What Happens After a Foreclosure Sale?

Homeowners who have gone through a foreclosure often ask me what happens after a foreclosure sale.  More specifically, these homeowners often ask if they need to leave their home right away after a foreclosure auction sale.  The answer is no.  Even after a foreclosure sale, the new owner is required to perform an eviction of the occupants remaining in the foreclosed property.

Overview of a Massachusetts Foreclosure

Massachusetts is a non-judicial foreclosure state.  This means that a bank does not need to go to court to get permission to foreclose (unlike states like New York and Florida).  A Massachusetts foreclosure requires sending a number of required notices, publishing a foreclosure sale notice, and holding a foreclosure auction.  If done correctly, the bank (or third-party buyer) becomes the record owner of the property.  While ownership of the home changes after a foreclosure sale, possession does not.  The new record owner is required to bring an eviction case against the former homeowner(s) residing in the foreclosed home.

Post-Foreclosure Eviction

What happens after a foreclosure sale?  The bank (or third-party buyer) must file an eviction against any persons who remain in the property.  This eviction, known as a summary process action, is generally filed in a District Court or Housing Court.  In these cases, the homeowner has the opportunity to defend against the new owner’s claim to possession by alleging that the foreclosure was not performed correctly.

An important point to note for homeowners in such a case: you do not need to leave the home until the court orders you to do so.  The new owner must obtain a judgment from the court allowing them possession of the home.  Until this is done, the new owner cannot forced you out of the property under any circumstances.

What Should You Do After a Foreclosure Sale?

If you have gone through a foreclosure of your home, contact a foreclosure defense attorney for a consultation, regardless of your intentions for the home.  In other words, even if you plan to leave the home, it is still worth speaking to an attorney.  An attorney can help determine if you have a defense against the foreclosure.  Even if you plan to leave the home, a foreclosure defense attorney can assist you with resolving any liability you may have against the new owner and possibly get you relocation assistance.

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.

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.

Guest Blog Post: How To Preserve Your Right to Challenge a Wrongful Foreclosure in Massachusetts

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The Massachusetts Foreclosure Law Blog is proud to have Attorney Uri Strauss guest blog on the Massachusetts foreclosure title clearing bill and its upcoming December 31, 2016 deadline for homeowners who have lost their homes to foreclosure.  Uri Strauss is an attorney at Community Legal Aid in Springfield, MA. He has been a Massachusetts attorney since 2010, and has focused on foreclosure law since 2011.  He may be reached at ustrauss@cla-ma.org.

HOW TO PRESERVE YOUR RIGHT TO CHALLENGE A WRONGFUL FORECLOSURE IN MASSACHUSETTS

If your Massachusetts home has been unlawfully foreclosed, you may need to act very soon to preserve your ability to challenge it.

On November 25, 2015, Governor Baker signed into law An Act Clearing Title to Foreclosed Properties, which amended, among other laws, Massachusetts General Laws Chapter 244, Section 15. In a nutshell, the act aims to force homeowners who have left their homes after a foreclosure to bring their case to court within three years, or lose the right to do so against bona fide buyers. This is a reduction of the previous 20-year period during which people could challenge foreclosures that failed to comply with the power of sale.

The deviltry is in the details of this confusing law. This post aims to clear up some of the confusion, and especially to help homeowners identify if they need to act before December 31, 2016 when the first set of people will lose their rights. The other point of this post is to warn people against misinformation about what they need to do to preserve their rights. In all cases, you should consult an attorney, if possible, about your particular situation. I am offering guidance in general, not legal advice for your particular situation.

My aim is to respond to three questions: Who needs to act before December 31? How does a homeowner need to act to preserve his or her rights? And who is entitled to challenge the foreclosure?

Who needs to act before December 31?

If it has been fewer than three years since the foreclosure affidavit has been recorded in your registry of deeds, you do not need to act before December 31 to preserve your rights. You will have until at least three years after the recording of the affidavit. However, if you are already in court in a foreclosure challenge, it is a good idea to record your pleadings. See below for details about the foreclosure affidavit, and about what it takes to challenge the foreclosure.

If it has been three or more years since the foreclosure affidavit was recorded, you need to act to preserve your rights if you fall in one of the following three categories.

  1. People who have moved out of their homes, without the validity of the foreclosure ever being litigated.
  2. People who are currently in litigation over the validity of their foreclosure.
  3. People who have litigated the validity of their foreclosure and won, when there is no deed granting the property back to the owner after foreclosure.

Please note that most lenders and servicers will also conduct a foreclosure by entry at the same time as the foreclosure auction, and that foreclosure is effective after 3 years if it is not opposed. Foreclosure by entry is a whole separate and complicated topic, and I won’t get into it here. If you intend to challenge a foreclosure, be certain to contact your local anti-foreclosure group and/or an attorney about it well before three years have passed.

