There has been a sea change in the way traditional real estate offices treat the Massachusetts Mandatory Licensee Consumer Relationship Disclosure. (Generally called "Agency Disclosure Form.") I ran across the change, twice, in the past week.
Here's the change: Larger, designated agency firms have been asking me and my agents to send a copy of the Agency Disclosure Form. I find this a curious practice. Why does the other company care if my agents are doing the right thing? My agents work under my license and I am responsible if they do not provide required disclosures. However, it is no breach of confidential information for us to comply with the listing agent's request, so we have been sending them when we are asked.
Recently, two of my agents did not send the form with the offer, and they were not asked for it during the transaction. It was only when the listing agents reviewed their final file, did the agents notice that the Agency Disclosure form was not there. As the broker -- and the person who was by the phone that day -- I got the calls: "Can you send me the Agency Disclosure Form, your agent didn’t send it with the offer." So, I asked the agent why their company needs proof that my company is doing the right thing. She (she's an agent, not a broker) said it was because the auditors are requiring proof that all parties have the opportunity for representation.FULL ENTRY
We know a lot of folks on this blog have foreclosure fatigue, but the Supreme Judicial Court has a busy Fall Term with several important foreclosure cases on the docket. Here’s a quick summary from Attorney Richard Vetstein:
HSBC Bank v. Jodi Matt (SJC-11101) The SJC is considering whether a mortgage servicer holding a securitized mortgage has standing to even begin a foreclosure action in the Land Court under the Service-members Civil Relief Act–one of the first steps in the Massachusetts foreclosure process. I wrote about this case in a prior post here. This ruling will affect just about every conventional mortgage foreclosure in the state. The lower court Land Court opinion can be read here. The court asked for friend-of-the-court briefs, and the Real Estate Bar Association filed a brief supporting the foreclosing lenders. Glenn Russell’s brief for the appellant Jodi Matt can be read here.FULL ENTRY
Oral arguments were held in early September, but unfortunately the webcast is unavailable. One of my sources told me that the justices were very active and peppered both attorneys with lots of questions.
Following the recent Eaton v. FNMA case, which held that a mortgage servicer may foreclosure upon a showing of proper agency and authority, I predict that the Court will ultimately hold that servicers and lenders holding rights to securitized mortgages have legal standing to start the Service-members Civil Relief Act proceeding, even if they merely hold a contractual right to the actual mortgage. The most compelling rationale for such a ruling is that the only purpose of the Service-member proceeding is to ascertain whether the borrower is in active military service. It is not intended to be a forum to litigate issues relating to the propriety of securitized mortgage transfers and contractual standing.
Attorney Richard Vetstein brings us an update on changes at Fannie Mae.
Responding to lender, condominium association and consumer outcry that the existing FHA condominium lending guidelines are too strict, the Federal Home Administration (FHA) has announced a round of changes which will hopefully make it easier for borrowers to qualify for FHA condo loans. The full FHA announcement can be found here.FULL ENTRY
While some of the changes are a step in the right direction, I think overall they are a mixed bag, as FHA left some of the most onerous provisions intact. I’m skeptical that these new changes will have a major impact on condominium sales, but of course, any loosening of the strict requirements is a positive move.
Condo fee delinquency rule increased to 60 days overdue
FHA is softening its stance on delinquent monthly condo fees and home owner association (HOA) dues. FHA is now allowing up to 15 percent of a project’s units to be 60-days delinquent on condo fees, up from just 30 days delinquent under the prior rule.
Expanded investor purchasing allowed
Under the new rules, investors can come in and buy more units in a project than they could previously. They can now buy up to 50 percent of the project units, up from just 10 percent before, but with an important caveat: the developer must convey at least 50 percent of the units to individual owners or be under contract as owner-occupied.
Attorney Richard Vetstein brings us another real estate court case. Discrimination and church doctrine crash head-to-head in a case about two men who wanted to buy a church property to build an events center.
James Fairbanks and Alain Beret, married business partners from Sutton, had been searching for the perfect property for nearly two years when they discovered Oakhurst, an aging mansion on 26 beautiful acres in Northbridge. The former retreat center, which was affiliated with the Diocese of Worcester and had been on the market for some time, would be the ideal spot for their next venture: an inn that would host weddings and other big events, as reported by the Boston Globe. When the Diocese of Worcester unexpectedly dropped out of negotiations with them in June, Fairbanks and Beret were shocked — and flummoxed. Then, they say, a church attorney inadvertently forwarded their broker an e-mail from Monsignor Thomas Sullivan, chancellor of the diocese, advising a church broker that he was no longer interested in selling to Fairbanks and Beret “because of a potentiality of gay marriages” there.FULL ENTRY
Sullivan wrote: “I just went down the hall and discussed it with the bishop. Because of the potentiality of gay marriages there, something you shared with us yesterday, we are not interested in going forward with these buyers. I think they’re shaky anyway. So, just tell them that we will not accept their revised plan and the diocese is making new plans for the property. You find the language.”
The couple has filed what could be a landmark lawsuit in Worcester Superior Court against Sullivan, the bishop, the church’s real estate agent, and the nonprofit retreat center, the House of Affirmation, alleging they discriminated against Beret and Fairbanks on the basis of sexual orientation in the course of a real estate negotiation, violating state law. A copy of the Complaint can be found on my outside blog here.
Here’s a peculiar thing that one of my clients is facing.
He bought a second and third floor condo in a two-family house. The condo downstairs is rented to a stable, pleasant couple. He met with the other owner before buying and was comfortable with the situation. The owner downstairs said that she would be selling down the road. Down the road happened; she approached him about selling the downstairs.
Then a problem cropped up: Fannie Mae (FNMA) does not approve loans for a buyer who wants to own both condos in a two-family house. Fannie Mae would be perfectly happy approving a loan on this exact property, were it a two-family house. My client would qualify to buy it as a two-family, but not as two condos. Since he does not want to re-do the legal work to change the building back to a legal two-family, he is going to get his loan from a non-FNMA lender.
My client is daunted. It is a two-family house, physically, but he cannot purchase it with a Fannie Mae loan because it is now legally two condos. He would own the same exact house on the same exact piece of land.
My client wrote:
[The portfolio lender] can work with me, but it would be in the bank's portfolio, not a Fannie Mae approved deal.FULL ENTRY
The interesting thing I learned is that Fannie Mae does not sponsor mortgages where owner of one unit in a 2-family then buys other unit of 2-family. I asked [The portfolio lender] how this was different than one person buying a 2-family. [The portfolio lender] agreed it was a mystery with no reasonable answer --- but it seemed like she hadn't really considered it until I pressed her… But I am also curious if you understand Fannie Mae's position on my buying a 2-family (OK) vs. buying both units of a 2-family (not OK)
Attorney Richard Vetstein has the next thing about foreclosure and the law. Today, he discusses Martha Coakley's fight with the Fed over the new Massachusetts Foreclosure Act.
Demands Fed’s compliance with new loan modification lawFULL ENTRY
Attorney General Martha Coakley is picking a very public fight with federal mortgage giants, Fannie Mae and Freddie Mac, in the wake of the new Massachusetts Foreclosure Prevention Act earlier in August. The new law requires that lenders first explore loan modifications before starting foreclosure proceedings. Fannie and Freddie control approximately 60% of all U.S. residential mortgages.
In a letter broadcast to the press last week, she demands that “Fannie Mae and Freddie Mac, like all creditors, to comply with these statutory obligations as they conduct business in Massachusetts. These loan modifications are critical to assisting distressed homeowners, avoiding unnecessary foreclosures, and restoring a healthy economy in our Commonwealth,” Coakley said. Stefanie Johnson, a spokeswoman for the Federal Housing Finance Agency, said, “We are reviewing the letter and will respond soon.”
The fact that AG Coakley had to write the letter begs the question. Will Fannie and Freddie comply with the new Massachusetts foreclosure law? Maybe not, if past performance is any indicator of future results.
I depend on Attorney Richard Vetstein for the news about foreclosure and the law. Today, he discusses House Bill 4323.
On August 3, 2012, Massachusetts Governor Deval Patrick signed into law what’s been called the new Foreclosure Prevention Law. The text of the law can be found at House Bill No. 4323. The new law makes significant changes to existing foreclosure practices, and also attempts to clean up the recent turmoil surrounding defective foreclosure titles after the U.S. Bank v. Ibanez and Eaton v. FNMA rulings, an issue for which I’ve been advocating for years. It goes into effect on Nov. 1, 2012. A quick summary is as follows with details below:FULL ENTRY
• New requirement that mortgage assignments be recorded
• New mandatory requirement to offer loan modifications and mediation to qualified borrowers
• New Eaton foreclosure affidavit confirming ownership of note/mortgage loan
• Protection for third party buyers of foreclosed properties
Mortgage assignments must be recorded
Going forward, a foreclosure may not proceed unless the entire chain of mortgage assignments from the original mortgagee to the foreclosing entity is recorded. This is a statutory codification of the recommendation of the SJC in U.S. Bank v. Ibanez case, and should provide some well-needed clarity for titles. Under the new law, no foreclosure notice will be valid unless “(i) at the time such notice is mailed, an assignment, or chain of assignments, evidencing the assignment of the mortgage to the foreclosing mortgagee has been duly recorded in the registry of deeds . . . and (ii) the recording information for all recorded assignments is referenced in the notice of sale required in this section.”
Unfortunately, the new law does not address defective foreclosure titles created before the Ibanez decision, as we were hoping. Accordingly, folks who are still waiting for legislative help to cure their defective foreclosure titles may be left without a remedy.
Attorney Richard D. Vetstein's client has his day in court, in a case that was filed in 2009. Here's the story from our Attorney Vetstein:
I couldn’t blog last week as I was in the middle of a week-long bench trial in an adverse possession case in Superior Court. (About 50 percent of my practice is litigation). Now that the trial is over, I wanted to share some tidbits from the trial. (For confidentiality reasons, I will not disclose the name of the case or the county).FULL ENTRY
The case was a fight over an approximately 3,000 s.f. pie-shaped area of land between two homes in a suburban town. The dispute arose after my client, “Ms. Jones,” surveyed her property in anticipation of doing an addition project. The survey unfortunately revealed that a portion of the driveway and nearby retaining wall owned by her next door neighbor, “Mr. and Mrs. Smith,” encroached the side lot line. Efforts to resolve the encroachment dispute were unsuccessful, and the Smiths ultimately filed the adverse possession lawsuit, claiming that they had used not only the small encroached area, but the much larger pie shaped area of Ms. Jones’ side yard, for more than 40 years.
Tracking down old owners
Since the Smiths were claiming adverse possession going back to the 1960’s, the first and most important thing we had to do was to track down all the old owners of my client’s property and put together an accurate historical timeline of the property. Including my client, there were seven owners of her property and we had to cover 6 decades of time. This was the only way my client could mount a defense against the Smith’s claim, since they have owned their property since the 60’s. One of the old owners lived in Florida and came up to testify. One of the “highlights” was him testifying about having large pig roasts and his guests sitting on a particular outcropping, which he affectionately called “lover’s rock.” Other former owners testified, and one particularly ornery lady was not exactly thrilled to be dragged into court and yelled as much on the stand.
Where is the line between taking care of the property and leaving the tenants alone to enjoy the property? One of the sore-points for tenants is that some landlords are not respectful of the tenant’s right to “quiet enjoyment” of their space. Landlords come in too frequently, do not give notice, and do not cooperate to enter at convenient times.
On the other side of the argument, landlords complain about tenants damaging the property or locking them out.
Your lease is the guiding document for what a landlord or tenant can or cannot do. This written agreement is the fall-back position for any dispute. Most people use a lease that was written by an attorney. Unless the lease was written by a hack or is outdated, it will conform to current law. I took a look at the lease that I use: There is a clause that allows the landlord to enter the apartment to inspect, make repairs, and show to other tenants, buyers, appraisers and such. It allows the landlord to enter to inspect and to charge tenants if they neglect the property and cause a need for repairs. There is also a clause holding the landlord responsible for keeping the locks in good order. Also, it specifically requires the tenants not to change the locks and to always provide that the landlord can get into every room.
That’s the rules, according to the lease. Read your lease! I am always surprised by how few of my tenants every have read the lease. I suspect that some landlords use boilerplate and don’t read them, either.
We are in the heart of rental season. Rentals aren’t just for students. Families rent, too, or at least try to. Today, I republish information from Attorney Richard D. Vetstein about family-unfriendly landlords.
In 2011, the Attorney General sued a Metro-Boston landlord for evicting or threatened to evict tenants with young children, renting apartments containing lead paint to tenants with young children, failing to abate lead hazards in those apartments, failing to provide proper notice of lead hazards to his tenants, and making misrepresentations regarding the presence of lead paint in his apartments. The complaint further alleges that the landlord retaliated against tenants when they reported him for violations of the law.FULL ENTRY
Unfortunately, many Greater Boston landlords aren’t prosecuted by the AG’s office and are allowed to impose family unfriendly and unlawful housing practices like advertising that “Unit Not Deleaded.” The ad, while albeit truthful, it might as well read “Children Under 6 Not Wanted.”
Attorney Richard D. Vetstein discusses the influence of local civic associations on zoning.
If you have ever had to deal with zoning or permitting in the City of Boston, you have probably come across local neighborhood “civic associations” in which the fate of your project or permit may unwittingly rest. There is the Beacon Hill Civic Association, the Allston-Brighton Civic Association, and the St. Marks Area Civic Association (Dorchester), to name a few. Each neighborhood or district has them. They are constituted by various neighborhood activists, watch-dogs, and concerned residents, etc. Many board members go back decades and some groups unfortunately lack younger members representing the new generation of city dwellers.FULL ENTRY
You will rarely find mention of these groups in the Boston Zoning Code, however, their influence looms large. When you file for a permit or propose a new project in Boston, the City or BRA will tell you that you must first present your application or project before whatever local civic association has “jurisdiction” over the neighborhood. These groups sit almost as a second zoning board of appeals, except without any rules, regulations or guidelines as to what they may or may not “approve” or “deny.” Now to their credit, the associations typically have a good sense as to what’s appropriate for the neighborhood and these folks care deeply about their areas. But some members are outwardly hostile to new development and some are even obsessed with conspiracy theories of what developers have planned for their neighborhoods.
It's a day at the beach for Attorney Richard D. Vetstein. Today, he tells us what is considered trespassing on "Private Beachs" in Massachusetts.
No Massachusetts summer is complete without some good times spent on the beach, be it on Cape Cod, Ipswich, or Duxbury. But what happens when you are taking a nice stroll on the beach and hit one of those “No Trespassing — Private Beach” signs? Can you continue walking? Can you walk on the water’s edge or wet sand? What about swimming, fishing or boating? Massachusetts beach access law is rather complicated and archaic.FULL ENTRY
The Colonial Ordinances of 1641-47
Massachusetts has a unique set of laws giving coastal property owners more extensive private rights to beachfront area than other states. In most coastal states, there is unlimited public access to beachfront areas, and the public can walk unfettered along the beach. In Massachusetts, however, that is not the case. Here, private coastal property owners own the beach area adjacent to their properties down to the mean low tide area, with some limited public access exceptions. This is how the concept of “private” beach areas has been established.
The origin of this law dates back to the Mayflower days. In order to facilitate coastal development, under the Colonial Ordinances of 1641-47, the Massachusetts Bay Colony conveyed most, but not all, rights of ownership to the area between the average or mean high water mark and the low water mark (up to 100 “rods,” or 1,650 feet, from the high water mark) to all private coastal landowners. The land—but not the water—between the two tide marks is known as “private tidelands.” This typically includes all of the wet sand area on most non-public beaches.
The general rule is that with some limited exceptions explained below, beach-goers in Massachusetts cannot access any private beach area down to the low tide water mark without the permission of the beachfront property owner.
Limited Public Beach access between low and high tide area for “fishing, fowling and navigation”
The Colonial Ordinance reserved three specific and important rights of public use within private tidelands for “fishing, fowling and navigation.” Those permissible uses have been broadly interpreted by Massachusetts courts to include: (1) the right to fish or to collect shellfish on foot or from a vessel; (2) the right to navigate, including the right to float on a raft, windsurf, or sail; and (3) the right to hunt birds for sport or sustenance, on a boat or on foot. (Although there is no court decision on point, the Attorney General maintains that this right also covers bird-watching.)
Last night a microburst passed through east Arlington. A microburst is a storm with intense down drafts and high winds. It came during rush hour. It was a mess. Trees came down in large number, blocking Mass Ave and some side streets. There was flash flooding, and power was out for some. For access to first-hand accounts, The Patch has them.
I was writing at my desk when it hit. The heavy rain was pelting my windows horizontally. Some tree limbs in my yard came down. It only lasted 15 minutes or so. I read later that a large tree came down a couple of blocks away, blocking the road.
The insurance summary is this:
The short answer is that, legally speaking, your neighbor is not liable for a healthy tree falling down during a major storm event. That is considered an “Act of God” for which no one is legally liable… So, you will have to make a claim under your homeowner’s insurance policy for the damage caused by the neighbor’s tree.FULL ENTRY
Attorney Richard D. Vetstein is here today with an overview of Massachusetts law about cutting down trees.
In a tragic case out of Somerset got me thinking about our tree cutting laws. As reported by Massachusetts Lawyers Weekly, a woman’s estate has recovered a $150,000 wrongful death settlement after she dropped dead when her neighbor cut down a row of trees which she and her husband planted 40 years ago. With all due respect to the dearly departed, those trees must have been quite sentimental!FULL ENTRY
Disputes over tree pruning and cutting are very common in Massachusetts. Indeed, Massachusetts has one of the oldest tree cutting and trimming laws on the books which provides for triple damages for any illegal cutting:
A person who without license willfully cuts down, carries away, girdles or otherwise destroys trees, timber, wood or underwood on the land of another shall be liable to the owner in tort for three times the amount of the damages assessed therefor; but if it is found that the defendant had good reason to believe that the land on which the trespass was committed was his own or that he was otherwise lawfully authorized to do the acts complained of, he shall be liable for single damages only.
Nevertheless, at common law, a neighbor may remove branches extending over a shared property line onto his or her own property. Also, the neighbor has no liability for roots growing into your yard and causing damage. Massachusetts law does not allow a person to cross or enter a neighbor’s property for these purposes without the neighbor’s consent, nor to remove any branches or other vegetation within the confines of the neighbor’s property. You can trim the branches and roots back, but you cannot kill the tree. This is called the “Massachusetts Rule.”
Andrea’s question from last week was about her out-of-pocket attorney’s fees. The discussion went quickly to Title Insurance, so I would like to restate the question:
Have you had the experience of an attorney padding the buyer’s side of the attorney bill, or padding the fee to the buyer that appears on the HUD-1? (When you answer, please note if you bought before or after the GFE changes in 2010.)
When I spoke to lenders that I work with, they tell me that they require that the closing attorney accept the stated fees on the GFE for the closing attorney line item. Period. So, there should be no change there from what a buyer expects. So, how does an attorney charge more, out of the buyer’s pocket?FULL ENTRY
Get ready to plant a for-sale sign on your lawn. Wall Street is now predicting a big surge in housing prices is right around the corner.
Analysts at JP Morgan Chase are forecasting a 12 percent jump in home prices across the country over the next four years.
Interesting prediction from a bank that just blew $5 billion in an epic trading blunder, but that's a story for another day.
Attorney Richard D. Vetstein describes changes in what is legal documentation of a deal, in the electronic age.
Massachusetts courts have been grappling with the question of “when is a deal a deal” for a long time. With the vast majority of communication in real estate now done via email and other electronic means, it was just a matter of time before a court was faced with the question of whether and to what extent e-mails can constitute a binding and enforceable agreement to purchase and sell real estate. The real estate community has been waiting a few years for a case like this to come down, and now it’s here. In Feldberg v. Coxall (May 22, 2012), Superior Court Justice Douglas Wilkins ruled that a series of e-mail exchanges between the buyer’s and seller’s attorney, the last one attaching a revised, but unsigned, offer to purchase, arguably created a binding agreement entitling the buyer to a lis pendens (notice of claim). This is also one of the first cases that I am aware of which applies the new Massachusetts Uniform Electronic Transactions Act law to preliminary negotiations in real estate deals.FULL ENTRY
This is a very interesting and important decision for anyone dealing in residential real estate in Massachusetts. The immediate take-away is that now anything sent in an e-mail can potentially create a binding deal, even if no offer or purchase and sale agreement is ultimately signed.
Attorney Richard D. Vetstein is here on a Monday to explain the news about the SJC ruling on Easton versus FNMA.
The Massachusetts real estate community has been waiting 8 long months for a decision from the Massachusetts Supreme Judicial Court (SJC) in the much anticipated Eaton v. Federal National Mortgage Association case. Link The decision came down Friday, and now that the dust has settled, I don’t think there is any question that lenders and the title community have been given a judicial Maalox.
Unity endorsed, a foreclosing lender must “hold” both note & mortgage
The first issue considered by the court was the fundamental question of “unity” urged by the Eaton side: whether a foreclosing mortgagee must hold both the promissory note (underlying indebtedness) and the mortgage in order to foreclose. After reviewing Massachusetts common law going back to the 1800′s, the Court answered yes there must be unity, reasoning that a “naked” mortgagee (a holder of a mortgage without any rights to the underlying indebtedness) cannot foreclose because they don’t hold (or more accurately, cannot prove they hold) the underlying indebtedness. If the Court stopped there, lenders and MERS would have been in big trouble. But the Court significantly limited the effect of this decision.
Disaster averted: ruling given prospective effect
Swayed by the arguments from the Massachusetts Real Estate Bar Association that retroactive application of a new rule would wreak havoc with existing real estate titles in Massachusetts, the SJC took the rare step of applying its ruling prospectively only. As Professor Adam Levitin (who drafted an amicus brief) noted on his Credit Slips blog, this “means that past foreclosures cannot be reopened because of this case, so the financial services industry just dodged billions in liability for wrongful foreclosures and evictions, and the title insurance industry did as well.” So going forward, lenders must establish unity of both note and mortgage, but past foreclosures are immune from challenge.
Attorney Richard D. Vetstein goes a bit off-topic today to discuss legislation that affects people with inflammatory bowel disease.
Rep. Kafka (D-Stoughton) has filed the “Restroom Access” bill, which the House initially approved this week, on behalf of a Sharon girl with an intestinal disorder who found herself in uncomfortable situations on shopping trips with her mom. “When the problem arises, they need to get to a bathroom quickly and, in some cases, there are no public restrooms,” he said. The new legislation, if passed, will require Massachusetts retailers and restaurants to open their private bathrooms to sufferers of inflammatory bowel diseases — and fine them $100 if they don’t. The law would apply only to people with Crohn’s disease, ulcerative colitis or any other medical condition requiring immediate access to a bathroom, as well as those who wear ostomy bags.FULL ENTRY
Retailers opposed, but why the big stink?
The Restroom Bill is unfortunately causing a major stink with retailers. “Why single out only retailers?” Retailers Association of Massachusetts President Jon Hurst told the Boston Herald, “Why not banks, why not office buildings, why not government buildings? I walk into the State House and see a lot of locked bathrooms.” Donna DePrisco, vice president of Boston’s DePrisco Diamond Jewelers, said legislative action just isn’t necessary.
The bill has been tweaked to address retailers’ concerns. It applies only to stores with at least two people working, so cash registers aren’t left unmanned; it absolves retailers from liability; and the restrooms must be in accessible areas that don’t pose health or safety risks to customers.
Today, Attorney Richard D. Vetstein gives us a legal definition and an example in the news to ponder.
The old Robert Frost saying goes “Good fences make for good neighbors.” But a neighbor can quickly turn from good to bad when a they maliciously construct a “spite fence” on the property line. And that includes Sarah Palin who installed this 14 feet monstrous fence at her Wasilla, Alaska home.FULL ENTRY
What is an illegal spite fence?
Spite fences are those which neighbors put up extremely close to the other neighbor’s property for the purpose of annoying or inconveniencing the neighbor, and not for any legitimate other reason. In certain circumstances in Massachusetts, courts can rule that certain types of fences are illegal “spite fences,” and order that they be taken down, decreased in height or award damages to the complaining neighbor.
Under the Massachusetts Spite Fence Law (Gen. Laws ch. 49, § 21, first passed in 1887) a fence is an illegal “spite fence” if:
A fence or other structure in the nature of a fence which unnecessarily exceeds six feet in height and is maliciously erected or maintained for the purpose of annoying the owners or occupants of adjoining property….
Can the City of Boston ban satellite dishes? Attorney Richard D. Vetstein looks at this question, from a legal angle.
Menino targets eyesore satellite dishes Consistent with his reputation as the “urban mechanic,” Mayor Thomas M. Menino, along with the City Council, want to pass a new ordinance to clean satellite dish clutter on residential properties in Boston. As reported by the Globe, the proposal would require the removal of all obsolete satellite dishes and ban new installations from facades and other walls facing the street, unless an installer can prove there is no other place to get a signal. Dishes would have to be placed on roofs, in the rear, or on the sides of buildings. East Boston Councilor Salvatore LaMattina, who has spearheaded the effort, says that this ordinance will help “save the character of our neighborhoods.’’FULL ENTRY
Ordinance may run afoul of FCC rules
The proposed ordinance, however, may face legal challenge by the satellite dish industry and affected satellite subscribers. The Federal Communications Commission (FCC) has ruled that state or local laws are invalid if they unduly impair the right of a subscriber to receive satellite programming on a one meter dish installed on property within owner or renter’s exclusive use or control. For a person living in a multi-dwelling unit, an area such as a balcony, patio or garden not shared with other tenants would be considered property within the individual’s exclusive control. Under the FCC rule, the only two situations where restrictions are permissible is if (1) the restriction is necessary for a clearly defined, legitimate safety objective; or (2) it is necessary to preserve a historic building.
Today, Sam Schneiderman, Broker-owner of Greater Boston Home Team, discusses the issues involved when one property is partially located in two different towns. After blogging weekly on BREN for three years, Sam now posts here on the first Monday of each month.
It may sound unique, but it is more common than you would expect to find one parcel of real estate that has a town or city line running through some part of it. While it is probably more common to find the town line running through a large parcel of land it can also occur on even the smallest lots.
When two parts of the same parcel are in different cities or towns, each municipality taxes the owner on the portion of the property that is located in their town. That is simple enough if the property in one of the towns is land and buildings are in the other town. It is also simple when a garage is in one town and the house is in another.
What happens when the town line goes through one of the buildings?
In that case, I have seen the municipalities calculate the percentage of the building that is in their town and tax the owner on that percentage. While that is a straightforward way of taking care of the taxes, there should be some additional issues of concern for prospective buyers of such a property:
If the town line goes through the house, what schools would children living in the house go to?
I once read about a town that required a child to sleep in the bedroom that was located within their town in order for the child to attend school in their town.
On the other hand, I am aware of a house with staircases in Brookline and the rest of the house in Boston. My understanding is that children can attend either the Boston or Brookline schools.FULL ENTRY
Attorney Richard D. Vetstein discusses a case concluded yesterday about another kind of underwater homeowner.
In one of the more important homeowner’s insurance cases decided in recent memory, the SJC considered what is covered under a standard Massachusetts homeowner’s insurance policy when rain, snow melt and runoff from the outside create damage to the inside of a home. The case is Boazova v. Safety Insurance Co., SJC-10908 (May 29, 2012).FULL ENTRY
The Court ruled that even though significant hidden water seepage through foundation cracks caused a kitchen floor to turn into a “spongy and mushy” mess, there was no coverage for the claim because the water which originally caused the damage originated from outside the home in the form of rain and snow melt, rather than inside the home, like a burst pipe. This ruling unfortunately puts to rest what most homeowners who have suffered a water damage claim know already: if the internal water damage is caused from the outside of the house, like rain, snow or even ice dams, it’s likely not covered.
Severe wood rot discovered
While undertaking a kitchen renovation project, the homeowner discovered severe deterioration of the wooden sill plate that rested on top of the concrete foundation at the base of the home’s rear wall, as well as of the adjoining floor joists and wall studs. The kitchen floor and sub-floor was moist, spongy and falling apart. The homeowner’s expert engineer opined that because the concrete patio was poured directly against the house, water and moisture migrated down from the sill plate, below grade to the foundation, causing the water damage. There was no dispute that the origin of the water infiltration and seepage was from outside elements such as rain, sleet and snow melt. The insurance company denied coverage based on the policy’s exclusion for damage caused by “surface water,” and this lawsuit resulted.
Attorney Richard D. Vetstein brings you the second part of his discussion. Are you ready to take action to support these pending bills?
The vast majority of the laws protecting tenants were passed in the 1970’s when rental housing was far more problematic than it is now in 2012. Unfortunately, these draconian laws disproportionately hurt the small property owners who own over 80 percent of the rental stock in Massachusetts. Laws which make investing and managing rental property hurt the economy and result in higher rents. Due to political pressure from tenant activists and liberal groups, lawmakers have been reluctant to level the playing field.FULL ENTRY
There are several bills pending at the State House which will provide landlords with more incentive to own rental property in Massachusetts, starting with a rent escrow bill.
Massachusetts is one of the minority of states which does not have some form of rent escrow law. The need for one is absolutely critical because without it landlords incur large losses when the tenant’s defensive claims of “bad conditions” turn out to be minor, nonexistent or, worse yet, the result of intentionally inflicted damage to the property by the tenant in order to live rent-free.
A mandatory rent escrow law would require any tenant who is claiming rent withholding to pay the withheld rent to a local court month by month until code violations are repaired. After repairs are done, either the landlord and tenant agree on how the escrowed rent should be divided, or a judge orders a fair settlement. In most cases, the owner will get back most of the withheld escrowed rent. But the most important impact of a mandatory rent escrow law is that those nonpaying tenants who do not escrow can be promptly evicted for nonpayment of rent. Although nonpayment evictions will still take about three months, and owners will lose about three months of rent, much-longer-delayed evictions and the free rent trick will be stopped. This should be a no-brainer.
Today Attorney Richard D. Vetstein begins a two-part discussion of the state of law regulating residential rental properties and what he thinks of them.
For landlords, navigating Massachusetts landlord-tenant law is like walking barefoot through a IED-filled field in Afghanistan. At some point, you’ll likely blow off a leg. Massachusetts has a well-deserved reputation of being one of the most unfriendly places to own rental property. Allow me to outline just a sampling of these Draconian laws and the penalties for landlords’ non-compliance:FULL ENTRY
• Breach of implied warranty of habitability: The first thing a savvy tenant will do after receiving an eviction notice is call the board of health to get the owner cited for code violations. Any violation, however minor, effectively enables the tenant to live rent-free during the case by withholding rent, and the owner will be compelled to make the necessary repairs while the eviction is pending. There have been many instances where tenants have intentionally inflicted property damage to claim code violations. Other penalties: reduction or elimination of rent owed; tenant cannot be evicted; triple damages; payment of tenant’s attorneys’ fees.
• Breach of quiet enjoyment: This is another tenant favorite claim. It used to be for when slumlords would shut off utilities to tenants, but that rarely happens anymore. I’ve seen this used repeatedly when tenants are “inconvenienced” by landlords’ repeated attempts to access the premises to make repairs. Penalties: tenant gets to stay in possession; up to 3 months’ rent or actual damages, whichever is more; payment of tenant attorneys’ fees.
Attorney Richard D. Vetstein alerts us to a case about the quality of information on MLS listing sheets:
The Massachusetts Supreme Judicial Court has agreed to hear the case of DeWolfe v. Hingham Centre Ltd. which will consider a very important issues for the real estate agent community: the scope of a real estate agent’s duty to disclose and independently verify property information posted on the Multiple Listing Service (MLS).FULL ENTRY
In summary, the real estate agent, relying on what turned out to be erroneous information supplied by his client, listed a Norwell property on Multiple Listing Service (MLS) and newspaper advertising as “zoned Business B.” The property was not, in fact, zoned for business use; it was zoned residential, thereby prohibiting the hair salon the buyer wanted to open at the property. Despite the general disclaimer on the MLS system and in the purchase and sale agreement, the Appeals Court held that the agent could be held liable for misrepresentation and Chapter 93A violations due to providing this erroneous information.
