Sherwin Law Firm Succeeds in Rescission of Contract Case

I’m pleased to announce that I prevailed last month in a rescission of contract case in Essex Superior Court.  The case involved many important issues involving real estate contracts and the relief that a party to such a contract can obtain from a court if the agreement runs into problems.

Overview of Case

This case involved an oral agreement between two parties for the purchase of a residential home.  The deal involved the payment of cash and a promise by one of the parties to assume the mortgage loan.  This required the buyer to apply for the mortgage loan to be put in his name, so that the seller was no longer responsible for the debt.  This deal was done by a “handshake”-the parties never put the terms of the agreement in writing.

Several years after this deal was made, the seller believed that the buyer had not fulfilled the terms of the deal, and brought a lawsuit seeking a rescission of the contract.  A rescission of contract is an action seeking to “undo” a contract.  This asks the court to unmake the agreement and put the parties back in the position they were in before the deal was made.

What is a Rescission of Contract?

A rescission of contract is not readily allowed by courts; only certain circumstances will justify this relief.  Rescission is generally only allowed in cases of fraud or when a party has committed a material breach of contract: one that defeats its purpose.  Here, the seller in this case was alleging this latter reason for seeking a rescission of contract, by arguing that the buyer (my client) failed to comply with important terms of the deal.

Outcome of Case

My strategy in this case was to convince the court that my client had done what was required of him per this agreement.  Because this was an oral agreement, this required me to attack the other side’s credibility and build a case that the seller’s story was not believable.  In the end, the Court agreed with my client, finding that he had done his end of the deal.

Such a case required an enormous amount of preparation and research.  As it came down to a decision by the court on who was more believable, it was essential that my client correctly told his story, and for me to highlight the inconsistencies in the other side’s version of the facts.

Conclusion 

This case highlights an essential lesson in entering into a contract (especially one involving real estate): put the deal in writing, and get the assistance of an attorney.  If the deal “goes bad”, as this one did, having a written agreement can spar you enormous time and money if a problem arises later on.   If you find yourself in a dispute over a real estate contract, contact me for a consultation.  Having an experienced attorney on your side is essential in a matter like this.

On a side note, one of the benefits of this case was having the opportunity to do a trial in the Newburyport branch of the Essex Superior Court.  This building, hands down, is the most beautiful courthouse in Massachusetts, and is setup in the style of a New England town meeting hall.  The picture above was taken by me with my drone, across the pond where the courthouse sits.

Does An Eviction Show On a Credit Report?

A common question for tenants facing eviction is whether an eviction will show on a credit report.  Tenants, understandably, are concerned about whether such cases will become a public record and be accessible by others.

According to the credit bureaus, the mere filing of an eviction case by a landlord will not, on its own, show on a tenant’s credit report.  This makes sense: the mere filing of an eviction case does not mean that the tenant deserves to be evicted.  If a tenant has a viable defense to an eviction case, the eviction will be unsuccessful.

However, if the landlord does succeed in an eviction case and the tenant owes the landlord money, the landlord can obtain a judgment for this owed amount.  Such a judgment can be reported to the credit bureaus (the same as any owed debt).  A landlord can also obtain a judgment if the tenant fails to show up to the scheduled court hearing; a landlord is permitted to obtain a default judgment, automatically giving the landlord possession of the property and the owed rent.

Although an eviction, on its own, may not show up in a credit report, evictions in Massachusetts are public record.  Court records are available on masscourt.org and eviction cases can be searched a party’s full name.  When an eviction is filed, it automatically becomes a public record and is accessible through this website.  Several tenant screening services are said to search this website and create lists of filed eviction cases, to help landlords learn the rental history of a prospective tenant.

With this in mind, tenants need to be careful in resolving an eviction case with a landlord.  If one of these cases is settled, the tenant should insist that an agreement for judgment or some similar paperwork be filed in the case to note that the matter was resolved amicably.

If you find yourself facing a landlord/tenant problem, contact me for a consultation.

