Friday, October 28, 2016

Taylor v. Martha’s Vineyard Land Bank Commission


By Caitlin E. Loftus

Massachusetts courts have long applied a bright-line rule, established in 1965 in Murphy v. Mart Realty of Brockton, Inc., that prohibits the use of an easement to benefit land to which that easement is not appurtenant. The Supreme Judicial Court recently examined a challenge to this rule in Taylor v. Martha’s Vineyard Land Bank Comm’n, 475 Mass. 672, a dispute over the scope of easements benefitting several parcels owned by the Land Bank in Aquinnah.

 The Land Bank advocated replacing the rule with a fact-intensive inquiry weighing whether the use of a particular easement to access non-appurtenant parcels unfairly increases the burden on that easement. After granting direct appellate review and soliciting amicus briefs, the Supreme Judicial Court reaffirmed the rule set forth in Murphy in a concise and unanimous decision.

 The Land Bank owns and manages a nature preserve on the Gay Head Cliffs of Martha’s Vineyard. At issue in Taylor were four parcels in the preserve benefitting from two separate easements over property owned by the plaintiffs Hugh and Jeanne Taylor. The easements provide access to and from Lighthouse Road, the nearest public way.  Neither easement is appurtenant to all four parcels. The first easement, referred to as the Disputed Way, is appurtenant to the three southernmost parcels. The second easement, referred to as the Twenty-Foot Way, is appurtenant to the northernmost parcel, so-called Diem Lot 5. A separate parcel, owned by the Taylors and on which they operate the Outermost Inn, connects the southernmost parcel to Lighthouse Road.

 In May, 2010, the Land Bank received approval for a plan to create a hiking trail over the four lots. The plan called for both easements to be incorporated into a single loop trail. The proposed loop, beginning at Lighthouse Road, would run the full length of the Disputed Way over the Taylors’ property and then continue over the three southernmost parcels. The trail would then run over Diem Lot 5 and intersect with the Twenty-Foot Way, running along the Twenty-Foot Way until returning to the trail’s point of origin at Lighthouse Road.

 Land Court Decision

In June, 2010, the Taylors filed a complaint seeking a declaratory judgment that the Land Bank could not use the Disputed Way as part of the proposed hiking trail. Because the Disputed Way was appurtenant only to three parcels, the Taylors argued the Land Bank could not use it to reach the fourth parcel, Diem Lot 5, and that such use constituted overloading. Plaintiffs also argued that opening the Disputed Way to the public, even without using it to reach Diem Lot 5, constituted overburdening. Overloading refers to the use of an easement to serve land other than that to which it is appurtenant, while overburdening describes the use of an easement for purposes different from those intended when it was created.   

 Plaintiffs moved for summary judgment in March, 2011, which was allowed in part. The Land Court judge ruled that incorporating the Disputed Way into a hiking loop that reached Diem Lot 5 would overload the easement and, accordingly, any trail over the Disputed Way must end before connecting to Diem Lot 5. This effectively divided the proposed loop into two separate trails that would prevent hikers from completing a single connected loop. The judge denied summary judgment on the overburdening issue, finding there was a genuine issue of material fact whether opening the Disputed Way to the public would unreasonably increase pedestrian traffic. After conducting a trial on the overburdening issue, he concluded that such public use fell within the easement’s original scope and did not constitute overburdening. Final judgment issued, incorporating the summary judgment decision.

 The Land Bank appealed and applied for direct appellate review. Its notice of appeal challenged only the summary judgment ruling that the Disputed Way could not be used to benefit Diem Lot 5. Direct appellate review was allowed.

SJC Decision  

Under Murphy, “a right of way appurtenant to the land conveyed cannot be used by the owner of the dominant tenement to pass to or from other land adjacent to or beyond that to which the easement is appurtenant.” Both parties agreed that under this rule, the Land Bank is prohibited from using the Disputed Way to access a parcel the easement was not intended to benefit, in this case, Diem Lot 5. The Land Bank, however, urged the SJC to adopt a new rule replacing the bright-line Murphy rule. It proposed a fact-based inquiry to determine whether use of an easement to benefit non-appurtenant land would place additional burdens on a servient estate and, if yes, whether the additional burdens would constitute an unfair extension beyond the easement’s original scope. Under the proposed rule, the Land Bank argued use of the Disputed Way to reach Diem Lot 5 would not constitute overloading, as pedestrian traffic over the Taylors’ property was unlikely to increase merely because the Disputed Way could now be used to access a fourth lot.

While the SJC acknowledged the proposed rule provided more flexibility, it ultimately was not persuaded that the benefits of flexibility outweighed its costs. The SJC explained a new rule could inject uncertainty in land ownership, where individuals often base their actions and decisions on existing precedent, and further stated it could potentially extend the litigation process, hurting owners of small servient parcels lacking the financial means to challenge defendants seeking to acquire and develop multiple parcels of land. The proposed fact-intensive inquiry also presented difficult factual disputes, such as defining an easement’s purpose or determining whether an expansion of the easement’s use would cause unreasonable damage or interference. The SJC expressly hoped to avoid these situations with the formulation of the Murphy rule.