I wrote to Attorney Richard D. Vetstein about something I have been hearing different opinions about. I wrote:
I have been told that a back up offer cannot be presented to a seller because it is inducement to interfere with a contract in place (the accepted offer.) I have also been told that a back up offer must be presented, forthwith, like any other offer. Since I never list property, I don’t know which one is true. Can you give a legal and practical explanation for the blog?
Attorney Richard D. Vetstein answers:
I do not believe that merely soliciting and presenting a back-up offer can give rise to a legal claim for interference with contractual relations as long as the seller does not break the existing contract with the buyer. Moreover, I believe that real estate agents have a legal and ethical obligation to present to their seller clients all offers made on the property, but it is the seller’s preference whether or not to solicit back up offers once he has already accepted an offer.FULL ENTRY
Unlawful interference with contract?
Rona is worried that accepting back-up offers could expose an agent to liability for interfering with an existing contract. I don’t think she has much to worry about unless the seller tries to cancel the existing deal without legal right.
In the real estate context, the requirements to make out a valid claim for unlawful “interference with contractual relations” are the following:
• There must be an accepted and signed offer to purchase between the buyer and seller which is sufficient to form an enforceable contract under Massachusetts law;
• The competing buyer (making the back-up offer) must have knowledge of the contract;
• The competing buyer must have intentionally induced or persuaded the seller not to perform its contractual obligations, i.e, not proceed with the transaction;
• The interference was improper in motive or means; and
• The plaintiff was legally harmed.
Under this legal definition, there is liability only where the seller unlawfully breaks the existing offer/contract with the first buyer. As a general matter, merely submitting a back-up offer (and not formally accepting it) will not support a legal claim because there has been no breach of the first contract.
If it is about foreclosure and the law, it must be Attorney Richard D. Vetstein
Common eviction defenses ruled unavailable to squatters who lived rent/mortgage free for 3 yearsFULL ENTRY
In a April 10, 2012 ruling, the Massachusetts Appeals Court just made it easier for foreclosing banks to evict squatters of foreclosed properties. This is one of the few pro-bank Massachusetts decisions coming out of the foreclosure crisis, and should help speed up the disposition and sale of foreclosure and REO properties which, in turn, should help the housing market.
The case is Deutsche Bank v. Gabriel, and can be downloaded here. The defendants were all members of a single family living at 195-197 Callender Street in Dorchester for over 28 years. In 2006, the property went into foreclosure, and Deutsche Bank acquired title by foreclosure deed. As has become common in neighborhoods throughout Boston, the foreclosed upon family refused to leave, and Deutsche Bank brought eviction proceedings against them.
Attorney Richard D. Vetstein writes today about a different insurance matter: can landlords require tenants to insure their apartments?
I’ve recently become aware that some Massachusetts landlords are requiring that tenants procure their own policy of renter’s insurance as a condition of leasing. But I am also hearing about a dark side to this practice where some landlords have a kickback arrangement with the insurance provider where the landlord receives compensation for any policy taken out by a tenant. Some landlords also insist on being named as a loss payee on renter’s policies, which could benefit their own insurance coverage.FULL ENTRY
Renter’s insurance is usually a good idea, but under Massachusetts law, can a landlord require that a tenant get a policy (if the tenant doesn’t want one) and must it disclose a referral relationship with the insurance provider?
Landlords should be careful about renter’s insurance requirement
In light of recent court decisions, landlords should be careful about a mandatory renter’s insurance policy requirement. In the recent Hermida v. Archstone class action ruling, which considered what fees landlords can charge at the beginning of lease, the court held that landlords can only charge first and last month’s rent, a security deposit, and a lost key fee at the beginning of a tenancy, and no other types of fees.
Attorney Richard D. Vetstein reviews legal rights, and lack thereof, in regard to bidding wars.
The spring market hype is in full force with lots of chatter on bidding wars even in Natick and other towns not usually known for them.FULL ENTRY
What are the legal issues surrounding bidding wars?
There are really no hard and fast legal rules with bidding wars. Contrary to popular belief, a private seller in Massachusetts is not legally obligated to accept the highest offer made during a bidding war. A seller can be as financial prudent or as irrationally arbitrary as she wants in deciding which offer to accept. A seller may decide to forgo the highest offer in favor of a lower offer due such factors as the financial strength of the buyer (i.e., a cash buyer), because the buyer waived inspections, or simply because the buyer wrote the sellers a lovely letter about how wonderful their home is!
Legally, an offer is simply an invitation to negotiate, and provides a buyer with zero legal rights to the property. An offer does not create a legally enforceable contract — unless it is accepted and signed by the seller.
Attorney Richard D. Vetstein reviews the next set of changes to real estate closing paperwork.
Final product will be a combination of both the final Truth in Lending (TIL) form and the HUD-1 Settlement Statement — a dramatic change from the existing forms.
For the second time in as many years, the federal government is substantially overhauling two of the most important disclosures given to mortgage borrowers, the Truth in Lending Disclosure and the HUD-1 Settlement Statement. The revisions are mandated by the Dodd-Frank Act. The new Consumer Financial Protection Bureau is in charge of re-designing and testing the new forms.
Most real estate industry professionals are unaware that these new changes are on the horizon. The new forms are expected to be implemented in 2013 after rule-making and industry comments are completed.
Here is the new prototype combined HUD-1 Settlement Statement: 20120220 Cfpb Basswood Settlement Disclosure
What do you think of the new form? Helpful? Deficient in any way?
To kick off a series for spring house hunters on mortgages, a historical perspective is in order. The current changes in the mortgage industry were a result of the mortgage meltdown in 2007. To understand that economic event, I recommend you take the time to read The Big Short.
Today, I rerun an entry from January, 2011.
I won’t try to summarize Michael Lewis’s 264-page book, The Big Short . He tells the story of the collapse, including character portraits of some of the players, in a rather short book. I hope many of you will read it.
Today, I write about how the concept of a mortgage changed in the past 50 years. (A reader pointed out in 2011 that home mortgages were short term at an earlier time in American history.)
Before I was born, my father bought his one and only house. Thanks to the GI Bill, he had a very low rate. But, even if he had a typical rate, the concept of refinancing would not have crossed his mind. He didn’t get bombarded by mail or TV ads encouraging him to refinance. The advertising he got was by mail, and occasional. It intensified as time went on. My father didn’t bite. My father’s mortgage was paid off in 1986, not a second earlier. In this way, my father was pretty typical of his “greatest generation” status.
Then things changed. Businesses that sold early payment and refinancing changed Wall Street behavior, over time.
Michael Lewis explains:
“The big fear of the 1980s [mortgage]bond investor was that they would be repaid too quickly, not that he would fail to be repaid at all. The pool of loans underlying the mortgage bond conformed to the standards, in their size and the credit quality of the borrowers, set by one of the several government agencies: Freddie Mac, Fannie Mae, and Ginnie Mae. The loans carried, in effect, government guarantees…”
In my adult lifetime, everything changed. Mortgages stopped being long-term loans used to purchase housing. People with mortgages stopped holding them for 30 years. As inflation hit the housing market in the 80s and 90s and 00s, the “flipping” mentality emerged along with Americans borrowing against their bubble-created equity. In the mortgage bond market, this is what was happening:
Attorney Richard D. Vetstein is here today with more on Ibanez.
Massachusetts lawmakers have taken action to help innocent purchasers of foreclosed properties in the aftermath of the U.S. Bank v. Ibanez and Bevilacqua v. Rodriguez decisions, which resulted in widespread title defects for previously foreclosed properties. The legislation, Senate Bill 830, An Act Clearing Titles To Foreclosed Properties, is sponsored by Shrewsbury State Senator Michael Moore and the Massachusetts Land Title Association. The bill is now before the Joint Committee on the Judiciary.FULL ENTRY
The bill, if approved, will amend the state foreclosure laws to validate a foreclosure, even if it is technically deficient under the Ibanez ruling, so long as the previously foreclosed owner does not file a legal challenge to the validity of the foreclosure within 90 days of the foreclosure auction.
The bill has support from both the community/housing sector and the real estate industry. Indeed, the left-leaning Citizens’ Housing and Planning Association (CHAPA) has filed written testimony. in support of the bill. Critics, however, will argue that this is another form of “bailout” of the banks.
Properties afflicted with Ibanez title defects, in worst cases, cannot be sold or refinanced. Homeowners without title insurance are compelled to spend thousands in legal fees to clear their titles. Suing the big banks is not an attractive option for cash strapped homeowners. Moreover, allowing such foreclosed properties to sit and languish in title “purgatory” is a huge drain on individual, innocent home purchasers and the housing market itself.
Have you seen this form? Did you notice that it is more complicated than it needs to be? Have you ever asked yourself why? The legislature in Maryland is taking a look at their agency disclosure law right now.
I could explain agency pretty easily. In Massachusetts, the form reads:
(Check one) ____The real estate agent listed below, the real estate firm or business listed above and all other affiliated agents have the same relationship with the consumer named herein (seller or buyer agency, not designated agency). ____Only the real estate agent listed below represents the consumer named in this form (designated seller or buyer agency). In this situation any firm or business listed above and other agents affiliated with the firm or business do not represent you and may represent another party in your real estate transaction.
The form means:
_____No one in the office will be representing the person you may be negotiating against.
_____An agent in this office is allowed to represent the person you may be negotiating against. (This is called designated buyer or designated seller agency. See the definition on the back.)
The flap in Maryland is because the current disclosure does not include “exclusive buyer agency” or “exclusive seller agency” or “single agency” (where the firm can represent buyers and sellers, but will recuse itself if both parties are in the same transaction.)
John Sullivan, Vice President of Buyer’s Edge Co. writes:
If passed, these changes to the Real Estate Brokers Act ... would provide the consumer with all of their agency choices when selling or buying their home...It would be the first of the 50 State agency disclosure statements in the country to provide the consumer with all their agency options including exclusive buyer, exclusive seller and most importantly single agency."FULL ENTRY
Attorney Richard D. Vetstein writes about a court case that ended with a wrecking ball with someone's name on it.
After a 16 year long saga, wealthy Marblehead mansion owner Wayne Johnson’s battle to save his house from a court-ordered wrecking ball has come to an end. The underlying legal saga is convoluted and complicated, but the end result was swift and destructive — the million dollar mansion is now rubble.FULL ENTRY
Johnson’s battle started in 1995 when he recorded a plan dividing his land into two lots. One lot contained an existing single-family dwelling. The second lot contained a garage. The house lot complied with all zoning dimensional requirements, but the garage lot didn’t comply with lot width requirements. The Building Inspector incorrectly determined that the garage lot complied with all applicable zoning requirements.
Johnson’s neighbors appealed the Building Inspector’s decision, arguing that the new house would greatly diminish their valuable ocean views. The local zoning board allowed the issuance of a building permit. After the building permit issued, the plaintiffs filed an appeal in Land Court and asked for an injunction to prevent construction on the garage lot.
The Land Court judge warned Johnson that proceeding with construction was at his peril. In a decision by another judge in May, 2000, the court ordered the building permit to be revoked. However, the court ruled that the house could remain in place while Johnson attempted to obtain appropriate zoning relief.
Attorney Richard D. Vetstein writes about every landlord's nightmare and how to avoid trouble.
Using best practices to screen and select good tenants is the most important thing a Massachusetts landlord can do to avoid costly non-payment and eviction problems down the road. As the saying goes, an ounce of prevention is worth a pound of cure.FULL ENTRY
I have come across a sub-set of tenants which are extremely dangerous to Massachusetts landlords. They should be avoided like the Plague. I like to call them Professional Tenants.
Let me give you the profile of a typical Professional Tenant. (This is a generalization based on my personal experience, but it’s fairly accurate).
• History of eviction history and/or delinquency with prior landlords
• Surprising (and dangerous) knowledge of Massachusetts landlord-tenant law
• Background in real estate, engineering, contracting, or community activists types
• Marginal to bad credit: prior history of nonpayment collections, judgments or bankruptcies
• Gaps in rental history
• Non-existent or incomplete prior landlord references
The Professional Tenant’s Scheme
Shortly after moving in, the Professional Tenant will start to complain about small issues with the rental property. Some will complain to the local board of health to have the landlord cited for code violations. (The state Sanitary Code can trip up even the most conscientious landlord.) Then the Professional Tenant will stop paying rent, claiming they are “withholding rent” due to bad property conditions. Of course, these tenants completely ignore the law’s requirement that any withheld rent be placed in an escrow account. Then the Professional Tenant will assert the landlord violated the last month rent and security deposit law, and ask for their deposit back, trying to set up the landlord for a triple damage claim.
Whether it is a short sale, lender owned property (REO) or market sale; there seem to be many different ideas about how buyers should submit offers and how sellers should respond to offers. Today, I want to clarify some of the rules of engagement for buyers and sellers in the Greater Boston market.
Here are the most common misconceptions that I hear from buyers, sellers and agents:
All offers must be in writing.
WRONG. A buyer can make a verbal offer to a seller and a seller can respond verbally to a buyer’s offer. The important thing to know is that in Massachusetts the final deal must be in writing and signed by both parties or it is not enforceable. (Many agents and sellers won’t get involved with verbal offers for that reason.)
Counter-offers must be in writing to be valid.
WRONG. The same rules that apply to offers apply to counter-offers. (If a seller puts a counter–offer in writing, he/she may not be able to accept other offers while the counter-offer is still active.)
Attorney Richard D. Vetstein writes today about a case regarding mortgage commitment and getting your deposits back. Here is a case where the buyer could not get a loan, but also did not get all deposits returned.
I recently came across a very interesting case from the Appeals Court, Survillo v. McDonough No. 11–P–290. Dec. 2, 2011. The case underscores how carefully attorneys must craft the mortgage contingency to protect the buyer’s deposit in case financing is approved with unexpected conditions.
The buyers submitted the standard Offer To Purchase provided it was “Not subject to the Sale of any other home.” The sellers accepted the offer. The buyers received a conditional pre-approval from a local bank for a first mortgage in the amount of $492,000. The pre-approval also stated that anticipated loan was “[n]ot based on sale of any residence.”
The parties then entered into the standard form purchase and sale agreement (P & S), with the typical mortgage contingency provision for a $429,000 mortgage loan. Due to the buyers’ debt to income ratios, the lender changed the loan into a “piggyback” and with the condition that the buyers list their primary residence for sale prior to the loan closing. The buyers absolutely did not want to list and sell their residence, so they wanted out of the deal.
On the last day of the extended financing deadline, the buyers timely notified the sellers that they had “not received a loan commitment with acceptable conditions,” and attempted to back out of the agreement under the mortgage contingency provision. Ultimately, with the buyers refusing to sell their home, the bank denied the buyer’s the mortgage application based on the fact that the “borrower would be carrying three mortgage payments and the debt to income is too high.”
My friend Kathy, in Philly, sent me this CBS news link about a woman whose Prius was being damaged from her neighbor's energy efficient windows. Since I have a Prius, high efficiency windows, and I am a real estate nerd, my friend knew I'd like the article. And I do. It gives me a chance to talk about things that affect the neighbors that one wouldn't expect to be a problem. Like new windows.
The window thing is weird. But I have seen this problem before. I saw a house where windows damaged the neighbor's vinyl siding. Generally, when I see melted siding it is in a patch roughly the width of the family grill. (People who place their grills too close to their siding find out that vinyl siding melts.) But at this Cambridge house, most of the wall was melted. It looked like a vinyl-covered house that was next to a burn-out. The agent said it was caused by the neighbor's new windows. He pointed through the treeless back yard to the house behind and its row of new windows.
Studies are still going on to prove or disprove that some replacement windows are sending hot light onto plastic surfaces in the neighborhood and whether that light is actually causing damage. There are no building codes or zoning laws prohibiting these windows due to this problem, yet.
So, if your house siding melts, whose fault is it? Do you have recourse? Not yet. Have you seen this problem? Have you heard of ways to mitigate the hot glare?FULL ENTRY
Attorney Richard D. Vetstein explains the law developed to prevent oil spills from residential heating oil tanks.
As a buyer's agent, I have been aware of the addition of the protective sleeves on oil lines. I have been seeing more and more of them, as time goes on. (They are easy to spot, since many are bright blue or orange.) Are you still seeing out-of-compliance oil systems?
Under a new Massachusetts oil heating law which went into effect on September 30, 2011, every homeowner with an oil heating system is required to install an oil safety valve or an oil supply line with protective sleeve in their system. The cost is approximately $150 to $350 depending on the system. The required upgrade is to prevent leaks from tanks and pipes that connect to your furnace. The upgrade will reduce the risk of an oil leak so by making a relatively small expenditure now, you can prevent a much greater expense in the future.FULL ENTRY
Who Must Upgrade?
Owners of 1- to 4-unit residences that are heated with oil must already have or install an oil safety valve or an oil supply line with a protective sleeve. Installation of these devices must be performed by a licensed oil burner technician. Technicians are employed by companies that deliver home heating oil or are self-employed. It is important to note that heating oil systems installed on or after January 1, 1990 most likely are already in compliance because state fire codes implemented these requirements on new installations at that time.
Since today is Martin Luther King, Jr. day, I couldn?t think of anything more appropriate than a post about fair housing rights and responsibilities.
Federal and state laws make it illegal to discriminate in the sale or rental of housing, including insurance and lending, on the basis of a person?s:
? National Origin
? Sexual Orientation
? Family Status (i.e. presence of or potential for children, unmarried vs. married parents, single parent)
? Source(s) of income (i.e. public assistance programs like Section 8 or welfare)
The list above details the ?protected classes? of people that are covered by fair housing laws.
People often ask if a landlord can refuse to rent to smokers or students.
Since smokers and students are not protected classes, fair housing laws do not protect them.
The most obvious way to violate a person?s fair housing rights is to decide not to rent or sell to them. Less obvious discrimination includes:
? Telling a real estate agent not to show the property to members of a protected class
? Negotiating differently with a member of a protected class
? Offering different information or terms to members of protected classes (i.e. request a higher deposit, offer different lease terms, or prepare the property differently for them)
? Performing different levels of employment, income or credit investigations for members of protected classes.
Discrimination is illegal whether intentional or not. I would go as to say that eliminating as much subjective decision making as possible from the process is not only good practice for landlords, sellers and agents, but it is their responsibility.FULL ENTRY
Attorney Richard D. Vetstein reports on another court case about foreclosure paperwork problems.
The Supreme Judicial Court has just issued an unusual order in the very important Eaton v. Federal National Mortgage Association case, indicating its deep concern over whether an adverse ruling against foreclosing lenders will have a disastrous impact on foreclosure titles and, if so, whether its ruling should be applied prospectively rather than retroactively. The Court is seeking supplemental briefing and friend-of-the-court briefs on these decisive issues. A final decision is expected in February or March.FULL ENTRY
As outlined in my prior post on the case, the Court is considering the controversial question of whether a foreclosing lender must possess both the promissory note and the mortgage in order to foreclose. If the SJC rules against lenders, it could render the vast majority of securitized mortgage foreclosures defective, thereby creating mass chaos in the Massachusetts land recording and title community. If you thought U.S. Bank v. Ibanez was bad, Eaton v. FNMA could be Apocalypse Now.
Most municipalities send quarterly tax bills. Recently, most cities and towns sent out their third quarter property tax bills, They are payable on February 1st. (Even though it’s the beginning of the year, the fiscal year for Massachusetts municipalities runs from July 1 through June 30th.)
The third quarter tax bill is very different from the others.
The two previous tax bills were preliminary estimates which were sent pending approval of the final tax rate by the state. For most cities and towns, 3rd quarter tax bills reflects the actual approved tax rate and should also show the property’s assessed value along with any special credits that the property owner has applied and been approved for (i.e. a residential exemption, personal exemptions for elderly, blind, surviving spouse, veterans with service connected disabilities or minor children of Deceased Parents. Boston added an exemption for National Guardsmen in 2012).
The assessed value of the property does not reflect today’s value. It should reflect the property's value on January 1 of last year. Assessed value does not necessarily reflect the amount paid for a property or what the property is worth today. It is based on a computerized evaluation of the presumed size, location and condition of the property on January 1st of the previous year. There are factors such as increasing or decreasing values, distress sales, property damage or changes in use that could cause an assessment to be different from today’s actual market value.FULL ENTRY
Who is at fault, legally, if a loan goes into default because of delays in loan modification paperwork? Attorney Richard D. Vetstein reports on a recent court case.
The fallout from the sub-prime and mortgage crisis continues in Massachusetts courts, and some judges are reacting in favor of sympathetic borrowers. In Parker v. Bank of America, Massachusetts Superior Court (Dec. 15, 2011), Judge Thomas Billings considered what is unfortunately now a very common fact pattern in borrowers’ quest to have their lenders approve loan modifications, or loan mods.FULL ENTRY
A common story of lost paperwork and ineptitude
In 2007, Valerie Parker granted first and second mortgages on her home in Lowell to Bank of America. She paid the loans on time for the first 24 months. As the economy worsened, however, she anticipated difficulty in making payments, and so she called BofA for advice. The bank told her that because the loan was not in default they could not help her, and that she would have to cease payments if she wanted their assistance. (Is this not one of the most ridiculous, yet common, responses lenders give to troubled borrowers?)
After a lengthy period of lost and repeatedly re-submitted paperwork, BofA informed Parker she qualified for HAMP (Home Affordable Modification Program) relief, underwent a lengthy financial audit over the telephone, and was promised follow-up documentation and a halt to further collection and foreclosure efforts. BofA repeatedly lost her paperwork; she had to submit and re-submit documents; and she spent hours at a time on hold, waiting to speak with a human being. She did, however, receive the bank’s verbal assurance that she was “pre-qualified” for the HAMP program and that confirmatory paperwork would be forthcoming. BofA never sent the promised documentation, however, and refused to approve a loan modification. Lengthy and repeated telephone calls produced no documents, no approval, and no progress.
A legal look at why condos are harder to finance by Richard D. Vetstein.
Since the condominium market meltdown, both Fannie Mae and FHA have passed increasingly stricter and tighter lending guidelines on condominium financing. Of particular concern to the agencies and potential buyers is the capital reserve account. For those who don’t know, a condominium capital reserve account is an emergency fund set aside for major capital common area repairs and expenses, such as a leaky roof, a new boiler system, or other major structural issues. In a new condominium, the developer will establish a capital reserve account through mandatory contributions by new buyers, then a certain percentage will be allocated towards that capital reserve account every month through condo fees. In established condominiums, some have already set up a healthy capital reserve fund, while others have little, if any, money set aside. That’s where the problem starts as far as Fannie Mae and FHA are concerned. 10 percent of operating budget now the goal.FULL ENTRY
FHA is now the strictest lending program for condominiums. Ironically, FHA is typically the loan of choice for first time condo buyers. FHA rules now require that condominiums set aside at least 10 percent of their operating income towards their capital reserve accounts. So if the annual budget is for $200,000, then $20,000 must be set aside in the capital reserve fund.
The lender may also require a review of the annual budget, and where the budget is inadequate, require a capital reserve study.
With regard to Fannie Mae, the 10 percent rule is often required by lenders although it’s not technically part of the Fannie Mae condominium guidelines. However, arguing with Fannie Mae and lenders about this issue is tough because a healthy capital reserve account is critical for the financial stability of any condominium project, and hence, vital to the underwriting of the condo mortgage loan.
Accordingly, for all FHA and some FNMA loans (the vast majority of conventional loans), the 10 percent capital reserve account rule will come into play.
Real estate law and Occupy Boston meet here, in an entry by Richard D. Vetstein.
Last week, Massachusetts Superior Court Justice Frances A. McIntyre issued a ruling clearing the way for the eviction of the Occupy Boston protest in Dewey Square. Judge McIntyre had originally granted the protesters a temporary restraining order sustaining the protests, but after reviewing evidence and hearing legal argument, she has changed her mind.FULL ENTRY
For interest to our real estate readers, the Judge balanced the City’s property rights vs. the protesters First Amendment speech rights. The judge ultimately concluded that the “occupation” as practiced by the Occupy Boston protesters — physically taking over the public park from the City and to the exclusion of others — was a classic trespass and not a First Amendment right.“To the extent that the act of occupation, as defined, communicates, it speaks of boldness, outrage, and a willingness to take personal risk. But the plaintiffs’ occupation of Dewey Square to the effective exclusion of others is the very antithesis of their message that a more just and egalitarian society is possible. It does not send the message the plaintiffs profess to intend.” — Judge Francis McIntyre
Richard D. Vetstein writes this week about the good and the bad side of Attorney General Coakley's lawsuit against five big lenders.
FULL ENTRY“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…” — Charles Dickens, A Tale of Two Cities
Breaking away from the proposed 50 state attorney general settlement talks, Mass. Attorney General Martha Coakley has filed a monumental consumer protection lawsuit over wrongful foreclosures against the top 5 U.S. lenders, Bank of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial. Coakley also names Mortgage Electronic Registration System, or MERS, the electronic mortgage registration system which proliferated during the securitization boom of the last decade. The lawsuit said it sought “to hold multiple banks accountable for their rampant violations of Massachusetts law and associated unfair and deceptive conduct amidst the foreclosure crisis that has gripped Massachusetts and the nation since 2007.” Specifically, Coakley blames the banks for not complying with the U.S. Bank v. Ibanez decision in foreclosing mortgages without evidence of legal ownership of the underlying debt, improper statutory foreclosure notices and illegal “robo-signing.”
With full subpoena and document production power available to her, Coakley will be one of the first state regulators with the power to pour over bank files. It’ll be very interesting to see what she discovers.
Richard D. Vetstein writes this week about the legal aspects of family transfers of real estate.
I came across an interesting New York Times article on Joe Paterno’s recent real estate activity. The Times reports that this summer “Joe Pa.” transferred title to his State College home to his wife for $1 and “love and affection.” Some say the transfer was intended to avoid the inevitable fallout from the Penn St. child abuse scandal and legal action brought by victims of the scandal. Joe Paterno’s attorney, however, says that this transfer was part of the Paternos’ long standing estate plan.FULL ENTRY
The debate centers over what’s known legally as a fraudulent transfers. Fraudulent transfers are property conveyances made with the specific intent to place the property outside the reach of creditors, or made where “the debtor received less than a reasonably equivalent value in exchange for the transfer and made it while insolvent.” The latter definition, in plain English, means the owner was broke and received less than market value for the sale of the property. Fraudulent transfers can be undone by the courts so creditors can tap into a home’s equity to satisfy legal judgments.
Today, our Monday guy, Sam Schneiderman, Broker-owner of Greater Boston Home Team, continues the conversation he began last week about standards for real estate agents and brokers.
Last week, the responses to my post about real estate reality shows began a lively discussion about standards (or lack of standards) for real estate agents. Today, I want to continue the conversation for those who may have missed it over the holiday weekend.
It all began when I questioned whether the “reality shows” that I saw set a poor example for both consumers and agents by over-simplifying some of the home buying process. During the discussion, I mentioned that
“In reality, there are no standards of practice (at least in Massachusetts) other than the Realtor’s ™ "code of ethics" which is full of holes and not even understood or observed by most brokers and agents. Even with that code, there is no standard for what an agent must do in a transaction other than get a buyer or seller to the closing table.”
Jima insisted that there were state standards of practice for real estate agents in MA CMR 254 3.00. I responded,
“that by following the "standards of practice" in MA CMR 254 3.00 an agent or broker will meet the state's minimum standards to protect the public and give proper disclosure about …. dual agency or designated agency, which is also a form of dual agency.”
My point was that there are few standards imposed on agents that require them to live up to the expectations of many consumers and certainly some of our readers.FULL ENTRY
Richard D. Vetstein tells how incorrect information on in the Multiple Listing Service and in advertising is not covered by that general disclaimer at the bottom on the MLS sheet.
In DeWolfe v. Hingham Centre Ltd, the Massachusetts Appeals Court recently considered a real estate agent’s duty to disclose and independently verify zoning information about a listing property. The agent, relying on what turned out to be erroneous information supplied by his client, listed a Norwell property on Multiple Listing Service (MLS) and newspaper advertising as “zoned Business B.” The property was not in fact zoned for business use; it was zoned residential, thereby prohibiting the hair salon the buyer wanted to open at the property.FULL ENTRY
Despite the general disclaimer on the MLS system and in the purchase and sale agreement, the Court held that the Realtor could be held liable for misrepresentation and Chapter 93A violations due to providing this erroneous information.
Do you know what a private way is? (Yeah, It’s the opposite of a public way.) A public way is land owned by the municipality that the public uses for a thoroughfare; in short, a road. A private way is also a road. But, the owner of the house owns half (or sometimes all) of the road in front. Towns will plow private ways so police and fire can get through. In towns that have garbage and recycling pick-up, the pick-up includes private ways.
The difference is twofold:
1. If a house is on a private way, the lot line of the property is in the road. So the lot includes the square footage under the road. Therefore a 6000 SF lot on a private road is smaller than a 6000 SF lot on a public road. (It is one of the things I check when I do a CMA) I see this in Arlington in a number of neighborhoods.They're in some in other towns, too. Seen 'em in Newton, Lexington, Somerville... There are developments with all private ways where the owners collectively need to plow and pave; I don't see those in the towns around Boston where I work.
2. Around Boston, where I work, private roads are plowed by the town, but in most cases they get paved or repaved by the private owners… or not. Have you driven on a really beaten-up road and wondered why the town was neglecting it? It might have been a private road. Private roads are maintained by mutual agreement. So, if the neighbors don’t get along well enough to chip in for road care, the road gets more and more rutted. I have run into owners who love their rutted private way; it keeps people off their street!FULL ENTRY
Richard D. Vetstein discusses a court case today about student housing.
In a decision which will significantly impact landlords renting apartments to students near local colleges and universities and perhaps beyond Boston and Amherst, the Massachusetts Appeals Court ruled that renting to 4 or more unrelated students in one apartment unit is an illegal “lodging house” unless a special license is obtained.FULL ENTRY
In City of Worcester v. College Hill Properties LLC (Mass. App. Ct. Nov. 8, 2011), several landlords renting to Holy Cross students challenged the legality of the Massachusetts lodging housing law. The law requires a lodging housing license for any unit rented to four or more unrelated adults. City of Worcester officials cited the College Hill landlords for renting to 4 students in each apartment unit, without a proper license and without sprinkler systems. The students all signed a 12 month lease. The Housing Court sided with the city, and when the landlords balked, found them in contempt.
Lodging housing law
Although enacted nearly a hundred years ago in 1918, the court found that the lodging house law has relevance today with respect to the common practice of overcrowding persons in an unsuitable space and fire prevention. To obtain a lodging house license, an applicant must have sprinkler systems in the premises, which most landlords find too expensive to install.
The landlords argued that a group of four college students was a “family unit” not lodgers. While the landlords get credit for creative lawyering, the court didn’t buy the argument, holding that “we have no doubt that four or more unrelated adults, sharing housing while attending college, is not an arrangement that lends itself to the formation of a stable and durable household.”
Richard D. Vetstein. discusses a court case today. Does a condo owner have the right to flip "the bird" at a Trustee?
Old Colony Village Condominium v. Preu, Massachusetts Appeals Court No. 10-P-875 (Oct. 31, 2011. Full text here.FULL ENTRY
I love when constitutional law intersects with real estate law. It’s rare, and usually full of drama. A recent decision by the Appeals Court considered a condominium unit owner’s unalienable right to complain, moan and kvetch about condominium management. The First Amendment and the unit owner won this battle.
The case is right out of the Seinfeld episode where Jerry’s dad, Morty, is embroiled in a condo trustee election battle at the “Del Boca Vista” condominium project in Florida. Mr. Preu and the condominium management had a history of, shall we say, bad blood between them. Mr. Preu ultimately went on a rampage, placing in the common area bags containing dog feces and labeled with the name of board president Gerard Ritzinger, apparently in response to Preu’s belief that Ritzinger had allowed his dog to defecate in an area in which it was forbidden. He gave the middle finger to condo trustees walking through the hall and to security cameras. He wrote nasty memos on his condo fee checks. He also obstructed common area fire doors. Lastly, he posted signs in the common area and a note on a unit owner’s door about the cleanliness of the condominium.
