Summer 2004 Vol.1, No. 3

The Newsletter of the Bar Association for Massachusetts

Defeat of effort to allow non-lawyers to handle closings highlight of busy legislative year

By Edward J. Smith tice,” but not a legal requirement, for lawyers and their provements borrowed from other states and from the employees who are notaries public. current draft of a proposed uniform act by the Nation- A year ago at this time I was al Commissioners on Uniform State Laws. pleased to report on a success- Mortgage Discharges, Assignments The text of the legislation, S.2386, and a Fact Sheet ful legislative hearing at the REBA recognizes that the matter of unrecorded mort- appear on REBA’s website at www.massrelaw.org. State House on H180, which gage discharges and assignments is perhaps the most vex- The legislation is before the Joint Committee on would have permitted the per- ing problem for conveyancers handling residential mort- Banks and Banking. formance of real estate closings gage closings. (That is in part why we were able to persuade by business corporations, the Legislature to grant a four-month reprieve from the high- Other Bills Supported by REBA notwithstanding the holding in er recording fees for mortgage discharges in 2003.) REBA is pleased to report that H.743, to enact a good the case of Massachusetts Con- REBA President Chris Kehoe requested the legislation and clear record and marketable title act (Landowners veyancers Association v. Colo- committee to meet with representatives of lenders and Title Protection Act) has been recommended by the nial Title & Escrow, decided by title insurers, to draft legislation that would address a Joint Committee on the Judiciary. Also recommend- the Superior Court in 2001. number of problems with discharge practice. There ap- ed by the Judiciary Committee are S.983, to facilitate Testimony by the MCA’s trial counsel in that case, registration at the Land Court of instruments executed Douglas Salveson, persuaded the Joint Committee on on behalf of a corporation, and H.744, to require a the Judiciary not to recommend such legislation. recital of the names and addresses of owners of land This past winter, the Office of Chief Legal Counsel to taken by to be included in the instru- Governor Romney proposed new regulations to govern Complete legislative ment of taking. the duties and responsibilities of notaries public in the S.6, a REBA bill to make the execution requirements Commonwealth. Included was the following provision summary from for subordination of a mortgage conform with those for (as ultimately promulgated in Executive Order No. 455): mortgage discharges and assignments, was recom- “A notary public who is not an attorney licensed to prac- mended by the Joint Committee on Banks and Bank- tice law in Massachusetts, or who is not directly super- past year ing. Another REBA-supported bill recommended by the vised by an attorney, shall not conduct a real estate clos- Banks and Banking Committee is H. 2731,which re- ing and shall not act as a real estate agent.” quires written payoff statement to be provided by a mort- While REBA was gratified to see this endorsement Page 18 gagee or servicer within five days of a request by the by the Executive Branch of the Superior Court holding, mortgagor or his designee. At the time of this writing, H. certain other provisions that were proposed in the Draft 2731 is before the House Committee on Bills in Third Executive Order were not received as well by REBA. pears to be a consensus for an approach by which the Reading, while S.983 and S.6 are before the Senate Led by REBA President Chris Kehoe and legislation mortgage servicer and record holder of a mortgage would Committee on Bills in Third Reading. chair Bob Kelley, REBA lobbied successfully to modi- be given notice, at the time of the payoff, that the lawyer fy objectionable language, including the requirement paying off the mortgage will discharge it by affidavit if a State Tax and Child Support Liens that every notary public maintain a bound Journal of discharge is not received within a specified period of time. The Romney Administration filed H.4485, DOR leg- official acts. The Governor’s Office of Chief Legal Coun- The idea is that by giving the parties in interest ad- islation that would have extended the current six-year sel agreed to make the Journal provision “a best prac- vance notice, a closing attorney ought to be able to liens for state taxes or for child support to be of in- make this a normal part of the release of mortgage liens definite duration, and created a central registry at the Edward J. Smith serves as Legislative Counsel to after a closing. Omnibus legislation has been filed to state Department of Revenue for said liens in lieu of REBA. include this provision, as well as several other im- Continued on page 18

REBA taps SJC ruling Title insurance What’s in Graham as highlights limits of industry faces this issue… new COO right of first refusal major challenges Pg 2 Pg 4 Pg 12

A Supplement to Massachusetts Lawyers Weekly 2 • REBA News Summer 2004 REBA rolls out three Susan Graham tapped new committees as chief operating officer

At the Real Estate Bar Association’s and Lawrence P. Heffernan, a partner at Susan A. Graham of Amesbury re- Spring Seminar on May 10 in Framing- Robinson & Cole LLP, a regional firm cently joined the Real Estate Bar Asso- ham, REBA President Chris Kehoe an- with offices in Boston, New York, New ciation as Chief Operating Officer where nounced the rollout of three new REBA London, Hartford, Greenwich, Stamford she will be in charge of office and staff Committees to serve the Association’s and Sarasota, Florida. management, implementation of mem- growing membership. This committee, comprised of civil lit- ber services as well as all programs and An Affordable Housing Committee, a igators sharing a common interest in tri- event planning. Litigation Committee and a Commer- al advocacy, will participate in REBA’s Graham, who recently celebrated the cial Real Estate Finance Committee will educational offerings, focusing on liti- birth of her first grandchild, served in a be formally launched in September. gation in all trial and appellate courts, wide variety of capacities at The Prov- “These three new committees demon- both state and federal. ident Bank, an Amesbury-based com- strate our expanded scope and broader The group will also become a forum munity bank. Her service at the bank mission as REBA reaches out to real estate for discussion and exchange of ideas included head of retail banking, com- lawyers and other real estate professionals leading to the improvement of individ- pliance officer, director of human re- in fields and concentrations beyond tradi- ual trial skills as well as an advocate for sources and executive secretary to the tional title-related practice,” Kehoe said. expanding the jurisdiction and stream- Bank’s CEO and Board of Directors. The Affordable Housing Committee lining the operation of the Land Court. At REBA she will also serve as COO will be co-chaired by Kurt James and Beth H. Mitchell, a partner in Boston- of the Association’s affiliates, REBA Robert Ruzzo. Kurt James leads the af- based Nutter, McClennen & Fish, LLP Dispute Resolution, Inc. and the REBA fordable housing and community de- will chair the Association’s new Com- Educational Foundation, Inc. velopment law practice group at Sherin mercial Real Estate Finance Commit- She can be reached at REBA’s 50 and Lodgen LLP in Boston. tee. The goal of this group is to become Congress Street headquarters in Boston Bob Ruzzo, a lawyer and long-time the pre-eminent resource for REBA at [email protected]. Susan A. Graham Association member, serves as Deputy members and others on emerging trends Director of MassHousing, formerly and industry intelligence in all aspects known as the Massachusetts Housing of commercial real estate lending. Finance Agency (MHFA), an independ- The Committee will address issues of ent agency dedicated to creating and concern to both commercial borrowers preserving affordable housing opportu- and commercial lenders. It will provide nities across Massachusetts. input to REBA on legislative initiatives The goals of the Committee are to ac- that bear on the commercial lending WE’RE PROUD quaint and educate REBA members and practice. others on emerging initiatives on devel- The Committee will also support REBA’s oping and financing housing. The group growing educational programs in the com- TO FINISH will also participate on behalf of the As- mercial real estate finance practice area. sociation in the Beacon Hill dialogue on The Real Estate Bar Association for all housing-related legislation, particular- Massachusetts, formerly known as the ly G.L. c.40B reform. The Committee will Massachusetts Conveyancers Associa- WHAT YOU START. serve as a legal resource in the housing tion, is New England’s fastest-growing and development field for lawyers across bar association. REBA’s lawyers and Massachusetts. Both James and Ruzzo other real estate professionals share a formerly co-chaired the Affordable Hous- 150-year tradition of professionalism hether you’re the buyer, seller conclusion. Our respect for your ing Committee of the Real Estate Section and excellence in advancing the prac- or real estate attorney, putting hard work guides our every move. of the Boston Bar Association. tice of real estate law. REBA is also the together a deal is hard work. For the That means focusing on The Litigation Committee will be co- Massachusetts leader in combating the finishing touch, you want a title solutions, not problems. Resolving chaired by Diane Tillotson, a former As- unauthorized practice of law. company that treats your deal with issues, not just raising them. Treating sociation President and a partner in the For more about REBA go to www.mass- the care it deserves. your concerns as out concerns. Boston firm of Hemenway & Barnes, relaw.org. That’s “Fidelity National Title”. 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to the editor! Fidelity National Title Peter Wittenborg, Executive Director, REBA 133 Federal Street Boston, MA 02110 50 Congress St., Suite 600, Boston, MA 02109-4075 617-350-8828 or [email protected] 800-882-1266 COMMITED TO MAKING YOU LOOK GOOD