 The SJC noted that maintaining the Murphy rule comported with the principle that the terms and conditions of an easement are well within the control of the parties creating it. The SJC distinguished the out-of-state cases cited by the Land Bank in support of a more fact-based analysis as situations in which the parties, at the time they created the easements, intended or contemplated that they could benefit after-acquired or non-appurtenant lots. Here, however, the Disputed Way was not intended to benefit Diem Lot 5 at the time of its creation.

 The SJC rejected the Land Bank’s assertions that the Murphy rule creates “substantial impracticalit[ies]” for landowners in similar situations and is inconsistent with the public policy favoring “socially productive” uses of land. The application of the bright-line rule in Taylor will not prevent hikers from making use of both the Disputed Way and the Twenty-Foot Way. It only prevents them from walking the two trails in a single connected loop. This disconnect may be inconvenient, but the SJC did not view it as a “substantial impracticality.”

 After taking this case for direct appellate review, some may have wondered whether the bright-line rule articulated in Murphy was marked for replacement or modification. The SJC stated that, while it may deviate from precedent, it chooses to do so only when the benefits of the change outweigh those provided by stare decisis.  In upholding the Murphy rule, and declining to add or create exceptions, the SJC found that the certainty provided by a bright-line rule defining a property owner’s rights outweighed any perceived advantages of a more flexible standard.

Caitlin Loftus is a research attorney at the Land Court Department of the Trial Court.  Prior to that she served as law clerk to Associate Justice Karyn F. Scheier.

Thursday, October 27, 2016

The Security Deposit Sky Is Not Falling: Meikle v. Nurse Did Not Change Evictions Forever


By G. Emil Ward

Lately this author has been hearing a lot of comments swirling around Meikle v. Nurse, 474 Mass. 207 (2016), a recent security deposit case. Some think the case means that $4.61 in unpaid interest on a security deposit claim can in and of itself act as a complete defense to an eviction. Others feel that this decision portends the doom of all evictions if the tenant files a security deposit counterclaim. This author has heard it said that this spells the end of the no-fault eviction and that the fate of landlords now lies in the hands of the legislature.

This author’s response is simple: This is not so.
The case does not represent a sea change in landlord-tenant law. The case came out the way it should have under the present incarnation of M. G. L. c. 239, § 8A, the statute that was not properly applied by the Boston Housing Court to produce the Meikle decision in the trial court. While one can argue that Section 8A should be changed, Section 8A is not producing any worse results for landlords after this decision than it did before it was handed down. Here is why.
For many years, security deposit claims have been an integral part of almost every tenant's defenses that this author has ever faced under Section 8A. In Meikle, the SJC confirmed this. “The steady progression in the availability of tenant defenses, culminating in the elimination of conditions-based restrictions, confirms the Legislature’s intent to provide tenants with a broad set of defenses and counterclaims in the summary process action, including the defense asserted by the tenant in this case [alleging a violation of the security deposit statute, M.G.L. c. 186, § 15B].” Id., p. 213.
M. G. L. c. 239, § 8A allows the tenant to raise any “counterclaim or defense” arising out of the tenancy, such as a security deposit claim.  In a trial, an award under any such claim can be added to the tenant's damage award along with other damage awards, if any, and then matched against the unpaid rent found due to the landlord to determine if the tenant or landlord wins possession after setting one off against the other. This is what is usually known as the “pay over” provision.
For those of you unfamiliar with Section 8A's “pay over” provision, here is how it works. Under Section 8A, if after trial the landlord wins judgment for unpaid rent in the same amount of the tenant’s damages or less than the tenant’s damage award, (for say, a leaky radiator ignored by the landlord for months in winter) the tenant keeps possession and the landlord must pay to the tenant the balance the court found that is due to the tenant. M. G. L. c. 239, § 8A, fifth paragraph.
On the other hand, if the tenant wins an amount of money damages less than the landlord wins in unpaid rent, then the tenant has seven days in which to pay the difference between the rent found due and the damages won by the tenant into the court clerk’s office. If he pays that sum into court, the tenant retains possession. If not, the tenant loses possession. “Where a tenant prevails in a defense or counterclaim and is awarded damages in an amount less than the amount owed to the landlord, the statute provides that ‘no judgment shall enter until after expiration of the time for such payment and the tenant has failed to make such payment.’” Id., p. 213.
In Meikle, the trial judge found that the landlord won $3900 (three months' unpaid rent). The tenant won the return of the security deposit and unpaid interest: $1304.61 ($1300 security deposit, plus $4.61 unpaid interest= $1304.61).  The difference is, of course, $2595.39 that the tenant would have had to pay to the landlord through the court clerk's office to maintain possession. It is at this point that the trial court decision went off track.
For some reason not articulated in the decision, the judge failed to end the decision by offering the “pay over” opportunity, as has been the law for decades, to the tenant who would then have had the option to pay the difference in 7 days' time and retain possession, or not as she chose. The trial judge then awarded $2595.39 and POSSESSION to the LANDLORD in violation of the statute.
That is the key part of the decision that was appealed by the tenant, namely, the judge's failure to state in the decision that now that the damages had been found for both sides and set off against one another, the tenant was to be offered the opportunity to pay the difference between unpaid rent of $3900 and her judgment for damages of $1304.61, or $2595.39, and thus retain possession. Of course, if the tenant had been given the “pay over” opportunity in the decision and failed to make the payment in seven days, judgment for possession would have issued for the landlord, Mr. Meikle. While Mr. Meikle was pro se in the appellate court, landlord groups filed an amicus brief as to the issue that concerned them most which is described below.
The interesting part, and the reason the author believes landlords were so upset with the decision is this. In the appellate brief drafted by the Harvard Legal Aid Bureau (HLAB) who represented the tenant, the brief tracks the SJC’s arguments and the current law as the author understood the applicable law until its conclusion. In its “Conclusion” section, HLAB goes out of bounds and asks the SJC to ignore application of the “pay over” provision that might benefit the landlord, and just grant possession to the tenant. “This Court should vacate the judgment for possession to the Landlord, award possession of the premises to the Tenant, and hold that G.L. c. 239, § 8A provides a defense for possession when there are violations of the security deposit statute, c. 186, § 15B.” Brief of Appellant at 23, Meikle v. Nurse, 474 Mass. 207 (2016) (SJC-11859).
The SJC reversed the order for possession to the landlord and remanded for entry of an order “providing notice to the tenant of the right to retain possession in compliance with G. L. C. 239, § 8A, fifth paragraph.” Id., p. 214.
However, to clear the air regarding the reach of the decision, the SJC stated that a security deposit counterclaim would not provide the tenant with a right to possession, “in perpetuity” if she made timely payment of the amount found due. Id., p. 214. “The statute does not impose an obligatory tenancy on the landlord.” Id., p. 214.
Please note the “pay over” provision may only be used by tenants who are evicted for nonpayment or in no-fault evictions. On its face, the statute bars its use in defense of possession by tenants who are evicted for fault, i.e., breach of the tenancy terms.  The statute does not consider nonpayment of rent to be a “fault” ground.
That's it.  The Supreme Judicial Court simply rectified that error. It did not make new law. In this author’s opinion, no big deal. Just another expensive and time-consuming security deposit case. But, not a sea change in the law.
Emil Ward chairs the Association’s Landlord/Tenant Law Section.  He can be contacted by email at gemilw@aol.com.

