Tuesday, March 31, 2020

My Cousin Vinnie Avoids Surgery


My cousin Vinnie, the suburban real estate attorney, and I, recently met in the North End before a Celtics game. It was great to see him
because I had missed the annual family Post Christmas Party at our cousin Carmella’s house. Vinnie filled me in on the current foibles of our various relatives, and provided me with a painfully detailed description of status of Aunt Mary’s cruise to Nova Scotia.  Sorry I missed it.  

Vinnie swirled his bread around the residual red sauce in his plate previously filled with chicken cacciatore, as he shifted the conversation to his small practice.  “Paulie”, he said with a mouth filled with bread soaked in sauce, “I have a new client who has been in a years-long battle with a local building commissioner who claims that the use of his property for an auto repair shop and selling used cars is unlawful. The commissioner is correct that the uses are not allowed in the zoning district. My client provided me with a 6 inch high pile of correspondence between he and the town, peppered with correspondence from his former attorney. It seems his former attorney specialized in criminal law (when not working on his part-time thespian career). He penned a series of inflammatory demand letters to the town manager, the building commissioner and the town planner asserting all sorts of mischief including violations of his client’s civil rights, unequal treatment under the law, injustices and shenanigans. It came as no surprise to me that the matter was not resolved and the town was turning up the heat on the landowner.”

I think Vinnie is hilarious, but I interrupted him “That sounds like trying to deal with the medical profession. If you ask for a diagnosis from a surgeon, don’t be surprised if the surgeon recommends surgery, even if you don’t need it!” Vinnie replied “Right; sometimes you just need the right physical therapist.”

Vinnie went on. “I went through the client’s pile of paperwork. Something in the pile suggested that the property had been used for auto repair for decades. I checked the Assessors’ property record cards and flipped through the old files in the Building Department.  I found a history of Class II Used Car Dealer’s licenses in the Selectmen’s records, as the December meeting minutes always list the annual license renewals. I checked the registry of deeds and identified the names of the various owners of the property over the years and found that they were in the auto repair business from their corporate purpose statements on file with the Secretary of State. I then went back to town hall to wade through copies of the zoning bylaw from the past 30 years to determine when the uses became unlawful in the zoning district. Turns out the uses are protected as lawfully pre-existing nonconforming uses.  I bundled together my evidence and had a cup of coffee with the building commissioner and the town planner. Case closed.”

I was nodding my head in the affirmative throughout his story. His approach was spot on, and second nature for a land use guy.  Vinnie concluded by saying: “Like most of our brethren, I like to think that I am pretty good at ‘issue identification’ and I try to send prospective clients in the right direction. I find that even when I turn people away and recommend that they see another specialist, it is not uncommon to hear from them again in the future when they are dealing with a real estate issue; which is one of the benefits of practicing for a long time. I wish all physicians were better at issue identification.”

I couldn’t agree with him more.

A former REBA president, Paul Alphen currently serves on the association’s executive committee and co-chairs the long-range planning committee.  He is also a member of the Executive Committee of the Abstract Club. He is a partner in the Westford firm of Alphen & Santos, P.C. and concentrates in residential and commercial real estate development, land use regulation, administrative law, real estate transactional practice and title examination .As entertaining as he finds the practice of law, Paul enjoys numerous hobbies, including messing around with his power boats and fulfilling his bucket list of visiting every Major League ballpark.  Paul can be contacted at palphen@alphensantos.com.

Thursday, March 19, 2020

Time to Abolish the Four Unities Rule

Edward J. Smith

Abolition of the “four unities” rule will be a priority of REBA’s Legislation Section this term.  Conveyancers and estate planners have long felt that the rule is unwieldy and too often frustrates the reasonable objectives of clients.  Based upon feudal common law for real property, in a joint tenancy
the “four unities” are unity of time, unity of title, unity of interest, and unity of possession.  The unity of time principle requires that each joint tenant receive his/her interest at the same time, i.e., upon delivery of the deed to the property. Unity of title exists because each joint tenant receives his/her title from the same grantor, and unity of interest means that each joint tenant owns an undivided interest in the property. Unity of possession exists because each joint tenant has the right of possession of every part of the whole property.  These rules, still largely in effect in Massachusetts, cause drafting problems in deeds, indeed frequently in the absence of competent legal advice.  Adherence to the technical distinctions required by the “four unities” often results in frustrating the central goal of a joint tenancy – which is to transfer title by survivorship, i.e. without the need to probate the estate of the deceased co-tenant.  

