Important Things to Include in a Lease

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Signing a lease is an important part of the landlord/tenant process.  A leases spells out the terms of the landlord/tenant relationship, namely the amount of rent and how long the lease will last.  Most landlords use a standard form lease that is pre-written, and only requires the landlord to fill in the blanks (The Greater Boston Real Estate Board has a form lease that is popular for landlords in the Boston area).  Form leases are extremely helpful in drafting a lease; there is no need to “recreate the wheel” in preparing a new agreement when a model lease is available.

However, when using a sample lease, landlords should note that there are important things to include in a lease, many of which are not found in these sample drafts.  Here are a few important things that I think every lease should include:

Payment of Utilities:  Massachusetts law requires landlords to provide all utilities to tenants, but allows landlords to “transfer” the payment of these utilities . . . in writing.  Failure to include, in writing, a requirement that the tenant pay these utilities can be a major problem for a landlord.  As such, a statement that the tenant must pay for utilities is one of the most important things to include in a lease.

No Security Deposit:  The Massachusetts Security Deposit Law is a pro-tenant law that has many traps for landlords.  As such, I (and most other attorneys) advise landlords not to accept security deposits.  If you follow this wise advice, include a term in the lease that the landlord isn’t accepting a security deposit from the tenant.  This helps prevent a claim for a tenant, down the road, that such a deposit was taken by the landlord, setting up a potential problem at the end of the lease.

Description of the Property:  If the rental property is something that is unambiguous (such as an apartment), this might not be necessary.  However, if there is any chance that the scope of the rental property may be misconstrued, it is worth including a description of what is, and what isn’t, included in the lease.  Use of the backyard, driveway, and other common areas are all important things that should be mentioned in the lease.

Allowance of Guests:  The difference between a guest v. a permanent tenant is not always clear.  While a tenant generally has a right to have guests at the rental property, only those persons stated on the lease are allowed to live in the property.  To keep the difference between a guest and tenant clear, consider a term about how long guests are allowed at the property.  This can be helpful if, down the road, the tenant allows others to move into the rental property.

No Smoking:  If you do not want your tenants to smoke in the rental property, be sure to include it as part of the lease agreement.

By no means is this a comprehensive list of everything that should be included in a lease; this will depend on your particular circumstances.  For help in drafting a lease, contact me for a consultation.

Interview with David Dayen, Author of Chain of Title

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The Massachusetts Foreclosure Law Blog is pleased to present an interview with David Dayen, author of Chain of Title, a new book about the foreclosure crisis.  Chain of Title is an account of how three ordinary Americans uncovered foreclosure fraud in the wake of the ongoing foreclosure crisis.  I started it during the Memorial Day weekend and recommend it as a great resource on foreclosure defense.  

Please tell us about your background and what inspired you to write Chain of Title.

I had a career in film and television production when I discovered political blogging back in 2004. I got more and more interested in it and then in 2009 started to work for a popular website of the time named Firedoglake writing political and news stories. The foreclosure crisis was this critical yet under-covered event in American life, affecting so much of our economy. I worked on stories about nightmares in the Home Affordable Modification Program (HAMP) and then heard about foreclosure fraud. Lisa, Michael and Lynn ran the most comprehensive websites about the scandal, and became sources of mine after I met them at a one-day conference about foreclosure fraud in late 2010. When I heard their stories about moving from foreclosure victims to activists, I knew it would be a great way to tell the story of the financial crisis at the ground level.

What is the most shocking thing you under covered while researching and writing Chain of Title?

Just the total lack of quality control on the part of the mortgage industry. You got the sense that they didn’t care what the piece of paper they put in front of judges or county officials said, as long as they could use it to dispossess someone of their home. There were mortgage assignments that were notarized but unsigned. There were entire filing cabinets of original notes that went missing. There were documents where the effective date was never filled in, leaving the date of execution of the mortgage assignment as 9/9/9999. Barack Obama’s own release of mortgage on his condo was signed by a robo-signer. The fraud was so systemic.

In Chain of Title, you discuss U.S Bank v. Ibanez, a landmark Massachusetts court decision that invalidated thousands of foreclosures across Massachusetts.  How do you feel other states and the federal government have responded to the foreclosure crisis? 