The Real Estate Bar Association for Massachusetts Summer 2004 REBA News • 3 From the President’s desk

REBA News is an official By E. Christopher Kehoe lawyers, we are subject to the oversight bilize the record title to consumers’ publication of the Real Estate Bar of the Supreme Judicial Court of Mass- homes in Massachusetts and to deal with Association for Massachusetts. achusetts and the Board of Bar Over- the issues created primarily by out-of- Real Estate Bar Association seers, both of which regulate our conduct state lenders, who are not familiar with for Massachusetts and provide sanctions for lawyers who mechanisms for properly releasing mort- 50 Congress Street, Suite 600 do not act responsibly and ethically in gage liens in Massachusetts. Boston, Massachusetts 02109-4075 their practices. Just recently, I had a conversation Tel: (617) 854-7555 The exemption from the journal re- with a lender representative on the West (800) 496-6799 quirement demonstrates the governor’s Coast, trying to convince this individual Fax: (617) 854-7570 understanding of the practicalities asso- to issue a Mortgage Discharge for a ciated with the day-to-day practice of law. client of mine who is selling his home President I am pleased to report that REBA’s on July 1 and paid off his mortgage in E. Christopher Kehoe, Esquire Omnibus Discharge Legislation has been March 2004. I explained that the lender President-Elect filed as Senate Bill No. S.2386. The bill, has an obligation to release the mort- Daniel J. Ossoff, Esquire which took almost a year to draft, is joint- gage lien within a reasonable time after Immediate Past President ly sponsored by the following members payoff of the lien. Richard (Dick) Keshian, Esquire of our Legislature: Senator Andrea F. Nu- The person I spoke with at the lender’s Clerk ciforo, Jr. (Senate Chairman, Joint office told me that Massachusetts law Virginia Stanton Smith, Esquire Committee on Banks and Banking); Sen- does not apply to a lender be- Treasurer ator Steven C. Panagiotakos (Vice chair- cause it is not in Massachusetts; that its Robert J. Moriarty, Jr., Esquire man, Senate Committee on Ways and time frame for releasing this lien was 60- As I reach the midpoint in my term as Means); Representative Robert A. DeLeo 90 days; and that there were no excep- Executive Director president of the Real Estate Bar Associ- (Chairman, House Committee on Bills in tions, even when a home was being sold. Peter Wittenborg, Esquire ation for Massachusetts, it’s appropriate Third Reading); Representative Christo- I must admit that I was rendered virtu- Editor to reflect on what we have accomplished pher G. Fallon (House Vice chairman, ally speechless at the callous indifference Sami S. Baghdady, Esquire in the first six months of this year and on Joint Committee on the Judiciary); and that came through the phone. It was only Managing Editor what remains to be done. Representative James D. Vallee (House the suggestion of litigation to the depart- Susan A. Graham It has been a busy and exciting year for Chairman, Joint Committee on Criminal ment supervisor that put the mortgage dis- REBA. We have devoted our energy to Justice). I would like to thank each of charge on a “30-day track.” Because this Mission Statement working on the Governor’s Executive Or- them for taking a leadership role in this was the servicer of the original mortgagee, der, filing important legislation, forming important area of consumer protection. there is not even a guaranty that the dis- To advance the practice of real estate law new committees, enhancing our part- There is a great deal left to be done to charge we will receive will be correct. by creating and sponsoring professional nership with Massachusetts Lawyers enact this significant legislation, which The Omnibus Mortgage Discharge standards, actively participating in the Weekly and reenergizing the residential will relieve consumers and closing attor- Legislation proposed by REBA would legislative process, creating educational bar. neys of one of the most vexing problems solve this problem by imposing penal- programs and material, and demonstrating I would like to thank Governor Mitt facing them on a daily basis: incorrect ties on lenders who do not fulfill their ob- and promoting fair dealing and good Romney, his counsel, Dan Winslow, and and missing mortgage discharges. ligations and easing the requirements for fellowship among members of the real Dan’s assistant, Judi Goldberg, for lis- Public hearings will be held on this leg- attorneys to discharge mortgages by af- estate bar. tening to our concerns about the gover- islation in the next few weeks and after fidavit. I implore all of you to contact your Mentoring Statement nor’s preliminary Executive Order regu- that, I will be calling on all of the mem- senators and representatives to share lating the conduct of notaries public in bers of REBA to contact their senators with them just one of the many horror To promote the improvement of the Massachusetts. We at REBA are espe- and representatives to urge passage of stories you have encountered in your practice of real estate law, the mentoring cially pleased that the governor’s coun- of fellow practitioners is the continuing this critical and long-awaited legislation. own practices. Please do it now, as we sel, working with the Board of Bar Over- The bill is currently before the Joint may not have this opportunity again. professional responsibility of all REBA seers, promulgated within the Executive members. The officers, directors and Committee on Banks and Banking, joint- Since the beginning of this year, REBA Order a significant protection for con- committee members are available to ly co-chaired by Senator Andrea Nuci- has established three important new sumers in the Commonwealth, namely respond to membership inquiries relative foro and Representative John Quinn. committees within the organization. that independent notaries public cannot to the Association’s Title Standards, The other members of the committee I would like to welcome the Real Es- hold themselves out as having the abili- Practice Standards, Ethical Standards are: Senator Brian A. Joyce; Senator tate Litigation Committee, which will be and Forms with the understanding that ty to conduct real estate closings in Mass- Robert S. Creedon; Jr.; Senator Robert co-chaired by former REBA President Di- advice to Association members is not, of achusetts. O’Leary; Senator Steven A. Tolman; ane Tilotson and Larry Heffernan. I am course, a legal opinion. We are also grateful to the governor Senator Robert L. Hedlund; Representa- also happy to report that Beth Mitchell and his counsel for exempting lawyers tive David M. Torrisi; Representative has agreed to chair the Commercial Fi- Endorsement Statement from the requirement of keeping a no- Philip Travis; Representative Edward G. nance Committee, and, finally, that Bob While the Real Estate Bar Association tary journal, in recognition of the unique Connolly; Representative Robert J. Ny- Ruzzo and Kurt James have agreed to for Massachusetts accepts advertising in place that lawyers hold in our society. As man; Representative Walter F. Timilty; co-chair REBA’s new Affordable Hous- its publications and educational offerings, Representative Michael F. Kane; Repre- ing Committee. it endorses no products or services. Chris Kehoe is a partner in the Boston sentative Michael A. Costello; Represen- Each of the chairs, in launching their office of Robinson & Cole LLP. He is a mem- tative Joyce A. Spiliotis; and Represen- committees, will bring new energy and ber of the American Land Title Associa- tative Daniel K. Webster. Please call or insight to REBA, and you will read more Web Address tion, the Real Estate Finance Association write to them, especially if you are one about these committees and their goals www.massrelaw.org and the real estate sections of the Ameri- of their constituents, and urge them to elsewhere in this edition of REBA News. Username: rebamember can Bar Association, the Boston Bar As- focus on passage of this bill. I look forward to helping the new com- Password: sizzle sociation and the Massachusetts Bar As- This bill appears to be the best oppor- mittees get off to a good start in Sep- sociation. He lives in Hingham. tunity we will have to help clear and sta- Continued on page 16