The proposed bill addresses these and other issues as they have arisen under both the common law and existing statutes (M.G.L. c.184, §§ 7, 8).  Principal drafters of the legislation were Joel Stein, Gene Gurvits and Bob Moriarty.  The bill would place the plain intention of homeowners and others ahead of legalistic formulas and eliminate the expense and delay of probate proceedings. 
A few examples of issues that the legislation would address are as follows: 

A.        A mother wants to help her son buy his first house. She gives him the 20% down payment, he agrees to pay the mortgage on the rest, and they take title as joint tenants with the mother holding 20% interest in the property, and the son 80% interest. Under the existing law, the title is held by them as tenants in common, and her death results in probate of her estate.

B.        A father has title to the property.  He is conveying it to his daughter and her husband, but he wants to retain a portion of the ownership until he dies. The deed from him gives the property to himself, holding as joint tenants with the daughter and the son in law, as tenants by the entirety.  Under the current law, this arrangement results in the father holding his interest as tenant in common, and not in joint tenancy.  His death will necessitate the probate of his estate, with his interest possibly passing to his other children - a result that he did not contemplate.

C.        A single-sex couple takes title prior to single-sex marriage being legalized in Massachusetts.  Subsequent to the legalization, the couple conveys the property to themselves as tenants by the entirety.  This conveyance is not valid under existing law, leaving the couple not eligible for the benefits of holding title as tenants by the entirety.
Variations of these cases happen often, and the result is further legal expenses for homeowners and increased caseload for probate courts, in addition to legal results not intended by grantors and testators.

What the Legislation Will Do
The bill will simplify the drafting of real property instruments, including devises in a will, that create joint tenancies, tenancies in common and tenancies by the entirety.  It would abrogate the ancient common law “four unities” rule to:

-                 Allow for joint tenants to have unequal percentage interests in real property, just as has been the case for tenants in common

-                 Allow for the transfer or devise by property owners to themselves and others, in any form of tenancy, notwithstanding the “four unities” rule – and without the need for a straw

-                 Create a new device where co-tenants could simply record a declaration of tenancy to transform their tenancy into a different form as stated in the declaration - again without the need for a straw

-                      Provide that a conveyance or devise to two or more natural persons as tenants in common, joint tenants or tenants by the entirety, or by a declaration of such a tenancy as provided in amended section 8, shall create the tenancy stated in the instrument or devise

-                 Allow for grantees to hold title in “combinations” of tenancies; e.g. husband and wife to hold title as tenants by the entirety together with another party as a joint tenant or tenant in common  

-                 Establish that joint tenants and tenants in common who hold title by virtue of a deed, devise or declaration shall hold an equal percentage interest in the title, unless a contrary intent manifestly appears in the instrument of transfer, devise, or declaration

The legislation is sponsored by State Senator Cynthia S. Creem (D-Newton) and State Representative Paul F. Tucker (D-Salem). Entitled an Act to clarify the rights of joint owners of real property and abolish certain inconsistent or archaic rules, the bill will likely be before the Joint Committee on the Judiciary, where it will receive a public hearing.  No bill number has been assigned as of the date of this writing.  REBA members should contact the REBA office for updates.

Ed Smith has served as legislative counsel to the Association since 1987.  He can be contacted by email at ejs@ejsmithrelaw.com.

Tuesday, March 17, 2020

Massachusetts Announces Waste Site Clean Up as well as Drinking Water Standards for Six PFAS “Forever” Chemical Compounds


Last December, the Massachusetts Department of Environmental Protection (“MassDEP”) announced final as well as proposed regulations to address Per- and Polyfluoroalkyl Substances or “PFAS”, a
family of man-made chemicals known as the “forever chemicals” due to their persistence in the environment.  Only a handful of other states are regulating PFAS.