The Security Deposit Sky Is Not Falling: Meikle v. Nurse Did Not Change Evictions Forever


By G. Emil Ward

Lately this author has been hearing a lot of comments swirling around Meikle v. Nurse, 474 Mass. 207 (2016), a recent security deposit case. Some think the case means that $4.61 in unpaid interest on a security deposit claim can in and of itself act as a complete defense to an eviction. Others feel that this decision portends the doom of all evictions if the tenant files a security deposit counterclaim. This author has heard it said that this spells the end of the no-fault eviction and that the fate of landlords now lies in the hands of the legislature.

This author’s response is simple: This is not so.
The case does not represent a sea change in landlord-tenant law. The case came out the way it should have under the present incarnation of M. G. L. c. 239, § 8A, the statute that was not properly applied by the Boston Housing Court to produce the Meikle decision in the trial court. While one can argue that Section 8A should be changed, Section 8A is not producing any worse results for landlords after this decision than it did before it was handed down. Here is why.
For many years, security deposit claims have been an integral part of almost every tenant's defenses that this author has ever faced under Section 8A. In Meikle, the SJC confirmed this. “The steady progression in the availability of tenant defenses, culminating in the elimination of conditions-based restrictions, confirms the Legislature’s intent to provide tenants with a broad set of defenses and counterclaims in the summary process action, including the defense asserted by the tenant in this case [alleging a violation of the security deposit statute, M.G.L. c. 186, § 15B].” Id., p. 213.
M. G. L. c. 239, § 8A allows the tenant to raise any “counterclaim or defense” arising out of the tenancy, such as a security deposit claim.  In a trial, an award under any such claim can be added to the tenant's damage award along with other damage awards, if any, and then matched against the unpaid rent found due to the landlord to determine if the tenant or landlord wins possession after setting one off against the other. This is what is usually known as the “pay over” provision.
For those of you unfamiliar with Section 8A's “pay over” provision, here is how it works. Under Section 8A, if after trial the landlord wins judgment for unpaid rent in the same amount of the tenant’s damages or less than the tenant’s damage award, (for say, a leaky radiator ignored by the landlord for months in winter) the tenant keeps possession and the landlord must pay to the tenant the balance the court found that is due to the tenant. M. G. L. c. 239, § 8A, fifth paragraph.
On the other hand, if the tenant wins an amount of money damages less than the landlord wins in unpaid rent, then the tenant has seven days in which to pay the difference between the rent found due and the damages won by the tenant into the court clerk’s office. If he pays that sum into court, the tenant retains possession. If not, the tenant loses possession. “Where a tenant prevails in a defense or counterclaim and is awarded damages in an amount less than the amount owed to the landlord, the statute provides that ‘no judgment shall enter until after expiration of the time for such payment and the tenant has failed to make such payment.’” Id., p. 213.
In Meikle, the trial judge found that the landlord won $3900 (three months' unpaid rent). The tenant won the return of the security deposit and unpaid interest: $1304.61 ($1300 security deposit, plus $4.61 unpaid interest= $1304.61).  The difference is, of course, $2595.39 that the tenant would have had to pay to the landlord through the court clerk's office to maintain possession. It is at this point that the trial court decision went off track.
For some reason not articulated in the decision, the judge failed to end the decision by offering the “pay over” opportunity, as has been the law for decades, to the tenant who would then have had the option to pay the difference in 7 days' time and retain possession, or not as she chose. The trial judge then awarded $2595.39 and POSSESSION to the LANDLORD in violation of the statute.
That is the key part of the decision that was appealed by the tenant, namely, the judge's failure to state in the decision that now that the damages had been found for both sides and set off against one another, the tenant was to be offered the opportunity to pay the difference between unpaid rent of $3900 and her judgment for damages of $1304.61, or $2595.39, and thus retain possession. Of course, if the tenant had been given the “pay over” opportunity in the decision and failed to make the payment in seven days, judgment for possession would have issued for the landlord, Mr. Meikle. While Mr. Meikle was pro se in the appellate court, landlord groups filed an amicus brief as to the issue that concerned them most which is described below.
The interesting part, and the reason the author believes landlords were so upset with the decision is this. In the appellate brief drafted by the Harvard Legal Aid Bureau (HLAB) who represented the tenant, the brief tracks the SJC’s arguments and the current law as the author understood the applicable law until its conclusion. In its “Conclusion” section, HLAB goes out of bounds and asks the SJC to ignore application of the “pay over” provision that might benefit the landlord, and just grant possession to the tenant. “This Court should vacate the judgment for possession to the Landlord, award possession of the premises to the Tenant, and hold that G.L. c. 239, § 8A provides a defense for possession when there are violations of the security deposit statute, c. 186, § 15B.” Brief of Appellant at 23, Meikle v. Nurse, 474 Mass. 207 (2016) (SJC-11859).
The SJC reversed the order for possession to the landlord and remanded for entry of an order “providing notice to the tenant of the right to retain possession in compliance with G. L. C. 239, § 8A, fifth paragraph.” Id., p. 214.
However, to clear the air regarding the reach of the decision, the SJC stated that a security deposit counterclaim would not provide the tenant with a right to possession, “in perpetuity” if she made timely payment of the amount found due. Id., p. 214. “The statute does not impose an obligatory tenancy on the landlord.” Id., p. 214.
Please note the “pay over” provision may only be used by tenants who are evicted for nonpayment or in no-fault evictions. On its face, the statute bars its use in defense of possession by tenants who are evicted for fault, i.e., breach of the tenancy terms.  The statute does not consider nonpayment of rent to be a “fault” ground.
That's it.  The Supreme Judicial Court simply rectified that error. It did not make new law. In this author’s opinion, no big deal. Just another expensive and time-consuming security deposit case. But, not a sea change in the law.
Emil Ward chairs the Association’s Landlord/Tenant Law Section.  He can be contacted by email at gemilw@aol.com.