Beware of Foreclosure Scams

While there are many dedicated professionals committed to helping struggling homeowners avoid foreclosure, the unfortunate reality is that the foreclosure crisis has its share of con artists.  Too often, I have met with homeowners who have come to me after having been scammed by an alleged business claiming to help avoid foreclosure.  These scams require homeowners to pay a large sum of money upfront and give the alleged “business” permission to speak with their financial institution.  These scammers do nothing to help the homeowner, leaving them to face foreclosure despite having spent money for purported foreclosure defense services.

A strong indication of a foreclosure scam is when the alleged business tells the homeowner to send them their monthly mortgage payments, and claims it will then forward the money to the financial institution as part of a loan modification.  Last month, a Lowell man was convicted of such a scheme, showing that such fraud remains prevalent as the foreclosure crisis continues.

How should homeowners beware of foreclosure scams?

  • Research any business, non-profit, or attorney who you are considering hiring for your case.  If you can’t find a reputable website, location of a physical office, or any indication that the service has been in operation for a while, proceed with caution.
  • Stay clear of any business, non-profit, or attorney who requests that you make mortgage payments directly towards them.  There is no reason why loan payments should go anywhere besides directly to your financial institution.
  • As the old adage goes: if it sounds too good to be true, it probably is.  If the purported foreclosure defense service guarantees to get you a free home or permanently avoid foreclosure, strongly considering speaking with a reputable professional.

If you find yourself in need of assistance with foreclosure, contact me for a consultation.  Too much is at stake to take chances with a fraudulent foreclosure defense service.

72 Hour Notice to Quit

A 72 hour notice to quit is a unique type of notice that is generally used for post-foreclosure eviction (“summary process”) cases.  Receipt of one of these notices is a sign that an eviction case following a foreclosure sale will begin soon.

A notice to quit is required prior to the start of an eviction case.  For evictions involving landlord/tenants, where the parties previously entered into a rental agreement, there are specific requirements for the notice to quit required prior to eviction.  Terminating a tenancy for non-payment of rent, for example, generally requires a 14 day notice to quit.  The sending of a notice to quit for a landlord/tenant eviction is a mandatory part of the process; a court will throw out an eviction if the proper notice is not sent, or the landlord cannot prove that the landlord received it.

The same is not true for a post-foreclosure eviction case, where the landlord (often the bank or lender who purchased the home at the foreclosure sale) is attempting to evict the former homeowner.  There is no specific requirement as to what type of notice a foreclosing entity needs to provide to a former homeowner.  Many cases on this matter suggest that no notice to quit is required for one of these cases (unlike a landlord/tenant eviction).

Despite the law suggesting that no such notice to quit is required, out of custom, a 72 hour notice to quit is generally used for post-foreclosure eviction cases.  This notice informs the former homeowner that they have 72 hours to leave the property, or an eviction will begin.  A notice to quit is generally served by a sheriff or constable.

Despite the 72 hour “deadline” in one of these notices, a former homeowner does not need to leave their home after receiving one of these notices.  A homeowner only needs to leave the home after a court enters an execution for possession, allowing the owner of the property to physically remove the former homeowner and their possessions from the property.  Before doing so, a former homeowner (like a tenant) is entitled to their “day in court” and allowed to present their reasons why they should not be evicted from the home.  The 72 notice to quit, simply put, is merely the start of the eviction process, and not the end.

A homeowner who receives a 72 hour notice to quit needs to act quickly in defending themselves against the imminent post-foreclosure eviction.  If you find yourself in such a case, contact me for a consultation.  Eviction cases move quickly, and it is important to have an experienced attorney to help you understand your rights.

Does a Landlord Need a Reason for Terminating a Tenancy?

Does a landlord need a reason for terminating a tenancy?  The answer depends on the type of tenancy that exists between the landlord and tenant.

In a tenancy at will, the rental agreement between the landlord and tenant continues until either party chooses to end it.  As an agreement “at will”, either party is free to end the tenancy simply by providing adequate notice to the other side.  Tenancies at will are generally month-to-month rental agreements, which requires the landlord to provide the tenant with thirty days notice prior to ending the tenancy.  The landlord, importantly, does not need to provide the tenant with a reason for terminating the tenancy.

