrocketing rents and lack of affordable housing, several activist pro-tenant groups in the City of Boston, with the assistance of the Harvard Legal Aid Bureau, have submitted a home-rule petition to the Boston City Council to create a wide-ranging “just cause” eviction protection for all Boston tenants. Harking back to the days of rent control, the petition would prohibit a landlord from evicting any tenant except for certain “just cause” grounds. These grounds and their related procedural impediments to eviction are shockingly socialist in nature, and in practice would make it nearly impossible (or cost prohibitive) to evict tenants, raise rents and sell occupied rental property in the City of Boston. Rental property owner groups are vigorously opposed to this proposal.
“Just Cause” Grounds for Eviction
The petition provides that landlords may only evict tenants for eight (8) specified reasons. The most troubling situations are outlined below.
Non-payment of rent. A tenant’s failure to pay rent must be “habitual” (which is left undefined) and “without legal justification.” Ordinarily, if a tenant fails to pay rent even once, the landlord may terminate the tenancy and evict. Under the just cause standards, the standard is significantly higher. What exactly is “habitual”? Two late payments, three, four? No one knows, but the petition puts the burden of proof on the landlord.
Damage by tenant. In order to evict, the tenant must have “willfully caused substantial damage to the premises beyond normal wear and tear and, after written notice, has refused to cease damaging the premises, or has refused to either make satisfactory correction or to pay the reasonable costs of repairing such damage over a reasonable period of time.” This would make it much more difficult to evict based on damage caused by a tenant.
Disorderly conduct. The tenant has continued, following written notice to cease to be so disorderly as to destroy the peace and quiet of other tenants at the property.
Illegal activity. The tenant has used the rental unit or the common areas of the premises for an illegal purpose including the manufacture, sale, or use of illegal drugs.
Failure to provide access. The tenant has, after written notice to cease, continued to deny landlord access to the unit as required by state law.
Rent Increases and No Fault Evictions
The most fundamental impact of the just cause eviction petition is how it attempts to severely curtail landlords’ legal right to raise rents and file no-fault evictions. Make no mistake about it, the underlying premise of the petition is rent control – to keep rents (even under market) from increasing and stabilizing “affordable housing.”
Resurrecting the old Boston Rent Control Board, landlords are required to participate in a City-approved mediation session with that agency before raising rents or even declining to renew an expired lease. The board is then required to notify all tenant advocacy groups in Boston of the situation. These groups are invited into every eviction or rent increase process. It will be one landlord against many tenants and advocates. There is no stated limit as to how long the mediation process can last, and after which a landlord still must go to Housing Court which can take anywhere from 6-12 months to complete a no-fault eviction under current law. A landlord’s failure to follow these requirements will result in the immediately dismissal of their eviction case and can also subject them to a $1000 fine by the City.
Moreover, in true socialist form, there are also substantial roadblocks to evicting tenants even where the unit will be used for the owner’s own personal residence. Owners are banned from evicting tenants who are 60 years old, disabled or have children in the school system and have lived in the premises for 5 or more years. (Landlords can only end tenancies after the school year is over.) Seeking to turn private properties into government subsidized elderly and disabled housing, the petition thereby creates lifetime tenancies for these classes of renters. This will greatly discourage investment and capital improvements for these properties many of which are double and triple deckers in struggling neighborhoods.
Rent Control Does Not Work
As counsel for landlords across Greater Boston and having testified at the State House in support of various landlord tenant legal reforms, I am strongly opposed to this proposal. This petition is the fourth attempt by Boston tenant advocates to bring back rent control, all of which have failed after voters rejected rent control state-wide in the mid-1990’s. The idea of rent control has been debunked as a failed policy by countless economists, and actually makes affordable housing stock shrink. A restrictive price ceiling reduces the supply of properties on the market. When prices are capped, people have less incentive to fix up and rent out their property, or to build new projects. Slower supply growth actually exacerbates the price crunch. Those landlords who do rent out their properties might not bother to maintain it, since both supply and turnover in the market are limited by rent caps; landlords have little incentive to compete to attract willing tenants. Landlords may also become choosier, and tenants may stay in properties longer than makes sense.
The problem of skyrocketing rents in Boston and affordable housing is complex and certainly worthy of out-of-the-box thinking. As an old city with little if any developable land left, Boston has always dealt with a supply vs. demand problem. Boston developers have long been required to pay into linkage funds designed to promote affordable housing. Mayor Walsh recently announced a plan to build 53,000 new housing units by 2030. The city’s colleges can also do a better job of creating new student housing. But even with all of this centralized planning, the influx of people to the city, drawn by jobs and Boston’s quality of life, have made this problem a very tricky one to solve.
However, rent control disguised as a just cause eviction proposal is not the answer. It’s not fair to make small property owners to bear the burden of creating affordable housing across the city. That’s just flat out Un-American. If we want more affordable housing, create economic incentives to build more, and encourage the City to buy their own properties and create housing. Rent control has never been a successful solution.
If and when the Just Cause Eviction proposal rears its ugly head in the Boston City Council again, email your local city councilor and the Mayor.
A copy of the Just Cause Home Rule Petition can be found below.
Scroll Down For My Complimentary TRID Rider and Offer Timeline Cheatsheet
I’ve been doing a lot of speaking, and more importantly, thinking and collaborating with loan officers and Realtors, on the impact of the new TRID (Truth in Lending RESPA/Integrated Disclosure) on Massachusetts residential real estate transactions. I know everyone is pretty much burned out with all this TRID talk, but what I will give you in this post is some hands-on, practical advice (like how to fill out an Offer) and forms to help you navigate TRID — best practices, if you will.
Those who are unfamiliar with TRID, the major change is that the Good Faith Estimate is going away in favor of a new “Loan Estimate” and the HUD-1 Settlement Statement is going away in favor of a new “Closing Disclosure.” TRID provides for specific deadlines as to when the Loan Estimate and Closing Disclosure must be delivered to the borrower. If those deadlines aren’t met, closings can be delayed for up to 7 days. For my comprehensive post on the new rules click here.
Change In Deadlines
The first major impact to real estate transactions will be the length of time to complete a transaction. The general consensus is that post-TRID, 60 day closings (from accepted offer) will be the norm. Will lenders be able to do 45 day closings? Yes, but only if all parties have their act together, and that’s a big “If.” Thirty (30) day closings will be nearly impossible to achieve, in my opinion.
So what does this mean? It means that all deadlines need to be tighter and that items typically left for the week or two prior to closing (like final readings and fuel adjustments) have to be done earlier in the transaction and closing table adjustments will be impossible.
Deadline to Submit Info For Closing Disclosure
One of the most important new dates will be the date on which all parties must provide the information necessary for the Closing Attorney and the lender to prepare the final Closing Disclosure (new HUD-1). TRID requires that the new Closing Disclosure issue to the borrower 3 days prior to closing (if sent electronically) or 7 days prior to closing (if sent by mail). Lenders will require all information necessary to prepare the CD well before this deadline. This will vary by lender anywhere from 10-20 days prior to closing. Also, some lenders intend to issue the Closing Disclosure along with the Loan Commitment. Accordingly, in my opinion the best practice under TRID is to target 20 days prior to closing by which all information needs to be submitted to the closing attorney. All parties should agree to this date in their purchase and sale agreements.
And by all information, what do I mean? See the graphic to the right.
Final Utility Readings and Oil/Fuel Adjustments
Although the TRID rules specifically allow for some last minute changes to the Closing Disclosure without triggering re-disclosure and delay in the closing, most of the lenders which I’ve consulted with do not intend to authorize last minute changes to the Closing Disclosure which might trigger a re-disclosure delay.
