The Verdict is in: New Land Court Rule 14 Approved and in Effect

By Giles L. Krill

Last October, the Rules Committee of the Supreme Judicial Court approved “Proposed Land Court

Rule 14: Binding Summary Decision Following Bench Trial: Waiver by Parties of Special Findings of Fact and Separate Rules of Law.”  The Land Court Department of the Trial Court promulgated Rule 14 as one of multiple initiatives carried out in accordance with SJC  Chief Justice Ralph D. Gants’ request that each Trial Court Department convene a working group of judges, court staff, and attorneys to develop a “menu of options in civil cases that will ensure litigants the opportunity to have a cost-effective means to resolve their dispute in a court of law.”

Rule 14 provides litigants and their counsel with the option to proceed to a bench trial under a stipulation waiving the requirement in Mass. R. Civ. P.  52(a) that the court “shall find the facts specially and state separately its conclusions of law thereon.”  If such stipulation is approved by the trial judge, the trial decision need not include “detailed written findings of fact and rulings of law” but will instead be in a written or oral form “comparable to a jury verdict.”  Such decision must also, at a minimum, “answer special questions on the elements of each claim, at a level of detail comparable to a special jury verdict form pursuant to Mass. R. Civ. P. 49(a).”  In addition, the trial decision may include special or subsidiary findings of fact in a form “comparable to the general verdict form of a jury accompanied by answers to interrogatories in a case submitted to a jury as provided in Mass. R. Civ. P. 49(b).” 

Rule 14 is a purely elective rule that not only requires the parties to voluntarily opt in, but also requires that their attorneys put significant thought into the stipulation that they submit for court approval.  In addition to waiving Mass. R. Civ. P. 52(a) findings and rulings, the parties’ stipulation must: i) set forth the form of any questions of fact they request to have answered by the trial judge, ii) indicate whether they waive rights of appeal, iii) waive any argument, both at trial and on appeal, that depends on the existence of detailed written findings of fact, and iv) acknowledge that the appellate standard of review shall be “that which would apply to a verdict by a jury in a case tried to a jury and to the judgment entered thereon.”  In order to obtain court approval of the Rule 14 stipulation, it logically follows that the parties should agree to a substantial number of undisputed facts and frame the trial issues in a manner that is susceptible to a ruling in the nature of a jury verdict, including by proposing the form of the “special questions on the elements of each claim” that must be answered by the trial judge.  While the court retains discretion to render full Mass. R. Civ. P. 52(a) findings of fact and conclusions of law, Rule 14 specifically provides that once the court accepts the parties’ stipulation, it shall not make findings or rulings without first giving the parties a chance to object and be heard. 

Rule 14 provides Land Court litigants with a means to obtain a speedier resolution of their disputes.  Land Court cases often exact a toll on the parties regardless of outcome.  After all, the pendency of litigation can frustrate attempts to sell, mortgage, develop or otherwise make profitable use of the land subject to the litigation.  Clients feel this hardship with every passing day that they await a decision and entry of final judgment.  However, in certain cases the divisive issue can be reduced to a discrete “yes or no” question, such as: i) whether a party can carry its burden of proving title by adverse possession, ii) whether a municipal by-law applies to a certain land use activity, or iii) whether a signature on a deed was forged.  In such cases, Rule 14 presents an opportunity for parties to obtain the answer they need to move on with their lives at or near the conclusion of the trial evidence in much the same way a jury trial provides more immediate closure.  At the same time, because the Land Court has an individual calendar system, the parties receive the benefit of a particular Land Court judge serving as the trier of fact in a case the judge knows well on its unique facts, in addition to the judge’s extensive background in commonly occurring issues of law and fact that can permeate real property controversies.

The final version of Rule 14 differs from the original version submitted for public comment in March of 2016.  Among other differences, the original proposal simply required the court to “decide only the ultimate issue(s) tried”, whereas the final version requires at a minimum, that the decision “answer special questions on the elements of each claim, at a level of detail comparable to a special jury verdict form.”  This revision ensures that in cases where appellate rights are preserved, the appellate courts will have some insight into the reasoning of the Land Court judge.