Wednesday, October 26, 2016

HUD’s Guidance on Criminal History Screening Procedures

By Kenneth A. Krems

HUD’s Office of General Counsel issued guidance on April 4, 2016 relative to the Fair Housing Act and landlords using criminal history as a basis for denying applicants for housing.  Among other things, the Fair Housing Act, 42 U.S.C. §3601 et seq., prohibits discrimination in the rental of apartments on the basis of race, color, religion, sex, disability, familial status or national origin.  As a result of HUD’s guidance, attorneys representing residential landlords should advise them to review their qualifying criteria and standards for rejecting applicants.

There are two types of discrimination:  intentional discrimination, or disparate impact/discriminatory effect, which is when a neutral policy or procedure has a disproportionately negative impact on a protected class.  In 2015, the U.S. Supreme Court in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., 135 S. Ct. 2507, recognized that the disparate impact theory applies in fair housing cases, and the HUD guidance concentrates on this type of discrimination in the context of criminal history.  It points out that as many as 100 million adults in the United States have a criminal record and that it is important for individuals released from incarceration to be able “to access safe, secure and affordable housing.” Applicant screening policies that disqualify individuals who have been arrested or convicted of a crime have a disproportionately negative effect on African Americans and Hispanics who are arrested and convicted at a rate much higher than that of the general population.

Landlords generally refuse to rent to applicants with an arrest or conviction because it is believed that they are more likely to pose a risk to tenant safety or property.  As perhaps the most fundamental obligation of a landlord is to strive to keep its residents safe and secure, that is certainly a legitimate concern for landlords.  The guidance recognizes this but states that landlords must be able to prove that their criminal screening policies actually do protect tenant safety or property.  It then rejects the approach of denying all applicants who have been arrested or convicted as not being an effective means of achieving that goal.

The guidance states that arrest records are not proof of past criminal conduct, since they just show the individual was suspected of committing a crime.  An individual with an arrest record does not necessarily constitute a risk to other residents, so excluding that person does not really protect residents and does not satisfy the landlord’s burden of demonstrating that the policy “is necessary to achieve a substantial, legitimate, nondiscriminatory interest.”  The guidance quotes the U.S. Supreme Court in Schware v. Board of Bar Examiners, 353 U.S. 232, 241 (1957), where the court stated that “the mere fact that a man has been arrested has very little, if any, probative value in showing that he has engaged in any misconduct.  An arrest shows nothing more than that someone probably suspected the person apprehended of an offense.”