Given this, the Mass. Real Estate Bar Association (REBA) has proposed language in its new TRID rider that all utility readings (water, sewer, oil/fuel) be completed and submitted to the closing attorney no later than 10 days prior to closing. The Closing Disclosure shall reflect payment and adjustments as of the reading date except for real estate taxes which shall be adjusted as of the closing date. No further adjustments will be made on the Closing Disclosure, but the parties are free to make their own estimates of utilities as of the closing date.
This is a change to current practice where it’s common that the final readings be done a day or two prior to closing. I’ve spoken to several agents about oil fuel in particular, and they all say they really don’t want to deal with the hassle under TRID, so they will be recommending to their sellers that they simply gift the oil to the buyer.
Opt for Buyer Credits Instead of Seller Repairs
Seller repairs will cause major hassle and potential delays under TRID. Under TRID, all property repairs must be fully disclosed in the purchase and sale agreement and to the lender. No more “side agreements” or “repair agreements” outside the PS Agreement. Most lenders will require an inspection of all repairs prior to closing and some will do the inspection prior to the issuance of the Closing Disclosure. This would also necessitate a much earlier walk-through by the buyer to inspect those repairs. If there are problems with the repairs, or the insistence on a holdback which would be reflected on the Closing Disclosure, this could delay the issuance of the Closing Disclosure, and therefore delay the closing.
Accordingly, the general consensus is that it will be much cleaner under TRID to forgo seller repairs and instead have the seller agree to a closing cost credit to the buyer. This will eliminate the lender inspection, additional walkthrough and potential of delays.
Also, a quick word about holdbacks at closing. We are not sure how lenders will handle holdbacks at the closing but many of us are of the opinion that lenders will not allow a holdback unless it’s disclosed on the Closing Disclosure. So that effectively means no closing table holdback agreements unless you want your closing delayed to re-issue the Closing Disclosure.
Use a TRID Rider/Addendum for all Offers
MAR, GBREB and REBA have all come out with their own TRID riders. In my opinion, the MAR/GBREB riders don’t sufficiently protect buyers from delays and they fail to address utility/fuel adjustments. The REBA rider is better, but could still use some improvement. So naturally I’ve drafted my own rider (and TRID timeline cheatsheet) which is embedded below. Feel free to use it to help you fill out offers. Whatever rider/addendum you chose, just use something, otherwise your buyer will be at risk of losing their deposit over TRID delays.
Recommend Attorneys Who Specialize In Conveyancing/Closings
Residential real estate closing work was already complicated and highly regulated. In a TRID world, the pitfalls for the inexperienced and non-specialists will be myriad. Now more than ever, Realtors and loan officers should partner with experienced attorneys who specialize in residential closings and are TRID ready and compliant. Do not allow your clients to use their cousin who is a lawyer and knows very little about real estate. It could be disastrous for you and your transaction.
If you have any questions about TRID, Offers, Purchase and Sale Agreements, Riders, etc., please feel free to contact me at [email protected] or 508-620-5352. I would be happy to help you navigate the TRID maze.
Landlord Sued for Wrongful Death After Assailant Shoots Four Guests At House Party, Killing One
A landlord’s worst nightmare is someone getting hurt, or worse, shot and killed on their rental property, and then getting sued for wrongful death. This was the situation facing a property owner in Dorchester in the recent case of Belizaire v. Furr, (Appeals Court 13-P-1908 Sept. 11, 2015). Fortunately for the landlord, the Court ultimately concluded that she was not legally responsible for the shooting because there was no reason to predict it would happen. Had the facts been different in this case, the landlord would not have been so luck to escape liability. After discussing this important case, I’ll talk about some ways that landlords can manage their risk.
Shooting at House Party, 5-7 Edson Street, Dorchester
The landlord owned a two-family in Dorchester which she rented out to several individuals. The landlord was fairly lax with written lease agreements, with some of the tenants having leases, but others not. On the night in question, the landlord’s son and one of the occupants (who were friends) hosted a party with a DJ, alcohol and dancing. Carl Belizaire attended the party as a guest. Late at night, an unknown assailant shot up the room, killing Belizaire and injuring three other guest. The assailant was never found or charged. There was no prior history of violence at the property.
Landlord Sued For Wrongful Death
Belizaire’s estate sued the landlord for wrongful death, alleging that she failed to keep the property safe. The Court first analyzed whether there was a tenancy or lease in place, because that would minimize the landlord’s liability and control over injuries occurring on rental property. The landlord’s failure to secure leases with the tenants at the property, particularly the tenant who threw the party, resulted in the court concluding that there was insufficient evidence to rule that there was a valid tenancy in place to shield the landlord from liability.
The Court, however, ultimately ruled that the landlord was not liable for the shooting because there was no evidence of prior shootings or similar violent incidents on the property. Although there was evidence of prior drug activity at the property, the court found this insufficient to support a finding of liability. There was no evidence of other large parties with uninvited guests similar to the one in question taking place on the property. Nor was there any evidence that the landlord was affiliated in any way with, or knowledgeable about, the assailant or any dispute that the assailant may have had with the victim. The evidence submitted suggests that the victim’s death was tied to events beyond the party at the rental property. As a general rule, a landowner does not owe a duty to take affirmative steps to protect against dangerous or unlawful acts of third persons. In certain exceptional circumstances, landlords may be liable for ignoring criminal activities that occur on their premises and were known or should have been known to them. That was not the case here.
Managing The Risks Of Property Ownership: Use Strong Leases and Set Up LLC’s to Hold Title
Many of my landlord clients often worry about liability issues at their rental property. They often ask me whether they can get sued over someone getting hurt on their rental property and what they can do to minimize their risk.
The landlord in this case made some catastrophic mistakes which, had the facts been different, could have resulted in a multi-million dollar liability. The first mistake she made was not securing written leases for all tenants and occupants at the rental property. The form lease that I have drafted contains a unique indemnification clause which would have help shield the landlord for liability for injuries caused by the tenants. The second major mistake made by the landlord was holding title to the rental property in her individual name, thereby exposing her personal assets to a lien or judgment. Although not always appropriate for every landlord, it’s a prudent idea to hold rental property in a limited liability company which would shield the landlord’s personal assets from liability. There is expense to set up the LLC and there is a $500 annual fee, but in my opinion, it’s well worth it relative to the risk of getting sued for wrongful death.
If you are a rental property owner and would like advice concerning your leases or would like to discuss setting up an LLC, please contact me at [email protected] or 508-620-5352. I would be happy to help you in any way.
Policy Changes Make It Harder To Insure Foreclosed/REO Properties
In the aftermath of the Supreme Judicial Court’s July 17th ruling in Pinti v. Emigrant Mortgage Company, which voided a foreclosure over a defective notice of default, two leading title insurance companies — First American Title and Fidelity/Chicago — have announced that they will be significantly changing the manner in which they underwrite foreclosed properties. These new policies will make it much harder to insure foreclosed properties, and may dramatically affect the sale and marketability of foreclosed/REO/bank owned properties.
The most drastic change comes from First American, which has the largest market share in Massachusetts. Under FATICO’s new policy (embedded below), lenders must obtain a judicial decree that the foreclosure was conducted in compliance with the Pinti ruling. (This applies only to foreclosures conducted after July 17, 2015). Because Massachusetts is a non-judicial foreclosure state (i.e, lenders do not need a judge’s approval to foreclose except for confirmation that the borrower is not in the active military), getting court approval for a foreclosure will require either a Superior Court or Housing Court action and will be expensive, lengthy and burdensome for lenders.