Every state is different because foreclosure law is generally adjudicated at the state level. Some states created verification standards where lawyers for the banks had to personally verify that the documents in their cases were legitimate. In other states, like those where you don’t need judicial sign-off for a foreclosure, the response was far more limited. I think Hawaii is a good example, they went from a non-judicial to a judicial foreclosure state. Lisa Epstein, one of my subjects, played a role in that, she testified via Skype to a legislative session in Honolulu to argue for the change.  I think the federal government took a walk on the rampant fraud that was evident in the foreclosure process, making no effort to criminally prosecute and wrapping up the whole thing into a large settlement designed to produce a penalty with a big headline dollar amount that didn’t correspond to reality. I believe it’s the greatest disappointment of the current Administration, and it fed a belief that there’s a two tiered system of justice in America. In many ways it fueled the anxiety and discontent we see in our politics.

While many Americans have struggled with the foreclosure crisis, others know little about the abuses of the lending industry.  What do you hope readers of Chain of Title learn from your work?

I do hope that the book sheds more light into just how many different types of abuses were heaped on homeowners and investors before, during, and after the crisis. More than that, I wanted to recognize these incredible people who did more investigation into this misconduct than the whole of state or federal government. And I wanted to let the public know that there was a real alternative here, that they could have gotten the accountability they so desperately sought. And we have to reckon with the consequences of how in America, who you are matters more than what you did.

Fannie Mae v. Rego: Supreme Judicial Court Permits a Chapter 93A Defense to Foreclosure

 

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The Massachusetts Supreme Judicial Court issued Fannie Mae v. Rego today, an important foreclosure law decision that permits a Chapter 93A defense to foreclosure (full copy of the decision is below).  Chapter 93A, the common name for Massachusetts’s Consumer Protection Law, is a broad consumer statute that prohibits “unfair and deceptive practices” by businesses.  Chapter 93A claims are commonly used for monetary damages, and can provide an an award of treble damages against a party who violates this law (along with attorney fees).  The question for the Court was whether a Chapter 93A defense could be raised to void a foreclosure (as opposed to simply awarding a party money).

Rego  was an appeal of a post-foreclosure eviction (“summary process”) case, where the homeowner was defending against the eviction of his home on the grounds that the foreclosure was void.  The homeowner brought a counterclaim (a lawsuit brought in the same case against the original party who filed the suit) for violation of the Consumer Protection Law.  Here, the trial court dismissed this counterclaim, without offering a real reason for doing so.  The Supreme Judicial Court held in Rego that a homeowner is permitted to raise a Chapter 93A defense in a eviction foreclosure case that goes to the issue of possession of the property; in other words, whether the foreclosure was done correctly.  If this is the relief sought by a Chapter 93A claim, Rego suggests that it can be raised in a post-foreclosure eviction case.  If the Chapter 93A merely seeks monetary damages, such a claim is not allowed in one of these cases (and would have to brought separately).

Rego, in my interpretation, is an important decision because it clarifies that a Chapter 93A claim may be used to void a foreclosure sale.  Many lawyers (and some judges) are not aware that Chapter 93A provides a court with equitable relief.  Equitable relief  is a remedy that goes beyond money damages, and requires a party to act or refrain from performing a particular act.  This type of relief is especially important in foreclosure defense, where the homeowner isn’t looking for money as a defense to foreclosure; the homeowner instead wants the foreclosure reversed.  Rego, in my interpretation, holds that there is a Chapter 93A defense to foreclosure; something that was less clear before today’s decision, where some trial courts took the position that money was the only award from a foreclosure that violated Chapter 93A.

 Rego also decided another issue of foreclosure law: whether an attorney could perform a foreclosure on behalf of a mortgagee without written authorization.  The relevant foreclosure law, G.L. c. 244, Section 14, seemed to suggest that such a writing was required for attorneys who performed foreclosures.  The Supreme Judicial Court held that no such writing is required, and that legal counsel may perform the steps of the foreclosure process without written authorization.  Although the bulk of  Rego was spent on this narrow issue of law, the Court’s decision is unsurprising:  I am aware of only one trial court decision that came out in the homeowner’s favor on this argument (with the overwhelming majority following the reasoning of  Rego).

 Rego

What is a Loan Modification?

