BAD FAITH IN AN EASEMENT AGREEMENT RESULTS IN EQUITABLE RELIEF AND SOME HARSH WORDS

By Paul F. Alphen, Esquire

I don’t know Superior Court Judge Richard E Welch III, but it appears that he either called one of the defendants, or counsel for one of the defendants, dumber than “the dullest first year law student” in a case pertaining to the grant of an easement in exchange for a promise to convey a parcel of land. Notwithstanding the execution of what the court referred to as “..to put it charitably, not a well drafted legal document”, and the granting of an easement by the plaintiffs followed by the construction of a retaining wall on the plaintiffs’ land, the plaintiffs never received the parcel of land from the defendants. The Court ruled in favor of the plaintiffs and ordered that the retaining wall be removed, and in doing so started the decision off with these strong words:

“Even the dullest first year law student learns in the first year contracts class that one cannot legally obtain something of value in exchange for an empty promise. That same student also understands that a party to a contract must act in good faith and cannot intentionally undermine the value of the agreed upon bargain. One hopes that any ethical adult would understand these basic rules of fair dealing without attending a law school. Unfortunately, not all act in good faith. This is an example of bad faith dealing which constitutes a breach of contract….  After carefully considering all the credible evidence, it is rather easy to conclude that this case presents an example of a company utilizing bad faith when breaching a contract with one of its neighbors.” Nicoli v. Gooby Indus. Corp., No. 2014-1216 B, 2016 WL 4607900, at 1 (Mass. Super. Sept. 2, 2016)

Ouch.

 

Paul F. Alphen, Esquire

Alphen& Santos, P.C.

Westford, MA

Defenseless, In the Gathering Storm

By Robert M. Ruzzo

Sarah Connor: “What did he say?”

Gas Station Attendant: “He said there is a storm coming in.”

Sarah Connor: “I know.”

Closing scene from “The Terminator” Orion Pictures, 1984

It’s time to connect some not altogether random thoughts as the haze of summer recedes.

Summertime, when the living was easy, this year also entailed: the death throes of the municipal planning defense doctrine, the expiration of zoning reform efforts in the state Senate and the demise of proposed housing production legislation launched through the efforts of the Massachusetts Housing Partnership (“MHP”) and carried forward by a number of housing advocacy groups.

What could it all mean?

Summer had not yet technically begun when the Appeals Court officially pulled the plug on the attempt to assert a “municipal planning defense” in order to deny a Comprehensive Permit application filed under Chapter 40B (the Commonwealth’s “Affordable Housing Law”) in Eisai v. Housing Appeals Committee (“HAC”).

After years of largely lying dormant since its first pronouncement in the Harbor Glen decision in 1982 (“Harbor Glen”), the  planning defense sprang back to life in Stuborn Ltd. P’ship v. Barnstable Bd. Of Appeals (“Stuborn II”) and even enjoyed a short lived day in the sun in 2009, when the 28 Clay Street v. Middleborough decision applied the defense in a land use setting far less exotic than either Harbor Glen (750 acre former military base) or Stuborn II (waterfront property).

While admittedly arcane, the municipal planning defense afforded its fans the promise of a “different path”- a means of achieving the directional goals of the Affordable Housing Law while injecting a degree of local control consistent with the public expectations of a home rule state.

Hopes (Fears?) for a broader application of the doctrine were dashed by two HAC decisions in 2014.  It was clear from the these two decisions that the HAC had come not to praise the municipal planning defense, but to bury it.  The Appeals Court, bound by the deferential standard of review for admistrative law appeals, had little choice but to follow suit.  As an added bonus, the unusual procedural posture of the Eisai case introduced a further complication to the already byzantine world of standing under Chapter 40B, but let’s save that tale for another day(s).

Andover’s planning efforts, which were the subject of the Eisai decision, met with what seemed to be a particularly harsh fate at the hands of the HAC.  While Andover was below the 10% Subsidized Housing Inventory threshold at the time of the permit application, it had at one time been above that magical number, although the HAC concluded that this was not as a “result of the town’s planning efforts” but instead despite Andover’s master plan and affordable housing plan.  A pretty neat trick, to say the least.

Dismissing the town’s well documented planning work and “longstanding efforts to preserve” the site and the area in question for commercial and industrial uses, the Court affirmed a Superior Court decision to let stand a HAC determination that the last vacant lot within a commercial subdivision should become a housing development.  This was at least in part because the Andover zoning board could not “point to possible foregone employment associated with future businesses that might be reluctant to locate in a subdivision whose future is uncertain.”

A cynic might protest that the best defense for a municipality under this line of thinking would be to poorly propose and half-heartedly market such commercial zones, and thereby preserve the ability to claim that any incursion into a commercial area jeopardized the coherence of the planning exercise as a whole.

Tellingly, the Appeals Court echoed the HAC’s complaint that a “major shortcoming” of Andover’s planning efforts was the fact that “multifamily housing is not permitted as of right anywhere in the town.”

Which shifts the focus back to Beacon Hill and competing efforts to address our distressingly high housing costs in Massachusetts via legislation.  The Senate’s efforts to enact zoning reform advanced one step further than in the last legislative session.  In 2014, a similar bill was reported out of committee favorably.  Before the expiration of this year’s formal session, zoning reform legislation that had been revised substantially to address some (but far from all) criticisms of real estate industry groups was actually passed by the upper chamber.

Nonetheless, at the end of the (legislative) day, we collectively remained in the same position that we were in two years prior: in a low interest rate, high demand, overheated housing market, with a fundamental zoning law incapable of producing new units in sufficient numbers and devoid of any meaningful link between planning and zoning.  Our ersatz solution, the Affordable Housing Law, becomes increasingly overtaxed, as it is called upon to create more market rate housing than it was ever designed to produce.