The Real Estate Bar Association for Massachusetts 4 • REBA News Summer 2004 Right of first refusal has limited use where premises are packaged with other

By Caroline Woodward The gave the tenant 30 days to accepted the offer for Unit 103, but negoti- for the purchase of Unit 103 was delayed, respond to any written notice of a pur- ated the purchase price for the remaining then the ‘time for performance’ for Coles to The Supreme Ju- chase price set by the , and a fur- units to a final price of $11,200,000. The purchase the 132 remaining units would be dicial Court’s deci- ther 30 days to enter into a purchase and two agreements were tied together by lan- similarly delayed.” Id. at 380. sion in Uno Restau- sale agreement with the landlord on guage stating, “If the ‘time for performance’ Continued on page 17 rants, Inc. v. Boston terms offered by a third party. Kenmore Realty, While the lease contained no provi- 441 Mass. 376 sion addressing allocation of any pur- (2004), highlights chase offer made on the entire build- the limited utility of ing, uncontested parol evidence a right of first re- offered at trial by a witness for Uno’s ABA President-Elect Michael fusal, and may have suggested that the parties had an “un- the effect of diminishing the ability of a derstanding” that if the entire building holder of a right of first refusal to realize were to be marketed, the price for the Greco keynote speaker at his anticipated benefits where the sub- unit would be 9.3 percent of the over- ject premises is sold in a package with all price, this being the percentage al- upcoming annual meeting other properties. located to the demised premises in the tax escalation clause in the lease. Michael S. Greco, slated to lead the Case Facts Boston Kenmore converted the 400,000-member American Bar Asso- Uno Restaurants, Inc. (“Uno”), suc- building into 133 residential and com- cation in 2005, will deliver the luncheon cessor in interest to Hamiltonian Com- mercial condominium units in 1986, keynote address at the REBA Annual pany, Inc., leased approximately 11,200 and retained ownership of all the units. Meeting on Monday, Nov. 15, 2004 at square feet of first floor and basement Pursuant to the Master , the the Wyndham Westborough. space in a building in Kenmore Square, leased premises became Unit 103 of “Mike Greco is perhaps the most Boston known as the Buckminster Ho- the condominium, with a percentage thoughtful and eloquent spokesman for tel, for use as a restaurant and lounge. interest of 15.9 percent. Uno acquired the legal profession in our time,” said Jon The lessor and owner of the building the lease from Hamiltonian Compa- Davis, a member of the REBA Board of was Boston Kenmore Realty (“Boston ny, Inc., with Boston Kenmore’s con- Directors who will introduce Greco at the Kenmore”). The lease, executed in 1984, sent, in 1987. In 1995, Boston Ken- provided that, in the event the Buckmin- more offered Unit 103 to Uno for Annual Meeting. “He has a keen under- ster Hotel building was converted into $1,500,000, which Uno declined. standing of the aspirations and nobility condominiums, the tenant would have a In 1997, an unsolicited $8,000,000 of our profession at its best.” right of first refusal to purchase the unit offer for the entire building, including The all-day Annual Meeting will include comprising the premises leased by Uno Unit 103, was made by Coles Hold- the following morning break-out programs. “at the initial purchase price set upon said ings, Ltd. Boston Kenmore rejected • Title Insurance Claims; Space or upon the same term[s] and the offer, stating that any offer made • Employment Law for Small Firms; conditions offered by any other party for for the building would have to be sep- Michael S. Greco the said space.” Id. at 379. arated into two offers, one for Uno’s • Elder Law and Conveyancing; unit because of the right of first refusal, Details and registration for the REBA • Commercial Real Estate Finance; and Caroline Woodward is a partner at and the other for the remaining units Annual Meeting will be available on line Sherin and Lodgen LLP where she prac- in the building. • Stress Management for Real Estate at www.massrelaw.org and will be pub- Coles made a second offer of tices in the Real Estate Department. Wood- Lawyers. lished in the fall issue of the REBA News. ward is a member of REBA’s Leasing Com- $2,800,000 for Unit 103 and $5,200,000 mittee and Title Standards Committee. for the remaining units. Boston Kenmore

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The Real Estate Bar Association for Massachusetts Summer 2004 REBA News • 5 ‘’ a priority for lawmakers