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I write often about loan modifications, but I’ve had many clients ask me what is a loan modification, and how does it compare to a loan refinance. It is an important topic, as loan modifications are essential for foreclosure defense. 

A loan modification is a restructuring of a mortgage loan.  The purpose is to make the monthly payments of the loan more affordable for the homeowners (the federal HAMP program aims to get the payment down to 31% of the homeowner’s monthly income).  Loan modifications attempt to do this through a variety of four different steps:

  1. Capitalization
  2. Interest Rate Reduction
  3. Term Extension
  4. Principle Forebearance
  5. Principle Reduction

Capitalization is where the lender adds the unpaid arrearage of the loan to the mortgage debt.   Through capitalization, the lender adds these unpaid expenses to the principle of the loan, which the borrower will repay as the part of the entire loan.

An interest rate reduction is where the lender decreases the loan’s interest rate, making the monthly loan payments more affordable.  HAMP permits a loan’s interest rate to be reduced to a minimum of 2%.  Non-HAMP loan modifications generally use the market interest rate (presently between 3% – 4%).

A term extension is an increase of the length of the loan.  HAMP permits loans to be extended up to forty years.  As the length of the loan increases, the monthly payments in turn decrease.

A principle forbearance is where a lender agrees to take a large chunk of a loan and put it at the end of the term.  A borrower is not required to pay interest on this amount of money, and it only becomes due once the loan term ends or the home is sold.  The purpose of a principle forebearance is to make the loan more affordable: while the borrower still owes this money, he or she will not pay interest on this portion of the loan.   However, this money ia still owed to a lender.  In contrast, under principle forgiveness, the  lender agrees to forgive a portion of the loan.  Understanding the difference between these two terms is critical in understanding what is a loan modification, as these two options come up often with modifications.  HAMP, for example, only allows for principle forbearances, without forgiving any portion of the loan.  Non-HAMP modifications, sometimes referred to as “in-house modifications” may be more open to debt forgiveness.

I hope this overview is helpful in understanding what is a loan modification.  If you find yourself having difficult obtaining a loan modification, contact me for a consultation.  As I always tell my clients, a lawyer is not a financial adviser.  Homeowners in need of loss mitigation assistance should always speak with a financial and tax adviser for advice on the advantages and consequences of accepting any sort of loan modification.

Overview of the Massachusetts Security Deposit Law

 

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Ask a room full of lawyers a legal question, and you will likely get a handful of different responses.  I would bet, however, that there is a major exception to this on the question of whether a landlord should accept a security deposit from tenants in Massachusetts.  On that question, Massachusetts landlord attorneys (including your’s truly) would likely uniformly answer no.  A Massachusetts landlord should never accept a security deposit from a tenant.

Why?  The Massachusetts Security Deposit Law is one of the most complex and detailed consumer laws on the books in Massachusetts.  Few lawyers and judges understand the detailed requirements of this law, and I imagine even fewer landlords actually comply with every part of it.  The Massachusetts Security Deposit Law has lengthy provisions for accepting, holding, and returning a deposit, making the acceptance of a security deposit a huge hassle for landlords.

The danger for landlords under the Massachusetts Security Deposit Law are the penalties associated with a landlord’s failure to comply with this law.  Several specific violations will result in a tenant being entitled to treble damages (three times the tenant’s security deposit), costs, and attorney fees.  This means, for example, that a violation of a tenant’s $500 security deposit can result in over $2,000 of damages, if the security deposit is not handled correctly.  If the tenant is represented by an attorney, expect these damages to be even higher.

An even greater danger to landlords is the use of the Massachusetts Security Deposit Law as a defense to a eviction case.  A recent Supreme Judicial Court decision has held that violation of this law not only entitles a tenant to monetary damages, but also serves as a defense to an eviction.  In other words, if a landlord fails to comply with the Massachusetts Security Deposit Law, he or she likely will not be able to evict a tenant, and may face a huge penalty from the court.

What can a landlord do to avoid the Massachusetts Security Deposit Law but still get some security from their tenants?  Plan accordingly by incorporating a “security deposit” into your monthly rent.  For example, say you wish to rent an apartment for $1000/month, and want a security deposit.  Instead of renting for $1000/month, add $80-$100 more to the rent ($1000/12 months = $83.33) , and set that money aside.  If, at the end of the lease, there is damage in the apartment, you’ll have the funds to deal with it, without the burdens of the Massachusetts Security Deposit Law.  Even better, if there are no damages in the rental property, you’ll have some extra cash at the end of the tenancy.