Trees are today’s topic for Richard D. Vetstein. He is in the no-power zone and wants you to know about the laws regarding trees:
Given all the trees and branches which fell across New England this weekend, the pressing question of the day for me has been who is responsible if my neighbor’s tree or tree branch fell on my house, car, shed, patio, grill, etc. during the storm?
The short answer is that, legally speaking, your neighbor is not liable for a healthy tree falling down during a major storm event. That is considered an “Act of God” for which no one is legally liable (except God of course, but I think he enjoys some type of legal immunity–I’m not sure, I’ll have to research that one). So, you will have to make a claim under your homeowner’s insurance policy for the damage caused by the neighbor’s tree..
I’m dreaming of a white Halloween. Well, it is a nightmare for those who took the brunt of the early snowfall in the northeast.
Trick-or-treating was cancelled in Lexington this year because of the snowstorm. I first heard of this on Sunday afternoon when a FaceBook friend mentioned it. Schools were closed for Monday, so Halloween was cancelled, too.
Is this good public safety? Does trick-or-treating create more cars on the roads? Should families without power be exempt from candy-giving?
My first impression was that cancelling trick-or-treating was overkill, but then I drove around Lexington. I was working in Lexington on Monday and was detoured off a main road (Pleasant Street) because trees or tree-removal equipment was still blocking the road. I passed several clusters of tree-removal trucks. There were branches all along the roadways on many streets.
If you own a house or condo, you should talk to an attorney about your wills.
Here's Attorney Richard D. Vetstein.
Benjamin Franklin once said famously that “the only certainties in life are death and taxes.” That’s certainly true in real estate practice. Today, I will go over how real estate passes when the owner dies – with a will or without a will – and how the probate process affects the real estate process.FULL ENTRY
Tenancy by the Entirety
Married couples in Massachusetts are recommended to hold real estate as “tenants by the entirety.” It’s a special form of joint tenancy for married couples. If one spouse dies, the surviving spouse succeeds to full ownership of the property, by-passing probate. By law, tenants by the entirety share equally in the control, management and rights to receive income from the property. Property cannot be “partitioned” or split in a tenancy by the entirety. A tenancy by the entirety also provides some creditor protection in case one spouse gets into financial distress as creditors cannot lien the non-debtor spouse’s interest in the property.
Death Without A Will—Intestacy Laws
Clients were often surprised to learn that when one spouse dies without a will, the law of intestacy in Massachusetts leaves a portion of the estate to the surviving spouse and a portion to the decedent’s children. This is changing as of January 2012 with Massachusetts’ adoption of the Uniform Probate Code. Under the “UPC,” if a spouse with children of the marriage dies, the surviving spouse gets the entire estate, including the marital home. If there’s no surviving “descendant,” or child, of the deceased, but a surviving parent of the deceased, the surviving spouse gets the first $200,000 of the estate, plus 75% of the balance of the estate. The UPC laws of inheritance remain rather complicated to explain fully here. A good guide to the new Uniform Probate Code can be found here.
For my readers who care about environmental issues: remember that next Friday, October 28 is Walk/Ride Friday, brought to you by Green Streets.
On a national level, there is a change being proposed for real estate mortgage underwriting that would make energy costs part of the value calculation. Energy costs would be added to the cost of home ownership for qualifying borrowers for a mortgage and would also be considered part of the appraisal calculations.
From the Institute for Market Transformation:
The SAVE (Sensible Accounting to Value Energy), championed by Senator Michael Bennet (D-Colorado) and Senator Johnny Isakson,(R-Georgia), require federal loan agencies to assess the expected energy costs for mortgage loan applicants. This can be accomplished through modest adjustments to underwriting guidelines and appraisal practices and could be implemented over a manageable period without disruption.FULL ENTRY
Were this print media, I would call this "hot off the presses." Another foreclosure title case was decided and here's Attorney Richard D. Vetstein with the summary:
The Massachusetts Supreme Judicial Court ruled today in much anticipated Bevilacqua v. Rodriguez case. (Text of case can be read here.). The final edict is mix of bad and good news for owners of property whose titles have been rendered defective due to improper foreclosures stemming from the landmark U.S. Bank v. Ibanez ruling last January. The Court held that owners cannot bring a court action to clear their titles under the “try title” procedure in the Massachusetts Land Court. Left open, however, was whether owners could attempt to put their chains of title back together (like Humpty-Dumpty) and conduct new foreclosure sales to clear their titles. Unfortunately, the SJC did not provide the real estate community with any further guidance as to how best to resolve these complicated title defects.FULL ENTRY
Background: Developer buys defective foreclosure title
Frank Bevilacqua purchased property in Haverhill out of foreclosure from U.S. Bank. Apparently, Bevilacqua invested several hundred thousand dollars into the property, converting it into condominiums. The prior foreclosure, however, was bungled by U.S. Bank and rendered void under the Ibanez case. Mr. Bevilacqua (or presumably his title insurance attorney) brought an action to “try title” in the Land Court to clear up his title, arguing that he is the rightful owner of the property, despite the faulty foreclosure, inasmuch as the prior owner, Rodriguez, was nowhere to be found.
Land Court Judge Keith Long (ironically the same judge who originally decided the Ibanez case) closed the door hard on Mr. Bevilacqua, dismissing his case. “I have great sympathy for Mr. Bevilacqua’s situation — he was not the one who conducted the invalid foreclosure, and presumably purchased from the foreclosing entity in reliance on receiving good title — but if that was the case his proper grievance and proper remedy is against that wrongfully foreclosing entity on which he relied,” Long wrote. The SJC took the case on direct review.
Today Attorney Richard D. Vetstein discusses eviction.
In Massachusetts, evictions are called “summary process.” According to the rules governing eviction cases, summary process is supposed to be “just, speedy, and inexpensive.” In practice, however, summary process can be anything but that. In fact, as I always inform my landlord clients, Massachusetts is one of the most tenant friendly states in the country, and an eviction can be costly, frustrating and unfair to landlords. In some cases, it can take many months to evict a tenant.FULL ENTRY
Grounds For Eviction
There are several common grounds for evicting a tenant. The most common is for non-payment of rent. In these cases, the landlord must send the tenant a statutory 14 day “notice to quit” before starting the eviction process. The notice to quit must be drafted carefully, and the best practice is to have it served by a constable or sheriff to ensure proof of delivery.
Another common ground for eviction is for termination of a tenancy at will, otherwise known as a no-fault eviction. Again, a 30 day notice to quit must be served on the tenant before commencing an eviction. Landlords often trip up on this type of notice with short months. In practice, judges will often give tenants in no-fault evictions a bit more leeway in terms of vacating the premises.
A client of mine asked:
During our condo meeting, there was talk about changing our HOA bylaws regarding pets and smoking. There wasn't a clear consensus on what we should do. As it stands now, we have no limits on smoking and a limit of 2 pets that weigh less than 75 lbs. One of my main concerns was how a non-smoking or an even more-limited pet policy could hurt or help our property value (one tenant wants to ban all pets and at a minimum ban dogs.) I've done some searching on the web, but I'm not narrowing in on an answer…
Pet and smoking bans are both an ongoing condo association dilemmas. My sense is that enforcement is where the problem comes in. You either need to enforce the no pet policy or the pet behavior policy. It creates a cop-neighbor tension between the pet owning condo owner and the non pet owning condo owner. Same goes for smoking bans. Either can harm condo owner’s relationships.
In my practice, there are condo buyers who will refuse to buy in a pet-free building because they have pets or plan on having pets. I have not run into a single buyer who would refuse to live somewhere because pets were allowed. I did a quick search of condos in Somerville, Cambridge and Brookline. At this moment 474 are for sale, only 18 have a no pet policy posted on the MLS.
I couldn’t find any good statistics on the economic impact of a no-pet policy. Anecdotally, I have noticed some drag on resale when a building has a no-pet policy. It is more about it taking longer to sell, not a noticeable drop in price. I haven’t seen a similar drag on resale based on buyers rejecting properties that allow pets.FULL ENTRY
Today Attorney Richard D. Vetstein discusses condo leins.
Unpaid condo fees and special assessments can be a real thorn in any condominium’s side, especially smaller condos. Not only do unpaid condo fees threaten the financial health of a condominium, but a high delinquency rate can run afoul of Fannie Mae/Freddie Mac and FHA condominium lending guidelines, thereby hindering the sale of a unit.FULL ENTRY
The Massachusetts Condominium Act, General Laws Chapter 183A, provides condominium trustees and managers with a fair amount of ammunition to recover those unpaid condo fees and special assessments. The law provides that condominium common expense assessments (monthly condo fees) are a lien against condominium units from the date each assessment becomes due, and that unit owners are personally liable for their share of condominium common expenses, including late charges, fines, penalties, interest, and all costs of collection. Ultimately, the condominium trust can foreclose its lien and sell the unit at foreclosure auction.
Everyone knows that an oral agreement is worth the paper it is written on, right? Today Attorney Richard D. Vetstein explains a new case where an oral agreement was upheld.
Today I’m discussing a case right from a first year law school property exam, Hurtubise v. McPherson, decided last month.FULL ENTRY
As most real estate professionals know, contracts for the sale of real estate must be in writing and signed by the party to be charged, i.e, the seller. This is a rule of law going back to English common law and is called the Statute of Frauds which can be found in the General Laws of Massachusetts, Chapter 259, Section 1.
As with most black letter law, there are a few exceptions to the general rule, and this case is a textbook example of the “detrimental reliance” exception to the Statute of Frauds.
Land swap agreement
Here are the facts of the case. Hurtubise and McPherson owned adjoining tracts of land in Templeton. Hurtubise operated a storage business on his property. He wanted to build an additional storage shed along the border between his property and McPherson’s property. Hurtubise realized that he could not meet the setback requirements of the local zoning code unless he acquired land from McPherson. Hurtubise approached McPherson, explained his need, and proposed a land trade, offering to convey to McPherson a portion of the front of his (Hurtubise’s) property in exchange for the portion of McPherson’s land at which Hurtubise intended to erect the new storage shed. McPherson agreed to the proposal and the parties shook hands.
Hurtubise proceeded with his plans for construction of the new building. He obtained a building permit and began to excavate along the border of McPherson’s lot. During the seven to eight weeks of construction, Hurtubise saw McPherson at the site. McPherson never objected to the location of the new building. Hurtubise eventually constructed a 300 x 30-foot storage shed for $39,690.
Could Eaton v Fannie Mae be the next US Bank v Ibanez? Attorney Richard D. Vetstein explains the next important foreclosure case coming down the Pike:
In a rare direct appellate review, the Massachusetts Supreme Judicial Court has agreed to hear an appeal considering the controversial “produce the note” defense in foreclosure cases. Perhaps more importantly, the court may also consider whether a foreclosing lender must possess both the promissory note and the mortgage in order to foreclose. This is especially important for MERS mortgages.FULL ENTRY
The case is Eaton v. Federal National Mortgage Association (Fannie Mae), The court will hear arguments in October, with a decision coming several months later. The court is also seeking amicus, or friend of the court, briefs from interested parties.
This could be a very important decision — potentially as important as the landmark U.S. Bank v. Ibanez case issued in the spring.
Attorney Richard D. Vetstein writes about a court ruling from this August.
The case of Brandao v. Docanto (link), handed down by the Appeals Court on August 18, 2011, is a real doozy. The Court ordered a condominium developer to remove his entire building which encroached merely 13 inches onto his neighbor’s property. And get this, that strip of land had been acquired by the neighbor through adverse possession which is open, notorious and continuous use for 20 or more years. This is a good one in the annuls of Massachusetts property line/boundary line disputes.FULL ENTRY
Here are the facts of the case. DoCanto built a new two unit condominium building on his Roxbury lot. After, DoCanto replaced Brandao’s old fence along the lot line, however, the new fence and condominium encroached on the Brandao’s property for a total of 188 square feet.
Brandao was none too happy about the encroachment. He sued and won in the Land Court, then won again on appeal, both courts finding that he had acquired ownership of the dispute land through adverse possession. Adverse possession is a legal doctrine under which a landowner can claim another’s property by using it openly, exclusively, continuously and notoriously for 20 or more years.
Trees are today’s topic for Richard D. Vetstein
Given all the trees and branches which fell across New England during Irene, the pressing question of the day for me has been who is responsible if my neighbor’s tree or tree branch fell on my house, car, shed, patio, grill, etc. during the storm?FULL ENTRY
The short answer is that, legally speaking, your neighbor is not liable for a healthy tree falling down during a major storm event. That is considered an “Act of God” for which no one is legally liable (except God of course, but I think he enjoys some type of legal immunity–I’m not sure, I’ll have to research that one). So, you will have to make a claim under your homeowner’s insurance policy for the damage caused by the neighbor’s tree.
As the court stated in the 1983 case of Ponte v. DaSilva:
The failure of a landowner to prevent the blowing or dropping of leaves, branches, and sap from a healthy tree onto a neighbor’s property is not unreasonable and cannot be the basis of a finding of negligence or private nuisance. Of course, a neighbor has the right to remove so much of the tree as overhangs his property. To impose liability for injuries sustained as a result of debris from a healthy tree on property adjoining the site of the accident would be to ignore reality, and would be unworkable. No case has been brought to our attention in which liability has been imposed in such circumstances
Chelsea is the site of a precedent regarding mold litigation. Richard D. Vetstein is here to tell you about it.
Toxic mold is a dangerous condition that can arise in buildings with untreated water leaks and penetration. The most common form of “toxic mold” is Stachybotrys chartarum (also known as Stachybotrys atra), a greenish-black mold. It can grow on material with a high cellulose and low nitrogen content, such as fiberboard, gypsum board, paper, dust, and lint.FULL ENTRY
The recent case of Doherty v. Admiral’s Flagship Condominium Trust deals with a unit owner getting sick due to toxic mold at the Admiral’s Flagship Condominium in Chelsea. The toxic mold arose from persistent roof leaks at the condominium which caused untreated mold in Doherty’s unit. Roof leaks are almost always a common area problem that the board of trustees must fix. According to the trial judge, the condo management did a shoddy job repairing the damage. Feeling sick and unable to live with the toxic mold, Doherty’s doctor ordered her to vacate her unit. She filed a lawsuit for personal injuries.
After you close, your closing “goes to record.” This is the process of getting your mortgage, deed, and other paperwork into the system. Someone paid by the closing attorney will go to the registry to get the paperwork filed into a registry of deeds database. (It can be done by a non-lawyer. There are errand services to do this for attorney’s offices.) Within a couple of hours of most closings, a new owner can see his/her deed on line at the local registry. The original paper deed will show up, by mail, months later. You can file it, but you don’t need to take extra-good care of it. To sell, you do not need an original deed; it is not like the title you have for your car. The important thing is that your deed is recorded at your local registry of deeds.
A registry is an old-fashioned system. The filing is done by Book and Page. This corresponds to big books with big pages. On-line searching can be done by document (Book and Page number or type of document), name (of buyer or seller) or address.
My buyers check to see that their purchase has gone to record. The ones that haven’t been patrolling the databases for months find this really neat. They also realize anyone can see it. They wonder about their privacy. What is not on record is your interest rate, what you paid along the way, or your social security number.
Getting the purchase to record is the easy part, and it goes well almost all the time. The problems develop later. Buyers rarely check later to see that the discharges (which take a while to process through the lenders) get to record.FULL ENTRY
A big "welcome back!" to Richard D. Vetstein. If there is an important case regarding real estate, Attorney Vetstein is our guy!
In the closely watched case of Bank of New York v. Bailey the Massachusetts Supreme Judicial Court ruled on August 4, 2011 that the Housing Court may hear a homeowner’s challenge that a foreclosing lender failed to conduct a foreclosure sale in accordance with state law and under the now seminal U.S. Bank v. Ibanez decision. Previous to this decision, foreclosing lenders and their attorneys were quite successful in evicting homeowners even where there were defects in the foreclosures.FULL ENTRY
A subprime eviction
KC Bailey obtained a mortgage in 2005, which appears to have been of the sub-prime vintage (America’s Wholesale Lender), on his home in Mattapan. Merely two years later, he defaulted, and the lender commenced foreclosure proceedings. Bailey claimed that the lender never provided him with any notice of the foreclosure, and he first learned about it when an eviction notice was duct taped to his fence. The lender started an eviction in the Boston Housing Court. Bailey defended on the basis of the alleged defective notice. The Housing Court judge ruled in favor of the lender, and the case went up to the SJC.
We count on Richard D. Vetsteinto keep us up-to-date on the issues about legal procedures and the foreclosure mess.
Ironically on the same day Bank of American was about to sign a historic $8.5 Billion settlement agreement over bad mortgages, somebody finally went through a registry of deeds to look at the effect of the U.S. Bank v. Ibanez decision and the validity of mortgage assignments in Massachusetts.FULL ENTRY
According to an audit performed by McDonnell Property Analytics, in the Salem, Mass. Registry of Deeds, 75 percent of mortgage assignments are “invalid.” About 27 percent of invalid assignments are fraudulent, McDonnell said, while 35 percent are robo-signed and 10 percent violate the Massachusetts Mortgage Fraud Statute.
McDonnell said it could only determine the financial institution that owned the mortgage in 60 percent of the cases reviewed. There are 683 missing assignments for the 287 traced mortgages, representing about $180,000 in lost recording fees.
“What this means is that the degradation in standards of commerce by which the banks originated, sold and securitized these mortgages are so fatally flawed that the institutions, including many pension funds, that purchased these mortgages don’t actually own them,” according to analysts at McDonnell. “The assignments of mortgage were never prepared, executed and delivered to them in the normal course of business at the time of the transaction.”
“My registry is a crime scene as evidenced by this forensic examination,” said O’Brien. “This evidence has made it clear to me that the only way we can ever determine the total economic loss and the amount damage done to the taxpayers is by conducting a full forensic audit of all registry of deeds in Massachusetts.”
Today, our Monday guy Sam Schneiderman, broker owner of Greater Boston Home Team, writes about problems that could have been avoided by paying attention to the Purchase and Sales agreement, or by keeping your hands off the peonies.
Something that is not a big deal to a seller can be a very big deal to a buyer or vice-versa. That is why good Purchase and Sale (P+S) agreements spell out the details of the agreement in minute detail.
But who reads them, aside from the attorneys?
Many agents and brokers don’t get involved in P+S details because they may have been told that once they do, they expose themselves to extra liability. I think that while an agent or broker is not an attorney, one needs to realize that a buyer or seller doesn’t usually know what to look for in a P+S or what areas cause the most common problems if they are not scrutinized before signing the P+S. Those areas should be understood by all of the parties involved in the transaction before signing the P+S. I prefer a conference call with the attorney and client to review the P+S prior to sending it to the other side.
In my experience, the area that causes the most trouble is the paragraph that spells out exactly what is being left with the property (i.e. which appliances, air conditioners, light fixtures, etc.). If it is not scrutinized by both the buyer and seller, it’s likely that someone may be surprised later.
Anything attached to a building is referred to as a fixture and is supposed to remain with the property unless specifically excluded from the sale.
Exclusions should be in offers and later carried forward to a P+S.
Here are a couple of issues that I have seen:FULL ENTRY
Richard D. Vetstein talks about how a title insurance case has made its way to the US Supreme Court.
In a case closely watched by the title insurance and real estate settlement services industry, the United States Supreme Court has agreed to hear a class action which will decide whether consumers can sue under the Real Estate Settlement Practices Act (RESPA) over a title insurance referral arrangement that allegedly violated RESPA’s anti-kickback provisions. The case’s outcome could shield title insurers, banks and other lenders from litigation under RESPA and a wide range of federal and state laws. If First American wins this case, we could see title insurance companies in Massachusetts taking a much more active role in the operations of their favorite and most profitable agents.FULL ENTRY
The case is Edwards v. First American Title Co. For more coverage of the case, read the SCOTUS Blog summary here.
Richard D. Vetstein explains how land court works.
Established in 1898 and still staffed with only a handful of judges, the Massachusetts Land Court is the smallest of all the Massachusetts trial courts. But for real estate practitioners, it is the most important court in the Commonwealth.
The Land Court is known for its real estate expertise and the starting place for almost all foreclosures. Its judges, most of whom were practicing real estate attorneys, are widely regarded as experts in the intricacies of Massachusetts real estate law. Indeed, the diminutive Land Court has recently been at the forefront of national foreclosure law with Judge Keith Long’s seminal decision in U.S. Bank v. Ibanez which made front page news for several days.
The Land Court was originally established to oversee the Massachusetts land registration system. Approximately 15-20 percent of all property in Massachusetts is registered land. Non-registered land is referred to as recorded land.FULL ENTRY
Bank of America foreclosed on someone who didn’t have a Bank of America mortgage. The owners say they had no mortgage at all. The judge charged the legal costs to Bank of America and the Bank commenced ignoring their debt. Whoever was in charge of paying this court bill did exactly what a lot of homeowners in trouble have been doing: He or she didn’t answer letters, didn’t answer phone calls, and generally ignored the problem. When a bill is delinquent, the last thing you should do is ignore the person you owe. Ignore it and it only gets worse. Doesn’t BOA know that after chasing delinquent homeowners for the past four years? Tee hee.
Foreclosure is no laughing matter for homeowners who can’t pay their mortgages. Help and advice are available. The worst thing you can do is to act like the person in charge of paying the court fees at Bank of America. Go to the next page for some serious information about foreclosure.FULL ENTRY
I was asked by a friend of mine whether I would take a listing on a house with a level-three sex offender* next door. Since I don’t take listings, I got to dodge the question. Since then, I’ve been asking listing agents. Some say that the person next door has done nothing wrong. That owner should be allowed to hire help to sell his or her house. Some say, they couldn’t sell a house with an offender next door.
When a level-three sex offender is released from prison, neighbors in the immediate area are informed. However, there is no requirement for the police to inform people who subsequently move into the area.
What brought my friend to call me and ask such a question? There is a sex offender living around the corner from this friend. The house next to the offender is under agreement to a family with little girls. My friend was driving past when she saw the new buyers were at the house with their buyer’s agent, and the listing agent. The little girls were dancing around (apparently invited) on the lawn of the level-three sex offender.FULL ENTRY
Every year at this time, I discuss the rental market. Richard D. Vetstein starts us off.
With the start of summer, Rona asked me to review rental discrimination law.FULL ENTRY
Earlier this year, the Attorney General sued a Metro-Boston landlord for evicting or threatened to evict tenants with young children, renting apartments containing lead paint to tenants with young children, failing to abate lead hazards in those apartments, failing to provide proper notice of lead hazards to his tenants, and making misrepresentations regarding the presence of lead paint in his apartments. The complaint further alleges that the landlord retaliated against tenants when they reported him for violations of the law.
Unfortunately, many Greater Boston landlords aren’t prosecuted by the AG’s office and are allowed to impose family unfriendly and unlawful housing practices like advertising that “Unit Not Deleaded.” The ad, while albeit truthful, it might as well read “Children Under 6 Not Wanted.”
You don't buy a house, you buy Title to a house and its land. Attorney Richard D. Vetstein explains:
The deed is the cornerstone of property ownership in Massachusetts and throughout the country. In Massachusetts, there are three types of deeds: a quitclaim deed, a warranty deed, and a release deed. By far the most common deed used in Massachusetts is the quitclaim deed and I’ll focus on that in this post.FULL ENTRY
Quitclaim Deed: taking title
How would you like to take title? This is an important question that buyers must consider. For single individuals, there really is no choice. You take title individually. For married couples, there are three choices: (1) tenancy by the entirety, (2) joint tenants with rights of survivorship, or (3) tenants in common.
Tenancy by the Entirety
This is often the best choice for married couples, and only husband and wife can benefit from this type of ownership. In a tenancy by the entirety form of ownership, if one spouse dies, the surviving spouse succeeds to full ownership of the property, by-passing probate. By law, tenants by the entirety share equally in the control, management and rights to receive income from the property. Property cannot be “partitioned” or split in a tenancy by the entirety. A tenancy by the entirety also provides some creditor protection in case one spouse gets into financial distress as creditors cannot lien the non-debtor spouse’s interest in the property. In the example, below you can see how the Obamas take title as tenants by the entirety.
Attorney Richard D. Vetstein discusses a court ruling about development. The question today is about the power of local zoning boards. Do they have too much and are they power hungry? Or are they trying to take care of their community? What is your experience in your town?
Score one for property rights advocates
Massachusetts has the well-deserved reputation of being one of the most challenging states to permit a new housing development due to its myriad of rules, regulations and zoning by-laws. Real estate developers seeking to build a new subdivision typically go through an arduous permitting process before the local Planning Board, Board of Selectmen, Board of Health, Conservation Commission, Zoning Board of Appeals and other town boards.
Open space set-asides
In what has become very much en vogue and required in the last decade are towns requiring that the developer dedicate or deed some of its developable land for open space and recreational purposes. In the recent case of Collings v. Planning Board of Stow, the Appeals Court ruled that the planning board went too far in requiring that the developer set aside almost 6 acres of a 5 lot subdivision for open space and “environmentally significant areas with views.”
I've had buyer-clients who considered houses that abut wetlands. For one of them, their closing almost got held up while the seller moved a shed (with no foundation) two feet forward to satisfy the local conservation office. If you are considering buying in a town with wetland, pay attention to what Attorney Richard D. Vetstein offers us today.
Massachusetts has one of the most restrictive wetlands and environmental codes in the U.S. Simply put you cannot do anything – not clear, cut, fill, dump (not even leaves, grass clippings or dirt), alter, grade, landscape or build upon — any wetland resource areas without a permit from your local town Conservation Commission.FULL ENTRY
The state Wetlands Protection Act and Rivers Protection Act imposes stringent restrictions and oversight of real estate development in and near coastal wetlands areas such as salt marshes, dunes, beaches, and banks, and inland wetlands areas such as swamps, marshes, rivers, streams, ponds, and lakes. Many homeowners are often surprised to learn their property contains or is near protected wetlands or is within a restricted buffer zone which will impact their ability to construct an addition, deck, pool, driveway, or cut trees.
Check with the local conservation agent first
A buyer and their Realtor should always research whether there are wetlands on or near the property. First, check the state Geographic Information (Mass GIS) maps online. Next, call over to the local Conservation Agent and pull out the local wetlands maps. The conservation agent should be able to answer most questions and will know whether there are conservation restrictions on the property.
Wetlands areas and buffer zones
The state Wetlands Protection Act and local Wetlands Bylaws include a number of different types of wetlands, and wetland-related areas called “Resource Areas.” These include rivers and streams (“perennial” if they run year round, and “intermittent” if they dry up seasonally); lakes and ponds; the vegetated wet areas bordering rivers, streams, lakes or ponds (“bordering vegetated wetlands”); the 100-year floodplain along rivers and streams; and isolated areas that flood seasonally, such as vernal pools. The determination of wetlands is a science and very complicated.
Attorney Richard D. Vetstein outline what lawyers see when the look at a two family home that is now a condo.
I've been getting a fair amount of calls these days regarding what I like to term dysfunctional condominium management. Usually these are smaller, self-managed condominiums. Converted multi-family homes, etc. Sometimes, however, the problem of dysfunctional condominium management can plague larger condominiums.FULL ENTRY
The problems can range from poor to no financial management, unpaid monthly condominium fees, problems with the transition from the original developer to the association of unit owners, power hungry condo trustees, special assessments, and disputes over costly repairs and capital improvements.
Here's some advice for would-be condominium buyers and condo unit owners to prevent and deal with dysfunctional condominium management problems.
A. Financial Mismanagement
A condominium is supposed to run like a democracy with trustees being elected by the majority of unit owners, and subject to being voted out of office when they do a poor job. The procedures for elections and removal should be set forth in the condominium declaration of trust/by-laws. In the case of financial mismanagement, unit owners often may have difficulty enforcing the internal governance rules. At minimum, disgruntled unit owners should call a special meeting and attempt to removal or vote out trustees who are causing problems. If the internal governance doesn't work, unit owners may seek legal action for "breach of fiduciary duty" against the trustees in the Superior Court. In egregious cases, the court can grant preliminary injunctions and other remedies to protect the unit owners from financial harm.
Today, Sam Schneiderman, broker owner of Greater Boston Home Team discusses the dilemma regarding lead paint laws, disclosure, and what is happening in the real world of home ownership, buying and selling.
The following language is included in the Property Transfer Notification Certification, most commonly know as "The Lead Paint Form":
"Every purchaser of any interest in residential property for which a residential dwelling was built prior to 1978 is notified that such property may present exposure to lead from lead-based paint that may place young children at risk of developing lead poisoning . ……….. The seller of any interest in residential real property is required to provide the buyer with any information on lead-based paint hazards. A risk assessment or inspection for possible lead-based paint hazards is recommended prior to purchase."
When the law came into effect years ago, many people felt that over time a significant number of homes would be tested for lead paint and hopefully deleaded. Despite the fact that the lead paint laws have been around for years, the majority of sellers claim to have no knowledge about the presence or absence of lead paint. To make matters worse, when researching whether to test for lead paint, they learn that they will be required to disclose the results of lead paint testing to potential buyers of their home when they sell. As a result many buyers or owners decide that they would rather not test for lead paint.FULL ENTRY
If there is news about Ibanezrelated court cases, Attorney Richard D. Vetstein is on it...Here's what happened this week at the SJC:
The SJC heard arguments on Monday in the case of Bevilacqua v. Rodriguez on whether a home buyer can rightfully own a property if the bank that sold it to him didn’t have the right to foreclose on the original owner, after the U.S. Bank v. Ibanez landmark ruling in January. This case, which national legal experts are watching closely, may determine the rights of potentially thousands of innocent purchasers who bought property at foreclosure sales that have been rendered invalid after the Ibanez ruling.FULL ENTRY
Land court ruling
The case started in the Land Court where Judge Keith Long (ironically the same judge who originally decided the Ibanez case) ruled that the buyer of property out of an invalid foreclosure has no right to bring a “try title” action to establish his ownership rights because he never had good title in the first place. Judge Long’s ruling can be read here.
Who’s side are they on anyways?
Given the importance of the case, the SJC accepted it on direct appellate review. The oral arguments can be viewed here.
The positions taken by the case participants were curious to say the least. While the mortgage lobby argued in favor of the homeowner’s right to clear his title, the state Attorney General’s office argued against enabling home buyers to clear their title. It would seem to me that the Commonwealth has a vested interest in assisting the thousands of innocent home buyers clear their titles. Maybe Attorney General Coakley didn’t want to give the impression that she was favoring the mortgage industry? But she’s short-sighted if she doesn’t realize that Ibanez title problems have hurt a lot of innocent folks.
Richard D. Vetstein discusses the long awaited ruling from the Massachusetts Supreme Judicial Court in case of Real Estate Bar Association (REBA) v. National Estate Information Services (NREIS) that came down yesterday.
The net effect of the Court’s ruling is to reaffirm Massachusetts attorneys’ long-standing involvement with all residential real estate transactions. The ruling can be read here.FULL ENTRY
This case pits Massachusetts real estate closing attorneys vs. out of state non-attorney settlement service providers which are attempting to perform “witness or notary” closings here in Massachusetts. At stake is the billion dollar Massachusetts real estate closing industry.
Quick analysis of ruling:
• Massachusetts attorneys must be present for closings and take active role in transaction both before and after the closing. The substantive ruling from the court was a huge victory for Massachusetts real estate closing attorneys. The court requires “not only the presence but the substantive participation of an attorney on behalf of the mortgage lender.” This is what Massachusetts real estate attorneys have been fighting about for consumers in the face of out of state settlement companies who have tried to conduct notary or witness only closings.
• No “robo-attorneys” allowed. The court went one step further here by ruling that not only are notaries banned from conducting closings, but the closing lawyer cannot be what I like to call a “robo-attorney.” A lot of these out of state settlement companies hire unemployed newly minted attorneys right out of law school who get a call to preside over a closing they know nothing about for $100 or less. The court commented that “if the attorney’s only function is to be present at the closing, to hand legal documents that the attorney may never have seen before to the parties for signature, and to witness the signatures, there would be little need for the attorney to be at the closing at all. We do not consider this to be an appropriate course to follow.”
Richard D. Vetstein says: When you find out you have a major title problem that prevents you from selling or refinancing your home, have fun explaining to your spouse that for a fraction of the cost of your home you could’ve prevented it by buying title insurance.