Numbering in the thousands with many created over 50 years ago, PFAS are water soluble, extremely stable and persistent, so do not fully degrade.  These properties make them popular for use in a wide variety of products, such as water repellent fabrics, non-stick coatings, consumer products, and fire-fighting foam.

Studies show, however, that exposure to some PFAS at elevated levels may cause a variety of health issues, including development effects on fetuses and infants, effects on the thyroid, liver, kidneys, certain hormones and the immune system.  Certain PFAS have been discovered to be quite toxic even at very low levels.  According to MassDEP’s website, scientists and regulators are still working to study and better understand the health risks posed by exposures to PFAS.

Recently, PFAS have been discovered in public drinking water supplies in at least fourteen different communities throughout Massachusetts.

To address PFAS, MassDEP is promulgating final regulations in its waste clean-up program and issuing proposed regulations in its public drinking water program.

As of December 27, 2019, parties responsible for cleaning up contaminated waste sites in Massachusetts will have to clean up groundwater that could be used as drinking water to meet a new standard in the Massachusetts Contingency Plan or “MCP” (310 CMR 40.000) of 20 parts per trillion (ppt) for the sum of six PFAS compounds. 

There are also new MCP standards for the clean-up of soils, with specific standards for each of the six PFAS. 

These PFAS are perfluorodecanoic acid (“PFDA”), perfluoroheptanoic acid (“PFHpA”), perfluorohexane sulfonic acid (“PFHxS”), perfluorononanoic acid (“PFNA”), perfluorooctanesulfonic acid (“PFOS”), and perfluorooctanoic acid (“PFOA”).

Wishing to coordinate efforts, MassDEP’s drinking water program is proposing new drinking water standards on December 27, 2019 for the same six PFAS compounds.  MassDEP proposes setting a Maximum Contaminant Level (MCL) for drinking water of the sum of 20 parts per trillion (ppt) for these six PFAS compounds. Presently, there is no Federal MCL for PFAS, only an EPA health advisory for PFOA and PFOS of 70 ppt.

Water suppliers will have to collect sample for PFAS and report to MassDEP.  Depending on the level of PFAS found, the water supplier may have to meet additional testing, monitoring, and reporting requirements.  The implementation of these new drinking water regulations would be staggered, based on the population served and type of system. 

Public hearings on these draft drinking water regulations (310 CMR 22.00) will be held throughout the state beginning in early January 2020.  More information about these proposed regulations are available on MassDEP’s website.

A senior associate at McGregor & Legere, P.C., Nathaniel Stevens handles a broad range of environmental and land use matters, from administrative law to litigation. He has helped clients with environmental issues including permitting, development, contamination, transactions, conservation, real estate restrictions, underground tanks, water supply, water pollution, subdivision control, tidelands licensing, Boston and state zoning, coastal and inland wetlands, stormwater, air pollution, and energy facility siting.  He can be contacted at NStevens@mcgregorlaw.com.

Tuesday, March 10, 2020

SJC to Address Proper Recipient of Unidentified IOLTA Funds


In a case closely watched by bar organizations and legal services programs, the Supreme Judicial Court will consider what should
happen to funds in an IOLTA account for which the rightful owner cannot be identified.  In the Matter of Gregory M. Olchowski raises the question of whether unidentified IOLTA funds should go to the IOLTA Committee to support legal services for low-income clients, as interest from IOLTA accounts already does, or to the Treasurer under Massachusetts’ abandoned and unclaimed property law, G.L. c 200A.

REBA joined with the BBA and the MBA in an amicus brief supporting the position of the IOLTA Committee (the Committee) that it should be the recipient of the unidentified funds.  As REBA notes in the joint amicus brief, a substantial amount of IOLTA revenue comes from real estate practitioners, making this issue especially relevant for REBA members.  The Board of Bar Overseers (BBO) and the Clients’ Security Board and Fund (CSB) also filed amicus briefs.

The case arises out of disciplinary proceedings against Gregory Olchowski.  As a part of his disbarment, the SJC ordered Olchowski to close his IOLTA accounts and return the funds to their owners.  Olchowski could not identify the owners of funds in his IOLTA accounts.  After extensive efforts by his accountant, his attorney, and the Office of Bar Counsel to identify the owners failed, Olchowski’s attorney filed a motion in the Single Justice session to remit the unidentified IOLTA funds to the IOLTA Committee.  The Treasurer intervened and opposed the motion.  The Single Justice then reported the matter to the full Court.