If you are currently in litigation, do not assume that you are protected. Do not assume that your attorney has thought to take the necessary steps to protect you. Raise the issue with them. Depending on how courts interpret the law, you might get away with missing the deadline if you win your case, but it is risky to rely on it.

You may notice, if you read the amended M.G.L. Chapter 244, Section 15, that only bona fide third party buyers, and not the lender or related organizations like Fannie Mae or Freddie Mac, have the benefit of the new law. Do not rest assured just because the bank or a related entity has bought your property at foreclosure and has not sold it. As I read the law, your failure to act by the deadline, followed by a sale to a third party, eliminates your right to challenge the foreclosure once it is sold. In other words, your title can be laundered while in the bank’s control, then sold clean to a third party buyer.

The three-year clock starts ticking when the mortgagee records an affidavit of sale in the registry of deeds. The affidavit of sale you are looking is usually recorded together with the foreclosure deed as a document type called “Foreclosure Deed/Affidavit”. It might be titled something different than “Affidavit of Sale.” The affidavit identifies the mortgage that was foreclosed, says that the conditions of the mortgage were not performed, and states that notices were published in a newspaper on three dates and sent by mail to the required parties. A copy of the newspaper publication is attached to it as an exhibit. Do not confuse this affidavit with other affidavits that may have been filed, such as an affidavit concerning the note (also called an “Eaton” affidavit), an affidavit concerning compliance with M.G.L. chapter 244, section 35B, an affidavit certifying compliance with 209 C.M.R. section 18.21A, or an affidavit concerning the right to cure (also called an “Pinti” affidavit).

It is the opinion of some respected attorneys that the affidavits of sale typically filed by mortgagees do not start the clock running, because they do not, as the law requires, “fully and particularly stat[e] the acts” done to foreclose the property. The affidavits are usually brief, do not fully state the facts, state legal conclusions instead of facts, and are made by people who do not have firsthand knowledge of the facts. I believe that this is a mistake, and that the courts will accommodate this failure by the banks to comply with the law, just as they have done with almost every other failure that they have considered.

How does a homeowner need to act in order to preserve his or her rights? 

To preserve your right to challenge your foreclosure, it is necessary to record the relevant *pleadings* in the registry of deeds. It is not enough to record an *affidavit* in the registry, as the Massachusetts Alliance Against Predatory Lending (MAAPL) has been informing people. The law is very clear that pleadings must be filed.

What is the difference? An affidavit is a sworn statement of facts based on personal knowledge. A pleading is a document filed in court in which legal claims are made. The purpose of the new law is to force people to litigate their claims by the deadline, not simply to make a sworn statement and record it in the registry of deeds. If your deadline is coming up and there is no existing litigation, you need to create litigation by filing a lawsuit. What is more, if you want to actually succeed, you need to file a good case. That means that you need to have a good argument based on your particular circumstances. It will not do to use far-fetched theories of the kind that often circulate on the internet. It is important to speak to an attorney to determine whether you have a good legal argument.

Note that to be valid, the pleadings should be from a court case from a court of competent jurisdiction. In my view, if you challenged the foreclosure as a defense to foreclosure proceedings in Housing Court, that is definitely an appropriate court. If it was in a state district court, that is almost certainly an appropriate court. If you were the plaintiff and you filed your case in Superior Court, Land Court, or the federal District Court, you are probably fine. If it was any other court, consult an attorney about whether it was a court of competent jurisdiction.

That means that if you fall into category (1) above, you need to file a lawsuit in the next few weeks, and record an attested copy of your complaint, to avoid losing your home. If you are in categories (2) or (3), your task is easier. You need to get an attested copy of your complaint, if you were the plaintiff, or of your answer, if you were the defendant, from the clerk’s office of the court in which the litigation is taking place or took place. If the complaint or answer was amended, make sure to get the most recent version, since the complaint or answer should state the foreclosure challenge that the court ruled on, or that you hope the court will rule on.

If you have fought and won your case, you still need to record the *pleadings*, rather than the court’s judgment, in the registry. You might think it makes more sense to record the judgment, in which the court states that it finds in your favor. I would agree, but that is not what the law says you need to do.

According to the law, you need to record a “true and correct” copy of the pleading in the registry of deeds. Does this mean that you can rely on just a photocopy of the pleading? In my view, yes – but the challenge is to get the registry of deeds to record it. The registry is not required to accept any piece of paper you hand to it. The new law requires registries of deeds to accept and record attested copies of pleadings, and this is what I recommend. “Attested” here presumably means attested by the court in which the case is being decided. It may be possible to preserve your rights under the act by signing an affidavit under M.G.L. Chapter 183, section 5B, attaching the pleading is an exhibit, swearing that it is a true and correct copy of a document filed in the court, and having it certified by an attorney as bearing on title – but I recommend getting an attested copy to be on the safe side.

