Wednesday, September 25, 2024

Answers to Frequently Asked Questions about the New Accessory Dwelling Unit (ADU) Zoning Legislation

 Michael Pill

Question: Does an ADU proponent have to wait until a local ADU


bylaw or ordinance is established by the local municipality?

Answer: No. G.L. c. 40A, § 3(11) (enacted by 2024 Mass. Acts c. 150 § 8, effective Feb. 2, 2025) is a zoning exemption allowing one ADU by right “in a single-family residential zoning district” which “may be subject to reasonable regulations, including, but not limited to” the following:

 

(1)     “310 CMR 15.000 et seq., if applicable” (i.e., Title 5 septic system regulations),

(2)     “site plan review,” by planning board, which can impose reasonable conditions on a use by right

(3)     “regulations concerning dimensional setbacks and the bulk and height of structures” and

(4)     “may be subject to restrictions and prohibitions on short-term rental, as defined in" G.L. c. 64G, § 1.

Question: What if the local municipality drags their feet in creating a local bylaw/ordinance?

Answer: One should apply for a building permit on February 2, 2025 or as soon thereafter as possible. If the municipality has not enacted a site plan review requirement or other restrictions, don’t wait for it to do so.

Question: Can a local building department deny a building permit for an Accessory Dwelling Unit if it meets the criteria of the state law?

Answer: No, unless local zoning has been amended to require site plan review, or “impose reasonable conditions,” or both, and the applicant has not satisfied those requirements.

Question: What is the process for appealing a denial of the ADU building permit application?

Answer:  G.L. c. 40A, § 8 authorizes an appeal to the “special permit granting authority” defined by G.L. c. 40A, § 1A as “the board of selectmen, city council, board of appeals, planning board, or zoning administrators as designated by zoning ordinance or by-law for the issuance of special permits.” G.L. c. 40A, § 15 requires that the appeal “shall be taken within thirty days from the date of” the permit denial.

Question: Can a municipality pass a moratorium on ADUs?  If so for how long and for what reason?

Answer: Municipalities have six months (until Feb. 2, 2025) to amend local zoning. A municipality can enact a moratorium by claiming it needs more time to develop and adopt local ADU zoning. If a municipality enacts a moratorium, but fails actively to develop zoning amendments, the moratorium is subject to judicial challenge as a stalling tactic.

One reason for seeking to obtain a building permit as soon as possible after the G.L. c. 40A, § 3(11) ADU zoning exemption goes into effect on February 2, 2025 is that G.L. c. 40A, § 6 provides: “[e]xcept as hereinafter provided, a zoning ordinance or by-law shall not apply to structures or uses lawfully in existence or lawfully begun, or to a building or special permit issued before the first publication of notice of the public hearing on such ordinance or by-law required by” G.L. c. 40A, § 5.”

In other words, if one applies for and is granted a building permit for an ADU before notice of a public hearing for a zoning amendment is published, the amendment does not apply to that building permit.

Begin construction promptly; do not let the building permit expire. That way, in addition to having “a building…permit issued,” one also will have a structure “lawfully begun,” providing additional protection under G.L. c. 40A, § 6.

Question: If you meet the dimensional setbacks of the subject zoning district as they pertain to accessory structures with the placement of the ADU, is there any reason the municipality should be allowed to place more stringent dimensional controls on the ADU's location?

Answer. The answer to this question depends on the language of a particular local zoning ordinance or bylaw, and on the facts of a particular case.

G.L. c. 40A, § 3(11) provides “that the use of land or structures for such accessory dwelling unit under this paragraph may be subject to reasonable regulations, including, but not limited to, 310 CMR 15.000 et seq., if applicable, site plan review, regulations concerning dimensional setbacks and the bulk and height of structures….”

Whether a local zoning limitation on ADUs is “reasonable” requires analysis of that provision to determine whether it can be invalidated on its face or challenged based on its application to the facts of a specific case. Court cases decided under other previously enacted zoning exemptions in G.L. c. 40A, § 3 can be applied by analogy for litigation challenging municipal zoning limiting ADUs.

Question: What does it mean when the state zoning act (G.L. c. 40A, § 1A definition of “Accessory dwelling unit” as amended by 2024 Mass. Acts, c. 150, § 7) says that an ADU is “is subject to such additional restrictions as may be imposed by a municipality, including but not limited to additional size restrictions”?

Answer: The newly enacted G.L. c. 40A, § 3(11) ADU zoning exemption opens with the mandate that “No zoning ordinance or by-law shall prohibit, unreasonably restrict or require a special permit or other discretionary zoning approval for the use of land or structures for a single accessory dwelling unit…,”

The above quoted zoning exemption should take precedence over anything to the contrary in the ADU definition left over from prior legislation.

But 2024 Mass. Acts, c. 150, § 7 reenacted verbatim most of the old definition of “Accessory dwelling unit” in G.L. c. 40A, § 1A, changing only the last portion dealing with owner occupancy and short-term rentals, as follows (amended portions of the definition are in bold face type; line breaks added):

Prior definition in G.L. c. 40A, § 1A, struck out by 2024 Mass. Acts, c. 150, § 7 (am in bold face type): “Accessory dwelling unit”, a self-contained housing unit, inclusive of sleeping, cooking and sanitary facilities on the same lot as a principal dwelling, subject to otherwise applicable dimensional and parking requirements, that:

(i) maintains a separate entrance, either directly from the outside or through an entry hall or corridor shared with the principal dwelling sufficient to meet the requirements of the state building code for safe egress;

(ii) is not larger in floor area than 1/2 the floor area of the principal dwelling or 900 square feet, whichever is smaller; and

(iii) is subject to such additional restrictions as may be imposed by a municipality, including but not limited to additional size restrictions,

owner-occupancy requirements and restrictions or prohibitions on short-term rental of accessory dwelling units.