Individuals who have been convicted did commit a crime.  However, the guidance notes that there are many different types of crimes that one may be convicted of, some much more serious than others.  Similarly, some crimes occurred long ago, while others were more recent.  It states that a landlord who has a blanket prohibition on accepting any applicant with any type of conviction cannot meet the same burden, that the policy “is necessary to achieve a substantial, legitimate, non-discriminatory interest.”  The guidance goes on to say that landlords should tailor their criminal history policy so it distinguishes between which criminal conduct poses a risk to resident safety or property and which does not, and consider the “nature, severity and recency of the criminal conduct.” 

It recommends that landlords perform an individualized assessment of a conviction and relevant mitigating circumstances, which could include the facts surrounding the criminal conduct, the age of the applicant at the time, the applicant’s tenant history before and after the conduct, and evidence of rehabilitation efforts.

Since the Fair Housing Act has specific exemptions for the illegal manufacture or distribution of controlled substances, the guidance points out that it is acceptable for a landlord to maintain a blanket rejection policy for convictions for those specific crimes.  These exemptions do not apply to arrests for drug manufacture or distribution, or to convictions for drug possession.  Aside from these specific exemptions, the guidance states that denying applicants based upon “a prior arrest or any kind of criminal conviction cannot be justified, and therefore such a practice would violate the Fair Housing Act.”

Landlords should now be reviewing and revising their qualifying criteria.  Arrests should be eliminated as a basis for denying applicants, and landlords should carefully examine the various types of convictions for their relation to threats to safety or property.  Landlords who use firms to search criminal histories and recommend acceptance or rejection of applicants should revise the specific criminal decision criteria used by the firms.  An applicant who is rejected solely for criminal history should be given an opportunity to provide evidence of mitigating circumstances for the landlord to consider. 
 
Implementing these new policies will take some time but should not be overly burdensome to landlords.  Without a doubt, taking steps now to comply with the Fair Housing Act can help avoid potential disparate impact claims in the future.

Co-chair of REBA’s residential landlord/tenant section, Ken Krems is a partner in the Boston office of Shaevel & Krems, LLP, where he focuses his practice on real estate management. Ken represents large residential management companies and is responsible for more than 11,000 units of housing in Massachusetts; he also represents landlords and tenants regarding commercial leasing issues, condominium associations and a buyers and sellers of real estate.  Ken can be reached at kkrems@shaevelkrems.com. 

 

 

Tuesday, October 25, 2016

Medical Marijuana in Apartments

By Kenneth A. Krems

Issues regarding medical marijuana are beginning to confront landlords in Massachusetts.  This is because in 2012, voters overwhelmingly approved a referendum allowing for the use of medical marijuana.  Implementation of this has been very slow, but it is now picking up steam and a number of dispensaries have opened.  Also, here in Massachusetts, recreational marijuana is on the ballot this November.

Residents in both completely smoke-free buildings and buildings which are not smoke-free often complain more about the odor of marijuana wafting into their apartments than they do about cigarette smoke coming into their units.  Smoke free or not, leases should provide that the illegal possession or use of marijuana is prohibited.  Since 2009, the possession of one ounce or less of marijuana has no longer been a criminal offense here.  However, possession of marijuana is still a federal crime.  In addition to the violation of federal law, marijuana smoke entering other units or being in the hallways interferes with the quiet enjoyment of other residents.  If a resident continues to smoke marijuana in violation of the lease, he should be given several oral and written warnings, and if the behavior continues he can be evicted.

But what about medical marijuana?  A resident who wants to use medical marijuana will need a medical marijuana card, and to get that she will need a doctor’s authorization that she has a qualifying disability.  Since the resident will have a disability, do we have to allow her to smoke medical marijuana as a reasonable accommodation?

Under Massachusetts and federal law it is unlawful for a landlord to refuse to make a reasonable accommodation in rules, policies, practices or services when the accommodation is necessary to afford a disabled person an equal opportunity to use and enjoy the apartment.

The Massachusetts medical marijuana statute doesn’t cover the use of medical marijuana in housing, but it does provide that “nothing in this law requires the violation of federal law or purports to give immunity under federal law.”

A 2011 memorandum from the U.S. Department of Housing and Urban Development dealing with the use of medical marijuana in multifamily assisted properties provides that owners of federally assisted housing are required to deny admission to any household with a member who is using medical marijuana; that owners cannot have lease provisions that permit occupancy by a household member who is using medical marijuana; and that owners can terminate the tenancy of current households with a member who is using medical marijuana if the owner wishes to do so.  HUD concluded that owners “may not grant reasonable accommodations that would allow tenants to grow, use, otherwise possess, or distribute medical marijuana, even if in doing so such tenants are complying with state laws authorizing medical marijuana-related conduct.”

There are no Massachusetts cases on the issue of the use of medical marijuana in apartments or condos.  However, in December, 2014 a federal court in Michigan in Forest City Residential Management, Inc. v. Beasley, 71 F.Supp.3d 715 (E.D. Mich. 2014) was faced with this question.  In that case a tenant possessed a medical marijuana card and asked the landlord for a reasonable accommodation to allow him to smoke marijuana in his apartment.

The court stated that federal law making the use of marijuana a crime supersedes state medical marijuana laws allowing marijuana use, so to require a landlord to grant this accommodation would not be reasonable because it would require the landlord to violate federal law.  The court stated:  “Such a requirement would fundamentally alter the nature of [the landlord’s] operation by thwarting Congress’s mission to provide drug-free federally assisted housing.”  The court held that a landlord is not required to grant a reasonable accommodation to allow a tenant to use medical marijuana.