By Joel A. Stein it life insurance, and not adequately dis- House of Representatives, amended the payments such that the result is an in- closing the inclusion, cost or any addi- “Home Ownership Equity Protection Act” crease in the principal amount.” Although there is tional fees associated with the insurance. (HOEPA) by tightening the definition of The Bill also adds Chapter 167I enti- no clear definition for 4. Charging excessive rates and fees a “high cost mortgage.” tled “Predatory Home Loan Practices.” “predatory lending,” it to a borrower who qualifies for lower rates According to the amendment, the new The statute defines “high cost home is now a high priority and/or fees offered by the lender. definition is as follows: ” as a home mortgage loan issue with consumer 5. Excessive mortgage broker com- 1. First mortgages with APRs that ex- that meets one of the following conditions: groups, the U.S. Con- pensation. ceed treasury securities by six percent- (i) the annual percentage rate at con- gress and state legis- 6. Bill of consolidation home equity age points; summation will exceed by more than six latures throughout the loans, which promise to reduce the 2. Second mortgages with APRs that percentage points for first-lien loans, or country. monthly debt payment, but instead trade exceed treasury securities by eight per- by more than seven percentage points Although no defini- short-term debt for long-term debt. centage points; or for subordinate-lien loans, the yield on tion exists, it seems that predatory lending 7. Balloon payments. The borrower 3. Mortgages with total points and fees U.S. Treasury securities having compa- falls under the category of “I’ll know it when may believe that he is paying down the payable by the borrower exceed the rable periods of maturity to the loan ma- I see it.” Predatory or abusive lending prac- loan after making monthly payments, but greater of 5 percent of the total loan turity as of the 15th day of the month im- tices can include: will find that at the point the balloon pay- amount, or $1,000. mediately preceding the month in which 1. Making a loan to an individual without ment becomes due, he may owe almost The bill revises the definition of points the application for the extension of cred- regard to the individual’s ability to repay. as much as he borrowed originally. and fees to be more inclusive. It allows it received by the lender; 2. Repeatedly a loan with- 8. Equity stripping. This results from a for two bona fide discount points outside (ii) excluding up to two bona fide dis- in a short period of time and charging loan amount that is more than the borrower of the 5 percent trigger. count points, the total points and fees ex- high points and fees with each refinance. can financially handle, knowing the bor- In Massachusetts, House Bill H-4606 en- ceed the greater of 5 percent of the total 3. Packing a loan with single premium rower will be likely to default. A titled “An Act Prohibiting Abusive Practices loan amount or $400. credit insurance products, such as cred- will result in stripping the homeowner of in Home Mortgage Lending” was intro- A lender shall not originate a high cost the equity he has earned over the years. duced in 2003 and provides the following: home mortgage loan without first re- A former president of the Association, The statute amends Section 6 of Chapter quiring the prospective high cost home Joel Stein chairs the Title Insurance and New Definition Of 167E by inserting the following paragraph: mortgage borrower to complete a cred- National Affairs committee of REBA. He ‘High Cost Mortgage’ “16. No home mortgage loan, other it counseling program. practices with Friedman & Stein, P.C. in The Predatory Lending Consumer Pro- than a reverse mortgage, may contain a A lender may not make a first or subse- Braintree. tection Act of 2002 introduced in the U.S. payment schedule with regular periodic Continued on page 23

The Real Estate Bar Association for Massachusetts 6 • REBA News Summer 2004 Unit owners must work together to enforce condo claims for defective design and construction

By Chris Caputo reasonably clear. To the extent that the and construction and for a breach of the of the individual units being uninhabit- unit owner purchased the unit from the relatively newly recognized implied war- able, the association, pursuant to Berish, While a person’s developer, he or she, not the condomini- ranty of habitability. is the proper plaintiff to advance the home may be his or um association, was a party to that con- In Albrecht v. Clifford, 436 Mass. 706 claim rather than the owner of the im- her castle, we in the tract. However, G.L. c.183A §10(b)(4) (2002), the SJC held that an implied paired unit. Boston area often provides that the association of condo- warranty of habitability attaches to the Claims against the condominium de- find ourselves living minium owners established pursuant to sale of new homes in the Common- veloper and the general contractor re- in a condominium sponsible for the construction of the fa- building with several cility (as well as any trade subcontractors other people, there- hired by the general contractor) will be by sharing our “cas- governed by the three-year statute of lim- tle” with strangers. Concerted action is precisely what is itations and six-year statute of repose im- Given the exigencies of condominium posed by G.L. ch.260 §2B. ownership, it may be difficult to motivate required in order for the condominium When presented with a potential claim this group of similarly situated strangers for defective design or construction, the into concerted action when legal issues owners to preserve their rights against association’s first task must be to pre- arise with respect to the physical condi- vent the claims from being barred by ap- tion of the common areas (in which each the developer and the various contractors plicable statutes of limitation and repose. unit owner possesses an ownership in- The statute of repose for construction re- terest pursuant to G.L. c.183A). and design professionals that might be lated tort claims operates as an absolute However, where issues of defective bar to any cause of action regardless of design or construction of the common legally responsible for the defective the date on which the claim is discovered areas arise, concerted action is precisely by the putative plaintiff. It runs six years what is required in order for the condo- designs or construction defects in from either the opening of the improve- minium owners to preserve their rights ment for use or the substantial comple- against the developer and the various common areas. tion of the project and the taking of pos- contractors and design professionals session by the owner. that might be legally responsible for the However, the statute of limitations for defects. construction claims bars claims after In Cigal v. Leader Development Corp., the chapter shall “conduct litigation and wealth. Berish v. Bornstein, 437 Mass. three years and its limitation period 408 Mass. 212 (1990), the Supreme Ju- . . . be subject to suit as to any course of 252 (2002), decided by the court less commences to run on the date on dicial Court noted that an individual unit action involving the common areas and than two months after Albrecht, extend- which the defect is discovered or owner may pursue a developer for a facilities . . ..” ed the implied warranty of habitability should have been discovered in the ex- breach of contract related to defects in Therefore, where the common areas cause of action to claims involving con- ercise of reasonable diligence. As such, the construction of his or her unit. of a condominium are impaired by de- dominium units on the principle that the the statute of limitations may run on a The rationale behind this principle is fective design or construction, the as- mere fact that new construction is per- claim, which will therefore be time- sociation itself is the proper party to formed in connection with a condomini- barred, prior to the end of the six-year Chris Caputo, counsel to the Boston of- pursue an action arising out of the con- um as opposed to a single family resi- repose period. G.L. c.260 §2B will also fice of Robinson & Cole LLP, concentrates struction and design of a condomini- dence should not abridge the rights of the control implied warranty claims relat- his practice in construction and surety um facility. condominium homeowner. ed to the construction contract. law. He recently received an award for The principal causes of action to be The builder cannot disclaim this war- Great care must be taken to meet the dedicated service from the American Bar pursued by a condominium association ranty. Where the breach of warranty is statutory requirements. An immediate Association Forum on the Construction against developers, builders and design manifest in the common areas of the factual analysis of the accrual date of the Industry. professionals will be for negligent design condominium and results in one or more Continued on page 16

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The Real Estate Bar Association for Massachusetts Summer 2004 REBA News • 7 SJC ruling dramatically alters rights between landowners and easement holders