New definition inserted by 2024 Mass. Acts, c. 150, § 7: “Accessory dwelling unit”, a self-contained housing unit, inclusive of sleeping, cooking and sanitary facilities on the same lot as a principal dwelling, subject to otherwise applicable dimensional and parking requirements, that:

 

(i) maintains a separate entrance, either directly from the outside or through an entry hall or corridor shared with the principal dwelling sufficient to meet the requirements of the state building code for safe egress;

(ii) is not larger in gross floor area than one-half the gross floor area of the principal dwelling or 900 square feet, whichever is smaller; and

(iii) is subject to such additional restrictions as may be imposed by a municipality, including, but not limited to, additional size restrictions

and restrictions or prohibitions on short-term rental, as defined in section 1 of chapter 64G; provided, however, that no municipality shall unreasonably restrict the creation or rental of an accessory dwelling unit that is not a short-term rental.


Question: Is this development approach available immediately or is there a waiting period for submitting applications?

Answer: A building permit application (or site plan review application if local zoning has been amended to impose such a requirement) for an ADU can be submitted on or after Feb. 2, 2025, which is the effective date of the G.L. c. 40A, § 3(11) ADU zoning exemption under 2024 Mass. Acts, c. 150, § 142.

Question: Title 5 - In the event of a two-bed ADU, is the local upgrade approval available to applicants, and if so, are you upgrading based on the number of new bedrooms or do you have to design a new system that's designed for the minimum of three bedrooms under title 5?

Answer: A property without access to a public sewer must be served by an on-site sewage disposal system (i.e., a septic system) which should have been designed to serve at least the number of existing bedrooms on the property.

Expanding an existing septic system or adding a second septic system for an ADU will require the services of either a Registered Sanitarian (R.S.) or a Registered Professional Civil Engineer (P.E.). The design professional must make a site-specific evaluation that includes but may not be limited to the following factors: lot area and dimensions; presence of any jurisdictional areas under the Wetlands Protection Act and Regulations (G.L. c. 131, § 40 and 310 C.M.R. [Code of Mass. Regulations]  10.00) and any local wetlands bylaw; proximity of water supply wells on the locus or on abutting properties; size, age and condition of the existing septic system; groundwater elevation; and what type(s) of soils are present on the locus.

Local upgrade approvals for septic systems are governed by the following provisions in 310 C.M.R. 15.00, known as “The State Environmental Code, Title 5…”:

 

15.401: General Provisions

15.402: Use of Local Upgrade Approvals or Variances

15.403: Local Upgrade Approvals

15.404: Maximum Feasible Compliance - Approvals for Upgrades

15.405: Contents of Local Upgrade Approval

 

A “Local Upgrade Approval” is defined by 310 C.M.R. 15.002 as “An approval granted by the Approving Authority allowing the owner or operator of an existing system, including a nonconforming system, to perform an upgrade of that system to the maximum feasible extent, all in accordance with the provisions of 310 CMR 15.401 through 15.405.”

Local upgrade approvals are granted by the “Local Approving Authority” in each municipality, defined by 310 C.M.R. 15.002 as “The board of health or its authorized agent or an agent of a health district constituted pursuant to M.G.L. c. 111, § 27 acting on behalf of the applicable board of health.”

The citation in the quotation above is incorrect; it should cite G.L. c. 111, § 27A, which authorizes two or more municipalities to establish a regional health district, with professional staff serving all municipalities in the district.

Question: Public Utilities - can they come from the primary house or is there a direct connection from the street needed for each service for the new dwelling?

Answer: This requires a site-specific evaluation and determination for each type of utility serving the property (e.g., public water or private water supply well, public sewer, electric, natural gas or propane).

Question: Is there any reason that a single-family home with a detached accessory structure cannot be conveyed to two parties as a condominium?

Answer: No. A condominium is a form of ownership generally not regulated by zoning. If the ADU is to be a condominium unit or may be rented, there should be separate metering of utilities where feasible. This may be a factor in determining whether utility service should come from the primary house or have a separate connection from the street.

A partner with the Northampton firm of Green Miles Lipton LLP, and a REBA member for more than years, Michael concentrates in land use (zoning, subdivision control, wetlands, rural water supply and sewage disposal), real property rights and restrictions, attorney & surveyor malpractice; status of roads; real estate conveyancing & contract disputes; forest & agricultural land tax classification; agricultural law, and real estate development.  He is the author of Massachusetts Practice: Real Estate Law with Forms, Volumes 28, 28A & 28B (West Publications - 2017).  Michael can be contacted at mpill@verizon.net.