So as of now, a landlord does not have to allow a tenant to use medical marijuana inside the building.  If a tenant wants to smoke marijuana for medical purposes, he can go outside to a location off the property where the smoke won’t bother other residents.  If the tenant is going to use medical marijuana inside the apartment, the tenant should have to ingest it in some other form, such as a pill or a brownie, or use a topical oil.

There is no question that in the next few years there will be cases in Massachusetts dealing with whether a landlord has to allow medical marijuana to be smoked in its building.  We’ll look forward to those decisions, but until a court rules otherwise landlords don’t have to allow this.

Co-chair of REBA’s residential landlord/tenant section, Ken Krems is a partner in the Boston office of Shaevel & Krems, LLP, where he focuses his practice on real estate management. Ken represents large residential management companies and is responsible for more than 11,000 units of housing in Massachusetts; he also represents landlords and tenants regarding commercial leasing issues, condominium associations and a buyers and sellers of real estate.  Ken can be reached at kkrems@shaevelkrems.com. 

Monday, October 24, 2016

In Defense of MERS


By Paul F. Alphen

In a recent Lawyers Weekly article by Kris Olson on Epps vs. Bank of America, it was suggested that MERS (Mortgage Electronic Registration Systems Inc) is “controversial.”  On the contrary,  case law in Massachusetts continues to support the conclusion that Mortgage Electronic Registration Systems, Inc. (“MERS”) and the MERS® System database operate in compliance with Massachusetts law.

By way of background, MERS (a wholly-owned subsidiary of MERSCORP Holdings, Inc.)_ serves as mortgagee in the land records for mortgages registered on the MERS® System database on behalf of lenders and investors that own mortgage loans that are traded in the secondary market. MERS holds the secured interest in the property pledged as collateral for the repayment of the loan in the capacity as nominee (a limited form of agency) for the lender making the mortgage loan and for subsequent purchasers (“beneficial owners”) of the mortgage loan. The MERS® System database is a national electronic database owned and operated by MERSCORP Holdings that tracks changes in mortgage servicing rights and beneficial ownership interests in mortgage loans secured by residential real estate.  Certainly, when MERS documents first appeared of record in our local Registries of Deeds about fifteen (15) years ago many old school conveyancers like I had questions and concerns; we are conservative by nature and slow to adopt new technologies in general. Nevertheless, with the passage of time and experience we grew to understand and appreciate the system.

Notwithstanding MERS success in both federal and state courts and the fact that MERS assigns its mortgage lien interest prior to the commencement of foreclosures, legal challenges against MERS related to foreclosure actions continue to be raised here in Massachusetts. Assertions that MERS was not the lawful mortgagee were raised and dismissed by the trial court, and affirmed recently by the Appeals Court of Massachusetts in Epps v. Bank of America (2015-P-1095).  This is the very same case where Olson questioned the validity of MERS.  In Epps, the Appeals Court ruled against the proposition that only the original “Lender” can be the mortgagee, based on both the mortgage’s contractual terms and as a matter of law in Massachusetts. This decision, rendered on Oct. 11, 2016, held MERS was the legal mortgagee under the express terms of the homeowner’s mortgage until MERS assigned its interest in the mortgage to a subsequent party. 

Further supporting the Epps holding are several other decisions by the Appeals Court that reject the theories underlying Epps’s action and appeal, such as Sullivan v. Kondaur, 85 Mass. App. Ct. 202 (2014) (“Sullivan”), Shea v. Federal Nat’l Mort. Ass’n, 87 Mass. App. Ct. 901 (2015) (“Shea”), and others.  Prior to Epps, the Appeals Court made clear in Shea that MERS may serve as mortgagee with authority to assign the Mortgage, even though MERS never held the Note.  87 Mass. App. Ct. at 902-03. And, in Sullivan, the Appeals Court (in confirming the validity of a MERS assignment just like the Assignment here at issue) determined that MERS was the original mortgagee with power to assign the mortgage, and it needed no instruction from the owner of the debt in order to do so.  See 85 Mass. App. Ct. at 208-09. 

Just recently, the United States District Court of Massachusetts held the mortgage’s express language provided that MERS was the mortgagee and authorized MERS to assign the mortgage. The court also noted that, pursuant to First Circuit precedent, a note and mortgage need not be held by the same entity and that MERS can validly assign a mortgage.  See Hayden v. HSBC Bank USA, N.A Hayden v. HSBC Bank USA, N.A., No. 16-11492-DJC, 2016 U.S. Dist. LEXIS 135977 (D. Ma. Sept. 30, 2016).

Today, there are more than 5,000 lenders, servicers, sub-servicers, investors and government institutions using MERS and the MERS® System database, including MassHousing, the Commonwealth’s independent, quasi-public agency created to provide financing for affordable housing in Massachusetts.  Far from controversial, the validity of MERS is settled law.

Paul Alphen is an Emeritus member of the REBA Board of Directors and a member of the Association’s Strategic Planning Committee.  Paul can be contacted by email at palphen@alphensantos.com.

Thursday, October 20, 2016

Suburban Foreclosures


By Richard P. Howe Jr.

The number of foreclosure deeds recorded in the Middlesex North Registry of Deeds during the first nine months of 2016 increased 29 percent from the same period in 2015, rising from 133 to 172. Projecting that number across the entire year would yield 229 foreclosures, far below the 639 that occurred in 2008 with the collapse of the economy, but far more than the 51 in 2005 when real estate was booming.