A storm is coming in, indeed.

While it is always difficult to predict the future of such things, the proponents of the Senate’s zoning reform legislation certainly have no reason to feel disheartened.  They will most assuredly be back in force when a new legislature convenes in January.  Some type of comprehensive zoning legislation is inching ever closer to reality.  Fortune favors the prepared mind.

Also returning to the hearing rooms next session will be housing advocates who, building upon the foundation of a research paper published by MHP some two years ago, advanced legislation that would have, among other things, required every municipality to have a certain percentage of its land area zoned for multi-family housing.

Is there any sign of potential progress?  Any hope for the elusive common ground?

Well, ironically the aforementioned provision requiring as of right multi-family zoning is the very type of provision that, had it been in effect in Andover at the time of the HAC’s initial decision, may have (indeed should have) allowed Andover’s assertion of the municipal planning defense to pass muster.

So there’s always hope… even for the municipal planning defense.

This article was written by Robert Ruzzo, Senior Counsel in the Boston office of Holland & Knight LLP, and it will appear in an upcoming issue of REBA News.  Bob can be contacted by email at robert.ruzzo@hklaw.com.

ALARMING SCAMS TARGETING REAL ESTATE LAWYERS

By: Noel M. DiCarlo

To hackers, we are all walking around with a bullseye on our back.  It’s that plain and simple.  Real estate lawyers, particularly conveyancers, transfer large amounts of money on a daily basis, and sometimes operate with sub-par and outdated cyber security systems.  If you and your clients are the target of any of these hackers and scam artists, you could face losses of six figures, or more.

The days of the obvious scam emails from a foreign prince (usually from Nigeria!) seeking your aid in securing his rightful legacy have long passed.  Today’s scammers are far more sophisticated and savvy.  The three most common scams are: the Compromised Wire Instruction Scam, the Counterfeit Check Scam, and the Forged IOLTA Check Scam.

Compromised Wire Instructions

The most prevalent and alarming scam targeting real estate lawyers  involves compromised wire instructions, also known as the Business Email Compromise (BEC) or the “Man in the Email Scam”.  The FBI has estimated the losses from these scams at over $2 billion in 2015.

In this scenario, you receive emailed wire instructions from the seller.  The deed goes on record, and you wire the funds pursuant to the wire instructions emailed to you.  The seller then calls looking for her sale proceeds that have not yet hit her account, despite the fact that they left yours.  As it turns out, the wire instructions you received were not for the sellers account.  The message came from an email address that was very similar to the seller’s address, but you would have to be looking very closely to realize that it was slightly different.   There are of course many variations of the same theme.  Here, the hackers targeting real estate lawyers, hack into your email account and monitor your account for a period of time tracking a transaction that involves a transfer of money.  At the moment in the deal that wire instructions are requested, the hacker makes his move and provides false instructions.  If the wire instructions were already sent by the correct party, the hacker may wait some time then send a subsequent email acting as the party stating that they actually want to change their previous email instructions and wire the funds to a different account. Once the money leaves your account, the funds are lost and the bank may not liable because it merely followed your instructions. 

Hackers particularly like to strike on the Friday before a long weekend, at the end of the month, or the days before a holiday – all times when they know that conveyancers are overloaded, busy and may overlook small details.

Here are some red flags you should look out for:

1.       Wire requests and instructions received on a Friday, especially a Friday before a long weekend, or the day before a holiday;

2.       Any revisions to wire instructions previously provided;

3.       Wires to foreign countries;

4.       Changes in the email addresses or the look of an email from prior email messages;

5.       A sense of urgency by the requestor or beneficiary.

Counterfeit Check Scam

In the counterfeit check scam, a new client contacts your office seeking representation.  You may even have several telephone calls with the would-be client, and then proceed to send over an engagement agreement.  It is important to note that these scammers are incredibly informed on the would-be deal. They can be very convincing.  They will then send you a seemingly legitimate bank cashier’s check for a retainer.  You deposit the check into your IOLTA account. Shortly thereafter, the client contacts you and tells you that the matter is resolved or that they no longer require representation.  They instruct you to deduct any amount for legal fees accrued and to wire the remainder back to them. You follow the client’s instructions and two to three days later, your bank tells you that the check was counterfeit and that you are responsible for the shortfall. Some banks make “funds immediately available” as an accommodation to conveyancer clients, but it is important to understand that this is a “provisional credit” only.  If the check does not clear (which can sometimes take up to even 10 days), the bank will retract the credit.  Again, your bank is not liable because they followed your wire instructions.

Forged IOLTA Check Scam

Think of how many IOLTA checks you circulate on a daily basis and how many municipalities, organizations, and people have access to those checks. The forged IOLTA check scam, like the previous scam, involves very good counterfeit checks.  These checks are so artfully forged, even the experts may have a difficult time catching the forgery on its face.   The scammer will obtain the account and routing number from your check or wire instructions and then create a fake check payable to “cash”. 

There are more than these three scams lurking around, such as malware that makes dummy websites nearly identical to bank sites in order to steal your log-in information.  All these scams however, have one thing in common: they want to steal from you and your client.  Conveyancers beware.

Noel Di Carlo is a Partner at Warshaw, Di Carlo & Associates, PC, where she concentrates her practice in real estate and personal planning.  She also serves on the REBA Board of Directors.  Noel can be reached at ndicarlo@warshawlaw.com.

www.warshawlaw.com

http://www.warshawdicarlo.com/our-team/meet-our-team/noel-m-di-carlo