Central to the case is whether unidentified IOLTA funds meet Chapter 200A’s definition of abandoned property and, therefore, must be turned over to the Treasurer under the law.  The Committee argues that because there is no known owner of the funds and there is a regular transfer of interest from the account, the unidentified funds do not meet the statutory definition of abandoned property.  The Treasurer counters that the broad language of Chapter 200A should be interpreted to cover the unidentified funds in IOLTA account.  According to the Treasurer, the Committee’s interpretation is inconsistent with the statue as a whole and would result in an ineffective statute that excludes numerous kinds of accounts, beyond just IOLTA, that the act is clearly intended to cover.

Also, at issue is the SJC’s authority over the practice of law and that authority’s interplay with the legislature’s power.  The Committee contends the SJC’s inherent authority to regulate the practice of law extends to controlling the disposition of unidentified IOLTA funds.  It follows then, the Committee claims, that the Treasurer’s attempt to control an aspect of the IOLTA program is a violation of the separation of powers under the Massachusetts Constitution and in conflict with the Court’s authority.  The Treasurer responds that there is no separation of power concern if the statute is interpreted to cover unidentified IOLTA funds.  Because neither Rule 1.15, nor any other SJC rule, specifies the disposition of unidentified IOLTA funds, there is no conflict with the SJC’s rules.  And without such a conflict, the Treasurer argues, there is no violation of the separation of powers.

In addition to the legal issues, the parties dispute who, as a practical matter, is best-suited to find the owner of unidentified IOLTA funds.  The Treasurer points to its existing resources for helping people find their abandoned and unclaimed property.  These resources include a website that allows people to search for property that has been turned over to the Treasury, as well as advertising campaigns that encourage people to consult the website.  The Treasurer notes it currently holds funds from 572 IOLTA accounts and has returned IOLTA funds to 58 owners on prior occasions.  The Committee argues the organizations under the judiciary, i.e., the BBO, CSB, and the Committee, have experience reviewing lawyers’ files, financial records, and other resources to locate the owners of IOLTA funds, making them the better choice to search for and handle claims by owners.  This approach, the Committee claims, is far more likely to find the owners than the Treasurer’s website, which only has the attorney’s or law firm’s name for the IOLTA account, not the funds’ owners’ name. 

The amicus briefs raise several additional points.  The REBA, BBA, and MBA brief stresses the importance of attorney-client confidences to the practice of law and argues that interpreting Chapter 200A to cover unidentified funds in IOLTA accounts would open the door to significant intrusion by Treasurer into attorney-client confidences.  The joint bar brief explains that the Treasurer’s extensive audit rights under the statute would threaten those confidences.  The brief posits that investigation into, and administration of, the unidentified funds by entities under the judiciary would not raise the same concerns.

The BBO’s brief points out that a lawyer’s inability to identify IOLTA funds’ owners may raise disciplinary issues, which are the exclusive province of the Court and handled by the BBO.  If the unidentified IOLTA funds are turned over to the Treasurer without notice to the BBO, it cannot investigate and take appropriate disciplinary action.  The Committee, on the other hand, is uniquely situated to recognize and notify the BBO of these issues. 

The CSB encourages the Court to amend Rule 1.15 to require reporting unidentified IOLTA funds to an appropriate authority to investigate the funds’ owners and, provided no owner is identified, specify the funds then go to the IOLTA Committee. 

In addition to the amicus briefs, the Massachusetts Law Reform Institute submitted an amicus letter, joined by twelve other legal services programs, supporting the joint bar brief.  Driving home the substantial need for legal services funding and the importance of the IOLTA program, the letter notes that due to the lack of funding, legal aid programs in Massachusetts are forced to turn away 60% of income-eligible clients. 

Oral argument in Olchowski was held on, February 11, 2020 and a decision is pending.  Those involved with the management of IOLTA accounts will want to keep an eye out for the decision as it could change the requirements under Rule 1.15 for maintaining and closing IOLTA accounts. 