To get an attested copy of your pleading, first call ahead to the court in which your case is being heard and let them know you want this. They might ask for a couple of hours to create an attested copy. Then show up and get your copy. It currently costs $2.50 per page to get attested copies of court documents. If you are poor, low-income or on state assistance, you may qualify for a waiver of fees – ask the court about it. Then go in person to the Registry of Deeds in your district, and ask them to record it. Take a printed copy of the statute – Massachusetts General Laws, Chapter 244, Section 15, Subsection (d) – with you. Registries of Deeds have not historically accepted attested copies of pleadings for recording, so you may need to show them the law that says they need to. I believe the cost of recording the document is $75. You can ask the Registry of Deeds about waiver of fees for poor, low-income or state-assisted people as well.

Who is entitled to challenge the foreclosure?

To be eligible to challenge the foreclosure, you need to be a person entitled to a notice of foreclosure, which means that you need to be the person who gave a mortgage to the lender (which is not necessarily the same as the person who obtained the loan), or else a person who held an interest in the property junior to the mortgage more than thirty days before the foreclosure sale. Based on this statute, you are not entitled to challenge the foreclosure if you are the spouse of the mortgagor, the child of the mortgagor, or the tenant of the mortgagor, unless you yourself are a mortgagor, or you happen to have a junior lien on the property.

This represents an apparent change in the law. It used to be the case that if a foreclosure was void, any person whose rights were affected by it – a spouse, a child, a tenant, a long-term guest – could challenge its validity. The new law clearly restricts it so that only persons entitled to notice can challenge the foreclosure.

What about after the pleadings are recorded?

If you have recorded your pleadings challenging a foreclosure within the time limit, do you have the benefit of the previous 20 year rule? Not necessarily. There are at least two ways a foreclosure can be undone by a court. A foreclosure is void if it is not conducted strictly in accordance with the power of sale, or if it fails to comply with preconditions to foreclosure stated in the mortgage. Void foreclosures can be challenged up to 20 years afterwards. A foreclosure is voidable if the power of sale and the preconditions in the mortgage are complied with, but the manner in which it was conducted was fundamentally unfair or perhaps violated some other law. In all likelihood, you need to assert a claim to undo a voidable foreclosure within the statute of limitations of some other law. For example, if you have a claim under the consumer protection statute, M.G.L. section 93A, there is a four year statute of limitations from the time of the unfair or deceptive act. If you have a tort claim, you may have to bring the case within three years. You should consult an attorney about whether your unlawful foreclosure claim is a claim that the foreclosure was void or voidable.

Everything in this article is directed at what it takes to preserve your claim of illegal foreclosure. Of course, it is not enough to have your case in court. You need to actually win your case in order to undo the foreclosure. The legislature has set up a tough procedure for illegally foreclosed homeowners to undo the harm that was done to them. It might seem very unfair that a bank can abuse you, deceive you, and illegally foreclose on you without going to court, yet you have to go to court and follow an unclear procedure just to avoid losing your home. For better or worse, this is the process that your elected representatives have chosen to impose on you, so you need to take care to comply with it.

What Is An Unlawful Eviction?

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Being a landlord in Massachusetts is tough.  There are many traps for the unwary; a reason why landlords should always consult a landlord/tenant attorney on Massachusetts’s numerous housing laws.  A good attorney can help landlords navigate these tricky waters and find the best way to resolve these complex matters.

There is one “sin” that is above everything else in matters of Massachusetts landlord/tenant law: an unlawful eviction.  What’s an unlawful eviction?  A unlawful eviction, sometimes known as a “self help eviction”, is an eviction done without a court process, such as changing the locks of an apartment or cutting off the utilities.  These are attempts to evict a tenant without a court hearing and execution for possession.  An unlawful eviction is just that: unlawful and illegal.  Not only will an unlawful eviction subject a landlord to numerous civil penalties, it may even put them in jail.

A landlord who needs to evict a tenant must do so through a formal eviction (“summary process”)  case.  It doesn’t matter how much money a tenant owes, or how much damage a tenant has done: the failure to properly evict a tenant has enormous repercussions and should never, never be done.

If you are a landlord and need to evict a tenant, do the process properly by hiring a landlord/tenant attorney and bringing a lawful eviction against a tenant.  The risks of an unlawful eviction just aren’t worth it.

How Long Does a Foreclosure Take?

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One of the most common questions I get from homeowners facing foreclosure is, how long does a foreclosure take?  The quick answer is: a while.  Compared to other states that have expedited the foreclosure process, foreclosures in Massachusetts generally take a long time to perform, from default of the loan to the foreclosure sale date.  While earlier is always better for attempting to avoid foreclosure, this lengthy period of time works to a homeowner’s benefit in trying to resolve these matters.