                                                                      

Wednesday, September 11, 2024

Free Anti-fraud Title Alert

The Massachusetts Registries of Deeds and Secretary of State offer a free title alert that


sends an auto-generated email each time a document is recorded affecting your real estate or in your name with the goal of minimizing title fraud or theft.  The service is free Sign up in each County or through the Secretary of State where you or family members own real estate

 


BARNSTABLE COUNTY: 

www.barnstabledeeds.org/consumer-notification-service

 

BERKSHIRE MIDDLE DISTRICT COUNTY:    

https://cns.masslandrecords.com

 

BERKSHIRE NORTH DISTRICT COUNTY: 

https://cns.masslandrecords.com

 

BERKSHIRE SOUTH DISTRICT COUNTY:  

https://cns.masslandrecords.com

 

BRISTOL NORTH DISTRICT COUNTY: 

www.tauntondeeds.com/home/bulletins/property-fraud-alert

 

BRISTOL FALL RIVER DISTRICT COUNTY

https://pfa.uslandrecords.com

 

BRISTOL SOUTH DISTRICT COUNTY 

https://pfa.uslandrecords.com

 

DUKES COUNTY: 

www.cns.masslandrecords.com

 

ESSEX SOUTH DISTRICT COUNTY: 

www.salemdeeds.com/AlertWebSite

 

ESSEX NORTH DISTRICT COUNTY: 

https://search.lawrencedeeds.com/ALIS/WW400R.HTM?WSIQTP=SY40DC

 

FRANKLIN COUNTY: 

https://cns.masslandrecords.com


HAMPDEN COUNTY: 

https://search.hampdendeeds.com/ALIS/WW400R.HTM?WSEMAD=&WSPWD=&WSHTNM=WW000R11CN&WSIQTP=SY40I

 

HAMPSHIRE COUNTY: 

https://cns.masslandrecords.com

 

MIDDLESEX SOUTH DISTRICT COUNTY: 

https://cns.masslandrecords.com

 

MIDDLESEX NORTH DISTRICT COUNTY: 

https://cns.masslandrecords.com

 

NANTUCKET COUNTY: 

Title Alert service not available.

 

NORFOLK COUNTY: 

www.norfolkdeeds.org/services/consumer-notification-service

 

PLYMOUTH COUNTY:    

www.plymouthdeeds.org/subscribe  

 

SUFFOLK COUNTY:    https://cns.masslandrecords.com

 

WORCESTER SOUTH DISTRICT COUNTY:   

https://cns.masslandrecords.com/

 

WORCESTER NORTH DISTRICT COUNTY:

www.fitchburgdeeds.com/ALIS/WW400R.HTM?WSIQTP=SY40DC


 

Thursday, September 5, 2024

10 Things to Know About the Registries of Deeds: Worcester County

The following is the second installment of a series of “10 Things to Know About the Registries of Deeds” presented by the REBA Registries Section.  This month’s installment is from Kathryn Toomey, Register of Deeds for Worcester County:  

1. Location, Location, Location: we have a newly remodeled


Registry. We are located in the Mercantile Center, Front Street, Worcester MA 01608.  We have a parking structure attached.

2. We have 4 closing rooms, and no reservations are required for use. Additionally, we have many public tables available in our large lobby areas for title examiners use – available on a first come, first serve basis.  

3. We have a large public space: the “Commonwealth Room”, which is available for use at no fee. This space holds up to 60 people comfortably. There is also a large screen TV for Zoom/Teams participation.

4. Our recorded land records are indexed back to 1961, and are unindexed from 1731-1961. Registered Land is indexed 1899-today. Our books have been moved to the archives in Boston, but we can have them brought to the Registry upon request. We have not published physical books since 2003.

5. We strongly encourage review of Registered Land documents prior to recording. Documents should be sent to Worcester.deeds@sec.state.ma.us (which is monitored by trained staff at all times). Though this review is not mandatory, we prefer it for staffing reasons and smoother recording, we offer it to make it easier, but you may skip it at your own peril.

6. We have recently launched e-recording of Registered Land, however cannot e-record for dual registered/recorded land documents. Again, review in advance of submission for e-recording in registered land is STRONGLY ENCOURAGED. It helps the flow of the recording clerk reviewing the certificate to complete electronic recording.

7. We record from 9:00 am to 4:00 pm Monday through Friday.

8. We have 4 Commissioners to Qualify on staff. Oaths are taken daily on the premises.

9. Since Covid Crisis we have maintained an average of 78% e-recording on recorded land; but WE LOVE IN PERSON VISITORS, so come on in!

10. Additional research tools available on our website include: surveyor indices (available on the home page), RR books, county records. Probate is available on Fitchburg Deeds site – we use the same indices. Probate/divorce indices are also available in book form for in person review. 


Thursday, August 15, 2024

Tenant’s Rights When Its Commercial Landlord Seeks Chapter 11 Protection

 

Andrew V. Tenzer

Financial distress persists in the commercial real estate market, raising the prospects that property owners and landlords could seek relief under chapter 11 of the Bankruptcy Code. The Bankruptcy Code contains numerous provisions that apply to commercial real property


leases — in Bankruptcy Code parlance, a lease of “nonresidential real property” — but only one provision relates specifically to unexpired leases of nonresidential real property where the lessor is in chapter 11. As a result, the Bankruptcy Code leaves open certain questions that arise in lessor chapter 11 cases, such as the tenant’s right to retain possession when the underlying property is sold and the impact of rejection by a debtor that is both a lessee and sublessor on the rights of the subtenant. This note summarizes those issues and their treatment in the courts, which has not been uniform or provided clear guidance to lessors and lessees.


Chapter 11 Options Generally

Virtually all commercial property leases contain a provision allowing the landlord to terminate upon a tenant bankruptcy; some leases contain a reciprocal provision benefitting the tenant. In neither case can the non-debtor party seek any remedy based on a default arising from the chapter 11 filing. The Bankruptcy Code renders such provisions unenforceable and until the landlord rejects the lease, the tenant is obligated to pay rent.