Fidelity/Chicago’s new policy requires closing attorneys to “verify that any preforeclosure default notices were sent by the foreclosing Mortgagee on or before July 17 [and] verify that the attorney for the foreclosing Mortgagee has included a statement to that effect in a recorded Affidavit that is part of the foreclosure documentation.” Closing attorneys must also “determine that the mortgagors, or any parties claiming under them, are no longer in possession of the premises or otherwise asserting any rights.”
The question is whether the other title insurance companies will follow suit. As of this writing, Stewart, CATIC, Old Republic and Westcor have not adopted a new foreclosure underwriting policy. I will monitor if that changes.
Act Clearing Title To Foreclosed Properties
These underwriting changes only underscore the importance of the Legislature passing the Act Clearing Title to Foreclosed Properties, Senate Bill 1981. The bill would protect arm’s length third party purchasers for value, and those claiming under them, who purchase at the foreclosure sale or in a subsequent REO transaction. It is the result of years of negotiation, and represents an honest effort to balance the interests of third party purchasers with mortgagors who legitimately believe they have been wrongfully foreclosed upon. Lenders who have conducted defective foreclosures would remain liable to the mortgagors. This is the same bill that was passed by both branches of the legislature at the end of the legislative session last fall, but was sent back with poison pill amendments by Governor Patrick and died. The bill should be voted on by the Senate soon after Labor Day. If passed, it will be considered by the House shortly afterward.
Major Change To Current Practices | Expect Delays and Bumpy Road Starting Oct. 3
I just finished yet another closing where a national lender issued the closing documents the morning of the closing, and worse, issued a revised TIL (Truth in Lending) disclosure during the middle of the closing! Under the new TILA-RESPA Integrated Disclosure Rules (TRID) set to start on October 3, this too-common practice would have resulted in a closing delay of up to 7 days, to the dismay of everyone in the transaction.
The new TRID rules are game-changing regulations which threaten to disrupt and delay closings across the country. The new rules, already pushed back once due to industry outcry, go into effect in about 60 days on Oct. 3. I am very worried that lenders, Realtors and closing attorneys are not at all prepared for one of the most significant changes in how we do business. Experts are predicting that closings will be delayed, 60 day loan approvals will be the new normal, and new forms will bewilder buyers. “Expect a one- to two-week delay in closings,” said Ken Trepeta, director of real estate services of the government affairs branch for the National Association of Realtors, when describing the impact of TRID.
Currently, we are finishing one of the strongest spring markets in a decade, but I’m quite concerned that come Fall, the new TRID rules will put the fall market into an ice bath. The best thing that every real estate professional can do is get educated and get prepared now for these changes. August is typically a slow month, so use it to get ready. My team will be doing a roadshow Powerpoint seminar to any local real estate office to explain the new changes. Contact me at [email protected] for more info.
New Closing Disclosure Replacing the HUD-1 Settlement Statement: 3 Day Rule
Under TRID, there will be a new settlement statement called a Closing Disclosure, which must be issued to the borrower at least 3 days prior to closing. If that does not occur, the closing will be delayed for up to 7 days. We are hearing that lenders will require that the information contained in the Closing Disclosure (all fees, closing costs, taxes, insurance, escrows, credits, etc.) be finalized as early as 20 days prior to closing, to give them enough time to generate the new Closing Disclosure in a timely fashion and to account for delays.
What does that mean for us professionals? It means that everything will need to be pushed up and done faster than before. That goes for titles, CPL’s, broker commission statements, invoices for repairs, insurance binders, condo fees, recording fees, title insurance, everything. And it means we can all expect delays as everyone adjusts to the new timetables and rules.
Lenders will require the new Closing Disclosure (embedded below) be signed by the borrower at closing. However, although the Closing Disclosure was intended to replace the current HUD-1 Settlement Statement, the geniuses at CPFB neglected to put a signature line for the sellers on the new Closing Disclosure. I’m not making this up. And we are no longer supposed to use the “old” HUD-1 Settlement Statement. Thus, our title insurance companies are telling us that there may be three settlement statements signed at closing: a Closing Disclosure for the buyer, a Closing Disclosure for the seller, and a combined Closing Disclosure. ALTA has created a new Combined Settlement Statement which can be found here.
Bank of America was asked whether it would require the use of the ALTA model forms, and it stated in a June 9 memo that it prefers the ALTA model if a closing attorney chooses to use a settlement statement to supplement the Closing Disclosure (CD), but specified that the settlement statement figures must reconcile to the CD and a copy of the settlement statement must be provided to the bank. The bank also stated that all revisions to fees and costs will require bank approval and an amended CD. In other words, closing attorneys will not be allowed to revise fees and costs by simply supplementing the CD with a settlement statement.
60 Day Approvals/Closings The New Normal?
With any historic change to how lenders disclose fees and approve loans, there’s going to be a steep learning curve — and delays. You can count on that. Industry insiders say the days of 30 and even 45 day loan approvals may be over, at least temporarily. Sixty (60) day approvals may be the new normal, and agents should build the longer timeframe into their offers and purchase and sale agreements and educate their buyers and sellers accordingly.
Repairs and Walk-Throughs
Since lenders will require all fees and credits finalized 7-10 days prior to closing, this will significantly impact how we handle repairs and credits. Agreed upon repairs also affect how the appraisal is conducted which will further impact the timelines. Experts are suggesting that Realtors consider doing walk-throughs at least 14-21 days prior to closing instead of the typical day before or day of walkthrough, because all repair issues and credits should be set in stone at least 7-10 days prior to closing and changes in fees and credits on the day of closing will not be permitted by the lender. Some experts are even saying that agents should do two walkthroughs, one within the TRID timelines and one immediately prior to closing. Also, under TRID paid outside closing (POC) items will be discouraged by lenders.
Take-away: Realtors should be warned that repairs contained in the purchase and sale agreement will have the potential to delay closings under the TRID rules. Ensure that any repairs are completed 14-21 days prior to closing. Better yet, don’t have the seller make repairs at all; use closing cost credits instead.
No More Back to Back Closings?
Due to the high potential for delays caused by TRID, back-to-back or piggyback closings may be a thing of the past, at least for now. A delay with a closing obviously has a domino effect on a back to back closing. The best practice, at least for the first few months of the new TRID era, is to schedule closings at least 3 days apart. Seller/buyers will have to prepare for this reality with bridge loans, use and occupancy agreements, or temporarily staying with your nearest relatives.
Partner with Trusted and Verified Providers
Now more than ever, Realtors are going to want to partner with lenders and closing attorneys who have been vetted and verified as fully compliant with the TRID rules, so there will be minimal disruption and delay on their transactions. Realtors and loan officers should ask their closing attorneys whether they are compliant with the ALTA (American Land Title Association) Best Practices, which is quickly becoming the standard for TRID compliance. Under the ALTA Best Practices, the attorney will have passed an intensive initial due-diligence screening, a third-party internal audit, background and credit check, extensive review of applicant’s experience, business model and policy loss history, and licensing verification. The closing attorney should also have secure document encryption capabilities and privacy/technology policies in place. My office has been vetted and verified by Stewart Title which has a comprehensive website on the TRID rules. If your buyer wants to use his personal attorney who does not specialize in real estate, explain to him or her why that is a mistake which could ultimately delay the closing.
Bumpy Road Ahead?
In my opinion, the TRID rules are the biggest change to the industry in 20 years, and will be much more difficult to implement than the new GFE and 3 page HUD of several years ago. As discussed above, my team will be doing a roadshow Powerpoint seminar to any local real estate office to explain the new changes. Contact me at [email protected] to schedule your complementary seminar.