A founding co-chair of the REBA environmental law section, Mary Ryan is a partner in the litigation department of the Boston law firm of Nutter, McClennen & Fish LLP, and a member of the land use group. Her practice includes substantial trial and appellate cases in the state and federal court, particularly in environmental litigation, as well as administrative hearings and proceedings.  Her email contact is mryan@nutter.com.

Micah Miller is a partner in Nutter’s litigation department. Clients rely on Micah’s guidance in a variety of litigation matters, particularly in intellectual property litigation. Micah is well-versed in assisting clients at all stages of litigation, including pre-filing investigations, document collection and production, technical expert discovery, claim construction, and trial. Micah’s email address is mmiller@nutter.com.

Monday, March 9, 2020

Zombie Foreclosure Case Resurfaces


The seemingly dormant decision of the U.S. Bankruptcy Court in Edry v. R.I. Hospital Trust National Bank (201 B.R. 604 (BANK) D Mass. 1996) has been revitalized by the holding by the Appeals
Court in Property Acquistion Group, LLC v. Kenneth Ivester Third and another, 17-P-1518 (2019)

The obligation of the Mortgagee to obtain the highest price at a foreclosure sale was addressed in cases across the country in the 1980’s.  In the case of In RE Ruebeck (1985), Judge Lavien noted that the Bankruptcy Court would be satisfied so long as all due effort was made to obtain a fair price for the property.  The issues raised in this decision, including advertising in the real estate section of the Sunday paper, obtaining appraisals prior to the foreclosure and making certain that the mortgagor and other interested parties received notice of adjournments, became regular practice for the foreclosure bar.

In 1994, the United States Supreme Court Decision in BFP v. Resolution Trust Corp., held that the value of foreclosed property is dictated by the foreclosure sale itself, not the property’s fair market value.  Justice Scalia, writing for the majority, noted that “when its state’s judicially and legislatively crafted rules”, governing the foreclosure process are followed, it is “black letter law” that mere inadequacy the foreclosure sales price is no basis for setting the sale aside.  However, Justice Scalia’s discussion noted that “a state’s interest encompasses more than mere statutory requirements”.

In his opinion in Edry, Justice Quinan, unable to avoid the sale solely because the foreclosure price was only 45% of the fair market value, relied on other factors including:

-  the bank failed to respond to the debtors attempts to resolve the deficiency;

 – the foreclosure sale was conducted by a paralegal;

 – the bank made no effort to seek the debtors permission for potential bidders to inspect the inside of the home;

 – the bank made no effort to determine the fair market value of the property; and most importantly;

 – the bank’s law firm specifically instructed the auctioneer not to use display advertising in providing notice of the sale, when the auctioneer used display advertising in 80% of its foreclosures.

In the above referenced case of Property Acquisition Group, LLC v. Kenneth Ivestor Third and another,  the Plaintiff, Property Acquisition Group, LLC, was the purchaser at a foreclosure sale.  The case was decided by the Massachusetts Appeals Court on appeal from an Essex Superior Court Decision allowing the mortgagees motion for summary judgment dismissing the mortgagor’s claim that the mortgagee failed to comply with its duty to exercise good faith and reasonable diligence, to protect the interest of the mortgagors. 

The Investers purchased their property at 245 Salem Street in Lynnfield for $399,000.00 in 2003.  They refinanced in 2006 with a first mortgage in the amount of $302,000.00 and a second loan in the amount of $50,000.00.  They stopped payments on the loan in 2013.  The foreclosure sale was conducted with an opening bid of $329,000.00.  Two parties bid and the successful bidder, by the Plaintiff, was in the amount of $355,000.00.

The property consists of 4.57 acres of which approximately half is buildable, the remainder being wetland.  The property was improved with a single-family home.  The Investors contend that the property could be developed; however, any development would require the installation of a new road. 

Fannie Mae relied on the property’s 2015 assessed value of $361,900.00.  The Investors’ expert appraised the property at $975,000.00 and the successful bidder submitted an appraisal valuing the property at $385,000.00.  The Court citing Edry noted that Fannie Mae took no steps to determine the fair market value of the property before the auction - and that the mortgagee must in some way ascertain the fair market value of the property in order to satisfy its duty of good faith and reasonable diligence in selling the property.