Available for a few years now, enhanced coverage policies offer vastly improved protection for common title problems at about a 10% cost over a standard coverage policy. (These policies run about $4 per thousand of purchase price). Enhanced coverage policies now cover some of the most common title problems facing Massachusetts residents. Realtors and mortgage professionals should be aware of the benefits of an enhanced coverage policy, and should recommend that their clients opt for the increased coverage. It’s well worth the small cost in premium.FULL ENTRY
• Appreciation in property value. Standard policies do not increase their coverage amount in a rising market as a home increases in value. The enhanced policy will increase coverage by 10% per year for 5 years up to 150% of the original policy limit.
• Encroachments/adverse possession. Standard policies, to most homeowner’s chagrin, do not cover encroachments like a neighbor’s fence, wall or structure over a property line. Enhanced policies provide coverage for such encroachments, and also cover adverse possession–which occurs when an encroachment exists for 20 or more uninterrupted years.
Richard D. Vetstein describes the changes to the lender compensation. Will this create more fairness and transparency? What's this going to cost the consumer?
Late week, after an initial win by the mortgage industry, a federal appeals court cleared the way for the immediate implementation of controversial new Federal Reserve loan officer compensation rules. In summary, loan officers must be compensated based on the loan amount, not on other factors of the loan. The new rules were also intended to prevent the practice of “steering” where a loan officer improperly steered the consumer into higher interest rate loans which provided more commissions.FULL ENTRY
For example, a loan officer can't earn a higher commission for selling a mortgage with a 5.5 percent rate versus a 5.25 percent rate. Another element effectively creates a rule on who pays a mortgage broker: Either the lender pays the broker directly or the consumer does -- but both can't pay for the services.
Richard D. Vetstein describes the changes to the Homestead Law. Anyone who owns a house in Massachusetts should know about this home owner benefit.
On March 16th, the revamped Massachusetts Homestead Act went into effect. The new law can be found here. The old homestead act had not been revised in decades and had caused confusion in certain aspects.FULL ENTRY
For those who don’t know, a homestead is a creditor protection device which protects the equity in a person’s principal residence against certain types of creditor claims up to the homestead amount—either $125,000 or $500,000. Homesteads play an important role in protecting principal residences in personal bankruptcy proceedings.
Here’s a summary of highlights of the new act:
• All Massachusetts homeowners will receive an automatic homestead exemption of $125,000 for protection on their principal residence without having to do anything.
• All residents are eligible for a $500,000 “declared homestead exemption” by filing a declaration of homestead at the registry of deeds. There is a new homestead form which must be used. For married couples, both spouses will now have to sign the form–which is a change from prior practice. The recording fee is $35 in most registries.
• If you already have a homestead recorded at the registry of deeds, you do not have to re-file it. All previously recorded homestead declarations are grandfathered into the new law, and have the full $500,000 protection.
Richard D. Vetstein discusses Kenner v. Chatham Zoning Board of Appeals.
Ocean and waterfront views are some of the most valuable and fought-over property amenities in Massachusetts. The difference in price between a property with unobstructed ocean view versus one without — even on the same street– can be significant. Massachusetts zoning law books are filled with petty and expensive fights about even the most minimal obstructions of ocean views. Kenner v. Chatham Zoning Board of Appeals (click to download), recently decided by the Massachusetts Supreme Judicial Court, falls into that category, and provides current guidance on one of the most important aspects of zoning challenges, a legal requirement called “standing.”FULL ENTRY
Blocked ocean views
For anyone practicing in the zoning trenches, it comes as no surprise that Brian and Carol Kenner were none too pleased when the Chatham Zoning Board of Appeals issued a special permit to their neighbors Louis and Ellen Hieb to demolish their existing small cottage and rebuild their house on Chatharbor Lane–with an increase in height of 7 feet and corresponding obstruction of their Atlantic Ocean view. The Kenners, who live directly across the street, claimed that the Heib’s new home would block the light and ocean breezes to their deck and would lead to an increase in traffic in the neighborhood.
Richard D. Vetstein takes a legal look at buyers who are selling and sellers who are buying.
Many home buyers today still need to sell their current homes and use the sale proceeds for their next purchase. Often, there is a closing in the morning on the “sell,” and a closing in the afternoon on the “buy.” We attorneys refer to this as a “piggyback” or “back to back” sale. Back in the boom days, we were doing piggyback transactions all the time, and lenders were able to offer special programs, like bridge loans, to facilitate these back to back transactions. The days of bridge loans, no-docs, and 100 percent financing may be over, but piggyback transactions are still going on, but in a changed market.FULL ENTRY
There are numerous factors and variables to consider when doing a piggyback transaction, from a legal, financial/lending and marketing perspective. There can be at least 11 different people involved – buyer, seller, 2 agents, up to 3 attorneys, loan officer, appraiser, home inspector and contractor. The piggyback transaction works best when one person takes on the role of “project manager.” It’s usually your real estate agent or attorney. Communication and coordination is the recipe for a successful piggyback transaction.
We hear from Richard D. Vetstein about another problem homeowners face during the spring thaw.
With the massive spring thaw and snow melt, and resulting high water tables, I think we are going to see a fair amount of septic system failure this spring. Thus, I thought a refresher question and answer session on Title V regulations were in order.FULL ENTRY
I am selling my home. What is the first thing I must do with my septic system?
The first thing that must be done is to have a Title V inspection, completed by an inspector who is licensed by the state and your town board of health. Here is a Board of Health roster for Massachusetts.
Sudbury Real Estate Agent, Gabrielle Daniels Brennan, advises that unless you have a very recently installed system, do not hire a company who also repairs and replaces the systems to conduct your Title V inspection. Such a company may be more interested in seeing that your system requires a complete overhaul than more minimal maintenance and repair.
The septic inspector will determine whether your system “passes,” “fails” or “conditionally passes” (i.e., requires repairs).
How long is the Title V inspection valid?
A Title V inspection is considered valid for 2 years. However, if the homeowner has his septic system pumped every year, it is valid for 3 years.
My septic system Title V failed. What do I do now?
If the inspection fails, your septic system must be repaired or replaced. If ownership of the house is not being changed, the homeowner may have up to two years to complete the repair. However, if the Health Agent deems the failure to be a health hazard, the homeowner can be required to begin the process of repairing it immediately.
We hear from Richard D. Vetstein about what the legal community is thinking about electronic signatures in real estate contracts:
Catching my eye this week was a recent New York Times article discussing a New York state court opinion regarding the legal effect of e-mail in real estate contracts. The ruling reaffirmed that e-mail may carry the same weight as traditional ink on paper contracts.FULL ENTRY
It made me think about the future of real estate contracts and how they will look. Will the common practice of executing four original purchase and sale agreements be replaced by some type of electronic PDF document with electronic signatures? (I hope so. They are in the West Coast now). Same for the standard Offer to Purchase? What about the stack of disclosures and loan documents signed at closings? (There must be a better way). And mortgages are already being electronically recorded in several Massachusetts counties.
I wonder how closings will be conducted in 2021?
Congress and state legislatures have already laid the groundwork for electronic real estate contracts and e-signatures. In 2000, Congress enacted the E-SIGN law which validated certain contracts in electronic form and electronic signatures. In 2004, Massachusetts adopted the Uniform Electronic Transactions Act (UETA), which is essentially updates the E-SIGN law. Lawmakers designed UETA and E-Sign to recognize that “a signature, contract, or other record relating to a transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form.” The Massachusetts UETA exempts several types of contracts and disclosures (e.g., wills), but not real estate contracts.
Today, Sam Schneiderman, broker owner of Great Boston Home Team discusses what happens when a real estate deal goes bad. This is his 100th entry here at BREN!
The buyer, who we will call Jane, has been a licensed Massachusetts agent for about two and a half years. She had less than six closings. Her agent license allows her to work for a broker who is responsible for overseeing her transactions.
Jane decided to buy herself one of my listings. She acted as her own buyer's agent so that she could collect a commission on her purchase.
Jane made her offer, negotiated a purchase price that worked for her, did her inspections and finally signed the purchase and sale agreement after the deadline to sign had passed. Her attorney obtained extensions to protect her right to the return of the deposit that she made with her offer.
When she signed the P & S agreement, I suggested that it would be wise to speak with a lender other than the one that pre-approved her because she might get a better rate and service. She didn't take my advice. I warned the sellers that we could be in for a bumpy ride.
Jane had a month to get her mortgage. After ten days, no lender’s appraiser. After more reminders, the appraiser arrived three days before her commitment date. Her mortgage broker needed to send her mortgage out to an investor for final review. It was obvious to me, but not Jane, that the commitment was going to be late. Her lender gave notice and her attorney requested an extension of the commitment date at the last minute. The sellers had a new home under agreement, so reluctantly agreed to extend.
The lender ran the final credit check before issuing the commitment. Jane's credit score recently dropped 20 points because she forgot to make a ten dollar credit card payment. She no longer qualified for her original loan. The lender said he had another investor that could close in about two to three weeks.
The sellers reluctantly agreed to extend the commitment date for two weeks. They closed on their new home.
Whatever you take on cell towers, Richard D. Vetstein tells you about the legal wrangling about them:
With the proliferation of cellular/wireless service and coverage, Massachusetts town and cities have been bombarded in the last several years with applications for zoning relief for new cell towers and related equipment. These applications – especially in residential neighborhoods –raise the ire of local residents who don’t want cell towers in their backyards. Local zoning boards’ ability to regulate cellular/wireless facilities, however, is significantly circumscribed by the federalFULL ENTRY
Telecommunications Act of 1996 (TCA) which provides that local zoning decisions cannot unreasonably discriminate among providers, have the effect of prohibiting service, or regulate on the basis of the effects of radio frequency emissions.
The TCA has spawned a decade’s worth of litigation with wireless servicers’ slugging percentage in the David Ortiz range. The most recent smack-down is T-Mobile Northeast LLC v. City of Lawrence.
Today, I am pleased to share a man bites dog story sent to me by my very favorite weird-news forwarder, Kathy in Philadelphia.
Kathy sent me this, from Boing Boing:
Patrick Rodgers, an independent music promoter in Philadelphia, has won a judgment against his mortgage lender, Wells Fargo, which Wells hasn't paid, and so he's foreclosed on them and arranged for a sheriff's sale of the contents of Wells Fargo Home Mortgage, 1341 N. Delaware Ave to pay the legal bill. Rodgers made all his mortgage payments on time, but Wells decided out of the blue that he had to carry insurance for the full replacement value of his home -- $1 million -- and started to charge him an extra $500 a month in premiums. When Rodgers sent a formal letter to the lender questioning this, they did not answer in good time, so a court awarded him $1,000 in damages, which Wells wouldn't pay. So the court is allowing him to sell the contents of the lender's office to make good on the bill.
I trust Kathy. I’ve known her to be reliable since I met her in college. But, this story was a little too good to be true. First I checked Snopes; it has no information one way or the other. Google sent me to the Philly.com , the on-line Philadelphia Inquirer.For those of you who never lived in Philly, the Inquirer is a real daily paper, not a local branch of the National Inquirer.
I looked a little further… I found it on Fox, too. (tee hee) That means it must be true.
Let’s assume it is real… what about it?FULL ENTRY
Here's Attorney Richard D. Vetstein with the next court case about mortgages.
First the robo-signing controversy. Then the U.S. Bank v. Ibanez ruling. Now the next bombshell ruling in the foreclosure mess has just come down from a New York federal bankruptcy judge.FULL ENTRY
The case is In Re Agard (click here to download),
and it essentially throws a huge monkey wrench into a hugely important cog of the entire U.S. mortgage market, the Mortgage Electronic Registration System, Inc. known as MERS.
What is MERS?
MERS, even for many seasoned real estate professionals, is the most important entity you’ve never heard of. In the mid-1990s, mortgage bankers created MERS to facilitate the complex mortgage securitization system where hundreds of thousands of mortgage loans were (and still are) packaged and bundled as securities for sale on Wall Street. Each mortgage entered into the MERS system has a unique 18 digit Mortgage Identification Number (MIN) used to track a mortgage loan throughout its life, from origination to securitization to pay-off or foreclosure. The MERS system was vital to the proliferation of the $10 trillion U.S. residential securitization mortgage market.
Critics say that the decision to create MERS was driven, in large part, to avoid paying recording fees charged by county registry of deeds which required that all mortgage transfers and assignments be properly recorded and indexed in publicly available registries of deeds. Thus, MERS was designed essentially as a privately run, national registry of deeds under which MERS would act as the record “owner” and depository of all mortgages participating in the system, while the mortgage notes and loans themselves were freely bought and sold on the secondary market. About 50 percent of all U.S. mortgages participate in the MERS system.
Here's Attorney Richard D. Vetstein with the next, inevitable, step regarding foreclosures in Massachusetts.
You knew this was coming. Massachusetts politicians smell a big political opportunity with the foreclosure mess here in the Bay State, post-Ibanez, and are filing legislation left and right.FULL ENTRY
The latest is legislation filed by State Senator Karen Spilka and Attorney General Martha Coakley mandating loan modifications in certain circumstances. Specifically, the loan modification legislation requires creditors to take “commercially reasonable efforts” to avoid foreclosure upon certain sub-prime loans. The legislation also provides a safe harbor for creditors to comply with this requirement of commercial reasonableness.
The legislation also addresses problems with foreclosures highlighted in the recent decision by the Massachusetts SJC, U.S. Bank v. Ibanez by prohibiting foreclosures where creditors lack the documents supporting their purported right to foreclose, and prohibits passing on certain fees and costs to homeowners. Specifically, this legislation:
Attorney Richard D. Vetstein is The Man when it comes to keeping an eye on the Ibanez case.
The Massachusetts Supreme Judicial Court has taken up an appeal about whether a home buyer can rightfully own a property if the bank that sold it to him didn’t have the right to foreclose on the original owner, after the U.S. Bank v. Ibanez landmark ruling a few weeks ago. This case may determine the rights of potentially thousands of innocent purchasers who bought property at foreclosure sales that have been rendered invalid after the Ibanez ruling.FULL ENTRY
The case is Bevilacqua v. Rodriguez, and can be read here. In Bevilacqua, Land Court Judge Keith Long (ironically the same judge who originally decided the Ibanez case) ruled that the buyer of property out of an invalid foreclosure has no right to bring a “quiet title” action to establish his ownership rights because he never had good title in the first place. “I have great sympathy for Mr. Bevilacqua’s situation — he was not the one who conducted the invalid foreclosure, and presumably purchased from the foreclosing entity in reliance on receiving good title — but if that was the case his proper grievance and proper remedy is against that wrongfully foreclosing entity on which he relied,” Long wrote. The net effect of the ruling is that the innocent buyer’s only remedy is to sue the foreclosing lender for damages–not a great option–or force the lender to fix the deficiencies with the original foreclosure–if that’s possible at all.
Estimating how many purchasers have been affected by Ibanez defects is difficult. There have been over 40,000 foreclosures in Massachusetts in the last 5 years, and over 12,000 last year alone, up 32% from the year before.
Attorney Richard D. Vetstein first brought The Big Short to the attention of BREN readers. Today, he gives his review:
Having thoroughly enjoyed reading The Big Short, by Michael Lewis a few months ago, I was thrilled that Rona selected it as a BREN book club selection.FULL ENTRY
Review: If you are going to read one book about the market this year, read this one.
Back in 2005, credit default swaps, Alt-A tranches, and interest-only negative-amortizing adjustable-rate subprime mortgage were exotic pieces of the Wall Street mortgage securitization machine. Now, and after cases like U.S. Bank v. Ibanez, we now know the dark and insidious side of the industry.
Lewis taught us that Wall Street bankers knew as early as 2006 about the rising default rate on subprime mortgages but engaged in an elaborate scheme to hide that reality from ratings agencies and investors. He explained that when investor demand for subprime mortgages outpaced inventory, Wall Street came up with "synthetic" mortgage-backed securities whose performance would mirror that of the real thing. Then the bankers conspired to inflate the price of mortgage-backed securities well into 2007, even when they knew the true value was falling, only marking them down in value after their own hedging strategies were in place. And bank CEO’s know as much as a 5th grader about the risks their organizations were taking.
Last summer, Attorney Richard D. Vetstein wrote about an important ruling on snow removal that will affect property owners for years to come. Today, I repeat it for those who weren't thinking about snow last July.
...This week I had to blog about the just announced important decision from the Massachusetts Supreme Judicial Court concerning a property owner’s duty to remove snow and ice from the premises. The case is Papadopoulos v. Target Corp. and can be read here.FULL ENTRY
Overruling 125 years of precedent that property owners had no duty to remove “natural accumulations” of snow and ice, the SJC held that all Massachusetts property owners must remove or treat snow and ice like any other dangerous condition on property. Reckoning back to the hardy New Englander, the old common law was that owners could simply leave snow and ice untreated and escape liability. Justice Ralph Gants rejected that rationale as “is not reasonable for a property owner to leave snow or ice on a walkway where it is reasonable to expect that a hardy New England visitor would choose to risk crossing the snow or ice, rather than turn back or attempt an equally or more perilous walk around it.’’
I knew something major had occurred when I received calls from CNN Money, Bloomberg News, and a Wall Street equity analyst last Friday morning, all wanting to speak with me about "Ibanez." I quickly pulled over on Route 9 in Framingham, and read the U.S. Bank v. Ibanez opinion on my iPad. While I was not surprised at the outcome—that the SJC had ruled that two sub-prime lenders could not foreclose mortgages in which they could not establish their legal ownership—I was surprised at how quickly the decision became and remains a national story of significant implication.
CNN-Money called it a “beat down” of the big banks. Reuters exclaimed it’s a “catastrophe risk” for banks. The ruling spooked investors, as bank stocks were down. A coalition of seven major public pension systems called on the boards of directors of major lenders to immediately undertake independent examinations of the banks’ mortgage and foreclosure practices.
But is the Ibanez case the next Financial Apocalypse? Well, it could be. Something akin to a fast spreading malignant tumor if followed by other courts.
Attorney Richard D. Vetstein reviews the headlines of real estate law for 2010 and looks ahead to the ongoing stories of 2011.
#5. The Great Flood of 2010. Ah, who can forget the flooding in the spring of 2010. I sure remember bailing out my flooded basement every 30 minutes through the night, into exhaustion. Good times… FEMA declared a “major disaster” and the IRS granted taxpayers in 7 counties an extension to file their taxes.FULL ENTRY
#4. The Obama HAFA Short Sale Program. The Obama short sale program, announced at the end of 2009, was aimed to speed up short sales of homes and other loan modification alternatives to stem the rising tide of foreclosures. However, by all accounts, however, the HAFA program has been a dismal failure.
#3. On Jan. 1, new RESPA rules went into effect, significantly changing the way lenders disclose settlement services, in particular closing attorneys’ fees, and title insurance.
Read more: New RESPA Rules 2010: Disclosure of Settlement Services, Closing Attorneys’ Fees, And Title Insurance .
#2. My posts on the Massachusetts Offer to Purchase and the standard form Purchase and Sale Agreement, were very popular. An indicator of the recovery of the Massachusetts real estate market perhaps? Or not?
Attorney Richard D. Vetstein is back with the second entry about the recent case involving brokers and deposits.
This post is a continuation of my discussion about the recent Massachusetts Appeals Court case of NRT New England, Inc. v. Moncure (click for link).
Last week I talked about why the decision was very important in upholding the standard liquidated damages clause in the typical purchase and sale agreement.
This week I’ll talk about the court’s ruling that the listing broker violated its fiduciary duties when it messed around with the escrow deposit.
Dispute Between Listing Broker and Buyer
The facts of this case are a bit unusual. Listing Broker represented the seller in a purchase of residential property in Wayland, MA. Under the standard purchase and sale agreement, the buyer posted a $92,500 escrow deposit which Listing Broker held as an escrow agent. The same buyer apparently used Listing Broker on another transaction and owed it nearly $35,000 in fees.
The buyer lost its financing and defaulted on the contract, thereby forfeiting the $92,500 deposit. (I covered that in my prior post). Listing Broker took an assignment of the buyer’s right to the escrow funds, but didn’t tell its client that right away. Then Listing Broker tried to strong-arm its client by threatening litigation if he didn’t accept $2,500 and release the escrow deposit to Listing Broker.
Breach of Fiduciary Duty and Chapter 93A Violation
The court was none too happy with Listing Broker’s course of action here. The court reaffirmed that Listing Broker had a fiduciary duty — one of the highest duties under law — to hold the funds for the benefit of the seller and not to engage in any self-dealing. The court found that Listing Broker’s collection of a debt against the escrow deposit while it was acting as escrow agent was a clear breach of fiduciary duty.
The kicker was that the court imposed triple damages and an award of attorneys’ fees under the Massachusetts Consumer Protection Act, Chapter 93A. So Listing Broker is now on the hook for $277,500 plus thousands in legal fees. Ouch!
Attorney Richard D. Vetstein describes a case that has the attention of brokers throughout Massachusetts.
Last week the Massachusetts Appeals Court handed down an important decision involving the standard form purchase and sale agreement and a listing broker’s fiduciary duties as the escrow agent. The case is NRT New England, Inc. v. Moncure (click for link). I’m going to break this decision down into 2 blog posts because it’s a lot to cover.FULL ENTRY
The first important part of the decision is that the court upheld the “industry norm” 5% deposit under the purchase and sale agreement as “liquidated damages” when the buyer lost his financing and couldn’t close–even in a hot and rising market (2004) and even when the seller ultimately sold the home for a better price.
“Liquidated damages” is essentially an estimate of the anticipated damages a seller would incur if the buyer defaults and cannot close. The parties under a purchase and agreement agree on a number, typically 5% of the purchase price, as the liquidated damages that the seller is entitled to retain–in case the buyer is unable to close. (The buyer is usually protected under the financing contingency until she received a firm loan commitment).
The typical liquidated damages clause in the Massachusetts purchase and sale agreement looks like this:
If the BUYER shall fail to fulfill the BUYER’s agreements herein, all deposits made hereunder by the BUYER shall be retained by the SELLER as liquidated damages, which shall be the SELLER’S sole remedy at law or in equity.
Tenants beware. The Tea Party President (correction: Tea Party Nation President) Judson Phillips believes
“If you rent your house or apartment, then you should not have the right to vote...”
"The Founding Fathers originally said, they put certain restrictions on who gets the right to vote. It wasn't you were just a citizen and you got to vote. Some of the restrictions, you know, you obviously would not think about today. But one of those was you had to be a property owner. And that makes a lot of sense, because if you're a property owner you actually have a vested stake in the community. [emphasis mine.] If you're not a property owner, you know, I'm sorry but property owners have a little bit more of a vested interest in the community than non-property owners."
I mentioned around Election Day, 2008, that white adult male tenants were granted the right to vote in 1850. Should we turn back to clock on this? Really??FULL ENTRY
He's not Scrooge, he's Attorney Richard D. Vetstein. Today, he has a timely reminder for buyers who are in the middle of their mortgage process!
I’m never one to rain on a good shopping day parade, but this year’s Black Friday and “Cyber Monday” shopping binges and the entire holiday shopping season could cause some problems for home buyers who make big purchases, but haven’t closed yet on their real estate transaction.FULL ENTRY
The reason is Fannie Mae’s Loan Quality Initiative (LQI) rules which have resulted in lenders pulling last minute credit reports and additional verifications of borrower information. If you have racked up a big credit card bill before your closing, these last minute credit checks could result in a closing delay, pricing adjustment, or, worst, loan approval cancellation.
On a Sunday afternoon I found myself face-down in the grass in front of my clients. What happened? While walking into a house for sale, my left foot found an 8 or 9-inch-deep hole. With that foot stuck, I fell forward with my next step. Luckily, I landed basically in one piece.
“Talk about homeowner liability!” says my client. He’s right. The hole looked like it was made for a fence post in the grassy area next to the curb. Maybe the sign-setters changed their mind and then forgot to fill it in. This accident is a pretty clear bit of negligence. Yet, I find it funny how people think: Accident… person hurt… who can be sued?
Fear of liability claims motivates some people to stay away from home ownership altogether. But liability comes up most often for people who are thinking about buying rental property. Why is that? Are we more afraid of legal tangling with a tenant than we are about hurting someone in our family? Surely not!
Attorney Richard D. Vetstein. writes today about the legal precedents regarding smoking in condos.
As anti-smoking restrictions become increasingly widespread, smokers find the last place they can indulge freely is within the confines of their home. However, the saying that a man’s home is his castle may not extend to condominiums where condo associations are enacting bans against smoking in common areas and even individual units.FULL ENTRY
In Chicago, the 1418 N. Lake Shore Drive Condominium Association recently banned smoking in interior common areas and inside the units. Smoking is permitted in a unit, however, if it is restricted to a single room that has been equipped with an association-approved, self-contained air-treatment system. Last year, a Cape Cod condominium considered a smoking ban in living areas.
I reviewed the Mandatory Licensee-Consumer Disclosure, AKA “Agency Disclosure” after being baited by REMaven last month. One question, from Bob02657, stumped me, a little. After checking with the MAR legal hotline, here is his question and my answer:
Bob02657 wrote: Rona on the Mandatory Agency Disclosure form front page there are check spaces for: __ Buyer's Agent; __Seller's Agent, but no __ Dual Agent? On page two all types of agency are described
In short, a licensee cannot start a professional relationship in dual agency. The licensee starts out as an agent to one party, or not an agent at all (facilitator.) There is a second form that licensees must get signed when dual agency arises.
Now some detail:
1. The disclosure is intended to explain to the consumer who the agent represents and what the representation requires of the agent. The disclosure is signed by the licensee, who can be a buyer’s or seller’s agent or facilitator (non-agent.)
2. If the licensee intends to become a designated buyer’s or seller’s agent, “buyer’s agent” or “seller’s agent” gets checked off. At the time of signature, the licensee has no transaction with a conflict, since you are just getting started. Later, the company can go into dual agency by having two designated agents who are on opposite sides of a transaction. At that point, there is another required disclosure.
Sam Schneiderman, broker owner of Great Boston Home Team (our Monday guy) writes today about resale problem for owners of small condo associations.
Condo associations that do not have their financial act together can cause problems for resales of individual condominiums in their building.
For those who don’t understand how condominiums deal with their financial responsibilities, here is some background:
Owning a condominium unit involves sharing responsibility with other owners for the parts of the condo property that are not individually owned by the unit owners. Usually, that shared responsibility involves providing for the upkeep and maintenance of a roof, building exterior, hallways, grounds and often, shared plumbing, electrical or heating system components.
Most condo owners pay a monthly fee into their condominium association bank account to cover those expenses, based on the projected annual budget of expenses for the building.FULL ENTRY
James Morrison writes today about home inspection before home inspectors began to be licensed in 2001.
BostonCharles wrote:There continue to be structural issues with the field, just like with appraisers. How many home inspectors with a rep for pointing out problems get new clients?
There are ‘structural problems’ in every professional field and the field of home inspection is certainly no exception. I’ve been a professional home inspector for my entire adult life (and indeed, part of my childhood.) What I’ve written should be interpreted from that perspective.
BostonCharles raises a thorny issue. Historically (when buyer representation was rare), home inspectors relied on seller-representing real estate agents to refer homebuyers to them. On the surface, it made good sense. Real estate agents have contact with hordes of homebuyers and are in a position to funnel loads of business to home inspectors.
The inherent conflict is quite clear. Home inspectors work for homebuyers. The traditional real estate agent worked for the seller. Buyers and Sellers have directly opposing interests, so what was a poor home inspector to do?
Attorney Richard D. Vetstein. writes today about the court case that looks into whether we need an attorney to do a closing.
Today, the Massachusetts Supreme Judicial Court heard arguments in the closely watched case of The Real Estate Bar Association of Massachusetts, Inc. (REBA) v. National Real Estate Information Services, Inc. (NREIS). This case pits Massachusetts real estate closing attorneys versus out of state non-attorney settlement service providers which are attempting to perform “witness or notary” closings here in Massachusetts. At stake is the billion dollar Massachusetts real estate closing industry.FULL ENTRY
Unauthorized practice of law?
I wrote previously about the case in this post. Massachusetts’ long standing practice is for licensed attorneys to oversee and conduct the residential real estate closing process. NREIS’s business model is to outsource the vast majority of those functions to back office workers who aren’t trained attorneys. REBA argues that this practice violates Massachusetts common law and consumer protection statutes requiring that attorneys perform the most vital functions of a real estate closing transaction, such as certifying and analyzing title, preparing the deed, handling the transfer of good funds, where necessary, and conducting the closing.
The case was originally brought in federal court, where NREIS won and obtained a $1Million attorney fee award. But the federal appeals court overturned that ruling, and asked the Massachusetts Supreme Judicial Court to answer the question of whether and to what extent a residential real estate transaction and closing is the “practice of law” required to be performed only by a licensed attorney.
I’ve had pretty good luck as a small-property landlord. But, one summer, my luck almost ran out. The bottom line of land-lording is that if your house is not up to code, you are in the hot-seat if something bad happens there. No matter how drunk or stupid your tenants are. Most houses are not up to code.
My blood pressure spiked when I read about Garfield versus Scott. That was the case where drunken tenants fell off a porch. The SJC ruled that rentals have “implied habitability.” Therefore, the landlord with the weak porch rail owed $450,000.
I had a drunken tenant incident and I got very lucky.
I have a flat roof over my home office. There is a door in the back hall leading onto its roof. Until I put in flooring and railings there, it is off limits. There was a sign there, at the locked door, marked “emergency exit only.” It was used once, to my knowledge. That was when the tenants used it to move a refrigerator in.
Attorney Richard D. Vetstein. answers two good questions from readers about the recent foreclosure mess.
FULL ENTRYAre title insurance companies still insuring foreclosure properties? – James In Cambridge
Yes, they are. Initially, the press reported that some major title insurers had temporarily stopped insuring foreclosure titles from JP Morgan Chase, Ally Financial, and Bank of America. However, my understanding is that all title insurers have resumed insuring all foreclosure properties in the wake of several major agreements between national title insurance companies and lenders. These warranty and indemnification agreements would essentially shift the risk of loss from irregular/defective foreclosures back onto the foreclosing lenders.
From the conveyancing side, I can definitely tell you that title insurers have advised their attorney agents to go through foreclosure titles with a fine tooth comb and to be especially diligent in examining and certifying foreclosure titles. Buyers of foreclosure properties should be prepared for delays in getting their transactions closed.
How is robo-signing different from the Ibanez case situation?–Scott
Answer: ”Robo-signing” and the Massachusetts Ibanez foreclosure case are two different situations, but the root of the problem — the complexity of the securitized mortgage industry and the sheer volume of foreclosure paperwork to be processed — remains a contributing cause of both problems.
Lawyer and jobless Maine homeowner at center of robo-signing scandal given heroic treatment by media, but is it deserved?
I guess whether you consider Nicolle Bradbury and her pro-bono lawyer heroes for successfully sticking it to one of the nation's largest mortgage lenders depends these days on where you fall on the ideological spectrum.
Check out this New York Times piece, which claims that this out-of-work Maine woman and Tom Cox, a retired lawyer volunteering for a nonprofit, triggered the national furor over robo-signing.
On the verge of losing her tiny, weather-beaten $75,000 home after having stopped paying her GMAC mortgage two years ago, Bradbury, an one-time employment counselor in Denmark, Maine, turned to help to Pine Tree Legal Assistance.
From there, she lucked out. Cox, the retired lawyer who took her case, had just happened to handle foreclosures for a local bank back during his working days.
Pouring over her paperwork, Cox's suspicions were triggered by the phrase "limited signing officer." He started digging, won permission from the state court hearing the foreclosure case to depose the GMAC executive, and the rest is history.
Tuesday, I wrote about conflicts of interest, based on Ethan’s email. Today, I answer another question that came up for Ethan:
I wish we had more advice as to what are common allowances to sweeten the deal (outside of negotiating the price) and what always needs to be strictly adhered to in legalese.
I can speak from an agent’s experience on this. I’m not qualified to discuss legal practice and contracts.
What should be in writing? As much as humanly possible! In my practice, we keep notes on what is agreed to, and we give all the conditions to the attorney for the Purchase and Sales Agreement.