Wile most parties opting for Rule 14 disposition will likely reserve rights of appeal, as a practical matter Rule 14 makes the most sense in controversies where the parties do not intend to appeal.  Appeals from civil jury verdicts are typically confined to issues such as evidentiary rulings and jury instructions, and it is harder to envision a tenable appeal on such grounds after Rule 14 forces the parties to collaborate on a thoughtful stipulation that streamlines the case into a discrete set of questions.  Furthermore, the appellate process will add to the delay that is avoided by opting for a Rule 14 trial decision, and certain categories of Land Court cases that proceed to trial are unlikely to be disturbed on appeal regardless of outcome.  For example, the appellate courts will give substantial deference to the fact-finding of the Land Court judge in assessing matters such as witness credibility or land characteristics gleaned from a “view” of the property in question.  In cases where the outcome turns on such factual assessments by the trial judge, the parties are not necessarily making a sacrifice by foregoing the broader spectrum of appellate argument that findings and rulings under Mass. R. Civ. P. 52(a) might afford.  In short, in certain classes of cases in which the law is long decided and an appellate reversal is unlikely, Rule 14 provides Land Court litigants with a viable path to quicker case closure.

A member of the Association’s litigation section, Giles Krill has over fifteen years of diverse legal experience, focusing on commercial litigation, real estate, environmental and land use law. He served as a REBA representative on the Land Court’s working group which developed Rule 14. His practice includes the representation of individuals and businesses, including developers, insurers, and lenders. Giles can be reached at giles@gottliebesq.com.

Workforce Housing trust Fund Launched

By Ted Carman and Eleanor White

Offering hope to the economically struggling Gateway Cities, a provision of the Economic Development Bond Bill passed by the House and Senate on July 31st and signed by the Governor on August 10th, authorizes a Workforce Housing Trust Fund (“WHTF”) as a $25 million pilot project.

The goal of the new program is to make it economically feasible to build or renovate new market rate housing in the Gateway Cities.  Unlike in many suburban and more affluent communities, the mayors and city councils from the Gateway Cities welcome new housing that does not carry income restrictions on residents.  NIMBYism (Not In My Backyard) is not a problem in the Gateway Cities for market rate housing.

There are 26 Gateway Cities, which are characterized by having higher than average unemployment rates and lower than average educational attainment than the Commonwealth as a whole.  The Gateway Cities include, among others, New Bedford, Attleboro, Brockton, Worcester, Lowell, Haverhill, Springfield and Pittsfield – as well as, closer to Boston – Quincy, Everett, Malden and Lynn.

Most of these communities are characterized by market rents for housing that are not high enough to make the financing of new housing feasible – whether new construction or renovation.  In fact, in most of these communities, new market rate housing is not feasible even with the equity that can be provided through the Federal and State Historic Tax Credits, equity that does not need to be repaid to investors.

At the same time, as demonstrated by numerous studies, the Commonwealth is suffering from a shortage of housing, a shortage that is projected to get worse over the next few years, with dire consequences for the Massachusetts economy.

The Commonwealth is experiencing demographic trends –the retirement of thousands of baby boomers and out-migration of younger workers-- that are expected to cause the labor work force in the State to actually shrink by 2020, causing a projected shortage of workers and a reduction in the rate of economic growth from 3% to 1.5% between the years 2015 and 2018.  It is hard for the economy to grow if there is not an increasing supply of workers to take new jobs that would otherwise be created, and it is hard to grow the workforce if prospective workers have no place to live.  This is going to present major problems to the Administration and the Legislature as the growth rate of revenues declines along with the economic growth rate.  The workforce can’t grow without additional housing units that are at prices the workforce can afford.   More housing production is therefore an imperative to address this inherent, structural, problem with the economy.

Many of the Gateway Cities have commercial and industrial core areas suffering from neglect, a lack of investment, and with many buildings empty or significantly underutilized.  New housing, built in significant volume, will not only be welcomed here, but can also have a transformative impact on the communities – leading to spill-over investment, and the attraction of new businesses and entrepreneurs.

Further, the built environments of these communities are exceptional, containing many beautiful historic buildings, both commercial and industrial.   Sixteen of the 26 Gateway Communities are connected to downtown Boston by the T or commuter rail.  Market rate housing would rent at workforce housing rent levels – exactly as needed by the Commonwealth—and in those cities with transit to Boston, would help to relieve the pressure on the housing market in Boston itself.