SJC Issues Long Awaited Ruling That Agents Can Be Classified as Both Independent Contractors and Employees, But Leaves Questions
The Supreme Judicial Court has just released its long awaited opinion in Monell, et al. v. Boston Pads, LLC, (link here), ruling that Massachusetts real estate and rental agents can remain classified as independent contractors under the state’s real estate licensing and independent contractor law. The ruling keeps the traditional commission-only independent contractor brokerage office model in place, with brokers allowed to classify agents as 1099 independent contractors, without facing liability for not paying them salary, overtime or providing employee benefits. A collective deep breath should be heard throughout the entire Mass. real estate industry this morning.
Although the ruling determined that real estate agents are exempted from Massachusetts’s independent contractor law, the Court left open whether future plaintiff employees could build a case on other legal theories, and the Court deferred to the Legislature to enact a bill to address any murkiness which remains with the law.
Despite the question left behind by the justices, Gregory Vasil, CEO of the Greater Boston Real Estate Board told Banker and Tradesman said that, “We’re pleased with the outcome.” “It preserves the right of choice for our members. It doesn’t change the industry, it doesn’t change the status quo. It’s pretty clear you can have both independent contractors and employees.”
Corrine Fitzgerald, 2015 president of the Massachusetts Association of Realtors and broker-owner of Fitzgerald Real Estate in Greenfield, agreed, calling it a “good decision.”
Rental Agents Sue Jacob Realty For Overtime Wages
This lawsuit was brought by a group of disgruntled rental agents at Jacob Realty seeking to recoup lost overtime and minimum wages. As is customary in the industry, Jacob Realty classified the agents as independent contractors, paying them on a commission-only basis and making them responsible for payment of their own taxes and monthly desk fees. At the start of their employment, however, the agents signed non-disclosure, non-solicitation and non-compete agreements. They had to own day planners, obtain a cellphone with a “617” area code, adhere to a dress code, submit to mandatory office hours and to various disciplinary actions if they did not meet their productivity goals — requirements typically reserved for employees, not independent contractors.
Court Holds That Agents Can Be Classified Either as Independent Contractors or Employees
The SJC was tasked with balancing the independent contractor laws and the real estate licensing law — which in many critical aspects the Legislature left directly in conflict with each other. Justice Hines, writing for the Court, noted the difficulty in construing the two laws, stating that “the real estate licensing statute makes it impossible for a real estate salesperson to satisfy the three factors required to achieve independent contractor status, all of which must be satisfied to defeat the presumption of employee status.”
The Court ultimately concluded that a real estate agent could be classified as either an independent contractor or an employee, but that the agents at Jacob Realty were unable to demonstrate they were employees in this particular case. The Court, however left open for another case the ultimate questions as to whether all real estate agents should be classified as independent contractors. The justices said that “in light of the potential impact of that issue on the real estate industry as a whole and its significant ramifications for real estate salespersons’ access to the rights and benefits of employment, we think it prudent to leave that issue’s resolution to another day, when it has been fully briefed and argued. Should the Legislature be so inclined, it may wish to clarify how a real estate salesperson may gain employee status under the real estate licensing statute.”
This ruling is somewhat frustrating. The SJC punted on the major question that everyone in the industry has been waiting on for a year now. I love when that happens (insert sarcasm here). Whether the Legislature takes up this issue remains to be seen. In the meantime, brokers and office managers can sleep a little better tonight knowing that the chances they will be sued over employee classification has gone down considerably, but they still may be awoken someday with a nightmare in the hands of a creative plaintiff’s wage and hour attorney.
Like Superman, A Use and Occupancy Agreement Can Save the Day, But Be Aware of the Risks!
Tom and Mary Ryan, and their two little kids, Abigail and Jake, are relocating from California to the Boston area so Tom can take a job with a local tech company in Burlington. They have already sold their California home, and have been living in a cramped rented condominium in Santa Monica for two months already. Their loan has hit some snags because Tom was out of work for half of 2013, and had some IRS issues, although he is on solid footing now with his new job. The closing is scheduled for the end of this week and they have their cross country movers booked and scheduled and their life is now packed in boxes. Just when they finish packing their last box, their loan officer calls with somber news. “Tom, unfortunately, our underwriting department is dealing with delays getting your tax transcripts from the IRS. We are going to have to push back the closing for about a week. I’m so sorry.” Canceling the movers will cost several thousand dollars, and they will have to cancel furniture shipments as well. To make matters worse, new tenants are supposed to move into Tom’s rented condo unit right after they leave.
While all characters appearing in this work are fictitious, and any resemblance to real persons, living or dead, is purely coincidental, Tom and Mary are in trouble. With the prevalence of back-to-back closings and unforeseen underwriting issues and title defects, these situations are not uncommon. And with new TRID closing disclosure rules coming online in August, which are bound to cause even more loan approval delays, we may be seeing more of these situations in the months to come.
Fortunately, there is a solution to this situation. The sellers are willing to let the Tom, Mary and family move into the home prior to the closing under a Use and Occupancy Agreement. This will enable the buyers to complete their move, move into the house, but before the actual closing. A use and occupancy agreement, however, is not without its risks and downside, which I will discuss below.
One of the most important aspects of a Use and Occupancy Agreement is what it is versus what it is not. The agreement should specify that it creates a mere license to occupy the premises, not a tenancy or a landlord-tenant relationship. This will make it easier to remove/evict the occupants if something goes wrong. In any event, if the sellers are forced to remove the occupants, they will still have to resort to judicial eviction proceedings, which in Massachusetts can potentially take several months. This alone is the biggest drawback of a Use and Occupancy Agreement. The seller should always put language in the agreement that the buyers will be responsible for all attorneys’ fees and costs in case of an eviction.
The parties have to agree on a rental rate, typically based on the fair market rent for the premises or the mortgage and carrying costs. Websites such as www.rentometer.com can give you an idea of what a fair rental rate should be. Your Realtor should give you guidance as well. The rent should be divided by 30 for a per diem basis. You can also charge penalty rent if the term is extended past the original deadline.
The sellers should also include general indemnification language providing that “during the period of occupancy, Buyers shall maintain the Premises in good, clean condition and shall not make nor suffer any strip or waste to the Premises, nor make nor suffer any unlawful or improper use of the Premises and Buyers agree to indemnify Sellers and save them harmless from all liability, loss or any damage arising from such additions, alterations, strip, waste or unlawful or improper use, any nuisance made or suffered on the Premises by Buyers, including their family, friends, relatives, invitees, visitors, agents, or servants, or from any carelessness, negligence or improper conduct of any person.”
Lastly, the buyers should do their pre-closing walk through before they move in under a Use and Occupancy, because once they move in, the home will be a mess for awhile. That way, everyone will be on the same page as far as the property condition goes on the date of move in.
Many attorneys advise clients never to agree to Use and Occupancy Agreements. I am not one of those attorneys. With any risk, it depends on the situation. The sellers need to be comfortable that any delays will be resolved favorably and quickly. Sellers also need to appreciate that despite any language in the agreement, it could take months to remove an occupant if things so south. As long as everyone understands the risks, a Use and Occupancy Agreement can be a life saver.
Elizabeth Gerhman, a writer for the Boston Globe Magazine and owner of two rental units, is fed up with how the Massachusetts legal system favors tenants over landlords.
“In just five years as a rental, the other [unit] — which has hardwood floors, granite countertops, and a $1,200 dishwasher — has been a nightmare, with tenants who bounced checks, didn’t pay their rent, and threatened to call the building inspector over, among other things, a loose toilet seat, a missing outlet cover, and, I’m not kidding, a bedroom that is allegedly 0.389 of an inch too small. The tenant who detailed these horrific, slum-like conditions also threatened to take me to court over some food that had spoiled when the refrigerator broke — which is what prompted the intimidation tactics in the first place.”