Purchases are based on price and terms. Those terms are everything that is not price. That includes when the loan closes, what is included in the sale, what condition the house will be in when it closes, how many times you can go to the place to bring contractors before closing, what happens if the appraisal comes in too low, what happens if the seller can’t get a clear title…
Here are the common things that happen:
1. Inclusions and exclusions get muddled. Anything attached to the house with a nail or bolt or wire is real estate; anything hanging from a hook or plugged-in is personal property (sometimes called “personalty” or “chattel.”) Buyers frequently ask for chattel, such as refrigerators and large mirrors over the mantle. Sellers frequently want to keep custom lighting fixtures and stained glass. There is a place on the Offer form where this information goes.
2. Seller’s private “yard sale.” Sometimes the seller agrees to leave furniture, lawn mowers, snow blowers and such, at a minimal price, to sweeten the deal. I think getting the leftover stuff does not benefit the buyer as much as a cash refund, so I separate the discussion about these items until the Purchase and Sales Agreement is signed. If you do get additional chattel, make a list!
The justices had many questions about the Wells Fargo/Option One mortgage pooling and servicing agreement, private placement memo, and other mortgage securitization documents. If you’ve read the great book, The Big Short by Michael Lewis,you know how complex these agreements are. Some of the justices clearly weren’t following the complex securitization process and agreements. Justice Ganz characterized the securitization documents as “extraordinarily sloppy.” • Chief Justice Marshall asked the attorney for the foreclosed homeowner whether “the sky will fall if the Land Court’s ruling is upheld”? (Answer was no). Likewise, Justice Ganz asked what are we to do about the seemingly innocent folks who bought these foreclosed homes unaware that the titles were defective. Justice Ganz and Marshall agreed that these purchasers could be “bona fide good faith purchasers” which under the law means they could be immune from claims challenging their title. That’s an encouraging line of reasoning for many people who bought foreclosed homes and are waiting on the outcome of this case.
I watched the oral argument webcast in the U.S. Bank v. Ibanez controversial foreclosure case before the Massachusetts Supreme Judicial Court. Here’s a recap of what caught my eye:
• There was also a discussion about changing the current common law which does not require recording of mortgage assignments, to require it. Justice Marshall asked how many states required recording of mortgage assignments, giving a hint of where’s she thinking on this.
• Lastly, Justice Cordy, the former big firm attorney, was clearly on the side of the lenders, even going so far as to ask whether Mr. Ibanez waived his challenge to the foreclosure by not challenging it in lower court.
The justices had many questions about the Wells Fargo/Option One mortgage pooling and servicing agreement, private placement memo, and other mortgage securitization documents. If you’ve read the great book, The Big Short by Michael Lewis,you know how complex these agreements are. Some of the justices clearly weren’t following the complex securitization process and agreements. Justice Ganz characterized the securitization documents as “extraordinarily sloppy.”
• Chief Justice Marshall asked the attorney for the foreclosed homeowner whether “the sky will fall if the Land Court’s ruling is upheld”? (Answer was no). Likewise, Justice Ganz asked what are we to do about the seemingly innocent folks who bought these foreclosed homes unaware that the titles were defective. Justice Ganz and Marshall agreed that these purchasers could be “bona fide good faith purchasers” which under the law means they could be immune from claims challenging their title. That’s an encouraging line of reasoning for many people who bought foreclosed homes and are waiting on the outcome of this case.
Columbus Day is a controversial holiday. It was designated to commemorate the explorer’s arrival in the New World; however, many believe that Columbus was more responsible for destruction and the collapse of the indigenous population than for prosperity and progress.
Opposition to the Columbus Day holiday usually focuses on the cruel treatment that natives received from Columbus and some later settlers, and the fact that the European conquest caused a significant decline in the native population.
In today’s real estate lingo we might be talking about gentrification and discrimination.
The settlers that followed Columbus risked their lives to create new lives in a new world where they hoped to live free from discrimination. The irony was that when they encountered natives that were different, many of the explorers and settlers discriminated against the natives by persecuting them for their lifestyles and beliefs.
It looks like gentrification and discrimination go back to the days of Columbus and the early settlers.FULL ENTRY
REMaven went after me about dual agency. She quoted me:
Rona wrote: “I step lightly on issues of dual and designated agency because I practice exclusive buyer agency and don’t want to oversell my model?” [Question mark by REMaven]Then continued:
Excuse me, but why would you not step hard on the practice of dual agency, when it affects the bottom line of both the buyer and seller? It has nothing to do with which type of sales model you utilize. It has everything to do with educating the public and calling out industry and any agent who practices this.
If you feel that you have to step lightly on issues of dual and designated agency as you may be blackballed by other agents and your offers might not be accepted, then I suggest that another blogger tackle this issue.
For those who are tired of me bringing this topic up or think that it isn’t important, the next time you go to court, please allow the Lawyer representing your opponent to represent you and your best interests. Maybe you’ll roar with laughter when it isn’t allowed or if it were (in a kangaroo court) with the results
I respond, in detail:
REMaven, you mistake tact and fairness for lack of commitment. It is easy for you to say anything you’d like, under your cloak of pen-name. I, however, use my real name. If I constantly wrote on agency -- which is a big part of my company's marketing -- I would be shouted down, rightfully, for self-interest. I will not accept that I am acting in my self-interest if I write about it and if I don’t write about it.
You are dead wrong to claim that I don’t take on these issues -- I do, just not every day. I follow this topic in a way that educates the readers about agency issues. I have a track record. You just weren’t reading:
I wrote about the Agency Disclosure. I included designated and dual agency on my list of what’s wrong with real estate in my recap of 2008. I explained what to look out for in dual agency. I also mentioned the poor rate of compliance to the regulations. I gave an example of where agents claimed they were buyer agents in a questionable situation, and why consumers need to beware. I explained the nuts and bolts of maintaining a fiduciary model as recently as last July.
Sam also posted on what consumers need to understand about dual and designated agency. Not once, but twice.
Attorney Richard D. Vetstein. continues to report about the legal angles of foreclosure.
This week, he explains the Bank of America decision to halt foreclosures and watches as Ibanez gets his day at the Supreme Judicial Court. (He’s kept an eye on the Ibanez case since September last year, with round 2
in October, and as it headed for the Supreme Judicial Court last winter.)
Last week, Bank of America, the nation’s largest bank, became the latest lender to halt foreclosures in 23 states because of concerns that lenders submitted faulty foreclosure court documents.FULL ENTRY
Massachusetts Attorney General Martha Coakley has asked Bank of America to halt foreclosures in Massachusetts, but has not filed a formal action to do so yet.
With the BofA/JP Morgan Chase announcement to halt foreclosures, the practice of “robo-signing” has come under fire. Robo-signing is where mid-level bank executives sign thousands of affidavits a month attesting that they had personal knowledge that the facts of the foreclosure were as presented, when in fact they had no such knowledge. A major bank executive admitted to signing over 8,000 such affidavits per month.
It's Wednesday, so here's Attorney Richard D. Vetstein, who wrote about something that he thought would make my day. Today, he has advice for listing agents based on a court case about handling client's escrow when there is a commission dispute.
Yesterday an interesting case came down involving a nasty tug-of-war between listing brokers and a buyer’s agent, with the buyer’s six figure deposit caught in the middle. The case is Zang v. NRT New England.
In the case, the seller signed the standard exclusive listing agreement with the listing brokerage which provided for a 5% commission, and cooperation with buyers’ brokers, with an equal split of the commission. Mr. Zang, a potential buyer, showed up at an open house for the condominium, unaccompanied by a broker. The buyer made an offer through a listing agent at that brokerage, but an agreement couldn’t be reached. The buyer then hired an exclusive buyer’s agent who submitted a second offer. The offer was ultimately accepted by the seller, and the parties proceeded to sign a purchase and sale agreement.
That listing brokerage, however, was none too pleased that the buyer’s broker had entered the picture at the final hour looking for a commission. One of the listing brokerage agents even left a few amusing voicemail messages for the buyer, asking him whether "you think that it's really fair that [the buyer's agent] should come in at this late date and capture half of the commission… and what does Alan [one of the listing brokerage agents] get for all of his work? Nothing. But, you know, I guess that's money in your pocket."FULL ENTRY
It's Wednesday, so here's Attorney Richard D. Vetstein. A few well-placed words can protect your deposits and your rate lock while you are getting your purchase mortgage commitment. Attorney Vetstein tells you how and why:
Today’s strict lending and underwriting environment has resulted in quite a few delays and even losses of buyers’ financing for home purchases. Loan commitment deadlines are being pushed back due to underwriting delays, regulatory compliance and appraisal issues, among other delays. The worst case scenario for any borrower is the wholesale rejection of financing in the middle of a transaction.FULL ENTRY
What is the typical mortgage contingency clause?
The Massachusetts “standard” form purchase and sale agreement contains a mortgage contingency clause which protects the buyer (and his deposit) for the period of time until he can obtain a firm loan commitment. The date is negotiated by the buyer and seller, and is usually around 30 days from the execution of the purchase and sale agreement, depending on the closing date. If the buyer cannot get a firm loan commitment by the deadline, he can opt out of agreement with a full refund of his deposit.
What if there are delays in obtaining my loan commitment?
The buyer really has only two choices if the lender cannot deliver a firm loan commitment by the mortgage contingency deadline: (1) ask the seller for an extension of the loan commitment deadline, or (b) terminate the transaction. There is, however, a smart way to handle this situation.
I always couple a request for a loan commitment extension with notice that if the seller does not agree, then the buyer will exercise his right to terminate the agreement. That way, the seller has to make a tough choice: grant an extension or lose the deal. If the seller does not want to grant an extension, the buyer really has no other choice but to move on to the next home for sale.
It's Wednesday, so here's Attorney Richard D. Vetstein. Today he looks at the mortgage part of the Wall Street Reform laws passed this summer.
Buried in the fine print of the much publicized Dodd-Frank Wall Street Reform and Consumer Protection Act is the new Mortgage Reform and Anti-Predatory Lending Act, which contains strict new rules aimed at preventing another sub-prime mortgage collapse.FULL ENTRY
What Is The Impact To Mortgage Lenders and Originators?
The Mortgage Reform and Anti-Predatory Lending Act certainly changes the regulatory landscape for mortgage originators who focused on high-risk, sub-prime lending, setting tougher new standards and creating new federal remedies for consumers victimized by deceptive and predatory lending. Stripped down, the Act puts the onus on mortgage lenders and originators to ensure, based on verified and documentation information, that borrowers can afford to repay the loans for which they have applied. Pretty novel idea, huh?
jackjj2 told his tale of being a newlywed in an in-law apartment:
When I first got married, my wife and I rented half of a walk-out basement apartment from an uncle who had just finished a remodel. He had put in a second kitchen and revamped the bedroom, bathroom, and living room. We had the benefit of cheap rent and a brand-new, fresh apartment.
He went on to identify some of the two biggest problems with such an arrangement:
1. How can you know if the apartment is legal and safe?
2. How do you insure privacy when living in the same house as relative?
I recently discussed in-law apartments with an attorney. He made some distinctions that I agree are important:
1. If the house is zoned in a single family home area, it cannot become a legal two-family house without a variance. Don’t count on getting a variance.
2. An in-law apartment can meet town zoning standards for living space. In that case, some towns will include it in the legitimate living space. This is sometimes called a “legal” in-law apartment because members of the family can live there.
3. Many in-law apartments are not safe, private living space.
4. Even if an in-law apartment is “legal”, it is not available for open rental.Since the house is not zoned as a two-family, only family members can live there.
Here are the words of Attorney Richard D. Vetstein. Today a look at the law regarding appraisal.
Several weeks ago Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is one of the most radical overhauls and reforms to the banking industry since the days of the Great Depression. The bill will “sunset,” or put an end to, the Home Valuation Code of Conduct, what many appraisers thought was an ill-advised attempt to revamp the residential real estate appraisal system back on May 1, 2009. The HVCC impacted all Freddie Mac and Fannie Mae loans and has stirred up quite a bit of controversy within the real estate industry.FULL ENTRY
The HVCC: A Failed Experiment?
The HVCC essentially re-wrote how lenders order appraisals. The HVCC’s goal was to remove incentives for mortgage lenders to apply pressure on appraisers to inflate values, understanding that lenders and mortgage brokers normally only get paid if a loan closes. No longer could lenders choose from their own roster of local appraisers who knew the local real estate market. Instead, the HVCC prohibited mortgage brokers from even communicating directly with appraisers, and required that appraisals be ordered through an independent Appraisal Management Company, or AMCs.
Sam Schneiderman, broker owner of Great Boston Home Team explains about a paper that every condo buyer and seller needs to know about.
A 6d certificate is required by lenders at closing to insure that all condo fees and assessments have been paid through the date of closing. Without it, there is no way to insure that the seller’s condo fees and/or assessments are paid up or if they owe the condo association thousands of dollars.
Most condo owners don't understand what it is, how it protects them, why they need to obtain or sign it, and how to get it notarized, which is typically a real inconvenience for them.
An attorney can not give clean title to a buyer without it. Therefore, a seller can not sell a condo without a 6d certificate.FULL ENTRY
Leases are contracts and can be oral or written. Today, Attorney Richard D. Vetstein. writes about what these contracts mean to renters and landlords.
There are basically two types of tenancies in Massachusetts: a lease and a tenancy at will.FULL ENTRY
A common misconception is that leases are better for landlords and tenancies-at-will are better for tenants. This is not necessarily true. Which form is better will depend on the needs of each party for stability, predictability, and flexibility, since the terms and conditions of either a lease or a tenancy-at-will can be negotiated between the landlord and the tenant. However, for any unit that receives a federal or state subsidy, there must be a lease for at least a one-year period.
Differences with a written fixed lease
The biggest differences between a lease and tenancy at will are the following:
• a lease is for a fixed term, usually a year, while a tenancy-at-will is from month(s) to month(s);
• a lease can be terminated during the term of the lease only for reasons listed in the lease, whereas a tenancy-at-will can be terminated without any reason; and
• the rent for a lease is fixed for the term of the lease, except where the lease itself allows for an increase, whereas the landlord can increase the rent for a tenant-at-will upon giving notice one rental period in advance.
Here are the words of Attorney Richard D. Vetstein. He knows the law regarding deposits. Do you? Does you landlord?
With the students arriving any minute, it’s a good idea to review last month’s rent and security deposits – one of the most heavily regulated aspects of Massachusetts landlord-tenant law and are fraught with pitfalls and penalties for the unwary, careless landlord.FULL ENTRY
If you don’t really know the rules for handling last month’s and security deposits, don’t take them. The reason is that any misstep, however innocent, under the complex Massachusetts last month’s rent and security deposit law can subject a landlord to far greater liability than the deposit, including penalties up to triple the amount of the deposit and payment of the tenant’s attorneys’ fees.
If a deposit is necessary, take a last month’s deposit, the requirements of which are less strict than security deposits. Here is an overview of the security deposit law:
Requirements for holding a security deposit
The following steps must be followed when a landlord holds a security deposit:
1. When the deposit is tendered, the landlord must give the tenant a written receipt which provides:
o the amount of the deposit
o the name of the landlord/agent
o the date of receipt
o the property address.
2. Within 30 days of the money being deposited, the landlord must provide the tenant with a receipt identifying the bank where the deposit is held, the amount and account number.
A lease is a contract in which the landlord and tenant make promises to one another in writing. Be aware of what you are promising! Today I am writing about tenancy-at-will, sometimes called “month-to-month” lease. How do tenancy-at-will leases work? With tenancy-at-will leases, either party can cancel with notice. The required notice length will be written in the lease.
Our commenter, Grasshoppa, had his tenant move out in the middle of the winter. I blamed the tenant, but he ‘fessed up that he had a tenancy-at-will lease:
You had a problem with a tenant who left you in the middle of winter. Bad problem…
The tenant who left in the winter was at-will. I now have a lease. Pros and cons to both. Another topic?
Yes, it’s a great topic. What is your experience with tenancy-at-will? Did the flexibility work to your advantage or did you have an unpleasant outcome?
Tenancy-at-will, obviously, works better for the party that plans to quit the contract and generally is unpleasant for the person who has to make an unexpected change. Sometimes both parties are ready to part and all is well, but that’s just lucky. Landlords are hurt when tenants leave during non-peak rental times. Tenants are almost always hurt because moving has both up-front costs for security deposits plus the fuss and expense of moving.FULL ENTRY
The last thing I am thinking about this week is snow removal. But not so for the SJC. Here's Attorney Richard D. Vetstein with an important ruling on snow removal that will affect property owners for years to come.
I’ll be back next week with my series on landlord tenant law. This week I had to blog about the just announced important decision from the Massachusetts Supreme Judicial Court concerning a property owner’s duty to remove snow and ice from the premises. The case is Papadopoulos v. Target Corp. and can be read here.FULL ENTRY
Overruling 125 years of precedent that property owners had no duty to remove “natural accumulations” of snow and ice, the SJC held that all Massachusetts property owners must remove or treat snow and ice like any other dangerous condition on property. Reckoning back to the hardy New Englander, the old common law was that owners could simply leave snow and ice untreated and escape liability. Justice Ralph Gants rejected that rationale as “is not reasonable for a property owner to leave snow or ice on a walkway where it is reasonable to expect that a hardy New England visitor would choose to risk crossing the snow or ice, rather than turn back or attempt an equally or more perilous walk around it.’’
Most buyers order professional home inspections of properties that they are considering. Inspections can include structural, mechanical, radon, lead, water quality, air quality, mold, well, and septic system or cesspool inspections. Inspections are limited to whatever the buyer and seller agree to in the offer.
I’m amazed at what good inspectors discover. Even in new homes, inspections typically reveal some items of concern.
If properly negotiated and written, the inspection clause should allow a buyer to negotiate for repairs or cancel a transaction (especially on an “as-is” purchase) if inspections are unsatisfactory and get the deposit back.
In some states, sellers have their homes inspected before they go on the market. Often, they’ll do repairs and provide a copy of the inspection and repair receipts to the buyer(s). The mindset seems to be that things will move along smoother with no unpleasant surprises or re-negotiation after the offer has been signed.FULL ENTRY
I asked Attorney Richard D. Vetstein. to add to the conversations about rentals, as we near peak rental season in Greater Boston.
In a few weeks, the quiet streets of Allston, Brighton and Cambridge will turn into the zoo that is known as student moving week. So it’s time to review frequently asked questions for landlord-tenant law.
Screening Prospective Tenants
Landlords can legally ask about a tenant’s income, current employment, prior landlord references, credit history, and criminal history. Your rental application should include a full release of all credit history and CORI (Criminal Offender Registry Information). Use CORI information with a great deal of caution, however, and offer the tenant an opportunity to explain any issues. Landlords should also check the Sex Offender Registry to ascertain whether a potential tenant could be a safety risk to others nearby. Use the rental application and other forms from the Greater Boston Real Estate Board.
Today, a follow-up on the story of a young family that I worked with this year. They are selling their too-small starter home and buying a bigger long-term family home.
They cleared out their house for showing. It looked good, but was far less functional. The printer was stowed away, because the desk went into storage. Their three-year old asked, when she couldn’t find something, “Mommy, is it in the Pod [temporary storage module]?”
Things went well. They had a buyer for the small house and chose a bigger one. Both loan commitments were committed: the buyer’s for their little house and theirs for their big house.
Two weeks before closing, they had their temporary housing lined up and were in the middle of lining up the contractors for the before-we-move repairs.
Their worries are over, right? Well, not 100 percent!FULL ENTRY
Sam Schneiderman, Broker-owner of Greater Boston Home Team (our Monday guy) warns that mistakes happen when people move too fast without fully understanding what they are getting into. Verify who you are working with before you hand over confidential information or money.
Whether buying or renting, finding the right home can be a challenge. Once found, it’s natural to think that others will also be interested in it. Most people react by getting excited and move quickly to make an offer or rental application to assure that someone else doesn’t get the property first.
Mary and Jane, two smart young women searching for an apartment together, looked at a dozen apartments and didn’t find anything that worked at their price point before they found an online post describing the perfect apartment at a great price. They called and dropped everything to rush over and meet the agent at the apartment. The apartment was perfect, so they went back to the agent’s office to fill out applications and put down a deposit to hold the apartment.
The applications required their Social Security numbers, birth dates and permission to run a credit check. They agent copied their licenses. Because they were just out of college, the agent said they needed co-signers. Their parents filled out co-signer agreements, including similar information for the agent to get their credit reports.FULL ENTRY
Attorney Richard D. Vetstein. is here today with a legal look at lead paint removal.
Under the new federal Lead Paint Renovation, Repair and Painting Rule (RRP), most home improvement projects on homes build before 1978 will require certified lead paint removal contractors to follow strict lead paint removal precautions. To comply with the new regulation, those working on older sites will need to invest in lead-testing kits, plastic sheeting, respirators, protective clothing and other lead-safety materials.FULL ENTRY
These rules will really impact Massachusetts because its housing stock is much older than other states’. According to a recent Boston Globe article, home improvement costs will no doubt rise due to the new rules.
The threshold for the new rules is whether the home improvement project will disturb more than 6 interior square feet of paint or 20 exterior square feet of paint. This extremely low threshold will cover virtually any home improvement project involving cutting into any wall or ceiling.
Attorney Richard D. Vetstein. describes that two extensions passed by Congress and what they mean for people waiting to close on some properties.
Congress gave home buyers some good news before the July 4th holiday weekend.FULL ENTRY
Home Buyer $8,000 Tax Credit Deadline Extended to September 30
At the eleventh hour, Congress approved an extension of the June 30 home buyer tax credit closing deadline. Buyers now have until September 30 to close their transactions, however, a purchase contract must have been signed by the original deadline of April 30th. President Obama has signed the measure.
Most conventional transactions qualifying for the credit closed in a flurry last week, as Congress was still debating the measure on the deadline day, so the extension was too late. But thousands of short sale and foreclosure related transactions were unable to close by the June 30th deadline, so the extension will breathe some life into that market segment.
Flood Insurance Program Restored
Even better than the tax credit was Congress’ move to restore funding for the federal flood insurance program which had run out of money on May 31. Perhaps Congress read my prior blog post on this situation! The President has signed the bill.
The Senate has passed the funding extension until September 30, 2010. This will allow transactions to move forward. The bill is retroactive and covers the lapse period from June 1, 2010 to the date of enactment of the extension. It’s a short term fix, but it will get closings completed for homes in flood zones. Congress will have to revisit the situation in September.
Attorney Richard D. Vetstein. explains a closing problem that happened in his office.
I recently had a closing on a property in a flood zone almost fall apart because, unknown to everyone, Congress decided to let the federal flood insurance program run out of money. After doing some research, I was dismayed to learn that since the program expired May 31, home buyers have been unable to buy or increase their flood insurance coverage, and many lenders are unwilling to close on properties in flood zones until the program comes back online. When, or if, that may occur is anyone’s guess. Luckily, in my transaction we were able to transfer the seller’s existing policy to the buyers so the deal closed. But others aren’t so fortunate. Researchers estimate that for each day the program remains in limbo, approximately 1,400 closings for home purchases must be delayed, according to the National Association of Mutual Insurance Companies in Washington.FULL ENTRY
The National Flood Insurance Program Runs Out Of Money
Flood insurance is funded through the federal National Flood Insurance Program (NFIP). Congress appropriates funding for the program, but it inexplicably allowed the program to lapse for the fourth time in a year when lawmakers took the Memorial Day holiday without extending coverage. This lapse comes at a precarious time for lenders, owners, and buyers alike as forecasters are predicting a tumultuous hurricane season and buyers are pushing to close quickly in order to qualify for the first time home buyer’s tax credit.
Sometimes it's necessary to get out of a real estate transaction.
I’ve seen buyers try to get out of a deal they've made because they:
- are unhappy about the inspections or the resolution of issues that arise from inspections
- can't get financing
- realize that they offered too much
- get cold feet and decide to back out
- become unemployed or get a job transfer
- find a better opportunity at another house
I’ve seen sellers try to get out because they:
- can’t agree with the buyer's request(s) after inspections
- can't afford to do the repairs or adjust the price to address home inspection issues
- decide not to move
- get a better offer
- decide they don't want to sell their homes to the current buyers
Only the first two circumstances for each party are covered by the average offer or purchase and sale agreement and only under certain circumstances.
To get out of a real estate deal, you need to understand how much of a commitment you made in the first place.FULL ENTRY
Attorney Richard D. Vetstein. writes today about the court cases that upheld the use of attorneys for real estate closing in Massachusetts.
In a huge victory for Massachusetts real estate closing attorneys, a unanimous First Circuit federal appeals court has overturned a controversial lower court ruling which had opened the door for non-attorneys to conduct controversial “witness” or “notary” real estate closings in Massachusetts. The lower court ruling threatened to overturn long-standing statewide practice under which attorneys conduct real estate closings, and open the door for the influx of “notary” or “witness” closings where buyers and sellers receive no legal guidance during the closing. The First Circuit decision is found here. The lower court ruling is here.FULL ENTRY
The First Circuit ruled that the Massachusetts state Supreme Judicial Court has the final say on whether attorneys must conduct real estate closings under rules governing the unauthorized practice of law. The case will now move to the SJC, which may be more hospitable to the real estate attorneys’ position.
As the deadline for tax credit collectors to close drew near, it became increasingly clear that lenders and closing offices could not handle the pace. The frenzy that real estate agents were handling in March and April then went into the loan pipeline where it quickly overflowed. There’s a backlog of 180,000 homebuyers nationwide. If their closings were delayed beyond June 30th, the borrowers were out of luck for collecting their credits.
Cue Senator Harry Reid, (Democrat from Nevada,) sponsor of an amendment that gives these borrowers and extra three months to close. Now, lenders, lawyers and title companies have until September 30th to get those titles cleared and get the mortgages closed. A sigh of relief is heard across the land.
Attorney Richard D. Vetstein. writes today about real estate lawsuits and how they can affect buying and selling.
Overview: A Suit Pending
A lis pendens is Latin for “a suit pending.” Under the Massachusetts lis pendens law, a lis pendens is a notice endorsed by a judge certifying that there is a litigation pending involving the title or occupancy rights to a particular piece of property. A lis pendens is often granted where a buyer seeks “specific performance” of a real estate contract in order to force a seller to go through with a transaction. Lis pendens are also common in other real estate cases such as boundary, title, zoning, and ownership disputes. The lis pendens is recorded at the registry of deeds against the property and its owner(s), creating a serious cloud on the title to the affected property. A lis pendens will, in many cases, effectively prevent the owner from selling the property until the claim is resolved–thus, earning its well-deserved reputation as dangerous arrow in a real estate litigator’s quiver.
Attorney Richard D. Vetstein. writes today about things you may be afraid of when you buy a house. How does the law work in regard to fear factor houses?
The well maintained 4 bedroom Colonial in a North Shore suburb with a great backyard looked nice enough thought “Debbie,” the buyer. However, she was dismayed to learn from neighbors after closing on the property, that the prior owner had committed suicide in the house. The real estate agent never advised her of this, and she says she would have never purchased the home if she had known this.
In Massachusetts, real estate brokers struggle to sell homes tainted by shocking murders, suicides, or even suspected “haunted houses.” For real estate brokers, sellers and buyers, these “stigmatized” properties are particularly difficult to deal with as they raise unique valuation problems and disclosure issues.
Just when I thought home buyer tax credits were a thing of the past, my friends and colleagues at the National Association of Exclusive Buyers Agents sent me a press release about a new bill that extends the credit for our servicemen and women. Because members of the military, the Foreign Service and Intelligence Community have unique circumstances, the bill has special provisions for this group:
• Tax credit extended for one year for military personnel serving outside the United States for at least 90 days in 2009 or 2010.
• Eliminates the 36-month recapture requirement for military personnel, including members of the Foreign Service and intelligence community, forced to sell or move from a tax credit home as a result of an official extended duty of service.
The tax credit is available for eligible purchasers who have a binding sales contract in place by April 30, 2011, and close by June 30, 2011.FULL ENTRY
Attorney Richard D. Vetstein. writes today about adverse possession.
When boundary or encroachments disputes arise, a little known legal doctrine often comes into play: adverse possession. Adverse possession is a legal doctrine in Massachusetts under which homeowners may lose title to their land by sleeping on their property rights for 20 consecutive years against a neighbor who has taken actions contrary to their property interests. Yes, a neighbor can effectively take ownership your land if you sleep on your rights. The doctrine of adverse possession reflects a public policy aimed at inducing landowners to actively protect their land.
The classic example of adverse possession is a neighbor who puts up a fence or paves a driveway several feet over their neighbor’s property line, without permission, and this “adverse possession” continues without objection for 20 consecutive years. Despite the fact that the neighbor’s fence or driveway encroaches the property line, under the adverse possession doctrine, the property owner may lose title to the disputed strip of land by not doing, saying or even knowing anything about it.
A landowner can only obtain adverse possession by filing a lawsuit and establishing several elements of the claim. (My Suffolk property law professor Bernie Keenan used a handy acronym called OCEAN to help students remember them). The use of another’s land must be Open, Continuous (for 20 years), Exclusive, Adverse and Notorious. Each element has its own specific requirements, and all adverse possession cases are very fact-specific.FULL ENTRY
Attorney Richard D. Vetstein. tells you about HAFA. Will the fast track work? If it does work, will it help?
Lost in the tax credit frenzy was the April 5 start of the Home Affordable Foreclosure Alternative program, known as HAFA, which is billed to streamline short sale transactions. However, read the fine print, and there are a lot of unanswered questions about the program and how it will affect short sale transactions in the “trenches.”
Is the new program really going to streamline the process or create more headaches for the industry?
To begin, it’s important to point out that the HAFA program is part of the federal Home Affordable Modification Program (HAMP). HAFA guidelines will only apply to short sale or deed in lieu of foreclosure requests made by borrowers who have applied for a HAMP loan modification. That means borrowers must go through all the time, hassle and endless forms under the HAMP modification program before even being eligible for a HAFA streamlined short sale approval. This requirement will likely substantially reduce the number of HAFA-required short sales. HAFA also requires participating lenders to forgive a borrower’s loan deficiency if the lender accepts a short sale. This is a significant deviation from many lenders’ policies. There is even some debate about which lenders actually fall within the mandate of HAFA. For all of these reasons, it is far too early to speculate regarding the impact of HAFA on the current backlog of short-sale requests. It is very unlikely, however, that HAFA is going to quickly streamline the short sale process.FULL ENTRY
I wear a lot of hats in my personal and professional life, like most people. Therefore, I have to look at events from conflicting angles. Here’s a case in point:
As of April 22, 2010, EPA regulations go into effect requiring that contractors treat surfaces painted before 1978 as if they have lead paint, unless they are tested and shown safe. Lead-painted surfaces must be handled in a way that minimizes lead dust exposure for workers and the environment.
Hat #1: I have sat on the Somerville Lead Paint Task Force since the 1990s. There, I have learned about how lead paint can permanently harm children and adults. The adults who have neurological damage are mostly workers who regularly scrape or remove wood that is covered with lead paint, and members of their family who are exposed to their lead-paint-dusty clothes. (This is also true of workers who were exposed to asbestos and radioactive dust in unsafe ways.)
Attorney Richard D. Vetstein's. office is inundated with last-minute paperwork for last-minute purchases.
• Buyers must have a signed binding contract on or before April 30, 2010, and close on or before June 30, 2010. Buyers will need to attach to their 1040 tax returns a copy of the signed purchase contract and HUD-1 Settlement Statement. There’s been quite a bit of debate as to whether a signed offer to purchase or signed purchase and sale agreements is sufficient for the April 30 deadline. I’ve been erring on the side of caution by recommending getting the P&S signed by Friday, but some realtors and attorneys disagree and say a signed offer is enough. I’d like to see some IRS guidance here. • The maximum credit amount remains at $8,000 for a first-time homebuyer –– that is, a buyer who has not owned a primary residence during the three years up to the date of purchase. • The new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time home buyers.” To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence. • The new law raises the income limits for people who purchase homes after Nov. 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.FULL ENTRY
Most Massachusetts real estate transactions include between one and three attorneys. Here are the various players along with an overview of their roles.