The Economic Development bill makes changes to the existing Housing Development Incentive Program (HDIP) by increasing the HDIP tax credit from 10% up to 25% and making new construction eligible for the program.  Further, historic buildings are eligible for a 20% Federal Historic Tax Credit at no cost to the Commonwealth.

In addition, the new Workforce Housing Trust Fund (“WHTF”) provides funding “support” (not a tax credit) for HDIP eligible projects up to an amount equal to 200% of the maximum Tax Credit amount (i.e. up to 50% of the HDIP eligible cost base).  These changes should make it newly feasible for developers to renovate historic buildings and build new market rate housing in HDIP Districts in Gateway Cities.

In return for WHTF funding – and this is a new, creative provision for Massachusetts’ housing programs – project developers will agree to share with the Commonwealth 25% of the annual cash flow (after expenses) and 25% of the profits on sale or refinancing of the project until such time as the full amount of support is repaid.

The legislative approval process contemplated that the funding would be provided through the sale of taxable bonds guaranteed by the Commonwealth.  This would provide a source of funding that would not impact the annual operating budget of the State.

Pursuant to regulations to be prepared by the Secretary of the Executive Office of Housing and Economic Development, the Legislature anticipated that the bond proceeds would be placed in the Workforce Housing Trust Fund.  One funding mechanism would have the Trust Fund provide funds to a quasi-public entity such as MassHousing or MassDevelopment, which would then in turn make long term (30 to 40 years), interest free, subordinated and non-recourse loans to specific eligible projects in HDIP Districts.

In addition to the profit sharing, the Cost-Benefit analysis assumes that for every 100 units of new housing that is built, between 30 and 50 permanent new jobs will be created.  These are jobs that, without the increase in housing supply, would simply not have been created or filled.  And the new taxes – income taxes and sales taxes – paid by these new employees will result in incremental, increased revenues for the State, available to help pay the debt service on the taxable bonds.

Analysis prepared for and during the legislative deliberations indicates that for every $1.00 invested by the State, it will receive, over time, $2.00 in benefits.  The Profit Sharing alone is projected to return the full cost of the initial support.  As a result, the WHTF program is expected to be self-funding, with the benefits received from higher taxes from newly-filled jobs being sufficient to pay the debt service on the bonds.

To the extent the program is self-funded, it can be expanded in the future to levels that will provide a significant impact on housing availability in the Commonwealth – potentially thousands of units per year.  And revitalize our Gateway Cities.

The Workforce Housing Trust Fund has the potential to help alleviate the Commonwealth’s shortage of workforce housing, revitalize the participating communities, and contribute to the economic growth of Massachusetts.

Ted Carman is the President of Concord Square Planning & Development, and Eleanor White is the President of Housing Partners, Inc.  Both have been engaged in the conceptualization and development of the ideas that resulted in the Workforce Housing Trust Fund legislation.  They can be contacted at Carman@ConcordSqDev.com and ewhite@housingpartnersinc.com.



The Future of M-792s and Release of Estate Tax Liens under the New MassTaxConnect Electronic Filing System

On December 5, 2016, the Department of Revenue plans to go live with its new MassTaxConnect electronic estate tax filing system, which will dramatically change the process of obtaining M-792s and estate tax lien releases in general.

In the video below attorney Luke C. Bean from the firm of Cushing & Dolan P.C. will explain in detail the new electronic filing requirements focusing on real estate lien releases, including the M-792 and Form M-4422, both of which are critical to a prompt and efficient closing in the case of decedents. Attorney Bean is particularly well equipped to present this material having been invited to the Department of Revenue to participate in a pre-MassTaxConnect rollout of its new system. Don't be caught short on this very important change affecting all lawyers involved in real estate transactions in Massachusetts.

 

 

MassTaxConnect How to Tutorials:

http://www.mass.gov/dor/multimedia/youtube/youtube-mtc-2016-to3-tutorials.html

SHOULD I BE CONCERNED WITH COMMISSION ADVANCES?

Paul F. Alphen, Esquire

Our office does not perform a ton of residential loan closings these days, but we recently received an email related to an upcoming closing that was disconcerting; but perhaps I am too conservative. It was an email from a company that provides brokers with an advance on the commission the brokers may earn as a result of a real estate closing. The email asked us to confirm the following (the names have been changed to protect the innocent):

1) Has earnest money been deposited for 123 Main Street? Yes or No

2) Is this sale a short sale? Yes or No. If Yes, does it have lender approval? Yes or No

3) Do you show the property with a tentatively scheduled closing date of November 21, 2016?