By Ed Bloom er might change the location of an ease- Decision Of Great Importance Common Problem ment without the consent of an easement This decision is of great importance to The facts of the case decided by the On June 15, 2004, holder. It has been widely assumed that landowners who, in the development of SJC are quite illustrative of the problems the SJC dramatically the common law of Massachusetts pro- their , discover ancient rights of landowners have been facing under the altered Massachusetts vided that, once the location of an ease- way or other similar easements that will existing common law of Massachusetts. real estate common ment has been fixed, it cannot be changed prevent or significantly impair their abil- In this case, the landowner, M.P.M. law regarding the right without the consent of both the landown- ity to develop their property. Prior to the Builders, received municipal approval to of a landowner to relo- er and the holder of the easement. case, a recalcitrant easement holder who subdivide and develop its property into cate an easement that To clarify the law and to address pres- simply refuses to consent to a relocation seven house lots. Dwyer, an abutting burdens its land. The ent-day realities, the SJC adopted as the of its easement could veto the develop- landowner, owned a right of way across Real Estate Bar Asso- common law of Massachusetts the mod- ment and prevent maximization of the the landowner’s property which would ciation (and The Ab- ern rule proposed by the American Law use of the landowner’s property. prevent the landowner from construct- stract Club) filed an amicus brief in which Institute in the Restatement (Third) of The rule espoused by the Restatement ing three of the seven planned house lots. they urged the SJC to adopt the very posi- Property (Servitudes) Section 4.8(3), The landowner, at its sole cost and ex- and now adopted by the SJC perfectly tion that the SJC ultimately took in render- which provides that: “Unless expressly de- pense, offered to relocate the right of balances the rights of the easement ing its decision. nied by the terms of an easement…, [a way in a manner that would still provide holder to benefit from the easement with In the case of M.P.M. Builders, LLC v. landowner] is entitled to make reasonable Dwyer with the access he needed but Dwyer, 442 Mass. 87 (2004), the court changes in the location or dimensions of the needs of the landowner to be able to would allow unimpeded construction by was asked to decide whether a landown- an easement at the… owner’s expense to use its property in a way that maximizes the landowner of the three house lots. permit normal use or development of… its value. Dwyer objected to the proposed reloca- Edward M. Bloom is a partner at the [its property], but only if the changes do Massachusetts is faced with a dwindling tion stating his preference “to maintain Boston firm of Sherin and Lodgen LLP, and not (a) significantly lessen the utility of the supply of developable land. Coupled with [his] right of way in the same place that is a member of REBA’s Board of Directors easement (b) increase the burdens on the a surge in the demand for housing, this it has been and has been used by [him] and the chair of its Leasing Committee. He owner of the easement in its use and en- scarcity has caused housing costs to soar, for the past 62 years.” wrote the amicus brief on behalf of REBA joyment or (c) frustrate the purpose for forcing people to leave the Commonwealth In order to resolve the problem, the in the case of M.P.M. Builders, LLC v. Dwyer. which the easement was created.” and adversely affecting the economy. Continued on page 24

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The Real Estate Bar Association for Massachusetts 8 • REBA News Summer 2004 RESPA reform efforts continue

By Joel A. Stein Bundling Is The Future The title industry felt strongly that HUD it report, valuation or appraisal and loan Bundling appears to be the future of should have considered a two-package information in an electronic form ac- As noted in the the marketplace. However, it is possi- approach that would have included one ceptable to the lender/consumer. This Spring 2004 issue for the borrower in a refinance transac- will require any vendor who wishes to be ble that packaging of loans may be REBA News, in late tion and one in a buy/sell transaction, part of a bundling operation to deliver its achieved without the need for further March 2004 HUD whether or not it included a loan. The ti- information in an electronic manner ac- HUD regulations. withdrew its pro- tle industry further believed that no mat- ceptable to the packager. The HUD regulation failed for a num- posed regulation ter what form of packaging was adopted, Moving other vendors’ products into a which would have ber of reasons. The Mortgage Bankers there should be no Section 8 exemption bundle will require control of the timing. replaced the exist- Association, the natural constituency of and any discounts, which resulted from Failure by a vendor to deliver its portion ing good-faith esti- HUD, was divided between its larger vol- the packaging, should be passed along of a package on time will destroy the na- mate regime, al- ume lender members and its smaller to the consumer. ture of the bundling. The packager will tered the treatment of the yield-spread members that believed that the packag- The HUD regulation failed to distin- need to have control over each of the premium on the HUD-l settlement state- ing of loans placed them at an unfair dis- guish between refinance situations and vendor’s pricing and technology. Each ment, and, most important to the title in- advantage, as they would not be able to buy/sell transactions. The National As- vendor will need to deliver its package to dustry, included a packaging proposal. provide the same volume discounts as sociation of Realtors, with one million the bundler in an electronic form the On May 20, 2004, Secretary-Desig- larger the lenders. members, made it clear that they sup- bundler can integrate into its system. nate Jackson told the House Financial Although it may be difficult for agents Services Committee that he would move to develop packaging on their own, it ap- forward on RESPA reform after an inter- pears that settlement agents have cer- nal review and consideration of some tain advantages, including a close rela- questions that the Office of Management The marketplace is open for tionship to the customer and home and Budget had proposed in its review. builders, familiarity with local customs At the time the rule was withdrawn, settlement service providers who and contact with brokers in buy/sell Secretary-Designate Jackson stated that transactions. Agents also have close re- his plans were to “revise the rule if nec- develop or take part in packages, lationships with the title insurance in- essary, and to re-propose the rule re- dustry that may be in the position to questing additional comments after I “plug” agents into packages. have had the opportunity to brief mem- and attorneys will have to be The marketplace is open for settlement bers of Congress and meet with con- service providers who develop or take part sumer and individual groups.” in packages, and attorneys in this state will Although it presently appears that no flexible and open to change. have to be flexible and open to change. further action will be taken before the No- The economic implications of packaging vember election, it is also evident that there are underlying concerns through- are an unknown, and it is certainly a pos- The major lenders made it clear that ported ALTA’s two-package proposal out all trade organizations and lender sibility that lenders will attempt to squeeze the HUD must preempt state laws in or- that would allow parties other than groups that the consumer issues which the price charged by its vendors. der for packaging to work while con- lenders to act as the packaging entity. the regulation attempted to address still sumer groups claimed that the preemp- In addition, the FTC did a consumer Discount Passed On need to be dealt with and that lender testing of HUD’s disclosure form for groups and consumer groups are inter- tion of state law would destroy the value To Consumers? mortgage broker payment, the so-called ested in packaging. of packaging. Consumer groups also The question remains unanswered as yield spread premium, and found con- have expressed concern that HUD failed to whether the discount the packager re- sumers in more than 50 percent of the A former president of the Association, to address predatory lending in the ceives from its venders must be passed test cases were choosing the higher Joel Stein chairs the Title Insurance and RESPA rule. Consumer groups also ex- to the consumers. Under the proposed pressed their support for a guaranteed priced loan. National Affairs committee of REBA. He regulation, it is believed that there is no mortgage package only if it included an In March 2004, at the confirmation practices with Friedman & Stein, P.C. in requirement for the discount to be passed Braintree. interest rate and closing cost guarantee. hearing for Secretary Designate Jack- son, his nomination was placed on hold. to the consumer; it would appear that un- About the same time, 250 congressmen der the RESPA rule, it would be consid- sent a letter to the Office of Management ered a violation for the packager to re- S E R V I C E , E X P E R T I S E , K N O W L E D G E and Budget urging HUD to reconsider tain the rebate or discount. and, if necessary, republish its Rule. Certainly lenders in the buy/sell trans- Providing Residential Mortgages to the Legal Community for over 12 years. As to the immediate future of bundling, actions are at a disadvantage as they it would appear that a number of lenders come onto the scene after the broker and ➣ Fast Turnaround from Application ➣ Second Homes are already packaging their loans, partic- occasionally after the attorney. It is clear to Closing ➣ Unique JUMBO Mortgages ularly in the equity line and second mort- that real estate agents will be a major fac- ➣ Interest Only/LIBOR Programs ➣ Loans up to $4 Million gage situations where the loans are closed tor in packaging in the buy/sell market. in-house and no title insurance is required. Concerning bundling, the future is In these situations, the lender can provide clouded, but certainly the mood of the ti- The Private Client Mortgage Group the borrower with a set amount for clos- tle industry is more positive than it was Mitchell J. Haddad, Jr. ing costs, with the only possible variation several months ago. To a certain extent, Senior Vice President being the cost of recording fees for dis- the future of bundling will be determined 617-357-8282 charges of prior mortgages. by the actions of the entire industry, in- [email protected] Technology is an integral part of cluding settlement attorneys, as we try bundling. In order to bundle, the party to alleviate consumer concerns and the Gateway Funding is a mortgage lender and broker in MA License MC#3052. providing the package must be able to concerns of HUD without requiring addi- deliver all services, including title, cred- tional regulation.