The lender's closing attorney:
Since we use attorneys instead of escrow companies in Massachusetts, if financing is involved, lenders require that the buyer pay for an attorney to look out for the lender’s interest in the transaction and conduct the closing. The lender’s closing attorney’s responsibilities include, but are not limited to;
- conducting a title search or arranging for a title search by a title examiner (see April 12th blog)
- assuring that all liens (including past mortgages) against the property have been paid off
- providing a certification of clean title to the buyer
- procuring title insurance for the lender (paid for by the buyer)
- procuring an owner’s title insurance for the buyer (if the buyer elects to purchase one)
- arranging and preparing the mortgage paperwork for closing
- obtaining a municipal lien certificate for the property
- obtaining mortgage payoff information and other lien payoff information
- ordering and reviewing a plot plan (for free standing property that is not a condo)
- preparation of the final settlement statement for the closing
- conducting the closing
- recording the appropriate documents at the registry of deeds
- paying off seller’s mortgages and other outstanding liens (i.e. water & sewer bills) from the purchase price
- disbursing the remaining proceeds from the sale to the seller, if any.
A closing is an event with the rare combination of being both boring and tense. Or is that tense and boring? At the closing, the buyers sign about 40 pieces of paper, many of which are redundant and confusing. They look at monetary figures the likes of which they never see, unless they run a business.
This week, I had an FHA closing. It was the first one in a long time, for me. Among the pages that said my clients know about the lead paint law – for the third time -- was a page explaining what bank fraud is. And, please don’t commit it.
Part of me sees this as a concise guide to what fraud is. Part of me sees it as a “how to.” Am I getting too cynical?
Don't Commit Loan Fraud It is important for you to understand that you are required to provide complete and accurate information when applying for a mortgage loan.FULL ENTRY
Do not falsify information about your income or assets.
Disclose all loans and debts (including money that may have been borrowed to make the downpayment).
Do not provide false letters-of-credit, cash-on-hand statements, gift letters or sweat equity letters.
Do not accept funds to be used for your downpayment from any other party (seller, real estate salesperson, builder, etc.).
Do not falsely certify that a property will be used for your primary residence when you are actually going to use it as a rental property.
Do not act as a “strawbuyer” (somebody who purchases a property for another person and then transfers title of the property to that person), nor should you give that person personal or credit information for them to use in any such scheme.
Do not apply for a loan by assuming the identity of another person.
Do not sign an incomplete or blank document; that is, one missing the name and address of the recipient and/or other important identifying information. [emphasis theirs]
Attorney Richard D. Vetstein. writes today about a case where a buyer was put out that a seller didn't accept a request to extend a deadline. In real estate law, a deadline is a deadline, according to the ruling on Coviello v. Richardson
I always check with lenders before putting a mortgage contingency date into an Offer to Purchase. Did your agent? When you bought or sold, did anyone miss a deadline and need an extension?
Last week, a very interesting decision involving the mortgage contingency provision of the standard form offer to purchase came down from the Massachusetts Appeals Court in Coviello v. Richardson. The case highlights the need for Realtors and real estate attorneys to be proactive with respect to mortgage contingencies and requests for extensions.FULL ENTRY
In the case, on February 12, 2008, the parties signed the standard form Offer to Purchase, which provided that a Purchase and Sale Agreement would be executed by 5:00 pm on February 26th. Under the mortgage contingency clause of the offer, which gave the buyer the right to cancel if she could not obtain financing, the buyer was required to secure a mortgage commitment by February 29th. The Realtor, who prepared the offer, made the first mistake here: asking the buyer to obtain a firm mortgage commitment not even 2 weeks after the offer is signed was completely unrealistic, especially in today’s tight underwriting environment.
Predictably, the buyer and her broker had immediate concerns that they would be unable to meet the mortgage commitment deadline. The broker asked the buyer’s attorney if he would ask the seller to agree to extend the commitment deadline for an additional week–a reasonable request.
The attorney, however, didn’t follow through on the request until 2 hours before the 5:00 pm deadline to sign the purchase and sale agreement. The seller, who was dealing with a high-risk pregnancy, didn’t want to extend the deadline. No agreement could be reached, and there was no tender or signing of the purchase and sale agreement.
There’s an old saying that “good fences make good neighbors”. Is that true?FULL ENTRY
At a recent seminar, the attorney/lecturer told stories about calls that he’s received from clients whose neighbors have put up fences and the disputes or bad will that followed. I found that interesting because when I’m brokering a transaction and there’s a fence on the property, buyers are normally happy about it. If it was there before the sellers bought the house, they usually don’t even know whether they or their neighbors own it. That also means that they don’t know the exact boundaries of their property, nor has it been a problem for them over the term of their ownership.
Something special seems to happen when a neighbor decides to erect a fence. Over the years I’ve also received calls from clients whose neighbors want to erect a fence. The big question is always “what if it’s on my land?” If the fence is already up and they think that it’s on their land, the question becomes “what do I do if I think that the fence is on my land?”
You can't avoid death and taxes, but if you live in Massachusetts, you may be able to postpone taxes. Attorney Richard D. Vetstein. tells you why and how...
President Obama and the Federal Emergency Management Agency (FEMA) declared a “major disaster” and the availability of federal disaster aid for victims of the late March rainstorms and flooding. The 7 affected Massachusetts counties are Bristol, Essex, Middlesex, Norfolk, Plymouth, Suffolk, and Worcester counties. Federal funds to homeowners in those counties affected by the recent flooding will be available. (Most flooding damage is not covered by standard homeowner’s policies, so this aid is very helpful to those hardest hit). The FEMA Massachusetts flooding resource page is here.FULL ENTRY
Also, the IRS announced tax filing extensions to May 11 are available to flood victims in the above affected counties. The extensions are automatic for all filers in the affected counties.
Very important: If you are considering applying for aid, document all damage and repair efforts. Take photographs and video of the flooding and resulting damage. Keep copies of all receipts for sump pumps, air blowers/fans, equipment, contractors, plumbers, electricians, etc. Keep copies of all estimates for repairs. Basically, treat this as any other insurance claim.
Buying or selling a home in Massachusetts is different than in most states. Of course, local customs vary from area to area (even within Massachusetts) so don't expect that if your previous home sale included a refrigerator and no stove, that will be the case here. Almost everything is negotiable, but customs in various markets dictate many of the unwritten rules.FULL ENTRY
In most states, "escrow companies" hold the buyer’s deposit money, research titles and handle closing details. Here, there are no "escrow" companies (yet). Here, the listing broker or the seller’s attorney usually holds buyer’s deposits in a special “escrow” account. Occasionally, the buyer's broker or buyer’s attorney may hold the deposit. Deposits are accounted for at closing and buyers receive full credit on the closing settlement statement.
One reason that we use attorneys here is because of the way that property records are kept at the county registries of deeds around the state. In many states, property records are indexed by address or another numerical system, but, in the Commonwealth of Massachusetts, we take our heritage seriously and continue to index property records by the names of property owners, like our colonial forefathers did.
You need a lawyer, and a good insurance agent to really understand your homeowner's insurance. That goes doubly for condo homeowner's policies. Attorney Richard D. Vetstein. tells you what he knows...
The recent flooding here in got me thinking about the importance of good insurance coverage. So I dug back into my notes and remembered that I never wrote about how lenders are now requiring “HO-6” insurance policies for condominium purchases. An HO-6 policy is like a regular homeowner’s policy, but for a condominium unit, and covers the interior of the unit and personal property inside–commonly known as “studs in” coverage.FULL ENTRY
HO-6 now required by lenders under the new Fannie Mae (FNMA) and FHA overhaul of condominium lending guidelines, lenders are now requiring HO-6 policies. Sounds like common sense, but many folks were under the mistaken impression that the master condominium insurance policy covered all damage to the interior of their unit as well as damage to furniture, appliances, etc. That isn’t so.
Attorney Richard D. Vetstein. gives the legal look on the condo fight over the right to hang a mezuzah.
As Rona wrote about earlier, a federal appeals court in Chicago ruled that a case may go forward involving the Bloch family’s fight to affix a small box containing Hebrew religious texts, known as a mezuzah, to the doorposts of their condominium units. This is one of the first cases of which I am aware where a court has held that the federal Fair Housing Act prohibits a private condominium association from enforcing condominium rules impacting a unit owner’s right to religious expression.FULL ENTRY
This case pits the rights of unit owners’ religious expression versus the right of condominium associations to regulate the use of common areas such as hallways, doorways and entrances. Usually, disputes surrounding condominium rules – such as pet prohibitions – are resolved under state law. In Massachusetts, condominium associations can adopt reasonable rules and regulations restricting or affecting the use of common areas and units. Trustees are given a fair amount of leeway provided the rule has a rationale and reasonable basis.
When religious or race comes into play, however, the Fair Housing laws comes into play. This law bars discrimination in “the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race, color, religion, sex, familial status, or national origin.”
It is now the Jewish holiday of Passover. Happy Passover to those who celebrate! In recognition of the holiday, I bring you a Jewish real estate story which relates to a discussion we had earlier this month. It is a story of a condo association running amok, as alleged by the plaintiffs.
The Blochs removed their mezuzot* from their doorways for a renovation in their condo association hallways. When they put them back after the renovation, they were removed by the association, repeatedly. The courts ruled in favor of the Blochs; they had the right to affix a religious symbol to their doorpost based on fair housing rules.
I have seen some questionable condo rules in my day. I have heard of even more. I have seen rules that require:
The outward facing side of all curtains had to be white or off-white.
No flags, furniture or satellite dishes on balconies. There are frequently bans on grilling, but some of these are in line with local fire code.
There was an association where I showed a condo. They changed the rules to no longer allow dogs and cats. The existing animals were grandfathered-in. One of the owners had a dog who died; he replaced that dog with another of the same breed. He was found out and fined; he was selling his dream condo, which he spent way too much to customize.
From the email, Jason asked:
We just bought a condo in a new condo conversion in July. We are a new association and fine tuning the condo docs to fit the original owners and making sure everything is in place. We were wanting to make an amendment to our condo docs that limit the amount of the 4 units being rented at 1 unit (25%). In addition, we were wondering if we could also put a limit on the number of occupants in a unit? First, I'm curious to know if that is legally possible in Massachusetts for both items, and if so, which documents would need to state that? (I.e. declaration of trust, master deed, or just the by-laws). All owners are in agreement on this, but we want to make sure we wouldn't have any legal issues down the road trying to enforce it.
Since Jason asked a legal question, I sent him to a lawyer -- since I don’t play one on this blog. However, buyers do need to understand about condo associations and owner occupancy before they think about buying into one.
Owner occupancy matters because most of the time, PMI companies require that at least half of the units in a condo complex be owner occupied. If owner occupancy is too low, buyers with less than 20 percent down can’t get PMI and therefore can’t buy the unit. This limits resale, since fewer buyers qualify.FULL ENTRY
Attorney Richard D. Vetstein. writes about where developer's rights, citizen's rights and salamanders collide!
The recent case of Brice Estates v. Smith where an abutter trespassed on a developer’s land to photograph endangered female four toed salamanders got me thinking about the frequent convergence of developer’s rights vs. citizen’s free speech rights in real estate disputes. In the case, the abutter sought refuge under the pro-free speech anti-SLAPP law, but the court said that he was still trespassing.FULL ENTRY
A SLAPP is an acronym for Strategic Litigation Against Public Participation. Before being legislatively outlawed, real estate developers would often use SLAPP lawsuits to muzzle abutters who would organize and complain during town meetings and sue to stop real estate projects. The abutters couldn’t afford to defend against the SLAPP suits, so they would back down.
I walked into an open house a couple of weeks back, my clipboard in hand. It was a quiet one, so the agent noticed me. When she finished talking to a customer, I came in to introduce myself. She said something like, “with that clipboard, you look like some kind of spy.”
That got me thinking. What could I be spying on? Oh, yeah... Agents at open houses must have an agency disclosure card. What’s that? It is prominently displayed card required as a substitute for the Licensee-Consumer Relationship Disclosure. In a couple of paragraphs, the card explains what the relationship between the seller and this agent is.
It can say:
1. the agent and everyone in the office works for the seller (single agency)
2. that the agent there works for the seller, but other agents in the office can work for buyers (designated agency)
3. or the agent there represents no one; he or she is acting as a facilitator at this house today (non-agent, facilitator.)
I haven’t been looking for these signs, until now!. Have you seen them?
Attorney Richard D. Vetstein. explains the task list that the closing attorney takes care of when a property is sold.
Many buyers and sellers often wonder what a real estate closing attorney does other than conduct the closing. The closing attorney, as the “quarterback” of the closing process, performs many time consuming tasks preparing a transaction from intake to closing.FULL ENTRY
When the title order arrives from the lender, the closing attorney first orders a municipal lien certificate, which verifies the real estate taxes and other municipal charges on the property. Insurance binders and payoffs of mortgages are also ordered.
The closing attorney is responsible for examining the title to the property. For purchases, the title is researched going back 50 years. The closing attorney carefully reviews the title examination to ensure there are no title defects; if there are any issues, the attorney will work with all parties to resolve them. Some title defects are extremely difficult to resolve. (By law, the closing attorney must provide new homebuyers with a certification of title).
Take a look at your Offer to Purchase. Does it have a "weasel clause" added? Sam Schneiderman, Broker-owner of Greater Boston Home Team tells you his take on what can happen when you replace "standard form" for "mutually agreeable."
The “standard form” offers to purchase property that are commonly used usually call for buyers and sellers to execute a specific version of a purchase and sale agreement or a form substantially similar to it by a certain date. If the offer form is from the Massachusetts Association of Realtors, it specifies their version of a Purchase and Sale agreement, while the Greater Boston Real Estate Board’s offer specifies their version, etc. You get the idea.FULL ENTRY
It’s not uncommon for an attorney or agent to modify an offer by crossing out the specified version of the purchase and sale agreement and inserting the words “mutually agreeable Purchase and Sale agreement”. That simple change appears to protect either party from getting locked into a specific Purchase and Sale format that they might not prefer. On the other hand, many attorneys have agreed that it can also open the door to a potential free for all re-negotiation of an offer’s terms, conditions and language as well as the language for the Purchase and Sale.
Attorney Richard D. Vetstein. takes a legal look at the foreclosure case that affects about a large number of foreclosure titles in Massachusetts.
For those of you following the controversial U.S. Bank v. Ibanez case, which invalidated potentially thousands of foreclosures across the state, both sides last week asked the Massachusetts Supreme Judicial Court to take the case — as I originally predicted. The SJC’s acceptance of the case would cut months to years off the normal appellate process. This would be great news for everyone eagerly awaiting a final decision. Click here for my post on the first ruling and here for my post on the second ruling in the Ibanez case.FULL ENTRY
Remember Mary from last week? She and John are renting with a young son. In our post mortem email on the entry about her, she wrote this:
…I had another idea for a posting on the topic of rentals for families…First, maybe a legal overview/responsibility of the Lead Abatement law? Including options for violations? I have several friends who’ve called apt listings only to be hung up on abruptly with “It’s not deleaded!!!” if they hear a child in the background or if they answer truthfully about having children. Other moms on our local moms’ blog post about receiving termination notices when the landlord discovers they are pregnant – usually of course for TAWs. Finally, there is also a listing this week in the local JP paper for an owner occupied (makes a difference for deleading requirements?) 2 family rental which states “Unit Not Deleaded” right in the ad.
I know when I shouldn’t begin to answer a question. This was one of these times. Thank God for Attorney Richard D. Vetstein. I passed this one to him:
The short answer is these are all potential violations of the Massachusetts Lead Law.FULL ENTRY
Under the Massachusetts Lead Paint Law, whenever a child under six years of age comes to live in a rental property, the property owner has a responsibility to discover whether there is any lead paint on the property and to de-lead to protect the young children living there. A property owner or real estate agent cannot get around the legal requirements to disclose information about known lead hazards simply by refusing to rent to families with young children. They also cannot refuse to renew the lease of a pregnant woman or a family with young children just because a property may contain lead hazards. And property owners cannot refuse to rent simply because they do not want to spend the money to de-lead the property. Any of these acts is a violation of the Lead Law, the Consumer Protection Act, and various Massachusetts anti-discrimination statutes that can have serious penalties for a property owner or real estate agent.
Attorney Richard D. Vetstein. takes a legal look at that facts of a recent lawsuit against a local broker.
Yesterday The Globe reported on a controversial lawsuit by a Alyssa Burrage, a condominium buyer, against a realtor over the disclosure of second hand smoke emitting from downstairs neighbors. Click for the story: Suit Over Second Hand Smoke Targets Real Estate Broker. As the hundreds of comments to the story indicates, this lawsuit raises a host of legal and public policy issues. I’ll focus on the legal issues.FULL ENTRY
Under consumer protection regulations governing real estate brokers, a broker must disclose to a buyer “any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction.” This is somewhat of a subjective standard; what may matter to one buyer may not matter to another. If a broker is asked a direct question about the property, she must answer truthfully, accurately, and completely to the best of her knowledge. Further, a broker cannot actively avoid discovering the details of a suspected problem or tell half-truths.
With that legal backdrop, let’s review the facts of this case. Ms. Burrage, who suffers from asthma, claimed that her broker failed to disclose the existence of the heavy smokers downstairs—despite the fact that she admittedly smelled “the unmistakable stench” of cigarette smoke at several visits to the unit. The broker – who worked for the same company as the listing broker (which may raise some thorny conflict of interest/agency issues) – assured her that the smell would dissipate once she painted and renovated the unit, the suit claims. Ms. Burrage claims that she wouldn’t have purchased the unit in the first place if she had known about the smoke problem.
As part of the "Broker skeletons in the closet" series, I asked Rich Rosa to write about procuring cause because he is not only one of the few exclusive buyer’s agents in Massachusetts, he is also an attorney.
There are two kinds of procuring cause disputes. One occurs between listing brokers and sellers. These disputes can end up in court because the seller and their agent have a listing agreement, or contract.FULL ENTRY
The other kind arises between real estate professionals. A procuring cause claim is derived from the offer of the listing broker to pay a commission to a cooperating broker for procuring the sale. The offer of a cooperating commission is primarily facilitated through a multiple listing service (MLS). This postis about these disputes. (It should be noted that listing brokers and cooperating real estate brokers have agreed to be bound by arbitration when such disputes arise.)
Procuring cause disputes between listing brokers and cooperating brokers generally are governed by local multiple listing services. They typically follow the National Association of Realtor's Arbitration Guidelines. The code of ethics and arbitration manual defines procuring cause as"the uninterrupted series of casual events which results in the successful transaction."
Black's Law Dictionary, Sixth Edition, defines procuring cause as"The proximate cause; the cause originating a series of events, which, without break in their continuity, result in the accomplishment of the prime object. The inducing cause; the direct or proximate cause. Substantially synonymous with 'efficient cause.'"
I, as a lawyer, think the phrase "without break in their continuity" is an important part of the definition.
A common misconception among real estate agents is that being the first to show the property or having a buyer's representation agreement with the home buyer automatically demonstrates procuring cause. It does not, and the opposite also is true. Not being the first to show the property and not having a buyer agent agreement does not preclude one from ultimately being the procuring cause.
DotGirl3 answered Div’s question about his deposit at signing of the Purchase and Sales Agreement (P & S):
A common misunderstanding is that the P&S deposit (step 2) is the same as the "down payment" (for lack of an easier description). The P&S deposit does not have to equal your "down payment". It has to be an amount that the seller will accept to take the property off the market and bind the buyer to the sale and an amount the buyer feels comfortable risking in the P&S. 5% is customary because it covers most brokers' commission should they be able to claim payment from the seller because the deal didn't close due to a default of the P&S contract.
Often I have buyers putting 10-20% down on a loan but no way in heck would I let them bind a P&S with 20% (I will probably eat my words here, but it has to be a pretty special circumstance when I'd recommend 20%)…
I have a story to tell you, and all the other readers! First a little more on these deposits:
The deposit that goes with the Purchase and Sales Agreement is credited toward the down payment at closing. That deposit will be returned if the buyer can’t buy the property because he/she fails to obtain a mortgage commitment by a specific date (stated in the contract.) If the buyer does not buy for any other reason, the deposit goes to the seller as damages for losing the ability to sell during the agreement. Generally, that’s how it works.
Back in the go-go years, seller’s agents were pressuring buyers to increase that deposit. Why? Because the more money that the buyer would lose for quitting the deal without reason, the less likely the buyer would do it. Personally, I don’t know anyone who can afford to walk away from 5 percent of a house purchase. But, seller’s agents got it in their heads that more is better. During the run-up, I routinely advised my buyers to increase that deposit to 8-10 percent, since it didn’t cost them anything (except interest on the funds) and put them in a better position in competition with other buyers. Since I watched the loan commitment dates carefully, there was little risk of a loss of those funds.
Condo homeowner’s insurance is a little different than insurance bought by the sole owner of a single or multifamily house. When you buy a condo, there is already insurance in place that you are, basically, stuck with. You sign onto the existing policy. After you buy, you can discuss changing it with your co-owners.
Condo insurance is not standard. You will need to talk to the insurance agent who is handling the current policy. The insurance may cover only the common areas “to the studs” of your unit. The insurance may cover your unit. The insurance may have liability that covers you sufficiently; maybe not. You need to know!
Attorney Richard D. Vetstein.told you RESPA changes were coming. Well, here they are! Avoid reading the 51-page FAQ; Attorney Vetstein tells would-be borrowers how to handle the new forms.
If you are applying for a loan in 2010 you will likely receive the brand new Good Faith Estimate under new Real Estate Settlement Practices Act (RESPA) rules which became effective January 1. These rules, which I wrote about earlier, significantly change the way lenders must disclose and charge for loan and closing costs. Under the new rules, loan and closing costs are categorized into one of three of what I call “tolerance buckets”:
(1) those that cannot change from the Good Faith Estimate (GFE) disclosure to the closing – 0% tolerance;
(2) those subject to a 10% tolerance–that is, those which cannot increase by more than 10% from the GFE to the closing; or
(3) those that can vary by any amount – no tolerance.
Here is a snapshot of the new Good Faith Estimate with the three “buckets”:
In the spirit of the New Year, Attorney Richard D. Vetstein looks back at the top legal issues of the past year as indicated by the Top 5 posts on his blog.
#1. The Catch-22 Impact of New Fannie Mae Condominium Regulations. In January, Fannie Mae was the first government agency to drop a big bucket of cold water on condominium lending underwriting practices which some say contributed to the condominium market meltdown. FHA and others would follow later in the year. The new guidelines had condominium developers and associations, buyers and sellers in a tizzy, as Fannie Mae imposed much tougher pre-sale requirements, condominium financial guidelines and the imposition of unit owner HO-6 insurance policies, among other requirements.FULL ENTRY
#2. New FHA Condominium Lending Guidelines Sure To Slow Financing and Chill Sales. The Federal Housing Administration (FHA) followed Fannie’s lead in tightening condominium lending requirements. Originally proposed over the summer, FHA delayed implementation of the new guidelines until earlier in the month and watered down some of the most stringent requirements, after major lenders and community association groups complained.
#3. There’s Nothing Standard About The Massachusetts Standard Purchase and Sale Agreement. Great to see a post about buying a new home ranking so highly. An indicator of the recovery of the Massachusetts real estate market perhaps? Check out this post for the ins and outs of the very seller friendly standard form P&S and how to level the playing field if you are a buyer.
Attorney Richard D. Vetstein.highlights the changes in RESPA that will greet us in 2010.
The New Year brings the long awaited Real Estate Settlement Practices Act (RESPA) reform to the residential real estate industry. Under the new rules, all lenders and closing attorneys must adhere to the new Good Faith Estimate (GFE) and HUD-1 Settlement Statement which is intended to simplify the disclosure of loan fees and closing costs and allow consumers to shop around for the best deal.
In anticipation of the new rules, HUD has released a very helpful guide: Shopping For Your Home Loan: HUD's Settlement Cost Booklet. Loan originators are required to provide consumers with the booklet within three days of a loan application. The booklet provides a basic overview of the home buying and mortgage lending process. It also explains in detail each part of the new Good Faith Estimate and the new HUD-1 Settlement Statement.
If you are the kind of cook who remembers that you have toast toasting when the fire alarm goes off, then this entry is for you. Attorney Richard D. Vetstein.explains the changes to the smoke detector law effective in January.
Whenever a home is sold in Massachusetts, the smoke detector law requires that the local fire department issue a certification that the smoke detectors are working properly and are in the correct location. Effective January 1, new smoke detector regulations go into effect. The new regulations require that certain properties be equipped with the latest photoelectric smoke detectors which are not as prone to false alarms as older ionization based detectors.
Currently, there are two primary detection methods used in modern smoke detectors:FULL ENTRY
photoelectric and ionization. Ionization detectors are often faster to alert than photoelectric detectors. But they are prone to false alarms such as when steam from a shower or other source interrupts the current. Photoelectric detectors emit a beam of light. They are less sensitive to false alarms from steam or cooking fumes but can take longer than ionization detectors to alert.
Rachel Bedick at Community Action Agency of Somerville (CAAS) is back to explain tenant’s rights in a foreclosure.
After foreclosure, tenants have more rights than former owners. If the tenants had a lease with the former owner, then due to a relatively new Federal law called the “Protecting Tenants at Foreclosure Act,” that lease must be honored by the new owner. For instance, if the tenants signed a 1 year (proper/legal) lease with the former owner and the foreclosure takes place 6 months into their lease, then the new owner can’t begin eviction proceedings for another 6 months. According to this new law, in most cases after the lease ends the new owner would have to serve the tenants with a 90-day notice-to-quit. (Certain situations may require less than 90 days.) After those 90 days the new owner could then begin the summary process. For tenants who never had a lease, they are also entitled, generally speaking, to receive a 90-day notice-to-quit. FULL ENTRY
She used this to get the details right.
Out of curiosity, what are the eviction rules when a landlord defaults on a mortgage and goes into foreclosure?
I know that an auction is usually scheduled outside the building on the day of foreclosure. So, say someone buys it right then and there. Assuming it's a two family, and the foreclosed owner occupies one unit, and tenants occupy the other. How long do either of them have before they are evicted (assuming that the landlord and tenant don't reach an agreement with the new owner about continuing occupancy?)
Sean’s question has two parts. One: what happens to the owner. Two: what happens to the tenant. The rules are different for owners and renters. Today, I am publishing what Rachel told me about what happens to the owners. Tomorrow, I’ll post what happens to the tenants.
The following information on foreclosure is very general and may not apply to every situation. In addition, state laws on foreclosure may vary, and federal law is changing quickly, so consult an attorney before acting.
Foreclosure is a process with several steps:FULL ENTRY
Petition to foreclose
Order of Notice
Attorney Richard D. Vetstein.writes today on another ugly reality of the recession: divorce. Here's what divorcing couples can do, legally, in regard to their real estate.
When a recession hits, divorce rates spike. Divorce often plays a major role in real estate transactions and decisions. The question posed today is what to do if you are getting a divorce and the marital home is “underwater” – that is, when the balance on the mortgage is more than the fair market value of the house.
Well, here are your choices:FULL ENTRY
1. You stay in the house with your divorced spouse until either one of you can afford to move out or refinance. Seriously!? Yes! More and more people are doing so in this new economy because there is simply not enough money to go around. I know of divorcing spouses creating separate living quarters in a house, akin to an in-law suite with separate entrances, etc.
2. You and your spouse continue to co-own the house together until someone can refinance the property. Either you live in the house or your spouse lives in the house. You could have a situation where only the person who’s living in the house pays for everything or everything is split 50/50. Either way, the couple will still own the house together.
3. Refinance. If you try to refinance, you will have to put up the money to make up the difference between what you owe and what your house is worth. That would be tens of thousands of dollars if not more. Some people have that kind of money but most do not.
Homeowner’s insurance covers your house against damage. Often, the policy also covers the owner’s liability in the event of accidents. It also frequently covers damage and theft of personal property in your house (for an additional fee, of course.) It is usually the personal property coverage that confuses people.
Here’s some real-life examples. Which insurance company covers these different losses?
1. When I was on vacation, my handbag and camera bag was stolen out of my friend’s dining room while we were sleeping. (This happened to me in 2003.)
Which insurance company paid the claim? My homeowner’s policy.
The items were part of my personal processions, so they are covered wherever I go. I called the Baltimore police and made a police report. Fortunately -- or unfortunately depending on how you look at it – I had just bought the camera and the charger and the handbag itself, so I had receipts. I wrote up an inventory of what was in the handbag and camera bag and I got a pretty fair settlement check back about a month later.
Due to HVCC and other changes in mortgage lending, the time it takes to get a loan commitment has increased by a week or two, sometimes three or four. That has caused a lot of stress in my business.
I cried because I had not shoes until I met a man with no feet.
The time between Thanksgiving and the end of the calendar year is prime time for charitable giving. Today, I share a story about someone who has been caught in the shifting maze of the mortgage crisis. Through no fault of her own, S.W. didn’t do as well as many do getting a modified loan with the help of CNAHS.FULL ENTRY
Over the river and through the woods… are you singing yet? Do you have older relatives living in Massachusetts who are have a low income? Would your grandmother stay in her home longer if her property taxes were deferred?
Low-income home-owning senior citizens in Massachusetts find it hard to make ends meet. Social security and savings do not go far enough for many. Even when their mortgage is paid up, home-owners still find themselves strapped to pay for heat and repairs and, of course, property tax.
There are two things everyone has to face, death and taxes, right? You can’t necessarily postpone death, but you can defer your taxes. Massachusetts has this law, Chapter 182, § 14 of the Acts of 2008 (G.L. c. 59, § 5(41A)) which spells out guidelines for property tax deferral for low-income seniors.
This is not the first time, and I regret to say, it will not be not the last… I just saw a house that was in foreclosure. We went upstairs first. The walls, and windows and fittings were all modern and pretty good. It was a nice, but not fancy, apartment. The back door had been opened with a crowbar. There were personal items left behind, sort of sprawled around the floor. There were a couple of pieces of furniture, too.
It looked like a police raid had taken place in the apartment. I was feeling pity for the people who were evicted. There were children’s things left behind along with adult clothes and books. I created a story in my head about how they were tenants who were up-to-date on their rent and losing their home because the landlord defaulted on his mortgage.FULL ENTRY
Friday was a lousy day for me. It ended with the flooded house I'll tell you about someday. It started with yet another house that is on the market, but not really.
This one is not a foreclosure or a short sale. It is merely a house where the absentee landlord is sick of being a landlord. It’s fully occupied. The agent gave me the lockbox code and confirmed the showing. She told me to knock on the doors. She didn’t call the tenants.
My client and I met some lovely tenants. They were polite and the apartments were clean. They spoke only Spanish. They didn’t laugh at my accent, but then again, I am not sure they understood what I was saying, either.
Sam Schneiderman, Broker-owner of Greater Boston Home Team teaches you how to commit bank fraud. Why would he do that? Because most buyers and sellers don’t understand how easy it is to get into trouble.
Many loan officers and agents don’t understand what the liability exposure is when they are involved in a fraudulent transaction.
Bank fraud is punishable by imprisonment for not more than 30 years, a fine of up to a million dollars or both. In addition, brokers, agents, loan originators and attorneys can lose their license(s) to practice. Obviously, the punishment depends on the severity of the crime. If the perpetrator is a mortgage loan originator (a/k/a “mortgage officer”), broker, agent or attorney that repeatedly helped buyers or sellers commit fraud, the punishment would probably be more severe than it would be for a borrower who lied on one mortgage application. A borrower that commits fraud risks having her loan denied or canceled if the lender discovers the fraudulent statement or omission.
If you doubt that people really get punished, I can tell you about a loan originator that was sent to jail for helping investors make loan applications that intentionally omitted facts. When the properties became vacant, the investors could not make payments and the lenders suffered losses. When the lenders investigated, it was easy to find that the common source was one loan originator that handled the loan applications in a way that hid the applicant’s true financial picture from the banks.FULL ENTRY
Welcome back to Attorney Richard D. Vetstein. The FHA guidelines for condos are changing again. Here's what Atty. Vetstein has to say about them:
With an eye on the volatility of the condominium market, the Federal Housing Administration (FHA) has backed off some of the stingy new rules for condominium lending set to be implemented Dec. 7. After a meeting with the Mortgage Bankers Association last week, the FHA made the following changes to its June 12 condominium guidelines:FULL ENTRY
• Spot loan approvals can continue until Feb. 1, 2010. Spot approvals are performed on non-FHA approved projects on a loan by loan basis, and are a way to make FHA loans available to home buyers in well run condominium projects even if they haven’t gone through the full approval process.