While every foreclosure is different, the following are the typical steps in the process, which helps answer how long does a foreclosure take.

  • Default of Loan (6 – 12 months):  The first stage of the foreclosure process is when the homeowner defaults on the loan.  While a lender can technically begin a foreclosure after the first missed payment, I have typically found that lenders wait 6-12 months after the initial default before moving ahead with the next steps towards foreclosure.
  • Right to Cure/Request a Modified Loan (3-5 months):  The next stage of the foreclosure process is the right to cure/right to request a modified loan period.  Massachusetts law requires lenders to offer borrowers an opportunity to cure their loan default prior to foreclosure, as well as the opportunity to pursue a loan modification.  Depending on the circumstances, a homeowner will either have 90 or 150 days for these options.
  • Servicemember’s Case (4 months):  Following the right to cure/request a modified loan, the next step in the foreclosure process is a Servicemembers’ Case, usually brought in the Massachusetts Land Court.  A servicemembers’ case is solely to determine whether the homeowner is in the military and entitled to a postponement of the foreclosure.  Unless a homeowner or their family member is in the military, the homeowner generally doesn’t have a defense in one of these cases.  However, the lender will usually wait until it gets a default judgment against the homeowner and court order before commencing a foreclosure sale.
  • Foreclosure Sale (1 – 3 months):  Following the Servicemembers’ Case, the bank then begins the foreclosure sale process itself.  This requires notice to the homeowner thirty days before the scheduled sale, as well as publication of three notices in the local newspaper.  Sometimes, foreclosure sales may get postponed, for a number of different reasons.
  • Post-Foreclosure Eviction Case (1 – 6 months):  Following a foreclosure sale, the lender or the party who brought the property at the foreclosure sale needs to obtain possession of the property, through a post-foreclosure eviction.  The eviction case generally begins 3-5 months after the foreclosure sale (through a notice to quit served upon the homeowner).  The time period of the eviction case generally depends on whether the homeowner fights it: if the matter is uncontested, the lender will generally be able to evict in one month.  If the homeowner raises a defense or counterclaim, the eviction can take up to six months (and sometimes even longer).

In answering how long does a foreclosure take, bear in mind that there are many factors that will delay the listed stages above.  A loan modification application, for example, generally delays a foreclosure, while the lender considers whether the homeowner is eligible for loss mitigation assistance.  A bankruptcy will also delay foreclosure: a lender generally can’t foreclose until its gets permission from the bankruptcy court.  Finally, there is often delay in going from one step to the other: the ongoing foreclosure crisis continues to create a backlog of cases, which delays how quickly foreclosures go from start to finish.

Nonetheless, this summary provides a rough estimate of the stages of the foreclosure process and how long to expect each part of the process to take.  If you find yourself in any part of the foreclosure process, contact me to see if I can be of assistance.

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).

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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)!

Decision

Sherwin Law Firm Helps Massachusetts Homeowner Beat Foreclosure

Foreclosure by Sale

I’m thrilled to announce that I helped a Massachusetts homeowner beat foreclosure, through one of my most successful (and hard fought) cases to date.  My client was foreclosed in 2009, as a result of a predatory loan that forced him into default.  I began representing this client during the bank’s post-foreclosure eviction (“summary process”) case against him, where the bank was attempting to evict him from the home on the basis of a lawful foreclosure.  To help him beat foreclosure, I developed a foreclosure defense based on the bank’s failure to send him proper notice prior to the foreclosure.

The case was anything but a cake walk: we went through a full jury trial and two appeals before settling with the bank.  The wait was worth it, however: my client has his foreclosure rescinded and a new loan modification, with a low interest rate and a $400,000 principle reduction.  My client did his part to save his home: he continued to work hard, save his money, and prove to the bank that he could make a modified loan payment.  In the end, both sides are winners: my client keeps his home, and the bank gets a fair return on its loaned money for the home (well in excess than the money it would have obtained from selling the home after an eviction of my client).

Is it possible to beat foreclosure?  As I always tell homeowners: absolutely.  I never promise that I can always succeed at a foreclosure defense, but I have found that many struggling homeowners have options to avoid foreclosure, in lieu of simply giving up and leaving their homes.  But, as I always say, homeowners need to do their part to beat foreclosure, by proving they can make reasonable, affordable payments on their mortgage loan.

To beat foreclosure, a homeowner should seek the assistance of an experienced foreclosure defense attorney.  While homeowners have the right to represent themselves in court (referred to as a pro se party) I have found that few homeowners are able to handle these tricky matters on their own.  The risks aren’t worth it: get the help of a professional if you are facing foreclosure (homeowners with limited income should contact the Massachusetts Attorney General’s HomeCorps program for assistance in finding a volunteer attorney).