If you’re a landlord and think you have violated the Massachusetts Security Deposit Law, don’t despair: it may be possible to remedy the situation by returning the deposit or reaching a resolution with the tenant.  To do so, contact an experienced landlord/tenant attorney as soon as possible.

 

Guest Blog Post: Meikle v. Nurse (Defenses in Massachusetts Eviction Cases)

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The Massachusetts Landlord Tenant Blog is proud to have Attorney Joseph N. Schneiderman guest blog on the Massachusetts Supreme Judicial Court’s recent Meikle v. Nurse decision, an appeal involving the important issue of defenses in Massachusetts eviction cases.  Attorney  Schneiderman is an appellate attorney licensed in Massachusetts and Connecticut and may be contacted at connlawjoe@gmail.com.

Supreme Judicial Court:
Violation of the Security Deposit Statute is A Defense to Possession In An Eviction Case

On April 27, in Meikle v. Nurse, Slip Op., SJC-11859, 474 Mass.—, the Supreme Judicial Court held that a residential tenant could assert a violation of the security deposit statute (G.L. c.186, §15B) as a defense to possession in a summary process action (a copy of the decision is posted below).

In October 2011, Ms. Nurse executed a one-year lease to live in a residence Mr. Meikle owned and paid a $1,300 security deposit equivalent to one month’s rent. Although Mr. Meikle acknowledged receipt of the deposit, he neither informed Ms. Nurse where he deposited the lease-nor paid her interest. Ms. Nurse lived there until April 2014, when Mr. Meikle commenced the instant summary process action. Ms. Nurse counterclaimed on multiple grounds, including a violation of the security deposit statute.

A Judge in the Boston Housing Court held for Ms. Nurse on her security deposit claim because Mr. Meikle failed to provide proper receipts and interest. However, in conflict with at least three past Housing Court rulings, the Judge ruled that the violation would only offset the unpaid rent and was no defense to possession. Ms. Nurse appealed and the Supreme Judicial Court took the case directly on their own motion.

 Writing for the Court, Justice Geraldine S. Hines distilled the case to the interplay of G.L. c.186, §15B and G.L. c.239, §8A, establishing defenses to eviction. The Court applied two established interpretive principles to resolve this issue. First, the Court interprets statutes to effectuate the intent of the Legislature based on the language of the statute and its purpose. Plain and unambiguous language in a statute was “conclusive of the intent of the Legislature.”  Second, the Court interprets remedial statutes broadly to best effectuate their purposes.

 Against this backdrop, the Court noted that the fifth paragraph of Section 8A provided that “a tenant may retain possession if: (1) the tenant prevails on a counterclaim or defense brought “under this section; and (2) the damages on that defense or counterclaim exceed the amount due the landlord, the tenant pays to the court the amount due within one week.” Construed harmoniously, the phrase “under this section” referred back to the first paragraph of Section 8A to assert a defense or counterclaim “arising out of such property, rental, tenancy…occupancy of breach of warranty, for a breach of any material provision of the rental agreement, or for a violation of any other law.”

The Court held that violation of the security deposit statute “fits squarely within this framework [as relating to or arising] out of the tenancy” and its violation was one “of any other law.” The Court emphasized that security deposits were a “prerequisite to most residential tenancies” the security deposit statute was “part of an elaborate scheme of rights and duties to prevent abuses and to insure fairness to the tenant.” Moreover, a contrary interpretation would frustrate both statutes, especially the historic expansion of Section 8A leading to the language “violation of any other law” in 1977. Finally, Mr. Meilke was not without a remedy. If he ameliorated the security deposit violation, he could later bring a new summary process action-even if Ms. Nurse paid the amount due.

The Court’s decision reflects a thoughtful balance. First, the Court broadly effectuates two remedial statutes as a harmonious whole to protect residential tenants. Security deposits are a sine-qua-non of residential tenancies and the Legislature enacted a broad constellation of rights to protect tenants. Holding that a security deposit violation was not “a violation of any other law” ignored two lessons of history: the expansion of defenses to tenants and robust protection of security deposits.