• The FHA will allow a 50 % concentration of FHA loans – up from 30 %-- in condominium buildings, and well-qualified buildings can have up to 100 %.
• The pre-sale requirement has been reduced to 30 % of new projects. So only 30% of a new project must be sold-out before being approved for FHA loans.
• The reserve study requirement has been eliminated. The new guidelines mandated that all existing and new condominiums undertake a study of its capital reserve account. The study can be expensive and onerous, especially for smaller associations. The guidelines instead require that all condominium budgets provide for funding the reserve account up to at least 10% of the operating budget. This is much more workable.
One of the differences between print media and on-line media is that topics I raise live on -- through the joy of search engines -- long beyond when we here at Boston.com have forgotten about them. Here’s a questions that came to me long, long after the June, 2008 entry. JZ asked about the specifics of the lead paint law when it comes to condos associations:
1+ year later, if anyone can confirm the specific laws one more time, I'd appreciate it. I have searched on the Internet and haven't found anything more specific.
This is specific to Massachusetts. Does the law state that the condo association/condo trust is responsible and will pay for all common area deleading that is required, including both interior common areas and exterior of the building, if currently only one unit has a child under 6 years of age? The interior of the condo unit with the child would of course be the responsibility of that condo unit's owner. The question is for the rest of the building which is all occupied by owners of the condo units (Condo Trustees).
This one is easy. Very easy! If you want to know anything about lead paint, contact Childhood Lead Poisoning Prevention Program. You can write them or call them, 800-532-9571.FULL ENTRY
Boston.com/renow readers know about, US National Bank vs. Ibanez, the decision that was decided twice about foreclosures. Judge Keith Long ruled that US National Bank could not foreclose without the proper papers on record. He upheld his decision on October 14th . Expect an appeal. Meanwhile, about 40 percent of Massachusetts titles that have been through foreclosure are clouded, according to this court decision.
Now that the dust has settled, I can tell the story of how the Ibanez decision has affected one of my clients. I have a client who had a Purchase and Sale on a property after the first decision and before the second on October 14th. The current owner bought it as a foreclosure before the first court case was heard.
Before making an Offer to Purchase, the agent told me that the title was clear and insured. Before working on the Purchase and Sales Agreement, the buyer’s attorney was told by the seller’s attorney that the title was clear and insured. It was after the Purchase and Sales Agreement was signed when the buyer’s attorney started examining the title. There it was: the hallmark title defect that clouds the title under the US Bank vs. Ibanez decision.FULL ENTRY
Welcome back to Attorney Richard D. Vetstein. Today, he answers questions about condo ownership and what an owner could be held responsible for.
Q: Is an individual unit owner liable if someone gets hurt in the condominium’s common areas?
The answer is no. This is good lead in to the concept of “common areas.” When someone buys a condominium unit, they also obtain an undivided share of the condominium’s common areas and facilities. Common areas typically include obvious things such as building entrances and exits, lobbies, interior stairways, pools and workout rooms. They also include not so obvious areas such as the space between adjoining units, telecommunication wires, and the roof. As outlined in the “master deed,” each unit owner “owns” an undivided share (expressed as a percentage) of all the common areas. But the condominium association has responsibility over managing and maintaining the common areas. Recognizing that unit owners have very little control over common areas, the Massachusetts Condominium Act provides that only the condominium association can be sued for claims related to common areas. In any event, the condominium association should also have a master liability insurance policy in place in case anyone gets injured on common area property. Now, if your unit has a private deck or porch (which is not a common area) with a faulty railing, you could be held responsible if someone fell.
That’s why it’s critical that unit owners have their own “HO-6” unit insurance policy in place.
Q: I own a condominium unit and rent it out to students. Am I responsible for my tenant’s noise and disturbance problems?FULL ENTRY
When I published comments from readers who thought their Offers were not being presented to lenders in short sales and foreclosure situations. I suggest that agents and consumers could do something about it. James wrote:
Where's the incentive for an honest agent in all of this? It seems like it's a lot of work for the agent, and he still won't get a commission. If the lender thinks the borrower is crooked, there will be a Fraud Alert flag on that file forever, making reasonable Offers nearly impossible to approve. Sure, it's the right thing to do, but it takes a lot of time, effort, and money (lawyers ain't cheap), and it doesn't get your client any closer to buying the house. Good community service (if you can get the bank to listen to you), but it won't pay the bills.
First a disclosure: on the bottom of the email address that I use with my clients is this statement:
Always do right. This will gratify some people and astonish the rest. --Mark Twain
So, I am someone who tilts at windmills; that’s who I aspire to be. Marcus thinks doing right to do right is a sign of hopeless naivety. But so be it. Attorney Michailidis thinks I owe someone an apology for saying there is something wrong with hand-picking low Offers to send to a lender in a short sale.
Back to James’ comment: why blow the whistle on sellers and their agents? James is right that the self-interest angle is weak, in the short run. The long-run upside is that action to stop those messing with the process will clear the path for buyers to buy properties; if the lenders are waiting forever to see market-rate Offers, would-be buyers are waiting along with them.
Welcome back to Attorney Richard D. Vetstein. Today, he looks at the wild world of short sales to tell buyers what they can expect...
A short sale is special type of real estate transaction between a homeowner, his mortgage holder, and a third party buyer. In a short sale, the homeowner’s mortgage company agrees to take less than what is owed on the outstanding mortgage, thereby being left “short.” In some but not all cases, the lender will agree to wipe out the entire debt. Many people believe that short sales offer bargain basement prices, but lenders will do their best to get as close to fair market value as possible so as to minimize their loss.
Short sales are a unique type of transaction and far different from the typical transaction between parties of equal bargaining power. Likewise, the legal aspects of a short sale are unique.
Welcome back to Attorney Richard D. Vetstein. Today, a look at yesterday's decision in U.S. National Bank v. Ibanez. If you bought a foreclosed property, or you are thinking of buying one, you need to know about this.
Yesterday, Massachusetts Land Court Judge Keith Long reaffirmed his controversial ruling made back in March 2009 that invalidated foreclosure proceedings involving two Springfield homes because the lenders did not hold clear titles to the properties at the time of sale. A copy of the decision can be found here. As I outlined in my prior post on this case, the problem the Land Court dealt with in this case is what happens when modern securitized mortgage lending practices meets outdated foreclosure laws. When mortgages are packaged to Wall Street investors, the ownership of a mortgage loan may be divided and freely transferred numerous times on the lenders’ books. But the documentation (i.e., the assignments) actually on file at the Registry of Deeds often lags far behind.
The Ruling:FULL ENTRY
Judge Long ruled that foreclosures were invalid when the lender failed to bring the ownership documentation (known as an assignment) up-to-date until after the foreclosure sale had already taken place. An assignment is a legal document confirming that a mortgage loan has been transferred from one lender to another. Assignments must be recorded with a registry of deeds so anyone researching a property’s title can track the loan’s origin and ownership. Oftentimes, as in the Ibanez case, lenders will sell bundles of loan and record backdated assignments with an effective date before the first foreclosure notice. Judge Long effectively prohibited this practice.
Welcome back to Attorney Richard D. Vetstein. Today, he explains the new FHA regulations and how they will put more obstacles in the path of would-be condo buyers.
Under revised guidelines set to go into effect November 2, 2009, the Federal Housing Administration (FHA) is implementing a new stricter approval process for condominiums to be eligible for FHA financing. Similar in some respects to the new Fannie Mae regulations issued earlier in the year, the FHA guidelines will surely slow down condominium mortgage financing, and negatively impact first time home buyers for condominium units.
For those who don’t know, FHA is a government program designed to help more people buy homes, and more borrowers will qualify with FHA financing than with conventional financing. It is a low down payment (3.5% down) program and the credit standards are much looser. The mortgage rates are typically better, as well.FULL ENTRY
Welcome back to Attorney Richard D. Vetstein. Today, he tells us about Scott v. Garfield. This case was about a guest who fell off a porch. The porch had a faulty rail; the guest had a few beers. Is the landlord liable for the injuries of the guest? How do you think it should have turned out? Here’s what happened in court:
The Massachusetts Supreme Judicial Court ruled last week that a landlord was liable for breaching the implied warranty of habitability when a tenant’s guest seriously injured himself falling from a defective porch. The case is Scott v. Garfield, and can be found here.
What’s the Implied Warranty of Habitability?FULL ENTRY
The implied warranty of habitability is a legal concept that imposes a legal duty on a residential landlord, in the form of an implied agreement, to ensure that an apartment complies with the State building and sanitary codes. Under the implied warranty of habitability, a landlord can be liable for personal injuries if a tenant is injured due to the premises being in violation of code.
A friend of mine, who is not my client, had a transaction fall through last week because of a “right of first refusal.” Her closing got delayed and delayed again because of it. She and her husband gave up on this place, they lost their apartment, they moved to another rental, and are about to go back to house-hunting.
I get a call about “right of first refusal” every couple of years from one of my condo-owning clients. Usually, someone else in the association is selling and the prospective buyer needs a sign-off from my client.
So, what is it? Here’s a hypothetical example:
There is a condo association with three units. The deeds were drawn up so that if a unit went up for sale, the other owners would have first crack at buying them. In this example, the owner of Unit A put the condo up for sale and got an offer of $335,000. The owners of Units B and C need to sign off that they exercise or waive their right to buy it for $335,000.
Why does this matter? The prospective buyer should care, since the seller of Unit A cannot sell it to them until the owners of Unit B and Unit C have their chance to buy it. The lender cares, since the deed is not clear until the other unit owners waive their right to buy it. The wording of “right of first refusal” clauses vary from deed to deed. A lawyer can tell you what is involved in getting the correct paperwork.FULL ENTRY
Richard D. Vetstein, today, he outlines FNMA requirements for condos:
New, stricter Fannie Mae (FNMA) condominium lending regulations are dragging down condominium sales and project development. The changes were part of the government effort to limit risky lending in a segment of the housing market particularly hard hit by foreclosures. The new guidelines apply to all loans sold on the secondary mortgage market and insured by Fannie Mae or Freddie Mac which amounts to approximately 40% of all mortgages in the U.S.
• For new construction and newly converted condominium developments, 70% of the units must be pre-sold (closed or under contract). This guideline is being increased from 51%. This is the real Catch-22. Fannie Mae won't approve condominium mortgages unless 70% of the units are sold, but a developer cannot sell 70% of the units without buyers being able to obtain conventional Fannie Mae compliant mortgages. Buyers who run into problems here are being forced to get loans from smaller local banks who hold their own mortgages and are not bound by the FNMA guidelines.
• No more than 15% of condominium units within a single project can be more than 30 days delinquent on condo fees. This is an existing guideline that is now being applied to new condominium projects. The requirement was also changed from 15% of the total fee payments to 15% of total units.FULL ENTRY
Richard D. Vetstein, today, he explains why buyers and sellers should treat an Offer to Purchase as a legally binding contract:
The first step in purchasing or selling residential real estate is the acceptance of an Offer To Purchase. Most often, the real estate broker prepares the offer on a pre-printed standard form offer and presents it to the seller for review and acceptance. Attorneys are not typically involved in the offer stage but given the amount of recent litigation over offers to purchase, it’s never a bad idea to consult an attorney even at the earliest stages of the home buying process.
Many buyers and sellers (and their brokers) are under the misconception that the offer to purchase is merely a formality, and that a binding contract is formed only when the parties sign the more extensive purchase and sale agreement. This is not true. Under established Massachusetts case law, a signed standard form offer to purchase is a binding and enforceable contract to sell real estate even if the offer is subject to the signing of a more comprehensive purchase and sale agreement. So if a seller signs and accepts an offer and later gets a better deal, I wouldn’t advise the seller to attempt to walk away from the original deal. Armed with a signed offer, buyers can sue for specific performance, and record a “lis pendens,” or notice of claim, in the registry of deeds against the property which will effectively prevent its sale until the litigation is resolved.FULL ENTRY
Richard D. Vetstein, today, he explains a legal case regarding foreclosure:
In late March of this year in the case of U.S. Bank v. Ibanez, Massachusetts Land Court Judge Keith C. Long issued one of the most controversial rulings in recent years which has called into question hundreds if not thousands of foreclosure titles across Massachusetts.FULL ENTRY
In the Ibanez case, the Land Court invalidated two foreclosure sales because the foreclosing lenders failed to show proof they held ownership of the foreclosed mortgages through valid assignments. In modern securitized mortgage lending practices, the ownership of a mortgage loan may be divided and freely transferred numerous times on the lenders’ books. But the documentation (i.e., the assignments) actually on file at the Registry of Deeds often lags far behind. The Land Court ruled that foreclosures were invalid when the lender failed to bring the ownership documentation (the assignments) up-to-date until after the foreclosure sale had already taken place.
The Ibanez decision has called into serious question the validity of any pending or completed foreclosure where the lender did not physically hold the proper paperwork at the time it conducted its auction. The mortgage industry has criticized the decision as form over substance. The judge is presently reconsidering the ruling, but whatever the outcome, the case will likely end up before the Massachusetts Supreme Judicial Court given its far-ranging impact.
When most people think about condominium life, they envision life with fewer maintenance responsibilities than they’d have with single family home ownership. After all, isn’t that why there’s a condo fee?
While the living may be easy in larger condominium associations that employ management professionals and pro-active board members, I often see problems in smaller associations (typically with under six units) that lack the knowledge and/or funds to properly maintain the building. While those owners enjoy lower condo fees, dealing with obvious problems as they arise, lack of pro-active preventive maintenance has caused many smaller condo buildings to literally decay around them or create dangerous situations that the condo owners are not even aware of. Usually, the damage caused by deferred maintenance is not discovered until one of the condo owners decides to sell and the buyer brings in a home inspector who discovers things like:
- gutters that are damaged or overflowing
- water leaks from the exterior into the structure, foundation or, worse yet, electrical panel
- siding that needs to be replaced because it wasn’t painted on time
- water penetration that caused wood rot or mold
- clogged chimneys that force carbon monoxide into basements or living areas
- chimneys that are about ready to topple over
- rusting main sewer pipes that are beginning to leak raw sewerage
- porches with structural problems because they weren’t maintained or were improperly repaired
Richard D. Vetstein, is back with some notes for buyers about the Purchase and Sales Agreement:
In Massachusetts, the purchase and sale agreement (known as the “P&S”) most often used is the so-called “standard” form agreement supplied by the Greater Boston Real Estate Board or one modeled very closely to this form. The “standard” form P&S is, however, far from standard, and should be modified by way of an attached “rider” to address some very critical issues arising in most every transaction.FULL ENTRY
From a buyer’s perspective, there are two major problems with the “standard” form P&S:
1. It significantly favors the seller, and
2. It doesn’t adequately address such important issues as seller repairs, septic system/Title V compliance, radon gas, lead paint, buyers’ access to the property while it is under agreement, to name a few.
I’ll outline a few common issues not addressed adequately in the “standard” form, saving others for a later post.
Septic Systems/Title V
If the home is serviced by a septic system, Title V requires the inspection of the system within 2 years of the sale of the home. Failed septic systems can cost many thousands of dollars to repair or replace. The standard form P&S should be modified to provided an “out” if the septic system fails inspection, or give the buyers the option to close if the seller can repair the septic system during an agreed upon time period, provided that the buyer do not lose their mortgage rate lock.
I always recommend that buyers purchase an owner’s policy of title insurance. The problem is that most home buyers don’t know what title insurance is or what it covers, and only see it for the first time on the closing settlement statement.
What Is Title Insurance?
Title insurance is policy of indemnity protecting homeowners and lenders from financial loss in the event that certain problems develop regarding the rights to ownership of property. While closing attorneys check each title to real estate before a closing, there are often hidden title defects that even the most careful title search will not reveal. In addition to protection from financial loss, title insurance pays the cost of defending against any covered claim.
There are two types of title insurance, lender’s and owner’s policies. Lender’s policies are required by every public mortgage lender, but do not protect a property owner. Buyers must separately purchase an owner’s policy.
Title Defects: What Does An Owner’s Title Insurance Policy Cover?
I recently represented a condominium seller who was shocked to learn a day before the closing that there were several un-discharged mortgages and liens on her unit left over from the original developer. Fortunately, she had purchased title insurance which enabled the closing to go forward as scheduled, with the title company undertaking the obligation to discharge the liens and clear the title.
Other common title defects which are covered by standard owner’s title insurance include:
• Sudden appearance of unknown heirs claiming an interest in the property
• Forged deeds or impersonations
• Incorrect legal descriptions
• Improper recording of deeds
There is also a newer enhanced coverage policy available from First American Title and other companies which covers many situations excluded by standard policies such as:
• Building permit violations
• Adverse possession or prescriptive easements
• Building encroachments
• Incorrect surveys
• Pre-existing violations of subdivision, zoning laws, restrictive covenants.
Title insurance, however, does not guarantee a property has good, clear title, and is not a substitute for a competent title examination by an attorney. There are numerous exceptions to a standard owner’s policy (i.e., certain boundary encroachments) which should be discussed with your real estate attorney. Many of these exceptions are removed in the enhanced policy which I recommend obtaining.FULL ENTRY
Attention landlords and tenants, Attorney Richard D. Vetstein. is back to tell you what is really required by law. Today he reviews the laws around security deposits.
Last month’s rent and security deposits are one of the most heavily regulated aspects of Massachusetts landlord-tenant law and are fraught with pitfalls and penalties for the unwary, careless landlord. Any misstep, however innocent, under the complex security deposit law can subject a landlord to far greater liability than the deposit, including penalties up to triple the amount of the deposit and payment of the tenant’s attorneys’ fees.
This is why I advise landlords not to require security deposits. If a deposit is necessary, take a last month’s deposit, the requirements of which are less strict than security deposits. If landlords insist on taking a security deposit, they must follow the law to the letter.
Security Deposit Requirements
The following steps must be followed when a landlord holds a security deposit:
1. When the deposit is tendered, the landlord must give the tenant a written receipt which provides:
o the amount of the deposit
o the name of the landlord/agent
o the date of receipt
o the property address.
2. Within 30 days of the money being deposited, the landlord must provide the tenant with a receipt identifying the bank where the deposit is held, the amount and account number.
Within 10 days after the tenancy begins, the landlord must provide the tenant with a written "statement of condition" of the premises detailing its condition and any damage with a required disclosure statement;
3. The tenant has an opportunity to note any other damage to the premises, and the landlord must agree or disagree with the final statement of condition and provide it to the tenant.
4. The security deposit must be held in a separate interest bearing account in a Massachusetts financial institution protected from the landlord’s creditors.
5. The landlord must pay the tenant interest on the security deposit annually if held for more than one year.
6. The security deposit may only be used to reimburse the landlord for unpaid rent, reasonable damage to the unit or unpaid tax increases if part of the lease. Security deposits cannot be used for general eviction costs or attorneys’ fees. Within 30 days of the tenant’s leaving, the landlord must return the deposit plus any unpaid interest or provide a sworn, itemized list of deductions for damage with estimates for the work. Only then can the landlord retain the security deposit.
Ohio Attorney General, Richard Cordray, filed a joint lawsuit with the Ohio Department of Commerce against Carrington Mortgage Services, LLC. The lawsuit alleges that Carrington breached its agreement with the state to offer reasonable loan modifications to eligible borrowers. The lawsuit also alleges that Carrington violated Ohio's Consumer Sales Practices Act by providing incompetent, inadequate and inefficient customer service in connection with its servicing of Ohio mortgage loans.
"This lawsuit makes it clear that we have reached zero tolerance for this kind of behavior from loan servicers," said Cordray. "We've tried to work with them, but now we must take action. I am determined to see that mortgage servicers step up, take responsibility and start making it right with Ohioans. No more excuses."
Ohio is the first, filing on July 31st. It may not be the last. New York’s attorney general, Andrew Cuomo, published a report about bank exec bonuses. The New York Times covered the story of bank execs and their bonuses during the crisis.
“All told, the bonus pools at the nine banks that received bailout money was $32.6 billion, while those banks lost $81 billion.”Attorney General Cuomo said he was particularly galled because the bonuses were given out by banks who survived the crisis because of government funds. FULL ENTRY
It is peak rental season in eastern Massachusetts. I am pleased to welcome back Attorney Richard D. Vetstein to remind landlords what they can and cannot do when interviewing potential tenants this summer.
Screening Prospective Tenants:FULL ENTRY
Landlords can legally ask about a tenant’s income, current employment, prior landlord references, credit history, and criminal history. Your rental application should include a full release of all credit history and CORI (Criminal Offender Registry Information.) Use CORI information with a great deal of caution, however, and offer the tenant an opportunity to explain any issues. Landlords should also check the Sex Offender Registry as they can be held liable for renting to a known offender. Use the rental application and other forms from the Greater Boston Real Estate Board.
Under Massachusetts discrimination laws, a landlord cannot inquire about a tenant’s race, color, national origin, ancestry, gender, sexual orientation, age, marital status, religion, military/veteran status, disability, receipt of public assistance, and children.
Since Richard is an attorney and thinks like an attorney, he has an attorney’s take on how to handle contractors. He writes:
Sign A Written Construction Contract In Compliance With Massachusetts Home Improvement Law (General Laws Chapter 142A)
The Massachusetts Home Improvement Law provides the bare minimum of what is required to be in home improvement contracts over $1,000, but most contracts supplied by the contractor are non-compliant and terribly one-sided.
Here’s what you need in your home improvement contract:
1. The home improvement contract must be written, dated, and signed by both parties…
2. The home improvement contract must provide the start date of the work and the date of “substantial completion.”
3. The home improvement contract must provide a detailed description of the work and materials involved. I suggest incorporating that detailed estimate provided by the contractor… (You can attach it as an exhibit or addendum to the end of the contract).
4. The contract must detail the scope of work, being as specific as possible. I cannot emphasize this enough. Itemize the exact type of materials involved (Andersen windows, California paint, Italian ceramic tile, etc.), and work to be performed (full kitchen remodel with installation of new flooring, appliances, etc.). If you are not specific in the contract, and there’s a problem later, your claim will be severely weakened, if not dead on arrival.
5. The contract must provide the total contract amount and the timing of progress payments…
Many years ago, I represented buyers that were buying from an estate. The final price included items like the washer/dryer, refrigerator, etc. The heirs wanted to keep other personal items (like furniture) that the buyers wanted. The Purchase and Sales agreement detailed all the minutia of the sale, and the buyers happily signed the Purchase and Sale agreement.
Prior to closing, I accompanied my buyer-clients to the final walk through. The wife, Elizabeth, was beside herself when she did not see the Peony plant by the front steps. She turned to me and asked what happened to the plant. Of course, I had no idea whether it was stolen by a plant thief or removed by the sellers, but it really didn’t matter because Elizabeth considered it a good luck omen when she saw on her first visit to the property. Now that omen was gone!
Whether it’s a Peony plant, lighting fixture, shed or stove, I’ve seen this story re-played numerous times. Sellers think that they can take what they want as long as they leave the house, and buyers expect that aside from furniture and art work, what they see is what they will get when they close.FULL ENTRY
Many offers and Purchase and Sale agreements contain the words "time is of the essence". Those words give legal teeth to the deadlines (also known as the "time for performance") in those agreements. If deadlines are missed by a buyer or seller, consequences are typically spelled out in the offer. For a buyer, consequences can range from losing the ability to request repairs after an inspection to losing one's deposit money and losing the ability to purchase the home, too, if the seller elects to exercise his legal right to collect on the consequences. For a seller, failure to perform on time can cause him to be sued or the buyer might be able to back out of the deal.
While some consequences may seem harsh, failure to meet deadlines can cause monetary and other damages to buyers or sellers. Therefore, most real estate contracts include consequences that should motivate the average buyer. For example, if a buyer comes to a closing a day late, the seller may lose his ability to purchase his new home with the proceeds of his sale. Therefore, consequences usually include the seller's ability to cancel the sale and keep the buyer's deposit.FULL ENTRY
Sam Schneiderman, Broker-owner of Greater Boston Home Team
continues his Monday series with the first part of a discussion about property rights and restrictions. This is a must read for anyone thinking about buying, building, renovating or adding onto their property.
Many people feel that when they buy property, they should have the right to do what they want with it. Sooner or later, most homeowners that try to modify their property discover that the use and possibly the design of their property is subject to municipal rules that can restrict their plans. This applies when building a new home on a vacant lot and even to simple modifications of existing property, like adding a deck, shed, or widening a driveway.
Over the years, communities have developed their visions of what their cities or towns should look like.
Municipalities designate areas for businesses and other areas are designated for residential uses, like single families, two families and larger multi-family property. Some communities have designated industrial areas, adult entertainment areas, hospital districts, historical districts, etc.
Appraisers estimate the market value of property. They are supposed to provide independent, unbiased opinions of value based on their research and analysis of the market and property that they are evaluating. Appraisers are used by lenders to assure that the property that they are lending on is worth enough to secure the loan if the borrower defaults. Appraisals are also used for estate purposes, eminent domain and any other reason someone wants to know the value of a property.
A residential appraisal primarily involves surveying sold properties, then selecting the properties that are nearest, most recently sold and most similar to the property being appraised. Those properties are called “comparable sales” or “comps”. They are placed on a grid with details like size, condition, number of baths, parking, updates, etc. Appraisers makes adjustments to the sale prices of comps approximating the dollar value that the average buyer would pay for those features or subtract for missing features. For example, let’s say that a condo without parking is being appraised and a comparable condo with parking sold nearby. If parking is worth $10,000, that amount is subtracted from the sale price of the comp to arrive at the estimated value of the condo being appraised.
There are two ways to appraise property. The correct way is to do research and analysis, then figure out the value. The other way is to know the desired value and find recent sales to support it. Which one do you think takes less time and is more profitable?
I was an appraiser for 9 years, managing and training 40 appraisers and signing off on their appraisals as review appraiser. When property could not appraise for the sale price or the amount needed to refinance, some lenders questioned if we missed something in the process, usually because the owner, seller, or listing agent thought that the property was worth more than it appraised for. Sometimes the mortgage officer or lender was motivated by potential profit. Unscrupulous lenders would not order appraisal for a while after a property failed to appraise. Since I did not appraise to targeted values, eventually those lenders went elsewhere. Fortunately, there were lenders that wanted accurate appraisals and they became long term clients.
Some banks hired staff appraisers and others formed appraisal management companies (AMC) to have more control over the appraisal process. Some of them pressured appraisers for values, others did not.FULL ENTRY
Economist Bill wrote:
One could argue that it should be a violation of the Realtors Code of Ethics for any Realtor to take on an overpriced listing, knowing full well that it will not sell unless the price substantially lowered.
I have seen a number of homes where the Listing Agent sold the home to the Buyer and acted as a dual agent. No one can ethically represent both sides of a transaction of this magnitude, having inside knowledge of both parties. Lawyers can’t represent both parties in a law suit, so why should Realtors be able to do it? Any comments?
Thank you Bill. You bring up two important points. However, we’re not talking ethics here, we’re talking law. There are thousands of licensed agents out there that are not Realtors. All licensees are all bound by the law.
The seller’s agent’s job is clearly defined on the back of the Massachusetts Mandatory Licensee-Consumer Relationship Disclosure.
The agent must put the seller's interests first and negotiate for the best price and terms for their client, the seller.
I agree with Economist Bill. Agents who take an intentionally overpriced listing are not looking to get the best price for their client. I will remind you that the sellers have free will, which cuts both ways. Some sellers are flattered by such agents and accept the inflated price. Some sellers are told a real price, but insist on marketing their home for an inflated price in order to “test the market.”
The second issue, that of dual agency, is commonly misunderstood. Economist Bill doesn’t get it. Dual agency equals no agency. A dual agent is supposed to be a neutral party. The disclosure reads:
A dual agent shall be neutral with regard to any conflicting interest of the seller and buyer. Consequently a dual agent cannot satisfy fully the duties of loyalty, full disclosure, obedience to lawful instructions which is required of an exclusive seller or buyer agent. A dual agent does, however, still owe a duty of confidentiality of material information and accounting for funds.
One of my clients wrote me this email:
There might be a remote chance that we will move from this house, either to go to another state (California maybe) or to upgrade to a bigger place if we stay in the Boston area. In either case, I am thinking to keep this house as an investment and rent it. I know that there is lead paint in this house… Do you know if the house needs to be deleaded to be rented (or can the landlord have the tenant sign a release form in which the tenant acknowledges the presence of lead and relieves the landlord of any legal responsibility)?
First to answer the direct question:
Can the landlord have the tenant sign a release form in which the tenant acknowledges the presence of lead and relieves the landlord of any legal responsibility?
The owner of a property is responsible to anyone living there to provide a lead-safe environment for any children under the age of six. If a child is lead poisoned in the property, the owner is responsible.
In an effort to recognize renters reading this blog, today we discuss living with roommates. Some people need to stroll way down memory lane to locate their group living experiences. Some find them just around the corner. Some are there now.
I was pretty lucky in my roommate days. I only paid someone else’s rent once, for one month. He was a charming guy (aren’t all dead-beats charming?) who lost his job. Around Thanksgiving he told us he couldn’t pay December rent; we let him stay until the New Year. While he was looking for a new job, he turned into He-Man Suzy Homemaker. He painted, repaired, cleaned, cooked, and didn’t pay rent. He left all manner of debris in his room when he left, but actually improved the property in his last month. There were five of us in the house, so the share of his rent didn’t set anyone back irreparably. We replaced him in January. Did you ever pay someone else’s rent when you lived with roommates?
Janet Portman in Inman News gave some advice for tenants. It makes perfect sense. If you are living with roommates, you should have a written agreement about how the rent and bills are paid. You may have a lease with the landlord which holds each of you wholly responsible for the rent. So, if a roommate flees before paying, it’s all on you.FULL ENTRY
We have chatted about the many restrictions that property owners are subject to. There are condo rules; there are municipal rules; there are even development rules. These rules can restrict the color of you curtains, what you can keep on your porches, the rooms you can add on, or even the color you can paint your house or whether you can put up Christmas lights.
Many of you have had something to say about those rules.
There is another way to restrict the use of private property. It is called a restrictive covenant. The person buying the property must agree to the conditions written on the deed. Sometime the restriction made the property less valuable. Sometimes it was neutral. Sometimes it was intended to enhance the value (like zoning laws are supposed to.)
Restrictive covenants can include rules like what you see in condominiums and historic areas. You see things like limits on additions, paint colors and such. There are also covenants that say things like, “Alcohol cannot be sold on this property,” “This land cannot be built on for 99 years,” “The elm trees at the entrance cannot be cut down unless they are damaged or diseased,” “This land may only be sold to people who go to such-and-such church.”FULL ENTRY
There is a designation on the Multiple Listing System (MLS) of a little red contract and the letters ACT in red. It means, "the seller is accepting back-up offers." If an Offer to Purchase (or a Purchase and Sales Agreement) has already been signed, how can a Seller accept a different offer?
The Seller can’t. There is a problem with language. If there is an Offer to Purchase or a Purchase and Sale Agreement signed between the Seller and the Buyer, the Seller cannot unilaterally dump that contract to make way for the back-up offer. The Seller can collect other offers, but the Seller cannot accept one.FULL ENTRY
Landlords, where do you stand on choosing a tenant in these difficult financial times?
How do you separate the dead-beats from the struggling workers? Where do you draw the line on who is too much of a financial risk? Would you rent to a new college graduate who has no work experience and a new job? How about someone who is deep in credit card debt? How about someone who was bankrupt? Foreclosed upon? Out of work for six months last year? These are troubled times; how much of their problems are you willing to take on? Do you ask for first and last month’s rent, plus security to protect yourself?
Many landlords advertize in public sources like on-line lists, newspapers, and network sites. Most of the time, the would-be tenant is a stranger. If you don’t know the person how do you choose? Because of fair housing standards, it is important to treat everyone the same. So, no matter who comes through the door, good landlords ask the same questions, get the same background checks and ask for the same deposits. Once you make a rule, you need to stick to it or risk being accused of discrimination.FULL ENTRY
Roommates.com would have seemed to have found the perfect Internet niche.