Most leases also provide that a security deposit remains the lessee’s property and that the lessee is entitled to its return when the lease expires (after any damages recoverable from the security deposit are paid). The landlord, therefore, should not be able to use the security deposit to pay the claims of its creditors.

As with any unexpired lease or executory contract, the Bankruptcy Code gives the bankrupt lessor three options for ultimately disposing of the lease. The landlord has the right to assume, assume and assign, or reject its lease with the tenant. Assumption is the lessor’s agreement to continue performing under the lease in exchange for retaining its rights. A landlord may opt to assume a lease that, for example, pays above-market rent or provides strategic benefits to its business. If the landlord wishes to assume (or assume and assign), the lease, it must first cure, or provide adequate assurance that it will promptly cure, all monetary defaults and any nonmonetary defaults that can be cured. The landlord also must provide adequate assurance that it will continue to perform under the lease. If the landlord wishes to assume and assign the lease to a third party, the assignee must provide the adequate assurance of future performance.


Lease Rejection and Section 365(h)

The more challenging issues arise, though, when the landlord rejects the lease. Rejection constitutes a breach and not a termination, but the tenant can treat the lease as terminated and vacate the premises if the breach would entitle it to terminate under applicable non-bankruptcy law. The tenant also would have the right to file a proof of claim for rejection damages.

Section 365(h) of the Bankruptcy Code gives the tenant another option. If the lease term has begun, then the tenant can retain its rights under the rejected lease (and rights in or appurtenant to the real property) for the entirety of the remining lease term plus any renewal or extension period to the extent such rights are enforceable under applicable non-bankruptcy law. The tenant also is entitled to its rights of use possession, quiet enjoyment, subletting, assignment, and hypothecation.

But Section 365(h) limits and conditions the tenant’s right to remain in possession. The tenant must continue to pay rent and other amounts owed under the rejected lease.  If the premises are in a shopping center and the lessee elects to remain in possession, the lessee must continue to abide by non-monetary restrictions on radius, location, use, exclusivity or tenant mix, as must the tenant’s successors, assigns or lenders. The tenant cannot file a proof of claim for rejection damages, seek specific performance or enforce any right against the debtor’s estate arising from nonperformance after the date of rejection. The tenant’s only right is to offset the value of any damage caused by the lessor’s nonperformance against its rent payments. The inability to enforce any rights means, for example, that the tenant cannot compel the landlord to make repairs or provide services.


Tenant’s Rights if Lessor Sells Property “Free And Clear”

Companies operating in chapter 11 often sell assets to raise cash to pay creditors. Section 363(f) of the Bankruptcy Code gives a debtor the right to sell assets of its bankruptcy estate “free and clear of any interest in property” if certain conditions are met. The Bankruptcy Code neither limits the phrase “interest in property” to liens nor defines the scope of those interests, but a tenant’s leasehold rights undoubtedly are an interest in property. 

The conditions for a free and clear sale include the situation where applicable non-bankruptcy law allows a sale free and clear of such a property interest. For example, in many jurisdictions a foreclosure sale to satisfy a senior mortgage terminates a subsequent lease recorded on the mortgaged property. Because such a foreclosure sale permits a transfer free and clear of the leases, a leasehold interest may be subject to the debtor’s rights to sell its property free and clear under Bankruptcy Code section 363(f). As a result, courts have had to determine whether a debtor-lessor can sell the underlying real estate “free and clear” and divest the tenant of its leasehold interest in the property and its right to remain possession.

In its much-discussed opinion in Precision Industries, Inc. v. Qualitech Steel SBQ (“Qualitech”), United States Court of Appeals for the Seventh Circuit held that a lease is an interest in property that can be extinguished in a free and clear sale of the underlying property under Section 363(f). Qualitech reversed a district court ruling which found that section 363(f) conflicted with the tenant’s right to remain in possession under Section 365(h) and there was no statutory basis for allowing the lessor to terminate the lessee’s right of possession by selling the property out from under it. The Seventh Circuit found no such statutory conflict. It determined that the where one of the criteria permitting a free and clear sale existed, the right to sell free and clear of “any interest” in property under section 363(f) was sufficiently broad to encompass a lessee’s possessory interest.

Qualitech found no conflict between Section 363(f) and Section 365(h). Nothing in Section 363(f)’s text subjected it to any limit Section 365(h) might impose. Further, section 365(h) applies only where the lessor rejects the lease but in Qualitech the debtor in the first instance sold the property without rejecting the lease. Section 365(h), therefore, applied to a set of circumstances that did not exist. Qualitech also notes that Section 363(e) of the Bankruptcy Code offers the tenant a remedy other than remaining in possession: the tenant can seek adequate protection of its leasehold interest.

The reaction to Qualitech has been mixed. A Ninth Circuit opinion concurred with Qualitech’s analysis that Sections 363(f) and 365(h) do not conflict but referred to it as the “minority approach.”The Fifth Circuit refused to issue a writ of mandamus to stay a sale of real property free and clear of a tenant’s leasehold because the sale satisfied the criteria of section 363(f), but criticized the bankruptcy court’s reliance on Qualitech as a “mistake” because of the Seventh Circuit’s “excessively broad proposition that sales under Section 363 override, and essentially render nugatory, the critical lessee protections against a debtor-lessor under Section 365(h).” A bankruptcy court in New York concluded that nothing in Section 365(h) mandates a contrary result where the debtor can sell free and clear, but that Section 363(f) will rarely permit a sale free and clear of a lessee’s appurtenant rights to the property and those rights will generally be enforceable against the buyer.