As landlord groups have been arguing for years, one of the major problems with the current system is that Massachusetts has no rent escrow law. Under the present system, a tenant can withhold months of rent for any cosmetic or minor problem with the unit until the eviction case is resolved, leaving the landlord unable to pay their mortgage. We call that the “free rent trick.” As Ms. Gerhman correctly points out, “with an average judgment of about three months’ rent, this can be a real hardship for house-poor landlords. And once a landlord does evict a tenant who owes back rent, he or she must pay to move the tenant’s belongings out of the apartment in addition to three months’ storage costs.” As I was quoted in the article, many landlords opt for “cash for keys” deals to avoid huge losses during an eviction.
A rent escrow law would require any tenant who withholds rent to simply pay it into an escrow account until the unsafe conditions or code violations are repaired and the eviction case is resolved. After repairs are done, either the landlord and tenant agree on how the escrowed rent should be divided, or a judge orders a fair settlement. The “free rent trick” would be gone and landlords less likely to get left holding the money bag.
Sounds fair? Tell that to your state legislators who have been sitting on rent escrow bills for over a decade.
New rent escrow bills return to the Legislature this session as House Bill 1654 sponsored by Rep. Chris Walsh and House Bill 1112 sponsored by Rep. Brad Jones. Both bills are expected to get hearings at the State House this spring. I will keep you posted.
Personally, I think a fair legislative compromise would be for landlord groups to support the Housing Court Expansion bill under the condition that a Rent Escrow Bill is passed along with it. That would be a win-win for both sides.
In the meantime, please email and call your local state rep and senator and tell him or her you are in favor of these bills. If you have any tenant horror stories, make sure you include those as well. Also, consider joining your local chapter of the Massachusetts Rental Housing Association or Masslandlords.net. Both organizations will be coordinating legislative efforts on the rent escrow bill and other landlord legislation. Lastly, please share this article and the Globe Magazine article on your Facebook pages, Twitter feeds and email blasts!
This winter has been one of the snowiest on record, and there is another major snow event on the way. Judging from the astronomical number of recent clicks on this blog, it’s clear that people want to know all about Massachusetts snow removal law. The law underwent a monumental change back in 2010 with a Supreme Judicial Court decision overruling the 125 year old “Massachusetts Rule” which allowed property owners to leave “natural” accumulations of snow and avoid liability. Now, owners are under a legal duty to keep their property free from dangerous snow and ice. Moreover, cities and towns have been passing all types of new snow removal ordinances and by-laws regulating whether owners must shovel public/private sidewalks, and how long they have to clear snow.
It’s clear that it’s time to give you the most up-to-date information. So here is a fresh set of Frequently Asked Questions (and Answers) with links at the end to various city and town webpages on their snow removal policies. Good luck and stay safe!
I own a two family rental property with a driveway and one common walkway and entrance. Am I responsible for shoveling snow on the driveway and/or walkway?
The answer is yes. Under a 2010 Supreme Judicial Court ruling, all property owners (rental or owner occupied) can be held liable for failing to remove snow and ice from their property. The old rule was that owners didn’t have to remove “natural accumulations” of snow and ice, but the court overruled that in favor of a general obligation to keep property safe for all visitors and guests. There are also many local town and city ordinances which likewise obligate property owners to keep snow and ice off their property and sidewalks. I will discuss some of those below.
Can I use a lease which provides that the tenant is responsible for snow removal. Is that legal and will that protect me from liability?
It depends on your particular property. Landlords have the primary responsibility for snow removal at a rental property. Under the State Sanitary Code, property owners/landlords must keep all means of egress free from obstruction — that cannot be negotiated away. As for the removal of snow and ice, the Code provides that the landlord shall maintain all means of egress at all times in a safe, operable condition and shall keep all exterior stairways, fire escapes, egress balconies and bridges free of snow and ice. Again, those obligations cannot be negotiated away.
A landlord may require the tenant be responsible for snow and ice remove in a lease provision only where a dwelling has an independent means of egress, not shared with other occupants, and a written lease provides for same. On its face, this exception only applies to entrance-ways and not driveways or parking areas. I am not aware of a court ruling on this particular Code provision, but if I were a landlord I would not risk being on the wrong side of a “test case” where someone is injured badly.
So, in the example above with an owner occupied two family with one common entrance and driveway, that lease provision would be illegal.
Even if the tenant is responsible for snow removal under a legal lease provision, the landlord could still face personal injury liability for slip and falls on snow and ice under the SJC ruling. A guest or visitor who is injured due to untreated snow or ice will likely sue both the property owner and the tenant. The property owner must ultimately ensure that the property is safe for visitors.
How soon do I have to shovel the snow before I get in trouble?
The City of Boston’s policy is to give businesses 3 hours to clean snow, and 6 hours to residents. In Worcester, it’s 12 hours to clear snow. Those are the minimums. As with any dangerous condition, my advice is to shovel and treat snow and ice early and often. Even a thin coating of black ice can cause someone to slip and fall and seriously hurt themselves. (Admit it if you’ve dumped on your rear end like I have!). If you are an out-of-town landlord, you must hire someone to shovel your snow.
Am I required to shovel the public sidewalk in front of my house/business after a storm?
In most Massachusetts towns and cities, the answer is yes. Check your local town ordinances for guidance. The cities of Boston, Cambridge, Somerville, Arlington, Belmont, Newton, Lynn, and Worcester (among others) all require property owners and businesses to clear municipal sidewalks in front of their residences or businesses. Fines are assessed against non-compliance. In Somerville, for example, if snow ceases to fall after sunrise (during daylight hours), property owners must shovel sidewalks by 10 p.m, and if snow ceases to fall after sunset (overnight), property owners must shovel sidewalks by 10 a.m. You can also be fined for shoveling snow onto the street, blocking a curb cut or putting snow on municipal owned property.
In some more residential towns, the local DPW will clear the sidewalks, but the default rule is that property owners are generally responsible for clearing their own sidewalks and driveways.
Will my homeowner’s or CGL insurance policy cover any injuries from slip and fall on snow/ice?
Yes, usually. The standard Massachusetts homeowners insurance policy and commercial general liability insurance policy (CGL) will have liability coverage for slip and falls on property. Make sure you have ample liability coverage of at least $500,000 to 1 Million. (You can never have enough insurance!). As with any insurance question, it’s best to contact your personal insurance agent.
I’m just a regular homeowner. What if the mailman or delivery person slips on my walkway?
You may be liable if you left dangerous snow and ice on your walkway. The new law applies to every property owner in Massachusetts, not just landlords. Get some Ice-melt and sand and spread on your walkway. If it re-freezes overnight into black ice, you will remain liable.
In a David vs. Goliath case pitting a Demoulas family heir against an elderly Brandeis professor over a tony Back Bay townhouse, the Appeals Court has let stand a $1.85 Million jury verdict — one of the largest awards in a private condominium governance dispute. The case is also one of the first to successfully employ the Massachusetts Civil Rights Act in a private real estate dispute. With interest and an award attorneys fees of $1.9 Million, the judgment will swell close to $4 Million — providing a cautionary tale to condominium trustees who abuse their power for ulterior purposes. The case is Kettenbach v. Wodinsky, Mass. Appeals Court (Jan. 6, 2015), embedded below.