In contrast, a tenancy by lease, where the rental term is fixed by the terms of an agreement, generally requires a reason for terminating the tenancy.  Here, the terms of the agreement generally defines the grounds for terminating the tenancy, and the type of notice that the landlord must provide to the tenant.  Such an eviction is known as a “for cause” eviction for that reason: the landlord must have a reason for terminating the tenancy.  This generally occurs when the tenant has broken one of the terms of the lease.  A landlord can also terminate a tenancy by lease for non-payment of rent.  Absent one of these reasons, a landlord cannot arbitrarily terminate a lease agreement (unless the agreement provides for this).  This is one of the benefits of a lease: a tenant is guaranteed a place to rent for a set period of time.

Regardless of the type of tenancy, there are limitations on the grounds that a landlord can use to terminate a tenancy.  A landlord can never discriminate against a tenant on the grounds of race, ethnicity, religion, or one of the other protected classes of discrimination under state and federal law.  Similarly, a landlord can never retaliate  (“punish”) a tenant by terminating a lease due to a tenant’s reporting of bad conditions in a rental unit.  A landlord who terminates a tenancy for one of these reasons can get into huge trouble, and be liable for large monetary damages.

If you find yourself in a situation involving the termination of a tenancy, contact me for a consultation.

Appeals Court Issues Decision on Legal Rights Following a Loan Modification

 

The Massachusetts Appeals Court issued an important decision last week concerning a homeowner’s legal rights following a loan modification.  In Barrasso v. New Century Mortgage Corporation, the Appeals Court held that a homeowner was unable to raise prior claims related to their mortgage loan after accepting a modification of that loan (a copy of the decision is below).

Background

In Barrasso, the homeowner entered into a loan modification with their lender, for the purpose of making the loan payments more affordable.  Years later, the homeowner brought a lawsuit against the lender, challenging several of the mortgage loan assignments and whether the present holder of the mortgage was the proper holder of the loan.

Legal Decision

Barrasso held that the homeowner was estopped from challenging the transfer of his mortgage due to the homeowner’s signing of this loan modification.  Estoppel is a legal defense that prevents a party from making an allegation or defense that contradicts a prior representation.  The loan modification in Barrasso, like most loan modification agreements, required the homeowner to agree to several factual representations about the mortgage loan, namely, who held the mortgage.  The Court reasoned that, because the homeowner benefited from this loan modification agreement, it could not then deny one of the prior statements in this agreement that it had agreed to: who the owner of the mortgage was.

Implications to Homeowners

Barrasso follows a line of reasoning that I have often taken with loan modifications: the signing of one of these agreements generally waives any prior legal claims associated with the loan.  A loan modification, in essence, is a new loan, with new terms and conditions.  If a homeowner had legal claims arising from the original loan (such as predatory lending), the homeowner probably won’t be able to raise them following a loan modification.  As explained by Barrasso, if a homeowner gets the benefits of a loan modification, it can’t then go back and raise matters that arose before the modification.

Some loan modification agreements, such as those coming from the federal Home Affordable Modification Program (“HAMP”), do not require a homeowner to waive any legal rights against a lender.  Barrasso makes clear, however, that  a loan modification has strong implications for one’s legal rights following one of these agreements.  Homeowners should keep this in mind when considering accepting a loan modification: homeowners generally won’t be able to raise claims arising out of the prior loan.

Barrasso should not scare homeowners away from accepting a loan modification.  Loan modifications are the best means of avoiding foreclosure, and a homeowner should absolutely accept a modification with an affordable loan payment.  The key is to make sure that such a modification is right for the homeowner.  If you find yourself in such a scenario, contact me for a consultation.

Barrasso v. New Century

Foreclosure Judgment

A common inquiry about foreclosures in Massachusetts is regarding a foreclosure judgment.  What does a bank get from a homeowner after it forecloses?

In judicial foreclosure states, where a bank needs to go to court to foreclose, a foreclosure judgement is a court order allowing the bank to do a foreclosure sale.  Massachusetts, in contrast, is a non-judicial foreclosure state, where a bank doesn’t need a court order.  A foreclosure judgment in Massachusetts, therefore, generally refers to what a bank can get after foreclosure: possession of the property and a deficiency judgment.