Qualitech also is not a case in which the lease was rejected.  Instead, the debtor moved to sell the property free and clear before any order had been entered as to assumption or rejection. Courts have often protected tenant’s rights under 365(h) to remain in possession under a rejected lease when assets are sold free and clear. For example, a Virginia bankruptcy court held that where a debtor, as tenant, assumed and assigned a prime lease in a 363 free and clear sale but, as sublessor, rejected its sublease, the subtenant retained its rights to possession under section 365(h). That decision relied, in part, on a Massachusetts bankruptcy court which ruled that “where the Debtor is rejecting the lease with [tenant], under its Liquidating Plan, [tenant] has, at its option, the right to remain in the premises in accordance with § 365(h). [Tenant] cannot be compelled to accept money for its rejected lease under § 363(f)(5) in view of the provisions of § 365(h).” Under the reasoning in these cases, the right to remain in possession set forth in section 365(h) survives rejection of a lease or sublease as part of a free and clear sale of the underlying real property under section 363(f).


Subtenant’s Rights if Sublessor Rejects Its Lease as Lessee

Section 365(h) also may create issues where a debtor that is both a lessee under a prime lease and a sublessor under a sublease rejects both agreements. Where the debtor, as sublessor, rejects just the sublease, the tenant could assert a right to remain in the premises under section 365(h). But where the debtor also rejects the prime lease for the same space and the prime lease is no longer in effect then, the Bankruptcy Code requires the debtor to “immediately surrender that nonresidential real property to the lessor.” This creates a situation where the debtor’s obligation to surrender the premises and the subtenant’s right to continue possession both apply. Various courts have addressed whether the subtenant’s right to possession continues after its sublessor rejects, as lessee, the prime lease with its landlord.

For example, in the chapter 11 case of the A&P supermarket chain, the bankruptcy court ruled that Section 365(h) does not give the subtenant a meaningful election to remain in its former subtenancy when the debtor rejects the prime lease prior to or simultaneously with rejection of the sublease. The debtor, as lessee, is required to surrender the premises under the rejected prime lease to its landlord, so the subtenant lacks any meaningful right to possession from a debtor that can no longer confer it. The court recognized that Section 365(h) allows the subtenant to assert it may have under applicable non-bankruptcy law against the landlord, such as a continued right to possession under common law, but continued possession under the sublease was not possible where the debtor no longer had a possessory interest to convey.

Other courts find that because Section 365(h) allows a lessee enforce its rights “to the extent that such rights are enforceable under applicable non-bankruptcy law,” the debtor’s rejection of a prime lease does not determine the outcome. Instead, any continued right of possession by the sublessee turns entirely on state law. For example, the Fifth Circuit has held that where a debtor-tenant has not timely decided whether to assume the lease and it is deemed rejected as a matter of law, that lease is merely breached, not terminated, and does not affect an implied forfeiture of the rights of third parties to the lease. Other courts have looked entirely to the sublessee’s rights under state law to determine the continued viability of the sublease. The sublease may still exist (when the prime lease has been terminated) but third party rights therein survive only if mentioned explicitly therein and/or to the extent recognized under pertinent non-bankruptcy law.


Conclusion

While the Bankruptcy Code and reported cases don’t provide definitive guidance on outcomes, tenants can best protect themselves by filing pleadings and carefully monitoring activity in their lessors’ bankruptcy case. The tenant should consider hiring counsel and enter an appearance to ensure that it receives notices of all motions and other pleadings. If the premises are subject to a free and clear sale, the tenant can negotiate with the debtor and buyer for adequate protection of its leasehold via the right to remain. If those negotiations are not productive, the tenant can seek relief with the bankruptcy court. Where the issue is protecting a subtenant under a rejected prime lease, the tenant may have to rely on its rights under applicable state law to protect its possessory interest.

Andrew Tenzer is a partner in Nutter’s Corporate Department and a member of the Bankruptcy, Restructuring and Workout practice group. Andrew focuses his practice on advising lenders, troubled companies, and buyers and sellers of distressed assets in chapter 11 reorganization and in out-of-court and cross-border restructurings. In addition, he frequently handles non-insolvency related syndicated financings, securitizations, and structured finance transactions. Andrew has extensive experience serving as a trusted legal adviser to domestic and multinational companies in a wide range of industries, including financial services, technology, manufacturing, energy, and retailing. Andrew’s email is atenzer@nutter.com.

Tuesday, August 13, 2024

Affordable Homes Act Brings Big Changes to 40A

Daniel P. Dain and Jesse D. Schomer

The Governor’s press release touting the signing of the Affordable Homes Act on August 6th called it “the most ambitious legislation in Massachusetts history to tackle the state’s greatest challenge – housing costs.” The press


release describes the “historic legislation” as authorizing “$5.16 billion in spending over the next five years along with 49 policy initiatives to counter rising housing costs caused by high demand and limited supply.” This statement is an important acknowledgement that rising housing costs are tied to limitations on the supply of housing, and, by implication, barriers to new housing production. Among the 49 policy initiatives contained in the new law are changes to the state’s Zoning Act, General Law chapter 40A (which applies to 350 municipalities in Massachusetts, excluding Boston). The change to the Zoning Act getting the most attention is a provision making accessory dwelling units allowed as of right, though subject to reasonable dimensional restrictions, in all single-family residential districts. But three other changes, while seemingly mundane, also promise to open up more lots for residential development and limit the ability of neighbors to make housing production more unpredictable and costly through long drawn-out appeals. These changes are to the merger doctrine, to the ability of courts to impose a bond on a plaintiff as a condition of proceeding with an appeal of the grant of a zoning entitlement, and to the burden on plaintiff project-opponents to establish an injury (prove standing) caused by the decision being challenged. (There are two other material changes to 40A that do not address housing production – new rules for approval of outdoor restaurant table service and for the adoption of preferences for veterans in inclusionary zoning – that this article does not discuss.)