The Court, citing Edry, noted that it is the duty of the mortgagee to do what a reasonable person must do to achieve the highest price possible to protect the interest of the mortgagor.   In this case, where the property has potential for development, the mortgagee must consider that potential and share it with prospective bidders.  However, the Court held that the Investors do not have superior title to the purchaser because the action was commenced after the sale had been completed and the foreclosure deed had been recorded.  The Ivestors showed no evidence that the purchaser new or should have known of Fannie Mae’s alleged failure to exercise good faith and reasonable diligence.  Although the purchaser knew that the property had value above that bid at the sale, the purchaser is not responsible for knowing that Fannie Mae had failed to exercise and reasonable diligence.  The case was remanded to the Superior Court for the issue of damages.

What should we take away from this Decision?

First off, Ivestor, unlike Ruebeck and Edry, is not a Bankruptcy case and no claim was made to attack the foreclosure as a fraudulent transfer under state law.  Secondly, as the foreclosure was not held to be invalid, this case is concerning primarily for lenders and foreclosure attorneys.  It would seem clear that best practice would require obtaining an appraisal in many cases.  However, the facts here are so specific, that even an appraiser might have missed that the property should not be assessed as a single-family home, but as developable property.  Should there be concern with any single-family house which lies upon a lot that could possibly be subdivided?

There is no indication in the Decision as to whether the Plaintiff intends to develop the property.  However, in this case, the Plaintiff is an LLC and their Certificate of Organization notes that the character of the business is to acquire, sell, develop, manage and otherwise deal with and operate real estate of any kind. Notwithstanding this, the Court held that the purchaser at the foreclosure sale was a bona fide purchaser.

A former president of the association, Joel Stein concentrates his practice in real estate law with an emphasis on title examination, title insurance and foreclosure. He is a 2006 recipient of the Association’s highest honor, the Richard B. Johnson Award, and founding editor of the REBA Guide to the Massachusetts Registries of Deeds.  Joel can be contacted at jstein@steintitle.com.


REBA President’s Message



I am honored to begin 2020 as REBA’s President and I look forward to an event-filled year ahead for our members. As schedules often fill up quickly at this time of year, I would like to take this
opportunity to highlight a selection of upcoming events, opportunities, and resources available this spring.

REBA’s nineteen practice sections cover all topics and issues related to real estate. The sections range in areas from affordable housing, to litigation, to residential conveyancing, to trusts and estates, and many more. The chairs of these sections schedule meetings on substantive topics of interest, many of which members can participate in via webcast – thanks largely to our Chief Information Officer Bob Gaudette. Notifications of these meetings go out to members via email and the full schedule is available under upcoming events on REBA’s website.

For members in the Hampden County area, the Residential Conveyancing Section has scheduled a lunchtime regional affiliate meeting on April 15 at Student Prince in Springfield. The meeting, which REBA hosts in partnership with the Real Estate Section of the Hampton County Bar Association, will focus on substantive issues impacting residential conveyancers, is one way in which REBA reaches out to members in areas outside of Boston.
 
In addition to substantive lunches and meetings, some REBA sections plan for events centered on networking. The Women’s Real Estate Networking Group is one such group, hosting several receptions every year. This year, the group’s annual fundraiser for the Women’s Lunch Place in Boston will be held on Thursday, April 23. This well-attended annual event is open to all real estate professionals and will feature Elizabeth Hopkins as a guest speaker. All funds raised from the event are donated to the Women’s Lunch Place.

For a combination of professional development and networking, the REBA Spring Conference is a go-to event. The chairs of the Continuing Education Section work throughout the year on programming for the Spring Conference as well Annual Meeting and Conference in early November and they welcome input from members. If there is a topic you would like to hear about, I encourage you to reach out. The Spring Conference will be held on Monday, May 4 at the Four Points Sheraton in Norwood. For anyone that has not yet attended these twice-yearly conferences, the full-day schedule includes numerous topical and timely breakout sessions, lunch with colleagues and friends, as well as the opportunity to earn 10 Rhode Island and New Hampshire CLE credits.