4) Is John Smith shown on the file as earning a commission?

Once this commission advance has been funded, you will receive a CDA signed by Jack Doe, Broker of Real Estate Broker Co, with instructions for disbursement of funds to Advance Commission Company upon the successful closing of this sale.

I love brokers and I don’t want to become a hindrance to their livelihoods. Perhaps the commission advance business has all the checks and balances in the world. But I have some questions:

1. I cannot always answer the above questions with accuracy. The name of the broker’s agency is often stated in the P&S, not the specific broker. I don’t know the relationship that the broker has with his/her agency and if the broker owes the agency for past due agency expenses. If I am not the escrow agent I cannot accurately represent that the deposit money has been “deposited”; I’ve been to more than one closing when I learned that the full deposit had not been paid.

2. We are already up to our necks in performing uncompensated services (everything from ordering insurance binders to contacting moving companies). We don’t need to add another.

3. A commission is not earned until and unless the closing occurs. I do not want to be part of a process that could result in a commission being advanced in a transaction that ultimately falls through. I expect that much finger pointing will follow; perhaps litigation. Perhaps there could be problems having the deposit released to the proper party if one of the brokers already spent the commission.

4. If a dispute arises, I do not want to become a witness, or an alleged co-conspirator to claims that (a) I should have advised the commission advance company that there were outstanding contingencies or other concerns with the pending transaction or (b) I breached a duty to a buyer or seller by participating in the commission advance because the advance interfered or delayed the release of the deposit when the transaction fell through.

Perhaps these concerns are just a reflection of my age. I also don’t like ride sharing apps, vacation rental apps, internet fantasy sports gaming, and electronic signatures on P&S agreements.

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

Taylor v. Martha’s Vineyard Land Bank Commission

By Caitlin E. Loftus

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

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

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

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

 Land Court Decision

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

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

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

SJC Decision  

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

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

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

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

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

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

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

By G. Emil Ward

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

This author’s response is simple: This is not so.

The case does not represent a sea change in landlord-tenant law. The case came out the way it should have under the present incarnation of M. G. L. c. 239, § 8A, the statute that was not properly applied by the Boston Housing Court to produce the Meikle decision in the trial court. While one can argue that Section 8A should be changed, Section 8A is not producing any worse results for landlords after this decision than it did before it was handed down. Here is why.

For many years, security deposit claims have been an integral part of almost every tenant's defenses that this author has ever faced under Section 8A. In Meikle, the SJC confirmed this. “The steady progression in the availability of tenant defenses, culminating in the elimination of conditions-based restrictions, confirms the Legislature’s intent to provide tenants with a broad set of defenses and counterclaims in the summary process action, including the defense asserted by the tenant in this case [alleging a violation of the security deposit statute, M.G.L. c. 186, § 15B].” Id., p. 213.

M. G. L. c. 239, § 8A allows the tenant to raise any “counterclaim or defense” arising out of the tenancy, such as a security deposit claim.  In a trial, an award under any such claim can be added to the tenant's damage award along with other damage awards, if any, and then matched against the unpaid rent found due to the landlord to determine if the tenant or landlord wins possession after setting one off against the other. This is what is usually known as the “pay over” provision.

For those of you unfamiliar with Section 8A's “pay over” provision, here is how it works. Under Section 8A, if after trial the landlord wins judgment for unpaid rent in the same amount of the tenant’s damages or less than the tenant’s damage award, (for say, a leaky radiator ignored by the landlord for months in winter) the tenant keeps possession and the landlord must pay to the tenant the balance the court found that is due to the tenant. M. G. L. c. 239, § 8A, fifth paragraph.

On the other hand, if the tenant wins an amount of money damages less than the landlord wins in unpaid rent, then the tenant has seven days in which to pay the difference between the rent found due and the damages won by the tenant into the court clerk’s office. If he pays that sum into court, the tenant retains possession. If not, the tenant loses possession. “Where a tenant prevails in a defense or counterclaim and is awarded damages in an amount less than the amount owed to the landlord, the statute provides that ‘no judgment shall enter until after expiration of the time for such payment and the tenant has failed to make such payment.’” Id., p. 213.