For housing advocates, more liberal allowance of accessory dwelling units (sometimes called granny flats) has long been a priority. Recent surveys showed that even in those municipalities that permitted accessory dwelling units, they were often subject to restrictions and limitations that made their production unpractical – such as the need for discretionary special permits, parking and dimensional requirements, and requirements that the ADU be occupied only by family members related by blood. As a result, few such units have ever been built in Massachusetts – certainly not enough to make a dent in housing prices.

The new rules in the Affordable Homes Act seek to change that balance by allowing one accessory dwelling unit (which may not exceed half the floor area of the principal dwelling or 900 square feet, whichever is smaller) as of right on all lots in single-family residential districts (outside of Boston), subject only to “reasonable regulations”, including site plan review, dimensional requirements, and restrictions on short-term rentals. Municipalities may not require more than one parking space per ADU in most locations and they may not require any additional parking where the ADU is located within a half mile of a transit station. The statute now also provides for a special permit to allow more than one ADU on a single lot.

This is a significant breakthrough in advancing housing production, but two considerations counsel caution. First, the allowance of site plan review for ADUs, as was also allowed for MBTA Communities projects, is disappointing. Site plan review is not governed by the Zoning Act, the process varies widely across municipalities, and the application typically requires that those proposing an ADU retain an engineer, architect, attorney, and/or other consultants. And while municipalities generally may not deny approval of a site plan, reviewing authorities do have broad discretion in their imposition of conditions, and local site plan review procedures frequently do not impose mandatory time limitations. This is a lot of time, expense, and process for a single unit that cannot exceed 900 square feet. Second, due to historic down-zonings across the Commonwealth, many homeowners who might be interested in adding an ADU currently live on a lot that is undersized or in a house that is at or near its FAR limit, and thus these proponents would need to seek a Section 6 finding or variance for a proposed ADU, further burdening the process. Thus, we will have to wait and see whether this change in rules will unlock enough new production as to make a material difference in the housing market.

Another long-frustration for housing advocates is how so many undeveloped lots around the Commonwealth have been rendered unbuildable through judicially-created merger doctrine case law that developed based on the premise that over time, lawfully pre-existing non-conformities, created through municipal down-zoning efforts to discourage density in housing, should be eliminated by requiring undeveloped parcels to “merge” with adjacent non-conforming developed parcels where both are jointly owned and the merger would eliminate or ameliorate the non-conformity. While the new language in the Zoning Act leaves the merger doctrine in place, it carves out an exception for lots in zoning districts that allow single-family residential use that contain at least 10,000 square feet of area and 75 feet of frontage. Houses built on these lots may not be used as a seasonal home or short-term rental, may not exceed 1,850 square feet of “heated living area”, and – curiously – must have at least three bedrooms.

On its face, this provision seems intended to promote “missing middle” housing and starter homes. However, the restriction of the exemption to only small lots limits the reach of this provision, and, in a Commonwealth with high construction and land-acquisition costs, the restriction to small year-round homes (but with at least three bedrooms) may make construction on lots saved from merger financially unviable.

Changes to the provision of the Zoning Act that governs zoning appeals (Section 17) are meant to address the ability of plaintiffs with dubious claims to standing or unrealistic chances of overturning a decision on the merits to nevertheless tie up development through protracted litigation that add to the cost and uncertainty of development (and, when these costs are added to a pro forma, kill a certain percentage of proposed projects even before the litigation concludes). In 2020, the General Court amended section 17 to add a bond provision of up to $50,000 “to secure payment of costs.” That provision was then rendered largely ineffective by the Supreme Judicial Court in the 2022 case of Marengi v. 6 Forest Road, LLC, which mostly limited the “costs” to be secured by the bond to taxable litigation costs (which are usually modest and exclude attorneys’ fees, carrying/delay costs, and lost profits) and conditioned the imposition of a bond on a finding of “bad faith or malice,” a nearly impossible standard to prove, particularly at the outset of a case. The Affordable Homes Act’s changes to the bond provision effectively overrule much of the holding in Marengi, by adding the language that such a bond is to “secure the payment of and to indemnify and reimburse damages and costs and expenses incurred in such an action…” and that such a bond is not conditioned on a finding of bad faith or malice. The new language is closer to the bond provision under St. 1956, c. 665, § 11, applicable in Boston, which may provide guidance on interpreting the new language in chapter 40A. See the recent Shoucair v. Board of Appeal of Boston. The revised provision also increased the bond cap to $250,000.