A Classic David vs. Goliath Tale
In 1996, Michael and Frances (Demoulas) Kettenbach bought a unit in the 5 unit townhouse located at 303 Commonwealth Avenue in the Back Bay. (Frances is the sister of Arthur T. Demoulas who was recently reinstated as CEO of Market Basket after a publicized family fight). With the goal to acquire all of the units and convert the building to a grand single family Back Bay residence, Kettenbach purchased three more units, leaving only the top floor unit owned by Jerome and Bernadette Wodinsky. The Wodinskys, who had owned their the fourth floor unit for over 30 years, didn’t want to sell.
According to the court’s ruling, Kettenbach enlisted Gary Crossen, a former prominent Boston attorney who was the Demoulas family’s trial lawyer in their epic family litigation in the 1990’s. When the Wodinsky’s made it clear they were not selling, Kettenbach and Crossen began to put the proverbial “squeeze” on them. Armed with the controlling interest in the condominium association, they summoned state inspectors to condemn the building elevator, leaving the 82 year old Wodinsky, who suffers emphysema, to make the daily climb up 86 stairs to his fourth floor unit. Instead of repairing the elevator, Kettenbach voted to replace it at a $275,000 price tag. When the roof leaked, rather than repair it, Kettenbach insisted on installing a new one – even though it was only 10 years old. He also completely replaced the building’s heating system and did a massive overhaul of the electrical system. The result was a $1 million special assessment, 20% of which Kettenbach attempted to impose on Wodinskys. Kettenbach also hired a private investigator who showed up at Mrs. Wodinsky’s workplace and threatened her with bankruptcy.
Staggering Jury Verdict
Not backing down, the Wodinskys sued, asserting claims under the little used Massachusetts Civil Rights Act, abuse of process, civil conspiracy, and the Consumer Protection Act, Chapter 93A. They won an early victory when a trial judge issued an injunction forcing Kettenbach to fix the elevator. The case went to trial in 2011 over 19 days, and the jury returned a whopping $1.85 Million verdict in the Wodinsky’s favor. Although the trial judge vacated the judgment on the Chapter 93A count, which would have given the Wodinsky’s triple damages, he left the judgment intact on all other claims. Both parties appealed.
Jury Verdict Upheld on Appeal
On appeal, Appeals Court Justice William Meade upheld the entire jury verdict and judgment, and awarded the Wodinsky’s their appellate attorneys’ fees and costs, which will balloon the judgment against Kettenbach to well over $4 Million and change. The justice held that there was ample evidence that:
Kettenbach and Crossen coerced, intimidated, and threatened the Wodinskys in an effort to force them out of their home. This evidence includes: the Kettenbachs’ active attempts to condemn and decommission the building’s only elevator; the excessive period of time during which the elevator was unusable, which forced the elderly Wodinskys to walk up and down four flights of stairs; Crossen and the Kettenbachs’ manipulation of the board’s voting process to the Wodinskys’ detriment; the Kettenbachs’ demand that the Wodinskys pay twenty percent of expensive, unneeded projects that were not lawfully voted upon by the board; the Kettenbachs’ instituting litigation against the Wodinskys to collect such payments while simultaneously forgiving the assessments of another owner who agreed to sell her unit; and the Kettenbachs’ hiring of a private investigator to visit Bernadette at her work place for the specific purpose of threatening the Wodinskys with bankruptcy.
Since a member of the Demoulas family is involved, you can bet that this case isn’t over yet, and that he will try to get the Supreme Judicial Court to hear this case. And he might be successful as this is a huge jury verdict and, as mentioned earlier, one of the largest involving the Massachusetts Civil Rights Act.
Expansion of Condominium Trustee Liability?
Although this was a particularly unique and egregious case, this ruling could be used to expand liability against condominium trustees to for state civil rights violations arising out of contentious governance and assessment disputes. I’m not so sure that the Mass. Civil Rights Act is the appropriate vehicle to address this sort of private claim, because I don’t see how it invokes traditional constitutional rights which the Act was intended to protect. The SJC will have to sort this out but if they don’t take this case, this ruling will be the law of the land. Either way, I will bet that we haven’t heard the end of this dispute.
We had another interesting year in Massachusetts real estate law. From that controversial $60,000 discrimination penalty for asking a prospective renter “where are you from?”, to the influx of Airbnb rentals, to the tragic murder of Realtor Beverly Carter during a showing, and finally Gov. Patrick’s disappointing scuttling of the title clearance bill.
With pro-business Charlie Baker in the Governor’s Office, the fate of the independent brokerage model with the Supreme Judicial Court, and significant regulatory changes to title and closing services, we should expect another eventful year in 2015. Without further ado, I give you my outlook for 2015:
The Charlie Baker Effect
Gov. Deval Patrick was no friend to the real estate industry, often kowtowing to ultra-liberal activists. Case in point was when he killed the title clearance bill which had broad support within the Legislature and would have helped hundreds of homeowners get out of toxic titles. A new era is here with Republican and former CEO, Charlie Baker. Hopefully the Governor Elect will be more supportive of homeowners, developers, real estate agents, lenders and others in the industry. On the legislative table this year will be comprehensive “smart” zoning reform (including 40B affordable housing development reform), another effort at the title clearance bill and maybe even landlord-tenant legal reform.
Will Realtors Be Treated As Employees or Remain Independent Contractors?
The SJC should decide the closely watched case of Monell v. Boston Pads, a class actionbrought by a group of disgruntled real estate agents at Jacob Realty claiming they should be treated as employees instead of independent contractors. Hanging in the balance is the fate of the historically independent, commission based real estate brokerage office model. An unfavorable result at the SJC would essentially turn this model upside-down, requiring brokerages to pay their agents minimum and overtime wages and provide all the statutory benefits afforded to employees. The real estate office as we know it today would likely cease to exist.
CFPB Compliance: New HUD-1 Statement, GFE, TIL, Back Office Procedures
The new Consumer Financial Protection Bureau rules, which go into effect this summer, have the potential to drastically change how loans are disclosed and transactions closed, affecting loan officers, Realtors and closing attorneys alike. Gone are the Good Faith Estimate, Truth in Lending Statement (TIL) and HUD-1 Settlement Statement, replaced with a longer Loan Estimate and Closing Disclosure. The disclosure timetables will be much, much stricter — the final Closing Statement must be given to the borrower no later than three business days before closing. Lenders and closing attorneys will have to work more efficiently and quicker to meet these new deadlines. Closing attorneys who are ALTA Best Practices Certified will have a competitive advantage over those who aren’t. Smaller firms could fall by the wayside.
Housing Court Expansion
This year will likely see the expansion of Housing Court jursidiction state-wide including in Middlesex, Norfolk and Barnstable counties. The Housing Court will be available in high density rental towns including Cambridge, Framingham, Brookline, Waltham, Dedham, Malden and Somerville.
I hope you all have a happy, healthy and prosperous New Year!
About 30% of people in Massachusetts do not have access to the state’s Housing Court — one of Massachusetts’ specialized courts handling landlord-tenant disputes, evictions and sanitary code enforcement. The unserved areas include the largest county in the state, Middlesex County and most of Norfolk County, with high density rental towns including Cambridge, Framingham, Brookline, Waltham, Dedham, Malden and Somerville. Also unserved by a Housing Court is all of Cape Cod and the Islands and Chelsea.
Under a plan touted by Supreme Judicial Court Justice Ralph Gants, the Housing Court would be expanded to cover the entire state by July 1, 2015. “We believe that all residents of the Commonwealth, regardless of where they live, should have the opportunity to have their housing case heard by a Housing Court, and benefit from its specialized expertise in residential housing matters,” Gants said in a statement.