At the same time, the Court establishes a key limit for future cases by interpreting “any other law” to invariably correlate to the landlord tenant relationship. Future tenants will therefore need to make this showing to have a defense to possession.  Landlords also may remedy their violation and bring a new summary process action; indeed, “the Legislature’s [was to provide…] a time limited equitable remedy.” The open question thus potentially becomes how long a tenant may retain possession for a security deposit violation-or, conversely, how long a landlord has to remedy a security deposit violation before commencing a new summary process action.  Hopefully, despite the summary nature of summary process, the SJC will address these issues again strike a balance.

Joseph N. Schneiderman has an appellate practice “on circuit” in Massachusetts and Connecticut, and argued his first civil appeal in the SJC on March 10. See Goodwin v. Lee Public Schools, SJC-11977. Joe gratefully thanks Adam for the opportunity to guest blog (again)!

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Overview of Robo-Signing as a Foreclosure Defense

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The recent foreclosure crisis brought to light a term that is now synonymous with foreclosure defense: “robo-signing.”  A “robo-signor” is someone who signs documents on another’s behalf in massive quantities.  The charge of robo-signing came to light largely due to CBS’s 60 Minutes segment on “Linda Green”, a bank vice president whose signature was made by dozens of low level bank employees.  The segment offered conclusive evidence that thousands of land records across the country have forgeries.  Here in Massachusetts, the Southern Essex Registry of Deeds has taken an active role in fighting robo-signing, through a list of alleged culprits on its website.

Successful claims against robo-signors have mostly come from state and federal lawsuits against lenders, alleging that these practices are in violation of land recording laws and other consumer protection statutes.  Many of these lenders have settled these claims through huge cash settlements.

Can Massachusetts homeowners use robo-signing as a viable foreclosure defense?  The overwhelming response by courts is “no.”  Massachusetts law gives recorded land documents a large presumption of validity, making such challenges nearly impossible to succeed.  I, personally, am aware of no successful foreclosure defense case made upon such a claim.

Robo-signing is attractive to many foreclosure defense claimants because it comes across as a “sexy” issue, filled with claims of fraud and deceit.  The reality, though, is that it isn’t going to get very far as a foreclosure defense.  This is one reason, among many others, why struggling homeowners should speak with an experienced attorney on these matters.

Attorney Adam Sherwin Nominated to the U.S. Supreme Court

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This will be my last blog post for a iteawhile.  President Obama has named me to the U.S. Supreme Court, as a replacement nominee for Judge Merrick Garland, to fill the seat of the late Justice Antonin Scalia.  Garland, I’m told, has decided to withdraw his name as a nominee to the Court, in fact of opposition from Senate Republicans.  

I’m deeply humbled by the confidence that President Obama has shown in me and will do my best to serve my country well.  

The White House will be released a statement soon, but gave me permission to break the news here.

The White House

FOR IMMEDIATE RELEASE

I would like to first thank Judge Garland for his outstanding service to our country.  Although I am disappointed that the Senate would not consider Judge Garland’s nomination, I know America will continued to be well served with his tenure on the U.S. Court of Appeals.

In his place, I have nominated Attorney Sherwin of Massachusetts.  Attorney Sherwin has a long and distinguished career as a Massachusetts litigator and will bring a wealth of experience to the Supreme Court.  I am confident that Democrats, Republicans, and Independent alike can agree that he will be a strong addition to the federal judiciary.

President Obama

For more information on this, click here.

Sherwin Law Firm To Argue Foreclosure Defense Appeal Before Supreme Judicial Court

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The Supreme Judicial Court has granted direct appellate review for one of my upcoming foreclosure defense appeals.  Direct appellate review allows the Supreme Judicial Court (Massachusetts’s highest court) to hear an appeal pending before the Appeals Court (the appellate court that is responsible for initially hearing appeals).  Direct appellate review is often granted for pressing issues of law that the Supreme Judicial Court believes is necessary to resolve as soon as possible.

This appeal is whether a mortgagee’s failure to comply with G.L. c. 244, § 15A (which requires notices to be sent after the foreclosure sale) invalidates a foreclosure.  This law has been included as among the requirements for a Massachusetts foreclosure and trial courts are divided as to whether this is a valid foreclosure defense.  Stay tuned!