Urban foreclosures tend to get the most attention, but troublesome mortgages in the suburbs pose a significant problem as well. While many of the 2016 Middlesex North foreclosures were properties in the Gateway City of Lowell, 114 came from the nine suburban towns (Billerica, Carlisle, Chelmsford, Dracut, Dunstable, Tewksbury, Tyngsborough, Westford, and Wilmington) that make up the rest of the registry district.

The vast majority of these foreclosures – 81 of 114 – were of refinanced mortgages. That status was determined by comparing the date of the mortgage being foreclosed with the date of the deed by which the borrower became owner of the property. In cases where the person who lost the home had acquired title through inheritance or gift, the first full-consideration deed into the family, not any subsequent no-consideration deeds, was used in this analysis. If the foreclosed mortgage was recorded on the same day as the deed, it was deemed to be a purchase mortgage. If the mortgage was recorded at some later time, it was deemed to be a refinanced mortgage.

Of the 81 refinanced mortgage foreclosures studied, 30 homeowners (or their family predecessors) had acquired title during the 2000s; 24 during the 1990s; 12 in the 1980s; three in the 1970s; five in the 1960s; three in the 1950s; and four in the 1940s. No matter when title was acquired, all of the refinanced mortgages that were foreclosed in 2016 originated during the 2000s. If we measure the housing bubble from the start of 2003 through the end of 2007, 68 of the 81 refinanced mortgage foreclosures originated then. Only one came before, 11 came after.

Comparing the original purchase price of the property with the amount borrowed on the refinanced mortgage, and the length of time between that mortgage and acquisition of title, provides context for these foreclosures. For the 30 people who purchased homes in the 2000s, quickly refinanced, and then lost their homes to foreclosure, the median amount borrowed on the refinanced mortgage was $249,000, while the median purchase price of the home was $247,450, a difference of just $1,550. This suggests that refinancing these newer mortgages may have been driven by lower interest rates or different terms rather than borrowing a larger sum

For the 24 people who purchased their homes in the 1990s, eventually refinanced, and then lost their homes to foreclosure this year, the median amount borrowed on the refinanced mortgage was $244,000, while the median purchase price of the home was $125,000, a difference of $119,000. The median time between purchase and refinancing for this group was 10.5 years (I did not count how many times they refinanced).

For the 27 people who acquired title before 1990, the median amount borrowed on the refinanced mortgage was $267,200 and the mortgage was obtained 25 years after acquisition of title. Because many homeowners in this group acquired title through inheritance or gift, it was difficult to ascertain the purchase price of these properties. Most likely, these homeowners paid little or nothing, suggesting that the amounts borrowed with these mortgages would most likely be all cash to the homeowner. 

As for the 33 foreclosures that involved purchase mortgages, 28 of the homes were purchased during the 2003-2007 bubble, none were purchased before, and five were purchased after. The median sales price of these homes was $276,000 and the median mortgage amount was $241,900. Eight homeowners financed 100 percent of the purchase price; six financed between 90 and 99 percent; ten financed between 80 and 89 percent, and nine financed less than 80 percent.  

Registry records do not explain why these foreclosures occurred, nor do they disclose why they occurred now. Did longtime homeowners suddenly experience some catastrophic disruption of family cash flow that precipitated the loss of the house? Or did these loans have defective mortgages that required time for lenders to rectify title problems prior to foreclosure?

One thing that is clear from the record is that many longtime homeowners took advantage of rising values to extract equity from their homes. Most of these loans were obtained during the real estate bubble when values were at levels so high that current values still lag. Many homeowners with mortgages from this period, not just those who have experienced foreclosure, remain underwater, unable to realize enough from the sale of the property to pay off the existing mortgage. For that reason, the relatively high number of foreclosures seen this year will probably remain with us for several years to come, and other underwater home owners, those who remain current on their mortgages, will remain frozen out of the housing market, thereby contributing to the continuing lack of inventory that plagues the market today.

Dick Howe has served as Register at the Middlesex North Registry of Deeds for more than 30 years.  His periodic thoughtful commentaries on   Massachusetts real estate market and foreclosure trends, have been a regular and welcome feature in REBA News.  He has also been a panelist at REBA’s twice-yearly conferences. Dick has also served as president of the Massachusetts Registers and Assistant Registers of Deeds Association  Dick can be reached by email at Richard.howe@sec.state.ma.us.

Tuesday, October 18, 2016

Municipal Modernization Act a Smorgasbord of Changes on Environment and Land Use


By Olympia Bowker

On August 9, 2016 Governor Baker approved HB 4565, “An Act Modernizing Municipal Finance and Government,” signing into law what is now Chapter 218 of the Acts of 2016. This newly enacted legislation tweaks, modifies, and streamlines several existing statutes governing cities and towns.

The statutes amended are many and varied, modifications that real estate attorneys and other professionals and their clients should know about. Here are select features of HB 4565, (“MMA”) with a focus on changes in municipal environmental and land use laws.