But where does finding a roommate end and a new form of housing discrimination begin?
That is the thorny question the on-line roommate matching service is grappling with as it fights for survival amid a serious legal challenge.
Last week in the Voices section of The Boston Globe, Meredith Goldstein discussed disputes over who keeps the ring in the event of a failed engagement. She says the woman should give the ring back, since it was a binder for proposed marriage (which is a contract) more than it is a gift. If the recipient was not financially hurt or abused, the ring should go back. You should “be glad you didn’t marry the guy for 20 years.”
Making a real estate Offer to Purchase is a lot like proposing marriage. You need to have enough to offer and it hurts to have your offer turned down. Not all Offers to Purchase get accepted. I work to get the lowest price for my clients, so if they listen to me, they get out-bid more often than if they do their own thing.
If you make an Offer to Purchase and it is accepted, you have declared yourself. In real estate, you are still “engaged to be engaged .” The seller’s agent or attorney starts holding good faith deposits in escrow to bind the contract. But contingencies abound: home inspections, attorney’s review of tenancy or condo documents (if applicable,) the buyer getting their mortgage and the signing of an agreeable Purchase and Sales Agreement (P & S).FULL ENTRY
Dan asked me:
... I had a quick question regarding lead paint. I have 3 children under 6 years old and I am renting a home. I just found out the home was built before 1978 and the only mention of lead paint by the landlord was a paragraph in the lease that they have no knowledge of lead paint on the property. I did not think much of it at the time because most of the homes on the street were built in the 1980's and I (foolishly) assumed the home we were renting was as well.
We never received the state-mandated lead paint form from the landlord. I would like to terminate my lease and move into a newer rental home so I do not have to worry about my childrens' health and safety. Can I legally terminate my lease early because the landlord failed to disclose this information and ensure the house is deleaded?
I don’t know what your rights are in regard to your lease. That’s a lawyer question. Anyone know? Lawyers? Public health professionals?FULL ENTRY
In a recent conversation with a fellow exclusive buyer broker, I found that we had different ideas about what is best for our buyer-clients. We both have been working only with buyers for more than ten years. We both learned our trade from another exclusive buyer broker. We disagreed entirely.
The subject was whether it is worth it for a buyer should hire a separate attorney to write their Purchase and Sales Agreement and to review their mortgage paperwork (especially the HUD-1 Settlement Statement) before closing. A buyer can have one attorney do both the P & S and conduct the closing for the lender. Because this is a legal question, we had an opinion only about the practical aspects of this decision. We always send our buyers off to discuss the pros and cons with an attorney or two. (For the record, I work with attorneys whose opinions vary on this topic. Not just attorneys who agree with me.)
Here are the options:FULL ENTRY
WSJevons wrote about his quest for a "not white bread" neighborhood.
Thanks for the info*. It is tough to find truly integrated communities in Boston.
Any readers (who are not real estate agents) have thoughts on communities that have a diverse mix of people?
* Is white bread a protected class?
Here's the answer I can give, as a broker. The rest is up to you, readers! Please! No bashing on anyone's race, religion or sexual preference!
These are the protected classes: Race, color, religion, national origin, ancestry, sex (gender), sexual orientation, marital status, veteran status, disability (mental or physical,) age (except elderly retirement communities that meet certain standards.)
There are additional classes in regard to rental housing.
"White bread" is not on the list.
I trust that when WS says “white bread,” he does not just mean Caucasian. I wouldn’t define it that way. You can figure out the "white bread" factor for yourselves, based on your personal definition. Look at the businesses an area supports, what kinds of cars are parked around, what bumper stickers are on the cars, what size is the average home there...There are many things that are not directly related to the color of the skin, the ethnic or religious origins, or who your neighbors choose as life partners. Look around you, the signs are everywhere!FULL ENTRY
Q: Why would agents not tell you about the great schools?
Answer number one: Unless the agent says the same thing to every customer or client, that agent may be seen as practicing “steering.” Steering violates fair housing laws. It is the attempt to encourage people to buy in areas with people “just like” the buyer. In the past, this practice maintained segregated communities.
Here’s an example:
Suppose Dullsville has a reputation for great schools and town service. It is more expensive than the town next door, Blahburg, known for mediocre schools and town services. Of course, Dullsville is more expensive.
If an agent assumes that a buyer will want Dullsville for the good schools because of who the buyers are, that agent is discriminating. If the buyer is in a protected class, that agent is breaking the fair housing law.*
If an agent says this, the agent is breaking the law:
To a heterosexual, white, couple: Since schools are important to you, it might make sense to look in Dullsville and buy a smaller house. Blahburg has lower MCAS scores and sends fewer kids to 4-year colleges.
To a couple with a foreign accent: You will find a bigger house in Blahburg. Schools? They have MCAS scores at about the State average and send about 30 percent of their students to 4-year colleges. You can’t get a house as big as you want in Dullsville.
To two married men: You can get more house for the money in Blahburg (assuming they do not intend to have children.)
Answer number two: Agents avoid subjective judgments.
Realtor AJS commented that this was LAW [his capital letters.]
I don’t think it is actually law. I think it is one of those things that agents are taught in agent-school. “It is best to keep your opinion out of things that you can’t quantify,” say the real estate instructors. The problem is that one person’s nice neighborhood is another person’s slum.
This should not stop an agent from knowing the comparative, measurable quality of the town(s) their client or customer is asking about. The objective measures should be quoted. Clients or customers need to ultimately make their own decisions.
*Protected classes: Race, color, religion, national origin, ancestry, sex (gender), sexual orientation, marital status, veteran status, disability (mental or physical,) age (except elderly retirement communities that meet certain standards.)
There are additional classes in regard to rental housing.
T. wrote to me:
Hi Rona, ... I have a general question about mortgage approvals in these tight economic times... 1. How does pregnancy effect a family's pre-approval, and later when buyer how does it affect the mortgage? 2. Can a bank discriminate against pregnancy? It seems as though this is a very unfair business practice. How can a buyer address these issues?
... I am pregnant and currently am the head bread-winner in our family. I am due this winter and my husband and I have been trying to buy a home for over a year and half with little to no luck. We are hopeful that we might have some luck with the slower winter market, but we have been told by a mortgage broker that my being pregnant will negatively effect our pre-approval and we might get denied a mortgage as well. This doesn't seem fair, or legal. Can you provide some insight? [emphasis mine]
My first thought was discrimination! My second was about income. Lenders look for steady employment. If she has been steadily employed and will be through closing, the lender should look favorably on the loan.FULL ENTRY
Please, let’s not talk about the candidates here today. There are other places to discuss them. Please no political party name-calling!
What I want to bring up is the intersection of housing and voter rights. There has been much made of disenfranchising citizens due to their homelessness and foreclosure. Whatever happens today, there will be people who believe their vote was taken away, and there will be people who believe that illegitimate people were allowed to vote.
Now let’s muddy the waters with some data sources:
In Massachusetts, if you were registered to vote and have moved, you can still vote in your old district for 18 months. You are permitted to vote for national and statewide candidates and ballot questions, but not for local candidates. This should help people in our state who were forced to move due to foreclosure. Here, too, there has been an effort to register homeless people through the shelter system. So, if you have registered, in Massachusetts, your housing status should not stop you from voting. If you are not on the voter rolls, you can try to vote with a provisional ballot. Here are the rules. You need suitable identification to get a provisional ballot. If your ID is verified, your vote will count. However, it is not clear what defines “suitable identification,” so bring anything and everything you have that shows your name and address.FULL ENTRY
Did America’s Constitution give the right to vote to all American citizens?
Of course not. No African-Americans, no women, no renters.
Not until 1850 was the vote extended to men who were not property owners.
What was the logic of the founding fathers?
Was the idea that landowners were the big stakeholders, so their vote counted? Is it that landowners were responsible and established? Was landownership the sign of responsibility, maturity?
Or was it only one step away from the nobility system of England that we rebelled against?
We’ve come a long way, baby.
What do you think?
Are homeowners bigger stakeholders?
Did home ownership translate into ruling class membership in 1790? Does it now?
Last week, I mentioned the increased scrutiny that appraisals are now getting. Today, an attorney-colleague told me there is also a trend for underwriters to not accept unrecorded condo document drafts; they want to review only final, recorded documents. I am wondering whether the underwriters care whether the rules make sense to owners, or if they will just be checking that they are recorded.
I have seen some questionable condo rules in my day. I have heard of even more. I have seen rules that require:
The outward facing side of all curtains had to be white or off-white.
No flags, furniture or satellite dishes on balconies.
No dogs and cats. However, this was a change. The existing animals were grandfathered-in. (I showed a condo where the owner had to sell because his dog died and he got a new one -same breed- but was found out and fined.)
One of my clients was a trustee in a big condo association before he came to me in search of his single family home. He told me, I paraphrase:
A lot of readers don't understand what short sales and foreclosures are. I am getting comments and emails. This is foreclosure and short sale 101. Skip it if you know this stuff and have no advice for those who don't.
Tim responded to Monday’s post. He is in a situation that has become more common since the sub-prime meltdown in the summer of 2007:
One of the problems we are facing is, when we tried to sell it, we asked if we could just pay off the difference to our mortgage holder, that was unsuccessful as they tried to push us into a short sale, which I didn't understand because we're current on our mortgage. We tried to take out a personal loan, however the amount was too much and exceeded personal loan limits. We've tried to refinance to make the mortgage lower - so we would actually want to keep it and maybe break even or make money off of the house (with the rental), but we cant refinance since the value has dropped so much we'd have to finance more than 100%, and banks just dont do that now-a-days. What does a person do!?
The very next day – I am not making this up! -- Another client wrote this:
BTW, I'm not sure I understand this business of tenants not letting prospective buyers into the house. If I had a house listed with an agent that couldn't get it shown, well, what's the point of putting it up for sale? (Or, less kindly, what's the point of using that particular agent?) Don't owners have clauses in their rental agreements requiring tenants to allow the house to be shown, given adequate notice? I don't get it...I know that if I was a tenant, I wouldn't be happy at the prospect of a new owner giving me notice to leave, but I'd let that person in since it's part of my rental agreement...and, I'd probably be seriously looking for a new apartment anyway...
And I answered:
About tenants. No, there isn’t a clause that says that they must allow the house to be shown. Tenants have the right of "quiet enjoyment" which means they have the say about who comes in and when. The sellers who do not empty a house for sale want to have their cake (sale) and eat it (rental income), too. If you have a house with problem tenants, they probably don't have the cash ahead to move (an extra month's rent can be hard for some people.)
So today’s sale and rental issue is about the people who rent a home while it is for sale.FULL ENTRY
A lengthy discussion about square footage was held here in March and again in May, led by Binyamin (remember him? Man, I miss him!) I chimed in.
Now it rears it’s head again. Katt is tired of house size inflation and thinks it does a disservice to sellers.
The only thing [broker name omitted *] is known for is inflating the square footage of the homes they have listed, along with sale prices.... .... Please add up the room dimensions and see for yourself. It's been under agreement 2x, and both times the deal has fallen through- I wonder why?? Could it be that the lenders are saying that the loan to value ratio is a little screwed up? Consequently, the realtor of this property will not admit that the square footage is grossly inflated, and the seller's will not come down on their price to a reasonable dollar amount for the size of the home....they will have to hope that someone has cash to pay in order to get ripped off by this [broker name omitted ], because I can't imagine a lender giving someone that amount of money for such a truly small home.... I could fit this home inside of mine, and mine is listed at 2700 sq. ft. Check out their other listings in the area- gross and overpriced, and stagnant. [broker name omitted ] needs to realize that they ain't in the driver's seat anymore, and they're doing the client's a great disservice.
I want to clarify:FULL ENTRY
The foreclosure entry that I wrote on September 9th is still drawing comments. Today this one came in from Polly:
I was a buyer in a short sale and today I got news the deal is off and the house is going into foreclosure. I paid for a home inspection and an attorney to review the P&S. (Wells Fargo was the Seller's lender.) Any advice for me? I really love the house and still want it.
My advice to Polly is the same as my advice so far for buyers who are trying to capitalize on foreclosed homes:
The time is not yet right for buying foreclosed properties. The lenders do not have their systems in order. They can’t manage the sales efficiently. The wait time is long; deals fall through for no reason. Prospective buyers end up wasting time and money. Sometimes they succeed, but the discounts that I have seen have been modest.
If you are going to deal with short sales and foreclosures, hire a lawyer who knows the ropes. Expect delays. Be prepared for the sale to fall through. Choose something that is worth the risk and bother -- or don’t buy that property. If you are expecting a normal deal in a normal time, you are dreaming.
I started in real estate during the last recession, in 1991. By that time, foreclosure sales were working for buyers. There was an agent who handled foreclosed properties who had good communication with her investor’s office. The investor was offering good financing options for the buyers. The management of foreclosure sales worked like a well-oiled machine.FULL ENTRY
One of the guys I work with is preparing to buy a home, so he has been researching buyer’s rights, etc., and he was intrigued when he read the disclosure law and came across the rules about “psychologically impacted” properties.
Seems in Massachusetts the seller’s real estate agent is under no obligation to tell prospective buyers if the house is believed to be haunted, or if the property was the site of a violent crime such as murder. State consumer protection law basically says that information isn’t germane to a property’s condition. The only disclosure that’s absolutely mandated under the law is whether the property contains lead paint or not, according to Mike McDonagh, an attorney at the Massachusetts Association of Realtors.
“But it’s very important to remember that if the buyer makes the inquiry, the broker and the seller must answer the question honestly,” McDonagh said. “They can’t make misrepresentations about the property.”
Monday, I got a robo-call from Senator Kennedy urging me to vote for Senator Kerry. Tuesday, I spent a few hours holding a sign for the candidate of my choice. It was primary day in Massachusetts. Here are my observations:
1. Many of the people working in the polling-place building did not live in the district.
2. There were a large number of people who were not citizens, or not registered, or both. One man said he was not a citizen, yet.
3. Young people are voting.
4. The turn out by mid-day was pretty anemic.
I got an email from a reader who signed a Purchase and Sales Agreement on a short sale. He was unhappy when his agent called to say there would be a two-week delay in closing. He was paying cash. He had no lawyer. What should he do?
First thing, if you don’t hire a lawyer you should read your Purchase and Sales Agreement. Most people don’t. They almost all have an automatic thirty day extension to perfect title (get liens and encumbrances off the title.)FULL ENTRY
A man from Delaware drove his Hummer into a residential property. Even worse, the property belonged to him. Even worse, his tenants were inside. Even worse, as he was leaving, he alleged shouted “Tell the police that the landlord tore up the building.” But what really got me, was that his local paper’s blog quickly identified him as a local real estate agent!FULL ENTRY
I was emailed this story and asked what I thought of it, as a broker:
A house was listed as roof being 4 years old. My inspector said it’s 15-20 years old. After seller/agent repeatedly told us the inspector was wrong and we insisted on some evidence, they finally admit it’s 14 years old. The excuse being bad memory.
So is there any consequence for such false information? Should the
seller’s agent check the fact before posting? Thanks.
When a seller’s agent puts information on a listing sheet, it must be reliable. Seller’s memory and the public record are considered reliable sources of that information. Neither really are. Binyamin and this blog have talked about the inaccuracy of square footage on these sheets. That’s just one more glaring example of inaccuracy run rampant.FULL ENTRY
Did you see the Real Estate section in the Globe yesterday? If not, you missed an interesting story on the legal pitfalls of buying a home that is in any stage of the foreclosure process. As correspondent Dave Copeland reports, buying a home that has been foreclosed, is in the process of being foreclosed, or being sold in a short sale involves exponentially more paperwork than a routine sale. And closing can take up to six months longer.
Obviously, it’s not the type of deal one should go into blindly.
Some agents interviewed for the story say they are avoiding certain types of listings because of red flags that could drag out a sale. One agent said he avoids short sales where there is more than one lender involved and he also avoids any foreclosure listing that has a clause giving buyers only 48 hours to decide on the lender’s offer.
But even home purchases involving non-foreclosure properties can turn into legal nightmares. I know of a case where a couple unwittingly agreed to purchase a house that was tied up in a very messy divorce – it took almost a year for them to get into the house.
What other possible legal hazards should buyers be on the lookout for? And what advice do you have for approaching a possible legal tie-up?
I can’t seem to get away from real estate, no matter where I go. I played hooky one Saturday in June to attend a family event. There my cousin Bernice bent my ear about the two “McMansions” across the street from her on the north shore of Long Island. Across from Bernice, two houses sold at about the same time. Both ended up being torn down, replaced by houses that dwarfed the lot.FULL ENTRY
A young professional couple rented an apartment recently. It was in a two-family house in or near Boston. The landlords were long-time local residents who need their rental income to make ends meet. The tenants earned 6-figures. The landlords verified the tenants’ income and checked their references, as a good landlord should. Then tenants moved in. Everyone was happy.
A few weeks later, the tenants informed the landlords that they were expecting, due five months from that day. This means the landlords will be obligated to make the apartment lead-safe.FULL ENTRY
A reader asked me a question about lead paint and condos. What happens if a unit is lead-safe, but the common area is not? How does the liability work? Since IANAL, I asked a legal colleague. She told me this:FULL ENTRY
Last week, a landlord asked me to address the impact of the lead paint law on landlords.
The Massachusetts lead paint law is very clear: the owner of the property is responsible for making the property lead-safe if a child under six lives there. Once a child is born, that child has the right to a lead-safe environment. It is a health and safety law, just like a landlord must maintain a working toilet in a rental unit.
As a landlord, you must present this form to prospective tenants. Landlords may not discriminate against families with children. They cannot ask pregnant women or children to leave.
I am starting a series on bad behavior on both sides of the landlord-tenant relationship. Please write me an email if you have stories and want an opinion. If you comment here, please remember no naming names, no identifying properties.
Recently, I got this first-hand account of a landlord who tried to get a little more money before falling into foreclosure:
Real estate agents are required to show consumers the agency disclosure before discussing a specific property with a prospective client. Have you seen it?
.... the real estate agent represents the buyer. The agent owes the buyer undivided loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality and accountability, provided, however, that the agent must disclose known material defects in the real estate. The agent must put the buyer's interests first and negotiate for the best price and terms for their client, the buyer.
Read about what happens when so-called “buyer’s agents” are in the pocket of builders. It led to “buyer’s agents” making it seem easy for a renter to turn homeowner. “Buyer’s agents” offered one-stop shopping for a loan; so easy. This led to buyers with a 17% default rate.FULL ENTRY
Not to get too political, but I do not think that “Don’t ask; don’t tell” is a good policy. It does not work in the military; it does not work in home buying.
The place where home buyers get hit with “Don’t ask, don’t tell” is in regard to lead paint. Lead paint was used in housing for a long time. Why? Because it lasts longer; it was the good stuff! It stopped being made in 1978 for housing. However, some of the paint was still around for years to come. Lead paint shows up on the exterior, the windows and on painted stairs and floors. Most disclosures presented to buyers at the point of Offer say the seller does not know if there is lead paint because the house was never tested. “Don’t ask; don’t tell.” The nicer the old house, the more likely there will be lead paint someplace.
The most successful foreclosure prevention program in the state of Massachusetts may be the rolling blockade orchestrated by City Life/Vida Urbana. Starting last fall, the Jamaica Plain activist group has undertaken the protection of a growing number of Bostonians living in foreclosed buildings, pledging to physically inhibit any attempted eviction.
With growing regularity, the group has sounded its trumpets, alerting supporters and the media that an eviction is scheduled. People and cameras muster outside the house in the early morning hours. And the eviction is canceled. The mortgage company backs down.
City Life's most recent victory came Tuesday, when city officials announced that Wells Fargo had indefinitely postponed an eviction of tenants from a foreclosed building on Norfolk Street in Dorchester.
Sometimes the cancellation happens the night before, and the blockade becomes a rally. Sometimes it's only clear when no constable comes to carry residents and possessions across the threshold.
What doesn't seem to vary is the result.
It has become increasingly clear that City Life/Vida Urbana -- and probably any other activist group -- effectively can prevent a given eviction simply by announcing that they plan to be in attendance.
It's the rare practical application of Heisenberg's uncertainty principle: Evictions apparently don't happen in the presence of spectators.FULL ENTRY
How do you choose a neighborhood when you don’t live there yet? As a licensed real estate broker, I can’t tell you where to live. Because if I told Italians to live in the Italian neighborhood and people in wheelchairs to only look at condos, I would be discriminating based on who you are. Therefore, I give the same advice to everyone:
If you do not know the area, spend some time there. Do what you normally do: Go grocery shopping, go to a playground, go to a movie, walk through town, and/or go out to dinner. If parks are important to you, then go to the parks, same for libraries, community centers, senior centers, schools, and little league games. If you do not like being there, you are in the wrong place.FULL ENTRY
When I wrote about local parking behaviors after snowfall, the discussion went to the inevitable “townies” do it this way and “newcomers” do it the other way. Well, the snow is falling again, so the cultural divide will soon be apparent at a curb near you.
Many years back, one of my buyers told a home-seller that he went to the local high school. After the offer was accepted and we were there for the inspection, we found a stack of high school year books on the kitchen table. The seller had checked to see if he really was a “townie.”
So who is a “townie”? Do you need to be born here? Go to elementary school here? Graduate high school here? Can a “newcomer” assimilate enough to be accepted as a “townie”? I moved here in the early eighties; what can I do the overcome my “newcomer” status?
I assume cheering for the Patriots is not enough; they are too easy to love!
Almost every time that the Massachusetts Association of Realtors takes a political stand, I find myself on the other side of the issue. Today, I got a “MAR Call to Action” to oppose mandatory energy scoring for single and multifamily homes at the time of sale that is included in energy legislation before the State Legislature.
As a buyer’s agent, I think having an energy efficiency score is a good thing for buyers (and owners.) The only thing I oppose is the “time of sale” part. I would much rather see that information required before advertising the home for sale (and if never advertised, then before closing.)
Those of you who have followed this blog since its beginning know that my father taught me how to understand the use of numbers found in newspaper articles.
In the Sunday Boston Globe, Trey Skehan explained the use (and misuse) of averages, medians and means in discussions of income.FULL ENTRY
A friendly competitor of mine spoke to me yesterday about a disturbing trend. Consumers do not realize that a contract with their agent protects them, as well as the agent. The practice of doing buyer agency without a contract has become common-place and it runs contrary to Realtor Code of Ethics.
He's a member of the Professional Standards Hearing Committee---which hears ethics complaints from the public and other Realtors, says that it seems as if many Realtors have never read the Realtor Code of Ethics and that, of those who have read it, far fewer keep up with its revisions.
It is a case in point that many buyer’s agents do not sign professional contracts with their clients. (Nearly all seller’s agents do.) There seems to be a perception that the relationship with a buyer client is somehow less important than one with a seller client.FULL ENTRY
The US Department of Justice, which has aggressively brought several high profile anti-trust actions against the real estate industry, has launched a new web site to educate consumers about competitive measures that could save them money.
The site contains a wealth of background material, pointers and encouragements for consumer. For example, one section has tables and a calculator to show how much consumers could save from some measures, such as getting rebates or selling the home without a broker.
The foreclosure auction was this morning. A third party was the high bidder. What happens next?
In a typical transaction, the buyer gets 30 days to finalize the deal. At that closing, the lender delivers a foreclosure deed to the buyer who then becomes the owner of the property.
Through all this time and beyond, the original homeowner-borrower is able to remain in the house. Technically, it takes an eviction order from a court to force the holdover owner out of the property.
Besides finding a new residence, the old homeowner is also likely to become a defendant in a deficiency lawsuit. In this proceeding, the lender seeks to recover the difference between the total owed on the mortgage and the amount realized at the auction. For example, if the balance owed on the mortgage was $350,000 but the winning bid at the auction was only $300,000, the borrower would still owe the lender $50,000. In some cases, these deficiencies might be written off immediately, but more likely, the lender will use the appropriate judicial process to scrutinize the borrower’s remaining assets and ability to pay on the judgment into the future.
The Federal Reserve Bank and other US lending regulators today issued a proposed disclosure form that would better explain to borrowers of adjustable-rate subprime mortgages the terms and conditions of these loans.
Coming amidst a enormous increase in the number of foreclosures of subprime mortgages, the regulators hope the new disclosure form will prompt potential borrowers to have a more realistic, clear-eyed understanding of the debt they're about to shoulder.
I think taxes are a good thing. Taxes pay for schools, police, fire safety, and infrastructure -- all these things make a community a good place to live. And, Lord knows, we need infrastructure! On August 8th, U.S. Rep. John Dingell revealed a plan to cut global warming by ending the mortgage tax deduction on homes larger than 3,000 square feet.
I say, “Bring it on!”FULL ENTRY
Michigan Democratic Congressman John Dingell is best known for his positions on the home-town auto industry, but his lastest suggestion to curb global warming and conserve energy is likely to roil the housing industry.
Dingell said he will proposed ending the mortgage interest tax deduction, an enormous bounty for homeowners, for properties larger than 3,000 square feet.FULL ENTRY
The federal Office of Thrift Supervision is soliciting public comment on what would constitute unfair and deceptive practices in lending and other activities. Though the words "subprime mortgage" are not mentioned in the OTS release, it's probably not an unfair inference to draw that the blowup in that end of the lending market is weighing on regulators.
Thursday, July 26, is the 17th anniversary of the Americans with Disabilities Act. This Thursday, the ADA Restoration Act of 2007 will be rolled out to the House of Representatives to help make the ADA more enforceable. Despite 17 years with a law to help disabled people have access to all aspects of American life, unfairness still reigns in our country. I see it here in the Greater Boston area real estate market.FULL ENTRY
A bill aimed at preventing foreclosures and cracking down on mortgage fraud is expected to fly through the Massachusetts Senate today.
The bill includes everything from making mortgage fraud a felony -- and tossing those convicted of it in prison for up to five years -- to creating a state system to rate mortgage companies on their lending practices, and a database to track foreclosure activity.
A recent edition of Massachusetts Lawyers Weekly (subscription only) contains an opinion piece by attorney Michael Collora who predicts that the collapse of the subprime market is likely to lead to state and federal criminal investigations of a number of attorneys, mortgage brokers, buyers and sellers.
Anyone who was around during the real estate collapse of the early 1990s is familiar with what can happen.FULL ENTRY
A story in today’s paper reports that a compromise bill that will give Massachusetts one of the most “proconsumer” statutes in the country regarding the prevention of identity theft will soon be enacted on Beacon Hill. While I haven't seen the final version of this bill, legislation of this type is of particular interest at the registry of deeds since our records contain thousands of social security numbers, a prime ingredient in identity theft. Social security numbers are contained in every state and federal tax lien and release, in many death certificates and in more than a few mortgages. As long as those document remain in a dusty book on a shelf in the courthouse, they're not much of a threat. But digitize those same documents and place them on the Internet as we have done with millions of records and they create much more exposure. To curtail this exposure, we’ve already made one pass through our records here in Lowell, redacting more than 65,000 social security numbers thus far. To protect the identities of innocent persons, government agencies should begin the task of removing social security numbers from online records, but such a project is a complex, costly and time-consuming task. In the meantime, if you discover that your social security number appears in an online record at your local registry of deeds, you should call that office, identify the document where the SSN is located, and ask that it be removed.
Financially stressed buyers often look to their brokers and mortgage professionals to help them make a deal happen. When they can't scrape enough cash together, creative solutions are often proposed. Here's a common scenario:
Buyer agrees to buy and seller agrees to sell. The purchase price is $300,000. Buyer has a down payment of $15,000, can get a loan with a 95 percent loan-to-value ratio, but can’t afford the additional closing costs. Buyer and seller agree to increase the purchase price by $5,000 and seller will give the buyer back a credit of up to $5,000.
The buyer can now borrow an extra $4,750 to cover closing costs at 95 percent LTV. Buyer gets house, seller gets money and the bank is fully informed. Creative financing, right?
Maybe not. Maybe, it’s fraud.FULL ENTRY
As quoted by Alison O'Leary Murray in her article on communities resisting Chapter 40B affordable housing projects, the Chairman of the Milford Board of Selectman, William Buckley, complained that "communities are being disproportionately challenged with 40B projects simply because of their proximity to . . . water, sewer, or access to a major highway."
Globe Correspondent Alison O'Leary Murray had an interesting story about growing community resistance to the state's affordable law, known as Chapter 40B.
Though these housing projects have never been wildly popular at the local level because the law allows developers to bypass some community oversight, the story had a neat bit of info about which towns are more likely to be targeted for such developments. Check it out.
Massachusetts law allows a homeowner to file a Declaration of Homestead at the registry of deeds to protect the family home from a forced sale by a creditor.
Many who already have homesteads often ask if they must record a new one after refinancing. The answer is unclear.
Technically, a mortgage is a deed and in homestead law, a new deed voids an existing homestead. So logically, if a mortgage is a deed and a deed voids a homestead, then a mortgage voids a homestead.
But logic doesn’t always work with property law. Many in the legal community contend that a mortgage is just a security interest and not a deed, so it has no effect on an existing homestead.
Why not record a new homestead, just to be safe? A homestead protects against debts that come into existence after the homestead is recorded, so you might have an unknown debt lurking about that would be covered by the old homestead but that would predate and fall outside the protection of the new one.
Since every case is different, the best thing to do is to ask the lawyer who is handling the closing for you before you leave the closing.
A provision of the pending Municipal Partnership Act would abolish an 80-year old law that exempts the phone company from paying an excise tax on the equipment it owns on the pole in front of your house.
Intended to promote the statewide deployment of the telephone in that technology’s infancy, the law’s objective was accomplished long ago. The electric company and your cable provider already pay this tax.
Proponents argue that repealing this exemption will help shift the burden of funding local government away from homeowners. Opponents contend that any increase will just be passed on to consumers.
I’m not sure that’s the case. Each month I pay two phone bills: one landline and one cell. I do that out of habit, I believe, because my cell phone seems to duplicate all of the functionality of my landline. Old habits die hard, but they do eventually die, so the next time my bill goes up, it might just be enough for me to forsake my landline phone and switch entirely to cell. I suspect the phone company realizes it has reached this tipping point and it will be very hesitant to raise its rates for any reason.
As an occasional conveyancing lawyer, I was intrigued by Richard Howe’s post The Paperless Real Estate Transaction .
Don’t get me wrong, the ability to file registry documents electronically will be a huge boon. But electronic filing does not a paperless transaction make.
Contractual documents between the parties to a sale will continue to be paper and pen, as will all of the typical closing documents. As Mr. Howe says, we will need to “transmit to the registry of deeds the scanned image of a document.” The document will need to exist and be executed before it can be scanned.
During the next real estate boom, perhaps this innovation will prevent the long lines at the recording desk, provide buyers instant gratification at closings, and save time and money on couriers and overnight mail.
I applaud and encourage the innovation. The paper, unfortunately, will continue to pile up around me.
In a recent article, Christine McConville cited an MIT study released last week shows that almost half of the so-called 40B housing developments proposed in Greater Boston has not been built because of community opposition, combined with a softer housing market.
Rona Fischman, in her blog entry, makes some notable suggestions about staying out of trouble, and staying out of foreclosure.
If “life happens” to you or someone you know, however, negotiating the foreclosure onslaught can be overwhelming. The most important advice I give clients to whom life happens is to deal with it – do not ignore it and hope it goes away.FULL ENTRY
After much debate, the townspeople of Hopkinton recently voted down the opportunity to purchase 708 acres from the bankrupt owners of Weston Nurseries. The land was protected under Massachusetts state law, Chapter 61A, as agricultural land and was paying lower taxes as a result.
Boulder Capital, a developer, will purchase the land and has presented plans to develop 940 houses and apartments, and 450,000 square feet of commercial space.FULL ENTRY
As anyone who recently borrowed money to buy a house or refinanced their mortgage can tell you, the stack of paperwork required by the banks is staggering. The “closing package” is so complete (and I use that term loosely), even the loan processors rarely understand what it all means. How then can regulators insure that borrowers understand the trouble they are getting into?FULL ENTRY