The most interesting language here are the added words “indemnify and reimburse.” One of the arguments for limiting bonds to taxable costs was that, in most cases, those are the only post-litigation expenses that a defendant can recover against a plaintiff absent a counterclaim (which are rarely brought in zoning litigation because of the Anti-SLAPP statute) – the bond amount should not be more than a defendant is able to recover post-disposition, so the argument went in part. But the new language might promise more post-disposition. The bond amount is meant to indemnify and reimburse – indicating it will be released in full to the defendant upon an outcome successful to the defendant – in an amount that would include “damages” from the litigation and other “expenses” beyond what was already encompassed within “costs”, probably including delay/carrying costs, such as property taxes, property insurance, and interest on construction loans incurred while a project is on hold during litigation. The full scope of this new bond provision will probably have to wait for further court guidance.

Finally, the right to appeal a zoning entitlement under Section 17 has always been limited to “person[s] aggrieved” (those with standing) by a local decision, the contours of which have been developed by five decades of Zoning Act jurisprudence. The insertion of a single new sentence in the first paragraph of section 17 would appear, on quick glance, as a simple summary of that existing standing jurisprudence – plaintiffs have the burden to prove a special and different injury by credible evidence. But a closer examination of the language indicates a change that is much more far reaching. Let’s parse those parts of the new language that constitute changes or clarifications to existing case law. First, the standing burden falls on “each plaintiff.” This is a change – currently, if any one plaintiff has standing, then all named plaintiffs have standing. Why is this important if you only need one plaintiff to prosecute a zoning appeal? Because the court-made rule makes settlement of zoning appeals with multiple plaintiffs much harder if every plaintiff, even those with little claim to standing (who, in many zoning appeals, are funding the litigation), has to approve a settlement. Thus, this simple change to the rule makes settlement of zoning appeals easier. Second, the burden on a plaintiff to “sufficiently allege and … plausibly demonstrate” an injury is irrespective of the plaintiff being a party-in-interest under section 11 of the Zoning Act. Before, any plaintiffs who were entitled to a hearing notice enjoyed a rebuttable presumption of standing (this comes from Marotta v. Bd. of Appeals of Revere), which met their pleading burden, and imposed a burden of production on the defendant project-proponent. The new language appears to eliminate the presumption of standing for abutters, abutters to abutters, and those who live directly across a street from the subject lot. Third, standing must be based on a “measurable injury.” This language tracks from the Supreme Judicial Court’s 2011 decision in Kenner v. Zoning Board of Appeals of Chatham that standing requires demonstration of an actual injury, not just impact (e.g., simply hearing noise or seeing a building versus actually suffering an injury from such noise or sight). Finally, the language requires that the injury will “likely flow” from the decision. To date, courts have been inconsistent in requiring that a plaintiff demonstrate causation or nexus between the decision (as opposed to the building) and the alleged injury. For example, if the zoning relief is only to parking requirements, must the injury be limited to parking? The new language indicates yes, there must be a nexus, and the nexus must be “likely,” not merely plausible. These all appear to be significant changes or at least significant clarifications to existing standing law, and should help eliminate appeals from those with more tenuous claims to standing.

There currently are few impediments to a project-opponent tying proposed new housing up in court for years. The changes to the Zoning Act seek a rebalance, preserving the right to appeal to those who will suffer a demonstrable injury and with a valid argument on the merits, while more quickly screening out the frivolous and nuisance cases.

The authors respectively head up the litigation and affordable housing development practices at Dain, Torpy, Le Ray, Wiest & Garner. Dain Torpy also worked with NAIOP Massachusetts: The Commercial Real Estate Development Association to help draft the language that made it into the final version of the changes to G.L. c. 40A, § 17 described in this article.

Dain Torpy is a REBA Law Firm Sponsor.

Co-chair of the Association’s Affordable Housing Section, Jesse’s legal practice focuses on Massachusetts real estate development, land use, and zoning/permitting. He primarily represents developers, entrepreneurs, and landowners in the context of residential and commercial land use permitting, development, and construction. Jesse can be contacted at jschomer@daintorpy.com.

A co-founder what is today, Dain, Torpy, Le Ray, Wiest & Garner, PC, Dan Dain Co-chairs the Association’s Litigation Section. He is also president and chairman of the firm which the premier boutique law firm for the commercial real estate industry in Massachusetts. He has authored A History of Boston, published in 2023. Dan’s email is ddain@daintorpy.com.



Wednesday, August 7, 2024

Massachusetts Eviction Record Sealing Bill Signed into Law

 Richard D. Vetstein

After years of lobbying, tenant advocates finally got a long-sought after
eviction sealing measure through the Legislature and signed by Governor Healey as part of the recently passed Affordable Homes Act. Governor Healey signed the measure into law on August 6th. Under the bill, tenants will have the right to seal eviction records from public view (and landlord screening efforts) and get them removed from their credit reports. Additionally, credit reporting agencies will face strict rules and stiff penalties for disclosing sealed eviction records, which may put them out of the business of tenant screening altogether. Advocates say this will help tenants obtain housing without the chilling effect of an eviction record typically caused by economic hardship. Housing providers counter that eviction records are a crucial screening tool for landlords, and without it they may ask prospective renters to show a higher credit score or income in order to qualify. The key with this new measure is that in the vast majority of cases, the burden is on the tenant to initiate the court record sealing process – if they don’t do that, then the record will remain publicly available. But if they do file a petition to seal, it will typically be a very quick and easy process to get the record seal and removed from credit reports, and in many cases, the landlord will not even realize that it happened.

With a 270-day waiting period, the law goes into effect in May of 2025. There are different court record sealing procedures for different types of eviction cases, outlined below, and the housing and district courts will need to create new forms under this law.