The Real Estate Bar Association for Massachusetts Summer 2004 REBA News • 9 Potential pitfalls in special permit applications

By Paul F. Alphen in the town in which I practice. One of Specialized Knowledge Needed Weeks later the attorney heard that the my first clients desired to expand his I was reminded of this lesson when I re- client and his neighbor had prepared and Sometimes it non-conforming dwelling and I advised ceived a call from a colleague who was filed their own Special Permit Application. seems that him that it would be helpful to research concerned about a recent conversation that When the attorney asked the client why by-laws (which vary the history of the zoning by-law as it ap- he had had with a client. The client and an they had chosen to proceed with the from municipality to plied to his house because there was the abutter both had pre-existing non-con- Special Permit Application prior to the municipality) are too potential that his house was not lawful- forming lots, both lots having insufficient exchange of the land swap agreements, esoteric for lay peo- ly pre-existing. frontage. Both lots also had non-conform- the client responded that he was trying ple to fully compre- The Town did not maintain a compre- ing dwellings that encroached upon the to control legal fees and that the Build- hend and appreci- hensive record of the history of zoning front yard setback requirement. The neigh- ing Inspector had informed him that it ate. Similarly, some changes and I summarized how I would bors wished to complete land swaps and was unnecessary to engage an attorney attorneys who do not conduct the research. reconstruct each of their homes so that the to apply for the Special Permit. regularly practice in the area of land use A month or so later I ran into the client new homes would conform with the appli- The attorney followed up with a cau- regulation may not appreciate some of and he explained that in order to avoid ad- cable setback requirements; but the lots tionary letter to the client and the attor- the eccentricities of the law. ditional legal fees, he had attempted to re- would continue to be non-conforming with ney asked me if I thought he was being When I first entered private practice, I search the zoning history himself and was regard to lot frontage. too persnickety. had the benefit of over 10 years experi- upset that he had spent days trying to de- The attorney advised the client of the I responded that it is the rare layper- ence in state and local government, termine the applicable zoning. necessity of having an Approval Not Re- son that can comply with all of the statu- most recently as the town administrator I explained to him that I had never an- quired plan prepared; the need for ap- tory requirements regarding a Special ticipated that he would perform the re- proval by the Board of Health of the sep- Permit Application. Defects in the appli- Paul Alphen is a partner in the law firm of search by himself and that because of tic system; the need for complete cation could render the Special Permit Balas, Alphen & Santos in Westford, where my familiarity with the Town’s records estimates from the various contractors; invalid, or susceptible to challenge upon much of his practice pertains to land use reg- I could have conducted the research in the potential for a Special Permit from appeal. Naturally, there are other con- ulation. He regularly appears before land use a few hours. It was an important lesson the Board of Appeals to reconstruct a cerns about the parties proceeding with boards representing residential, commercial in my early legal career. One has to be home on a non-conforming lot; and the land swaps without the prerequisite and industrial developments within towns cautious about encouraging lay people need for a comprehensive agreement be- agreement between the parties. along Route 495 and the Merrimack Valley. He to perform steps that are best per- tween the two lot owners. For example, a Special Permit appli- serves on the REBA Board of Directors and is formed by an attorney with appropriate The attorney prepared a proposed land cation will be defective if the application Chair of its Land Use Committee. experience. swap agreement and sent it to the client. Continued on page 20

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The Real Estate Bar Association for Massachusetts 10 • REBA News Summer 2004 Overcoming obstacles to planning