Even if a bank performs a lawful foreclosure, it must still bring an eviction (“summary process”) case to get possession of the property.  A foreclosure only changes title to the subject property; a eviction is required to get the former homeowners out of the home.  A post-foreclosure eviction case generally occurs several months after the foreclosure sale, and is usually brought in District or Housing Court.  If a bank is successful in one of these cases, it is entitled to an execution for possession, allowing the sheriff or constable to physically remove the occupants and their possessions from the property.  In one of these eviction cases, a bank can also obtain a judgment for use-and-occupancy against the former owners, which amounts to  rent for the time that the former owner resided in the home after the foreclosure sale.  While banks generally request use-and-occupancy in post-foreclosure eviction cases, it is rare for a bank to pursue this claim for money; the bank generally just wants possession of the home.

Another foreclosure judgment in Massachusetts is a claim for any deficiency judgment that exists following the foreclosure sale.  This is the difference between the amount that the homeowner owes on the mortgage loan and the amount obtained at the foreclosure sale.  For example, if the homeowner owes $400,000 on the mortgage loan, and the bank obtains $300,000 at the foreclosure sale, the homeowner is potentially liable for the difference: $100,000.  Claims for deficiency judgments are not frequently pursued.  Generally, most former homeowners do not have sufficient assets to make one of these claims worth pursuing.  Additionally, a bank has a two-year deadline (“statue of limitations”) from the foreclosure sale to bring one of these claims, which many banks fail to do.  A homeowner can also usually file a bankruptcy to get rid of this type of debt.

Each type of foreclosure judgment in Massachusetts is an important consideration for homeowners who are facing foreclosure or who have been foreclosed.  If you find yourself in either situation, contact me for a consultation.

What To Do About Unsafe Conditions In An Apartment

Unsafe conditions in an apartment is an unfortunate reality for many tenants and landlords owning rental property.  Buildings by nature get old and need repair, and despite the efforts of even the best landlords, unsafe conditions in an apartment can arise.  How should this be handled?

Step one: tell the landlord in writing.  Despite the “slumlord” stereotype of many landlords, most owners of rental property care deeply about their property and those who live in it.  Tenants with unsafe conditions in an apartment should promptly notify their landlord of the problem, and take pictures /video of the poor conditions.  Give the landlord adequate time to address the matter, and be as cooperative as possible in helping to get the problems fixed.

If the landlord refuses to address the problem, the next step is to file a complaint with your town or city’s inspectional services department (“ISD”) or department of health.  These agencies have trained staff who are responsible for inspecting apartments, documenting poor conditions in units, and filing a complaint with the landlord.  If the landlord continues to address the problem, the town or city can bring civil and criminal charges against the landlord.

The law allows a tenant with unsafe conditions in an apartment to withhold rent and seek damages against the landlord.  An important requirement of this, however, is that the landlord has notice of these  unsafe conditions.  This makes sense: a landlord can’t repair a problem that it doesn’t know about.  This is why it important to provide this notice in writing, and keep a copy for yourself.

Massachusetts law prohibits a landlord from retaliating against a tenant who complains about unsafe conditions in an apartment.  A landlord cannot raise rent, begin an eviction, or do anything to “punish” a tenant from making a complaint.  A landlord can be liable for monetary damages if they do such retaliation.

Landlords should always take complaints about an apartment seriously, and document all repairs made to the unit.  Landlords should also be careful about requesting a raise in rent or beginning an eviction after such a complaint is made, so as to avoid a claim of retaliation.

While tenants should absolutely report unsafe conditions in an apartment, this should be done in good faith.  Repeated, bad faith complaints done solely to annoy the landlord, or avoid paying rent, can possibly subject a tenant to problems done the line.  Moreover, this can become a “boy who cried wolf” scenario that will hurts tenants who actually need their apartments repaired.

If you find yourself in a case involving unsafe conditions in an apartment, contact me for a consultation.