In terms of practice resources, I should also mention REBA Dispute Resolution, which has a panel of retired Appeals Court and Land Court judges as well as many experienced attorneys, all of whom are well-versed in resolving business and real estate disputes. I, and many of my colleagues, have utilized REBA Dispute Resolution neutrals with great success and I can personally attest to the quality and efficiency with which cases are approached. If you have a particular matter that is in need of ADR, REBA’s Executive Director, Peter Wittenborg, can assist in finding the right neutral.

Of course, there are many more events and resources all of which can be accessed on REBA’s website. In the coming months I will be thinking about ways REBA can be a more valuable resource to its members in all areas of the Commonwealth and from all manner of diverse backgrounds. If you have ideas or thoughts on how we can improve the organization, please feel free to email jmarkowski@fmglaw.com or call (617) 807.8962.

Wednesday, March 4, 2020

Superior Court Issues Landmark Decision Concerning Statute of Repose in Favor of Condominium Association


On January 28, the Essex Superior Court (Feeley, J.) issued a decision providing that (1) the statute of repose does not begin to run – with respect to a phased condominium – until the final phase is recorded; and (2) a developer may waive its rights – under the statute of repose – by executing a tolling agreement. There had previously been no reported Appellate Court decisions – or even trial court decisions – concerning these issues in the Commonwealth of Massachusetts.

The condominium initiated the lawsuit seeking to recover damages related to certain alleged widespread deficiencies in the design and construction of the common areas and facilities of the condominium.

The case involves the Regency at Methuen Condominium – an age-restricted (55+), gated community located in Methuen, Massachusetts – which was developed and constructed by Toll Brothers. The condominium initiated the lawsuit seeking to recover damages related to certain alleged widespread deficiencies in the design and construction of the common areas and facilities of the condominium.

The condominium’s master deed was recorded in 2011. Thereafter, sixty-six phasing amendments were recorded over the next four years as additional units were constructed and added to the condominium. “Phasing of a condominium permits a developer to expand the size and scope of a condominium project in response to market conditions. In a phased condominium development, groups or stages of units are completed over a period of several years and become part of the condominium by successive amendments to the master deed. ‘Phasing’ is not a statutory term, but is a usage that has grown out of the general enabling provisions of G.L. c. 183A.” Queler v. Skowron, 438 Mass. 304, 312 n.15 (2002) quoting Podell v. Lahn, 38 Mass.App.Ct. 688, 689 n.3 (1995). After the final phasing amendment for the Regency at Methuen Condominium was recorded, the condominium contained 240 units.

Toll Brothers filed a motion to dismiss, contending that many of the association’s claims were barred by the statute of repose. The statute of repose provides, in pertinent part, that “in no event shall [an action arising out of any deficiency in the construction of an improvement to real property] be commenced more than six years after the earlier of the dates of: (1) the opening of the improvement to use; or (2) substantial completion of the improvement and the taking of possession for occupancy by the owner.” M.G.L. c. 260, § 2B. Simply put, most of an association’s construction defect claims are absolutely time barred six years from the date that construction of a condominium is completed.

Toll Brothers contended that the Trust’s tort claims – as to the first fifteen (15) phases and first sixty (60) units of the Condominium – were time barred by the statute of repose. These particular phases/units were opened/substantially completed before December 22, 2011 – more than six years before the association’s complaint was filed on December 22, 2017.

To be clear, although Toll Brothers had signed an agreement with the condominium association – explicitly providing that it would not raise the statute of repose as a defense to a lawsuit – Toll Brothers proceeded to advance a motion to dismiss, arguing that “a tolling agreement cannot operate to revive a Plaintiff’s claims.”

Toll Brothers – relying almost entirely upon the U.S. Supreme Court’s Waldburger decision – contended that “Statutes of Repose are absolute bars, which are not subject to any form of tolling.” In actuality, however, the U.S. Supreme Court, in Waldburger, merely recognized that equitable tolling does not apply to the statute of repose. CTS Corp. v. Waldburger, 134 S. Ct. 2175, 2183-2184 (2017).