By Robert C. Adams Plan.” Why is this? Why does planning, the constant demands for action. that sits unopened on a shelf, then we which is clearly recognized as a virtue If we face a choice about whether to need other ways of defining our plan- We’ve all had sim- and a necessity, result in reactions rang- plan or not, we think of the decision this ning expectations. ilar experiences of ing from boredom to cynicism? Why way: “I can plan and create a huge One way to consider a plan is to think planning, whether in does planning seem to ring hollow? Why backlog of work for myself, or I can of it as solution to a problem. Another is the workplace or in is it the subject of Dilbert cartoons? avoid it and at least keep my head to consider it as the answer to questions. organizations, I think there are several reasons why above water.” Whether it’s a solution or an answer, a whether as partici- planning fails to engage us. One is our pri- Finally, planning is messy. It means plan is first and foremost a decision about pants or observers. or experience. Often planning is an- talking with other colleagues about what something to be done, about action to be Senior-level people nounced with great fanfare and excitement “might be” or “ought to be” instead of taken. “Here’s what we’re going to do…” go on a “planning and expectations are kindled. When plan- talking about what “is”. It means trying or “Here’s what we’ve decided…” should retreat” to a confer- ning fails to produce tangible results, it cre- to find the right words to describe our own be the first words in every plan, whether ence center or hotel. ates frustration instead. Consistent frus- ideas or goals for the organization. It printed in a formal document or scratched They meet, discuss “bold new ideas” tration ultimately gives way to cynicism. means having to disagree publicly be- out on a legal pad. and “plan the future.” There’s excitement Another reason is the process itself. cause of differences of opinion or, de- This viewpoint can be helpful because in the air at the retreat, even though oth- it begs a couple of important questions ers “back home” may be more doubtful that need answers. than eager about the probable outcomes. If a plan is a solution to a problem, then The result is “The Plan.” Thick three- one first has to frame and understand the ring binders containing “The Plan” are The next time someone says, “We need problem before developing the solution. distributed, (though often only to a priv- If the plan is an answer to questions, one ileged few). From time to time other a plan,” don’t cringe reflexively. Ask has to first decide what those are. planning activities follow (sometimes at The advantage of starting with prob- mid-winter retreats in warm places to re- them what problems the plan will solve. lems or questions – it doesn’t matter inforce the importance of planning). which, provided participants agree on These result in updates to “The Plan” and Or what specific questions it will answer. them – is that it helps direct the plan- one subsequently hears the sound of ning activity and the expected output. those three-ring binders being opened, Don’t ask why a plan is needed. Developing a plan doesn’t become an old pages removed, new pages inserted, end in itself but rather provides an ac- binders snapped shut. Then back on the Instead, ask what a plan will do. tionable solution to a problem or an an- shelf goes “The Plan.” swer to key questions. No one denies the value of having a plan We want success. We want to help set in an organization, whether it’s a legal goals, solve problems, and provide an- practice, a software company, or a mu- Everyone has experienced planning that pending on the need for tact and diplo- swers about where we should go and how seum. The future will always be unknown, consists mostly of “thinking outside the macy, swallowing our words and nodding we should get there. None of us will in- the past behind us, and the present con- box” or “brainstorming ideas” or “blue- dumbly in agreement even when we vest energy and emotion, even if we’re stantly in flux. The very notion of having sky thinking.” But a list of novel ideas know we don’t mean it. It’s a very hu- forced to invest time, in an activity that “a plan” just seems to make sense. No or unusual approaches isn’t the same man process. seems only to be an end in itself. We will, one gets ahead by saying, “Who needs a thing as developing a plan. Too often however, invest ourselves if it’s clear why plan? Let’s just drift into the future and see that output, whether conceived “inside” Overcoming Reluctance To Plan it’s necessary, if we know that through what happens.” or “outside the box,” never materializes So how can we overcome our on reluc- planning we can meet the challenges Yet as soon as the suggestion of plan- in a way that impacts the organization’s tance to plan and also motivate others to posed by problems and answer impor- ning arises, the response is Pavlovian – current activities. give more than lip service to planning? One tant questions. an involuntary cringing at the notion of Still another difficulty with planning is way might be to think differently about The next time someone says, “We spending time to develop or update “The that it is in fact an intrusion into the nor- what the output of planning ought to be. need a plan,” don’t cringe reflexively. Ask mal flow of work. (This is often reinforced Yes, in a simple way the expected out- them what problems the plan will solve. Bob Adams works with clients to ad- by having the participants leave the nor- put is “a plan,” but unfortunately that Or what specific questions it will answer. dress issues of planning, organizational mal boundaries of workplace time and usually conjures up the image of a doc- Don’t ask why a plan is needed. Instead, change, and business. He can be space and go “on retreat.”) The interrup- ument that’s venerated but never used. ask what a plan will do. When they can reached by e-mail at RAdamsConsult- tion of routine produces anxiety because If people assume that the output will be answer that question, they’ll have your [email protected]. it uses up already scarce time needed for little more than an irrelevant document respect and your participation.

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The Real Estate Bar Association for Massachusetts Summer 2004 REBA News • 11 Affordable Housing Committee update

The Real Estate Bar has a 150-year to provide opportunities for attorneys programs including its $100 million Pri- con Hill. In addition to the continuing tradition of excellence advancing the to hear from other practitioners, experts ority Development Fund and transit ori- debate surrounding Chapter 40B and practice of real estate law in Massa- in the field and legislators regarding re- ented development initiatives and an the Land Use Reform Act, possible new chusetts. Starting in September, REBA cent changes and proposals that will af- analysis of expected changes to Chap- initiatives could include a green build- will be extending this mission with of fect the practice of affordable housing ter 40B and to budget provisions such as ing tax credit and establishment of a an Affordable Housing Committee law in Massachusetts. the Municipal Incentives for Smart homeless court to assist homeless indi- (AHC) to be co-chaired by Robert Ruz- Prospective topics for the fall could in- Growth Zoning. viduals convicted of misdemeanors zo, Deputy Director of MassHousing, clude examination of the legal and poli- In addition, members of the AHC will transition back into society. and Kurt James, a partner at Sherin Finally, the AHC will serve as a legal and Lodgen LLP. resource in the housing and development The goals of the REBA AHC will be to The goal of the committee will be to field communities in order to leverage the educate attorneys to lead and educate abilities of existing organizations. This attorneys to serve the Massachusetts af- lead and educate attorneys to serve will include partnering with other organ- fordable housing community. This lead- izations such as the Lawyers Clearing- ership and this service will come at a time the Massachusetts affordable housing house for Affordable Housing and Home- when affordable housing needs are felt lessness to expand the availability of pro in communities throughout Massachu- community at a time when affordable bono assistance for homeless individu- setts and when affordable housing poli- als, non-profits involved in affordable cies are at or near the top of the agendas housing needs are felt in communities housing development and towns seek- of most local, state and federal legisla- ing assistance in using governmental re- tors and administrators. throughout the state. sources in local strategic planning. Among our priorities will be to keep We look forward to an exciting and pro- our members current on new housing ductive first year working with other development and financing programs, cy implications surrounding the disposi- assist in filing amicus briefs in relevant REBA Committees and the affordable case law decisions and state and fed- tion of church land by the Archdiocese court cases, such as the recent Arde- housing community. If you are interest- eral legislation. We intend to hold of Boston, case studies of the recently more decision, and participate on be- ed in joining the AHC please contact monthly brown bag lunches and plan enacted District Improvement Financing half of REBA in the affordable housing REBA Executive Director Peter Witten- other continuing legal education forums (DIF) law, a review of new MassHousing policy and legislation dialogue on Bea- borg at [email protected].