As an eviction and landlord-tenant attorney who practices quite a bit in both Middlesex County and in the Housing Court, I can say positively that this is a great idea. In Framingham District Court, for example, the Thursday eviction session can be standing room only with landlords and tenants often spilling outside into the hallway. The busy court is already swamped with criminal matters, and getting a trial date in an eviction case can take upwards of several months — certainly not “just, speedy and inexpensive” as mandated by the Uniform Summary Process Rules.
The Housing Court would be able to take the burden off the local, overworked district courts. With a few more full time judges and already with one of the lowest cost-per-case ratios of any court, they should be able to handle the increase in cases. The “X-factor” will be the overall cost, of course.
The Legislature is set to take up the proposal in early 2015. I’ll keep tabs on any developments.
Perry v. Equity Residential: Application Fee, Amenity-Community Fee, Move-In Fee and Upfront Pet Fee Held Illegal
In a stinging class action ruling on August 26, 2014, Boston federal district court judge Rya Zobel ruled that Equity Residential’s up front apartment fees are illegal under Massachusetts law. Even worse for the national apartment owner, the judge found the fees also violate the Massachusetts Consumer Protection Act which imposes up to triple damages and attorneys’ fees. With potentially thousands of affected tenants, Equity Residential could be faced with a sizable legal tab for this policy.
The class action was brought by Brian and Kim Perry, former tenants at Longview Place in Waltham, and Cheryl Miller, who lived at Emerson Place in Boston. The Perrys paid Equity an upfront $100 application fee and a $99 amenity or move-in fee, while Miller paid $50 application and $500 amenity fees, according to the lawsuit. Equity also allegedly charged a $250 pet fee and $500 “community” fee.
Judge Zobel held that the application fee, amenity/move in fee, the community fee and the upfront pet fee was unlawful under the Massachusetts Security Deposit Law which prohibits landlords from charging any upfront fees except for first, last months rent, security deposit and a lost key fee. The judge also found that Equity attempted to do an unlawful end-around the law by charging some of the fees in the second month of the tenancy.
The judge also ruled that the case can be consolidated with another federal lawsuit pending against Equity and granted it class-action status. The potential number of Massachusetts tenants impacted is unclear. Chicago’s Equity leases some 31 apartment complexes in the Bay State with about 6,680 units.
This case is yet another big wake up call for Massachusetts landlords, both large and small, to be extremely careful about up-front move in charges imposed upon tenants. This is also one of the first publicized cases calling into question the practice of charging an upfront application fee. Application fees are very much widespread, and I would counsel landlords and property managers to think twice about charging them under any circumstance. This ruling may also call into question the legality of charging prospective and actual tenants credit report and background check fees.
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If you have any questions about this ruling or your policy for upfront fees, please contact Attorney Richard Vetstein at [email protected].
It’s a classic Boston neighborhood turf battle. Mayor Martin Walsh, the Irishman from Savin Hill vs. the Brahmins of Beacon Hill. The nature of the dispute: sidewalk ramps in Beacon Hill for the disabled.
Boston Mayor Marty Walsh is fed up with some of Beacon Hill residents’ long time opposition to the installation of disability sidewalk ramps and other accommodations for the disabled under the Americans With Disabilities Act. Always up for a fight to preserve the historical character of “the Hill,” the Beacon Hill Civic Association and its members are upset because they feel that Mayor Walsh is not willing to consider what they feel is more historically appropriate materials and designs for Beacon Hill sidewalks and streets. They also accuse Mayor Walsh of exacting political revenge for not getting any votes in the recent mayoral election — he was decimated in Beacon Hill voting by a 70% margin over challenger, Harvard trained John Connolly. Hogwash, says the Mayor. Caught in the middle of this unfortunate fight are disabled folks who have a hard time navigating Beacon Hill’s narrow, winding, cobblestoned thoroughfares.
The brouhaha has now moved to Suffolk Superior Court where the BHCA has filed an interesting lawsuit against the City, claiming that the Beacon Hill Architectural Commission has the final legal say in what type of materials and design are used for the accessibility project. Some interesting legal issues will be decided in this case, the most important of which would be whether the federal ADA trumps local and state regulations on historical design where a district or building is listed on the National Registry of Historical Places.
The streets of Beacon Hill are lined with red brick sidewalks, giving it a warm, welcoming feel. The proposed disabled ramps are grey concrete, topped with bright red panel inserts. Yes, these ramps didn’t exist during the times of John Hancock, but Charles Street was also lined with horse dung for all to step on. Let’s hope Mayor Walsh and Beacon Hill residents can put the emotion and rhetoric aside to do what’s right for the disabled. After all, they have every right to enjoy Charles Street, with or without horse dung.
Court Side-Steps Whether Sec. 8 Tenant Can Be Evicted For Possession of Under 1 Oz. of Marijuana
In the first of what should be many cases dealing with marijuana use in rental housing, the SJC ruled last week that a Section 8 tenant could be evicted for an undetermined amount of marijuana combined with allowing her live-in boyfriend to deal marijuana and possess a gun at the leased premises. The court overruled Boston Housing Court Justice Jeffrey Winik’s prior decision stopping the eviction of the tenant. Judge Winik was unconvinced that a public tenant could be evicted for marijuana possession unless it was over 1 oz. which makes it a crime in Massachusetts, whereas possession of under 1 oz. is merely a civil infraction.
The case isFiggs v. Boston Housing Authority (SJC 11532). A link to the opinion can be found here.
Based on oral arguments and briefings, court watchers were expecting the justices to address the interplay between the recent Mass. law decriminalizing the possession of under 1 oz. of marijuana and federal public housing eviction laws. The justices, however, side-stepped the weight issue, ruling instead that there was more than sufficient evidence of drug dealing at the apartment to warrant eviction based on a serious violation of the lease and criminal activity. Police found a small amount of marijuana, plastic baggies, cash and a firearm in the bedroom of the tenant’s boyfriend, charging him with possession with intent to distribute and unlawful possession of a loaded firearm.
Although the question of whether a tenant can be evicted for possession of a recreational sized amount of marijuana (and medicinal marijuana) will be left for another case, the Figgs decision can be used to hold tenants responsible for the drug and criminal activity of their household members, including boyfriends, husbands, children and guests. This should be a helpful tool to enable public housing authorities and private landlords to keep drugs and guns out of rental housing.
Senate Bill 1987 Would Have Cleared Title For Innocent Homeowners
Acceding to the demands of fair housing community activists, Massachusetts Governor Deval Patrick has rejected Senate Bill 1987, An Act Clearing Titles to Foreclosed Properties. The bill would have cleared title of homes affected by defective foreclosures with a one year waiting period from enactment of the bill while giving homeowners three years to challenge wrongful foreclosures. The Governor filed an amendment to the bill, raising the statute of limitations for homeowners to challenge foreclosures from 3 years in the current bill to 10 years. The Senate and House are unlikely to agree on such an absurdly long statute of limitations, so Patrick’s action should effectively kill the bill.
This is truly devastating news for the thousands of innocent homeowners who are stuck with bad title due to botched foreclosures.
The bill had cleared the Senate and House with near unanimous support. The bill also received favorable press in the Worcester Telegram and Boston Globe. The bill preserves the right to challenge foreclosures and sue the banks, while helping innocent homeowners stuck with bad title. Despite this, organizations such as the Massachusetts Alliance Against Predatory Lending and activist Grace Ross were successful in getting Governor Patrick on their side.