In Meikle, the trial judge found that the landlord won $3900 (three months' unpaid rent). The tenant won the return of the security deposit and unpaid interest: $1304.61 ($1300 security deposit, plus $4.61 unpaid interest= $1304.61).  The difference is, of course, $2595.39 that the tenant would have had to pay to the landlord through the court clerk's office to maintain possession. It is at this point that the trial court decision went off track.

For some reason not articulated in the decision, the judge failed to end the decision by offering the “pay over” opportunity, as has been the law for decades, to the tenant who would then have had the option to pay the difference in 7 days' time and retain possession, or not as she chose. The trial judge then awarded $2595.39 and POSSESSION to the LANDLORD in violation of the statute.

That is the key part of the decision that was appealed by the tenant, namely, the judge's failure to state in the decision that now that the damages had been found for both sides and set off against one another, the tenant was to be offered the opportunity to pay the difference between unpaid rent of $3900 and her judgment for damages of $1304.61, or $2595.39, and thus retain possession. Of course, if the tenant had been given the “pay over” opportunity in the decision and failed to make the payment in seven days, judgment for possession would have issued for the landlord, Mr. Meikle. While Mr. Meikle was pro se in the appellate court, landlord groups filed an amicus brief as to the issue that concerned them most which is described below.

The interesting part, and the reason the author believes landlords were so upset with the decision is this. In the appellate brief drafted by the Harvard Legal Aid Bureau (HLAB) who represented the tenant, the brief tracks the SJC’s arguments and the current law as the author understood the applicable law until its conclusion. In its “Conclusion” section, HLAB goes out of bounds and asks the SJC to ignore application of the “pay over” provision that might benefit the landlord, and just grant possession to the tenant. “This Court should vacate the judgment for possession to the Landlord, award possession of the premises to the Tenant, and hold that G.L. c. 239, § 8A provides a defense for possession when there are violations of the security deposit statute, c. 186, § 15B.” Brief of Appellant at 23, Meikle v. Nurse, 474 Mass. 207 (2016) (SJC-11859).

The SJC reversed the order for possession to the landlord and remanded for entry of an order “providing notice to the tenant of the right to retain possession in compliance with G. L. C. 239, § 8A, fifth paragraph.” Id., p. 214.

However, to clear the air regarding the reach of the decision, the SJC stated that a security deposit counterclaim would not provide the tenant with a right to possession, “in perpetuity” if she made timely payment of the amount found due. Id., p. 214. “The statute does not impose an obligatory tenancy on the landlord.” Id., p. 214.

Please note the “pay over” provision may only be used by tenants who are evicted for nonpayment or in no-fault evictions. On its face, the statute bars its use in defense of possession by tenants who are evicted for fault, i.e., breach of the tenancy terms.  The statute does not consider nonpayment of rent to be a “fault” ground.

That's it.  The Supreme Judicial Court simply rectified that error. It did not make new law. In this author’s opinion, no big deal. Just another expensive and time-consuming security deposit case. But, not a sea change in the law.

Emil Ward chairs the Association’s Landlord/Tenant Law Section.  He can be contacted by email at gemilw@aol.com.

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

By G. Emil Ward

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

This author’s response is simple: This is not so.

The case does not represent a sea change in landlord-tenant law. The case came out the way it should have under the present incarnation of M. G. L. c. 239, § 8A, the statute that was not properly applied by the Boston Housing Court to produce the Meikle decision in the trial court. While one can argue that Section 8A should be changed, Section 8A is not producing any worse results for landlords after this decision than it did before it was handed down. Here is why.

For many years, security deposit claims have been an integral part of almost every tenant's defenses that this author has ever faced under Section 8A. In Meikle, the SJC confirmed this. “The steady progression in the availability of tenant defenses, culminating in the elimination of conditions-based restrictions, confirms the Legislature’s intent to provide tenants with a broad set of defenses and counterclaims in the summary process action, including the defense asserted by the tenant in this case [alleging a violation of the security deposit statute, M.G.L. c. 186, § 15B].” Id., p. 213.