No Fault Cases

No-fault cases are defined as evictions when a landlord terminates a tenancy at will or after a lease expires where no unpaid rent or material violation of a lease provision is claimed by the landlord. No fault cases also include an “action brought after termination of a tenancy for economic, business or other reasons not constituting a violation of the terms of the tenancy.” This situation would typically involve a decision by the landlord to sell the leased property. 

In a no-fault case, a tenant may file a petition to seal the eviction record, with notice provided to the landlord. If no objection is filed within seven days of filing the petition, the housing or district court will approve the petition administratively without a hearing. It will be interesting to see how the courts verify whether the landlord has been properly notified, if at all. My sense is that enforcement here will be quite lax. 

Non-Payment of Rent Cases

Eviction sealing is available in non-payment of rent cases where a tenant has a clean eviction record for the last four years. The tenant must certify that the nonpayment of rent was due to economic hardship which rendered them unable to satisfy the judgment. Notice of record sealing must be provided to the landlord, and an objection must be filed within seven days of the petition filing. If no objection is made, the court will presumptively order sealing of the record. If an objection is filed, the court must conduct a hearing to determine whether the nonpayment is due to economic hardship and may require the tenant to file a financial statement. 

In cases where the tenant has paid up under a payment agreement or judgment, landlords are obligated to file with the court a satisfaction of judgment within 14 days of full payment. If the landlord doesn’t file the satisfaction, the tenant may petition for the entry of a satisfaction of judgment. Upon entry of the satisfaction, a tenant may petition immediately for sealing of the court record under the process above. 

At Fault/For Cause Cases

In so-called at-fault and for cause cases (including nuisance/drug/criminal cases brought under Chapter 139, §19), a tenant may petition for court record sealing if he or she has a clean eviction record for seven years. At-fault/for cause cases typically involve serious violations of a lease or tenancy, such as drug or criminal activity, excessive noise, smoking, housekeeping, and behavioral problems. The filing procedure is the same as described above, with at fault/for cause cases presumptively approved where the landlord does not file an objection within seven days of the petition filing. However, for Chapter 139, §19 cases, a court hearing is required to determine whether the tenant has been charged with any crimes and sealing is in the interests of justice and public safety.

Dismissed Cases/Judgments in Favor of Tenant

In cases which have been dismissed or where the tenant wins and receives a judgment in their favor, the tenant may file a petition to seal the court record immediately without any notice to the landlord. These petitions will be administratively granted without a hearing.

I’ve flagged this provision as problematic because non-payment cases are often dismissed if a tenant moves out voluntarily, or shortly after a payment plan is completed or if the case is old. Tenants may be able to use this loophole to get cases sealed even if they do not presumptively qualify are able to skirt the four- or seven-year waiting period.

Credit Reporting Agencies

In a far-reaching provision, consumer reporting agencies will need to comply with very strict limitations on using sealed (and un-sealed) eviction records in consumer credit reports. Credit agencies cannot disclose sealed records “unless the court record was available for inspection with the court within 30 days of the report date.” This provision is unclear and confusing, but I think the intended policy is that sealed records should not be available on credit reports. Credit agencies must remove from a credit report any information related to a sealed eviction court record within 30 days of sealing. (I’m not sure how agencies are going to monitor this). But the bill goes even further, requiring credit agencies, who collect non-sealed eviction court records, to list the exact type of eviction action on the credit report (i.e., no-fault, nonpayment, or for cause). This would require that credit agencies actually pull the court docket and make a determination of the type of case, which they are essentially incapable of doing unless they hire a small army of lawyers (which they likely won’t do). Tenants can recover actual damages and attorneys’ fees against credit agencies for violations of these new rules, and the Attorney General also has oversight jurisdiction. The net effect of these new rules will likely be that credit report agencies doing business in Massachusetts will stop collecting eviction records all together.

Rental Application Disclosure Language

The new measure also mandates that all tenant rental applications contain the following new language: “An applicant for housing or credit with a sealed record on file with the court pursuant to section of chapter 239 of the General Laws may answer ‘no record’ to an inquiry relative to that sealed court record.”

What’s Next? 

As mentioned above, the measure does not go into effect until May 2025, and that’s probably a good thing because the courts need to create new forms, and the credit agencies have a lot of internal changes they will need to make. Same for landlords and rental agents. While I was writing this up, a colleague asked me this question: “If a record is sealed, does that prevent it from being a “hit” on the 4 or 7 year look-back periods when/if a tenant petitions for a record to be sealed?” My answer (as least right now) is that if a record is sealed, it appears that there should be no “hit” at all for any of the look back periods. Now this is in theory, and I think what will actually happen is either credit agencies will remove all eviction “hits” altogether from their MA reports, or there will be a big lag between what’s on the reports and what’s supposed to be sealed, and the onus will likely be on the tenants (or the courts ….good luck with that) to fix that. Since it’s Massachusetts, I’m sure it will be the usual mess! So we’ll see how this will shake out once the law goes live.  

Rich Vetstein is a nationally recognized real estate lawyer with a diverse practice in litigation, title/closing work, rental housing, and zoning. A fierce advocate for rental property owner rights, He was lead counsel in the state and federal legal challenge to the Mass. COVID-19 Eviction Moratorium, the success of which resulted in Governor Baker letting the controversial law expire. Rich can be reached at rvetstein@vetsteinlawgroup.com.