Local Agricultural Commissions are modified by three separate sections of the MMA. Section 23 of the MMA modified G.L. c 40 by adding § 8(L), which gives municipalities the explicit authority to establish a municipal agricultural commission, and further outlines the authority of such a commission. Section 215 of the MMA modified G.L. 111 § 31 to accommodate the existence of any subsequently created municipal agricultural commissions. Finally, Section 243 of the MMA garners the same authority established in G.L. c. 40 for new municipal agricultural commissions, to ones that predated the legislation.

Municipal Procurements are affected by sections 2-4, and 6-12 of the MMA. These changes increase the dollar threshold for contracts requiring less than full competitive bidding. Sections 2-4 of the MMA alter G.L. 30 § 39M by replacing subsection (a) with a new language that mandates all public construction valued at less than $10,000 be obtained through the sound business practices defined in G.L. c. 30B §2. In addition, contracts for construction that are above $10,000 must be awarded to the lowest eligible responsible bidder. The new § 39M  (a) also includes specifics regarding notice requirements, and blanket contracts.

Sections 6-12 of the MMA also alter the dollar threshold for contracts. G.L. 30 § 4 is modified so procurement for a supply or service for between $10,000 and $50,000 needs at least three written quotes from providers.

Prior to the MMA, under G.L. c. 30B § 5 (which governs competitive sealed bidding procedures) procurement contracts must have been valued at a minimum of $35,000 to fall under the listed procedures. The MMA altered this provision so the procurement contracts must be valued at least $50,000 to be required to conform to the competitive sealed bidding procedures set forth in G.L. c. 30B § 5. The MMA also altered G.L. c. 30B § 6, which now allows a chief procurement officer to enter into procurement contracts in the amount of $50,000 using competitive sealed proposals—a bump from the previous dollar threshold of $35,000.

A municipality’s ability to deny local licenses and permits to delinquent taxpayers has been altered by sections 37 and 38 of the MMA. Prior law allowed municipalities to deny local licenses and permits to taxpayers that had neglected or refused to pay taxes for at least one year. This new change allows municipalities to a mirror a “good standing” requirement, and removed the one year waiting period.

The MMA also alters G.L. c. 40 by adding a new § 60B. This new section allows adoption and implementation of a workforce housing special tax assessment (“WH-STA”) plan, to “encourage and facilitate incased development of middle income housing.” The new provision goes on to outline the applicability and prescribed parameters of such a plan.

The MMA also amends G.L. c. 59 § 5 by adding clause fifty-eighth, which mandates that taxes on property included in a WH-STA plan only be assessed to the portion of property not exempt under G.L. c. 40 § 60B.

The Municipal Affordable Housing Trust Fund Law, G.L. c 44 § 55C, is amended by the MMA so that G.L. c. 44B funds, from the Community Preservation Act (“CPA”), appropriated to local affordable housing trust funds are subject to the same restrictions as other CPA monies. In addition, at the end of each fiscal year the Municipal Affordable Housing Trust must ensure that all uses of 44B funds are reported to the community preservation committee so they are included in the CP-3 form to the department of revenue.

The newly enacted MMA also modifies Community Preservation Act surcharge exemptions in G.L. c. 44B § 3(e). In doing so, the MMA set a deadline for persons submitting applications for surcharge exemptions, which is the same deadline set under G.L. c. 59, §59.

G.L. c. 58, § 8C, which governs Affordable Housing and Real Estate Abatements, is modified to allow a municipality to establish an agreement regarding an abatement of up to 75% of the outstanding real estate tax obligations and up to 100% of the outstanding interest and costs on the sites.

The MMA imposes some interesting changes to G.L. c. 61A. The MMA created G.L. c. 61A, § 2A, which allows installation and operation of renewable energy on c. 61A land. However, there are several caveats for the location of the energy production, the amount of energy that can be produced, and the application of the energy produced.

In addition, G.L. c. 61A, § 13 was amended regarding the application of roll-back taxes, so they will now apply to agricultural land used or converted to renewable energy generation under the new § 2A.

The MMA also amends Section 276 of Chapter 165 of the Acts of 2014, to extend a special exemption from the annual gross sales requirement for cranberry bogs from 2017, to 2020. Essentially, the cranberry bog owners don’t have to meet minimum requirements for crop production and sales to maintain the tax benefits of c. 61A.

The amended statutory provisions listed above are just a sample of the many changes created by the MMA—the complete text can be found at https://malegislature.gov/Bills/189/House/H4565. Not all provisions of the MMA are effective simultaneously, so landowners, developers, lenders, investors and of course their attorneys should ascertain the timelines associated with the most noteworthy amendments.

Olympia Bowker is of Counsel at McGregor & Legere, P.C. in Boston, and works on a variety of environmental, land use, and real estate issues. She  received her J.D. and Masters of Environmental Law and Policy from Vermont Law School, and was admitted to the Massachusetts bar in 2015. She can be contacted by email at obowker@mcgregorlaw.com

Thursday, October 6, 2016

Throw Back Thursday - Philip S. Lapatin - Recent Developments in Massachusetts Case Law


 
2015 REBA ANNUAL MEETING & CONFERENCE
 
MONDAY, NOVEMBER 2, 2015
 
Now in his 37th year at these meetings, Phil continues to draw a huge crowd with this session. His presentation on Recent Developments in Massachusetts Case Law is a must‐hear for any practicing real estate attorney. Phil is the 2008 recipient of the Association’s highest honor, the Richard B. Johnson Award.