M. G. L. c. 239, § 8A allows the tenant to raise any “counterclaim or defense” arising out of the tenancy, such as a security deposit claim.  In a trial, an award under any such claim can be added to the tenant's damage award along with other damage awards, if any, and then matched against the unpaid rent found due to the landlord to determine if the tenant or landlord wins possession after setting one off against the other. This is what is usually known as the “pay over” provision.

For those of you unfamiliar with Section 8A's “pay over” provision, here is how it works. Under Section 8A, if after trial the landlord wins judgment for unpaid rent in the same amount of the tenant’s damages or less than the tenant’s damage award, (for say, a leaky radiator ignored by the landlord for months in winter) the tenant keeps possession and the landlord must pay to the tenant the balance the court found that is due to the tenant. M. G. L. c. 239, § 8A, fifth paragraph.

On the other hand, if the tenant wins an amount of money damages less than the landlord wins in unpaid rent, then the tenant has seven days in which to pay the difference between the rent found due and the damages won by the tenant into the court clerk’s office. If he pays that sum into court, the tenant retains possession. If not, the tenant loses possession. “Where a tenant prevails in a defense or counterclaim and is awarded damages in an amount less than the amount owed to the landlord, the statute provides that ‘no judgment shall enter until after expiration of the time for such payment and the tenant has failed to make such payment.’” Id., p. 213.

In Meikle, the trial judge found that the landlord won $3900 (three months' unpaid rent). The tenant won the return of the security deposit and unpaid interest: $1304.61 ($1300 security deposit, plus $4.61 unpaid interest= $1304.61).  The difference is, of course, $2595.39 that the tenant would have had to pay to the landlord through the court clerk's office to maintain possession. It is at this point that the trial court decision went off track.

For some reason not articulated in the decision, the judge failed to end the decision by offering the “pay over” opportunity, as has been the law for decades, to the tenant who would then have had the option to pay the difference in 7 days' time and retain possession, or not as she chose. The trial judge then awarded $2595.39 and POSSESSION to the LANDLORD in violation of the statute.

That is the key part of the decision that was appealed by the tenant, namely, the judge's failure to state in the decision that now that the damages had been found for both sides and set off against one another, the tenant was to be offered the opportunity to pay the difference between unpaid rent of $3900 and her judgment for damages of $1304.61, or $2595.39, and thus retain possession. Of course, if the tenant had been given the “pay over” opportunity in the decision and failed to make the payment in seven days, judgment for possession would have issued for the landlord, Mr. Meikle. While Mr. Meikle was pro se in the appellate court, landlord groups filed an amicus brief as to the issue that concerned them most which is described below.

The interesting part, and the reason the author believes landlords were so upset with the decision is this. In the appellate brief drafted by the Harvard Legal Aid Bureau (HLAB) who represented the tenant, the brief tracks the SJC’s arguments and the current law as the author understood the applicable law until its conclusion. In its “Conclusion” section, HLAB goes out of bounds and asks the SJC to ignore application of the “pay over” provision that might benefit the landlord, and just grant possession to the tenant. “This Court should vacate the judgment for possession to the Landlord, award possession of the premises to the Tenant, and hold that G.L. c. 239, § 8A provides a defense for possession when there are violations of the security deposit statute, c. 186, § 15B.” Brief of Appellant at 23, Meikle v. Nurse, 474 Mass. 207 (2016) (SJC-11859).

The SJC reversed the order for possession to the landlord and remanded for entry of an order “providing notice to the tenant of the right to retain possession in compliance with G. L. C. 239, § 8A, fifth paragraph.” Id., p. 214.

However, to clear the air regarding the reach of the decision, the SJC stated that a security deposit counterclaim would not provide the tenant with a right to possession, “in perpetuity” if she made timely payment of the amount found due. Id., p. 214. “The statute does not impose an obligatory tenancy on the landlord.” Id., p. 214.

Please note the “pay over” provision may only be used by tenants who are evicted for nonpayment or in no-fault evictions. On its face, the statute bars its use in defense of possession by tenants who are evicted for fault, i.e., breach of the tenancy terms.  The statute does not consider nonpayment of rent to be a “fault” ground.

That's it.  The Supreme Judicial Court simply rectified that error. It did not make new law. In this author’s opinion, no big deal. Just another expensive and time-consuming security deposit case. But, not a sea change in the law.

Emil Ward chairs the Association’s Landlord/Tenant Law Section.  He can be contacted by email at gemilw@aol.com.