Although there were no reported decisions in the Commonwealth concerning the issue, the association pointed a relatively recent decision by the United States Court of Appeals for the Eleventh Circuit. In that case the court ruled that a statute of repose is subject to express waiver. Secretary, U.S. Department of Labor v. Preston, 873 F.3d 877, 884 (2017). The Court – in elucidating the not-so-subtle distinction between the equitable tolling at issue in Waldburger and the express waiver of a statutory right – provided, in pertinent part, as follows:

The Court in Waldburger observed only that statutes of repose aren’t subject to equitable tolling. Our case has nothing to do with equitable tolling; rather, the defendants here executed a series of contracts in which they expressly – and (as they have since acknowledged) knowingly, willingly, and voluntarily – renounced their rights under [the subject statute of repose]. That express waiver makes this case a whole different ballgame. The mere fact that a defendant ordinarily won’t lose the protection of a statute of repose through no fault (or even act) of his own – as in the equitable-tolling context – says nothing about whether he can expressly disavow that protection. A statute of repose confers on a defendant a personal privilege of sorts, in the form of an immunity from further liability. While that privilege can’t just be snatched out of the defendant’s hand – certainly not, as Waldburger confirms, by a squishy doctrine like equitable tolling – there is nothing to prevent the defendant from voluntarily giving it away.

Preston, 873 F.3d at 884.
The association acknowledged that the statute of repose is not subject to the principles of equitable tolling. The association, however, was not relying upon the doctrine of equitable tolling, but rather the fact that Toll Brothers intentionally and voluntarily waived its rights under G.L. c. 260, § 2B. Accordingly, the association maintained, its claims against Toll Brothers are not time barred.

The Court agreed with the association, rebuking Toll Brothers as follows:
No case cited by the Toll defendants supports that unfathomable contention that potential defendants can lull potential plaintiffs into delaying the commencement of suit by execution of a written tolling agreement, and then sandbag them by disavowing the legal effect of the written agreement. (emphasis supplied).

The Court clearly recognized that Toll Brothers’ conduct, in this regard, was particularly unseemly. Indeed, after signing a contract providing that it would not raise a statute of repose defense, Toll Brothers essentially argued that its promise was worthless and that the association was out of luck with respect to its claims of shoddy construction. Such actions should provide a cautionary tale as to the depths that developers will stoop to shirk responsibility for defective construction. Fortunately, in light of the Court’s ruling, associations can continue to rely upon tolling agreements as an effective tool for prolonging negotiations with a developer during the transition period.

In sum, the Court’s decision reflects a commonsense, pragmatic approach to these two issues. Indeed, it makes sense that a statute of repose – which is based upon the completion of construction – should not begin to run until construction of all phases of a condominium is complete. It also makes sense that a developer, who signs a contract waiving a statutory defense, should not be permitted to raise that waived defense in a lawsuit. Unfortunately, however, one can never be certain that the Court will adopt a sensible approach to such issues.

The Court’s ruling in the Regency at Methuen case should be viewed as a victory for the condominium industry, as well as yet another decision reflecting a general disdain for condominium developers’ efforts to avoid liability for defective construction. See e.g., Trustees of the Cambridge Point Condominium Trust v. Cambridge Point, LLC, 478 Mass. 697 (2018)(ruling that a condominium developer could not invoke an anti-litigation provision in the condominium’s governing documents to avoid liability – finding that the subject provision “is void because it contravenes public policy”); Wyman v. Ayer Properties, LLC, 469 Mass. 64 (2014)(economic loss rule does not apply to damage caused by negligent design and construction of the common areas of a condominium building).

Originally posted on tlawmtm.com:

Associated with the Boston and Braintree based firm of Moriarty, Troyer & Malloy LLC,   Dave Rogers specializes in complex civil litigation at both the trial and appellate levels. He has extensive experience in the area of construction litigation. Dave’s practice is focused on construction, real estate, and condominium matters. His clients include condominium associations, real estate developers, general contractors, subcontractors, and individuals.  Dave can be contacted at drogers@lawmtm.com

The above-referenced lawsuit is captioned Board of Trustees of the Regency at Methuen Condominium Trust v. Toll MA Land Limited Partnership, et al., Essex County Superior Court, Civil Action No. 1777-CV-01924. The Court’s decision may be found here at this link