The Governor’s statement accompanying his action on the bill states as follows:
Massachusetts is emerging from a period of far too many foreclosures, on far too many families, and in far too many communities facing significant economic challenges. It is no secret that, too often, the foreclosure was not properly effectuated. The entity purporting to foreclose did not have the legal authority to do so. The effect of these impermissible foreclosures has been lasting. Families were improperly removed from their homes. Buyers who later purchased the property — or, at least, believed they had done so — are now faced with title questions. Many of these buyers were investors, but many are now homeowners themselves. I commend the Legislature’s effort to address these problems. But I believe the proposed three year period is insufficient. A family improperly removed from its home deserves greater protection, and a meaningful opportunity to claim the right to the land that it still holds. The right need not be indefinite, but it should extend for longer than three years. Certainty of title is a good thing — it helps the real estate market function more smoothly, which ultimately can help us all. But this certainty should not come at the expense of wrongly displaced homeowners or, at least, not until we have put this period further behind us.
As a long time supporter of this bill, I am truly disheartened at this result. I thought the bill did a great job in balancing the rights of innocent home buyers who are stuck with unsellable properties through no fault of their own with the rights of folks who are fighting foreclosures. A three year statute of limitation — which is the same length for malpractice and personal injury claims — is a reasonable amount of time to mount a challenge to a foreclosure, especially when debtors have many months prior notice before a foreclosure sale. The people who would have benefited from this bill are everyday people who bought properties out of foreclosure, put money into them and improved them. I have personally assisted several of these families. Everyone agrees that the banks are largely at fault for the mess left behind with the foreclosure crisis but why put the rights of those who don’t pay their mortgages above those who do? I will never understand this rationale. Perhaps that’s why I could never be in politics!
So where do we go from here? I honestly don’t know. Fortunately, the Land Court recently issued a ruling which may help clear some of these toxic titles. Maybe the legislation will get another chance at the next session or when Patrick leaves office at the end of the year.
Decision Could Have Wide Impact Upon Marijuana Use By Tenants
The law on marijuana and rental housing remains clouded to say the least. And that’s no pun. This week on April 8th, the Supreme Judicial Court will consider the first of probably many cases dealing with marijuana use in rental housing. In this particular case, Boston Housing Authority v. Figgs (SJC 11532), the high court will assess whether a state housing authority may evict a subsidized tenant and terminate her federal housing benefits for the alleged possession of less than one ounce of marijuana — which is no longer a criminal offense in Massachusetts, but still a crime under federal law. With the decriminalization of small amounts of marijuana, the rollout of the medical marijuana dispensaries and the conflict with federal drug laws, this case may have wide-ranging impacts upon the relationships of landlords, tenants, housing authorities and even condominium owners and trustees over the use of marijuana, both recreationally and medicinally.
Oral arguments are available via live stream here. Legal briefs and filings in the case can be found here. A final opinion and ruling is expected this summer.
This case should also put the new Medical Marijuana Law into re-focus. Landlords have been increasingly anxious about how to manage and regulate tenants’ use of medical and recreational marijuana, if at all. The law not only grants qualified patients the right to obtain medical marijuana but it also allows patients the right to grow a two-month supply of marijuana at home if they cannot get to a marijuana dispensary because they are too sick or too broke. There is a bill in the Legislature granting landlords the right to prohibit medical marijuana on rental property without fear of being sued for disability discrimination.
I’ll be monitoring this new and dynamic area of the law. It will surely be a hot topic in the next couple of years.
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Richard D. Vetstein, Esq. is an experience Massachusetts landlord tenant and real estate attorney. If you are concerned or have questions about the new Medical Marijuana Law, please contact him at[email protected].
Bill Would Curb Tenant Abuses of Eviction Process | State House Hearing Set For Feb. 25
For the last decade, Massachusetts landlords have been lobbying for a tenant rent escrow bill which would prevent tenants from using the infamous “free rent trick” in evictions. This may finally be the year that the Legislature passes this much needed reform to curb tenant abuses of the eviction process. Two bills, H.B. 1131 and H.B. 1110, have made their way to public hearing at the State House for a February 25th hearing before the Joint Committee on Housing. Landlords are urged to come and testify before the committee and otherwise support the bill by contacting their local representatives and senators.
The bills are designed to reform tenant abuses of the rent withholding law, including the infamous “free rent trick.” The free rent trick works like this: Tenant stops paying rent for various reasons, such as economic hardship or by design. After receiving a 14 day notice to quit for non-payment of rent, the tenant will immediately call the board of health to get the owner cited for minor or cosmetic code violations such as a hole in a window screen. Under current Massachusetts law, any code violation cited, however minor, allows the tenant to withhold rent until the eviction case is resolved. What usually happens is that the tenant skips out of town or agrees to a move out but never pays the months of accrued unpaid rent, leaving the landlord stuck with thousands of lost income to pay their mortgage and expenses.
Unlike most other states, there is no requirement in Massachusetts that the tenant post the withheld rent into some form of escrow account. There have been many instances where tenants have intentionally inflicted property damage to claim code violations or just made them up altogether.
A mandatory rent escrow law would require any tenant who exercises their right of rent withholding to pay the withheld rent into an escrow account until the unsafe conditions or code violations are repaired. After repairs are done, either the landlord and tenant agree on how the escrowed rent should be divided, or a judge orders a fair settlement. In most cases, the owner will get back most of the withheld escrowed rent. But the most important impact of a mandatory rent escrow law is that those nonpaying tenants who do not escrow can be promptly evicted for nonpayment of rent. Although nonpayment evictions will still take on average three months to resolve, much-longer-delayed evictions and the free rent trick will be stopped.
The bills will most benefit small landlords and owners-occupants of multi-family residences who rent out apartments. These property owners are typically on strict budgets, and any lost rent and attorneys’ fees will prevent them from paying their mortgages, real estate taxes and property expenses, potentially leading to default and foreclosure.
Should Result In Much-Needed Inventory Boost To Housing Market
Good news to report for property owners saddled with toxic titles resulting from the seminal U.S. Bank v. Ibanez foreclosure ruling. Massachusetts lawmakers are poised to pass into law a new bill aimed at legislatively clearing up all of these defective titles.
By way of background, properties afflicted with Ibanez title defects, in worst cases, cannot be sold or refinanced. And homeowners without title insurance have been compelled to spend thousands in legal fees to clear their titles, while some have not been able to clear their titles at all.
The new legislation, Senate Bill 1987, would render clear and marketable any title affected by a defective foreclosure after 3 years have passed from the foreclosure. Most of these toxic titles were created prior to 2009, so the vast majority of them will be cleared up.
The bill does preserve any existing litigation over the validity of foreclosures. The legislation does not apply if there is an existing legal challenge to the validity of the foreclosure sale in which case record notice must be provided at the registry of deeds. The bill also does not shield liability of foreclosure lenders and attorneys for bad faith and consumer protection violations over faulty foreclosures.
The bill has recently been passed by the Senate and now moves on to the House. Word is that it should pass through the House and on to the Governor’s Desk.
Shrewsbury State Senator Michael Moore and the Massachusetts Land Title Association have sponsored this effort for several years now. I have been supporting this effort as well.
This is great news for the real estate market. I don’t have firm numbers, but there are probably hundreds, if not thousands, of these unsellable properties just sitting on the sidelines, and now they can get back onto the market. This is exactly what the inventory starved market needs.
(Hat tip to Colleen Sullivan over at Banker and Tradesman for passing along this important information).
Richard D. Vetstein, Esq. is regarded as one of the leading real estate attorneys in Massachusetts. With over 25 years in practice, he is a four time winner of the "Top Lawyer" award by Boston Magazine, a "Super Lawyer" designation from Thompson/West, and "Best of Metrowest." For Rich's professional biography, click here. If you are interested in hiring Rich or have a legal question, email or call him at [email protected] or 508-620-5352.
New Law Will Resolve Thousands of Foreclosure Title Defects In Wake of U.S. Bank v. Ibanez Ruling