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The Real Estate Bar Association for Massachusetts 12 • REBA News Summer 2004 Major challenges facing title insurance industry

By Tom Flynn number of the coverages that tradition- nia to allow them to be licensed to sell future, we will have to be vigilant to see al title insurance provides, such as cov- these products. If that legislation pass- whether such provisions as “kick- There have been erage against defects and es, we may hear from the Radians of backs,” “incentives” and “skimming” many challenges on the title to the mortgaged property, the world once again. are proposed again and, if in the same facing the title insur- the validity and enforceability of the in- kind of anti-consumer-choice form, op- ance industry and sured mortgage, unmarketability of the RESPA Reform pose them. real estate practi- title and a legal right of access to and As you know through REBA and oth- tioners in recent from the mortgaged property. er sources, RESPA reform is currently on Extended Coverage years, many of Fortunately, for both lenders and bor- the back burner to a certain degree. Owner’s Policies which threatened rowers, to date the title insurance indus- Nonetheless, there is an overall senti- Title insurance at times seems to be the future of the in- try and the various state Departments of ment that some type of reform will be in- nothing more than a necessary evil to dustry and the liveli- Insurance have been successful in limit- troduced again in the near future. consumers. However, more and more as hood of real estate practitioners in this ing the sale of this product, primarily on The changes proposed to date had of late, various title insurance products state. I would like to briefly address some have been created or enhanced to ad- of the major challenges we’re facing. dress the needs of consumers and en- hance the overall value of title insurance. Mortgage Impairment Insurance A prime example of this is the Ex- Mortgage impairment insurance has One of our biggest challenges will be to tended Coverage Owners policies that been touted as an alternate product to ti- have been available for a while in the tle insurance. It has been introduced in a ensure that the marketplace does not industry but have become more the number of states, most notably Califor- norm only recently. This policy adds nu- nia. The proponents of this product claim merous coverages for the consumer, that it provides many of the same cov- perceive us to be just another closing some of which are beyond the scope of erages as traditional title insurance at a what we have known as traditional con- reduced price. expense, and does not pressure us to cepts of title insurance, such as cover- However, such claims are inflated at ages that involve subdivision, zoning, best. These products are risk assump- compromise the quality and value that and survey issues as well as certain tion products insuring against liens im- post policy matters. pairing the lien priority of the insured our particular service provides to the These policies are of such value to res- mortgage but no title search is required idential owners that it is important for all prior to issuance of the “policy.” The parties to any . real estate practitioners to become fa- biggest proponent of this alternate prod- miliar with them and to offer to their uct has been Radian Guaranty, Inc. in clients or their lender’s borrowers. promoting their Radian Lien Protection Product (RLP) and it’s purported low-cost the basis that this product is a title insur- potentially adverse effects on all of us Demands Of National Lenders to consumer borrowers. ance product (albeit very limited in cov- involved in the lending, title and clos- There is also heavy pressure from na- However, the RLP does not provide a erage) and the companies issuing these ing process because of the requirement tional lenders to provide the necessary products are not licensed to do so. for “bundling” or “packaging” of the services in a closing transaction faster, Thomas Flynn is Vice President and After a lengthy administrative and various components of title and settle- cheaper and from one source. This cre- New England Division Manager for Stew- judicial review of the issue, the Cali- ment services. It would also have a po- ates quite a challenge on the local level art Title Guaranty Company. He has been fornia Department of Insurance so tentially negative impact on consumers to accomplish this and keep everyone with Stewart for over nine years and has ruled last year. as well as they would have their choic- involved in the process. been in the title insurance industry in Be aware, though, that Radian and es of providers in the real estate trans- With the demise of government-man- Massachusetts for over 21 years. He other companies wishing to cash in action limited. dated bundling or packaging, the mar- serves on the REBA’s Title Insurance and on this type of product have since When and if we do see a new version ketplace has stepped in and we are be- National Affairs Committee. been promoting legislation in Califor- of RESPA “reform” at some point in the ginning to see some national lenders initiating bundled settlement services programs. It is too early to tell how suc- cessful these programs will be and how much of the marketplace such programs DIRECTORY OF REAL ESTATE SERVICES will affect, but it is yet another thing for all of us to keep an eye on.

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The Real Estate Bar Association for Massachusetts Summer 2004 REBA News • 13 ALTA adopts new form title insurance policy endorsements

By Lawrence F. Scofield By standardizing the most common com- Endorsement Form 16 sured, except as expressly stated in this mercial endorsements the ALTA Executive Mezzanine Financing to an Owner’s endorsement. (Editor’s note: In Committee intended for benefits to flow to Policy: 4. In the event of a loss under the policy, the Spring 2004 is- insureds as well as insurers. Customers re- the Company agrees that it will not assert 1. The Mezzanine Lender is: sue of REBA News, questing these endorsement forms may the provisions of Exclusions from Cover- and each successor in ownership of its the author ad- rely on the coverage being consistent from age 3(a), (b) or (e) to refuse payment to loan (“Mezzanine Loan”) reserving, how- dressed Endorse- company to company, state to state, and the Mezzanine Lender solely by reason of ever, all rights and defenses as to any suc- region to region. the action or inaction or knowledge, as of ments 14 and 15 cessor that the Company would have had By using common endorsement lan- Date of Policy, of the insured, provided: and their various against the Mezzanine Lender, unless the guage, judicial decisions interpreting each (a) the Mezzanine Lender had no subparts of the new, successor acquired the indebtedness as endorsement will have greater precedent knowledge of the defect, lien, encum- primarily commer- a purchaser for value without knowledge from state to state. Less time will be spent brance or other matter creating or caus- cial, endorsements promulgated by the of the asserted defect, lien, , Title Insurance Forms Committee and negotiating over exact language. Though ing loss on Date of Policy. in some circumstances it may be neces- adverse claim or other matter insured (b) this limitation on the application of adopted by the Executive Committee of against by this policy as affecting title to the American Land Title Association at sary to modify standard endorsement lan- Exclusions from Coverage 3(a), (b) and the estate or interest in the land. (e) shall: its October 2003 annual meeting. In this guage to fit specific circumstances unique to a transaction or series of transactions, 2. The insured: (1) apply whether or not the Mezzanine article, the author analyzes Endorse- nevertheless, it is valuable to have well- (a) assigns to the Mezzanine Lender Lender has acquired an interest (direct ments 16-19.) considered coverage and language in the right to receive amounts otherwise or indirect) in the insured either on or af- standardized forms useful in the vast ma- payable to the insured under this policy, ter Date of Policy, and Larry Scofield, a 25-year veteran of the jority of circumstances. not to exceed the outstanding indebted- (2) benefit the Mezzanine Lender only real estate and title industries, has re- Some of the following endorsements ness under the Mezzanine Loan; and without benefiting any other individual or cently been appointed Vice President contain bracketed language that is op- (b) agrees that no amendment of or en- entity that holds an interest (direct or in- and New England States Manager of tional language. It may or may not be used dorsement to this policy can be made direct) in the insured or the land. The Talon Group, a division of First depending upon specific circumstances without the written consent of the Mezza- 5. In the event of a loss under the Pol- American Title Insurance Company cur- and individual company practice. In draft- nine Lender except as provided in Section icy, the Company also agrees that it will rently operating in key markets across ing these Forms, the Committee took 12(a) of the Conditions and Stipulations. not deny liability to the Mezzanine Lender the US. For more information on The Ta- great pains to use words and phrases con- 3. The Company does not waive any on the ground that any or all of the own- lonGroup go to www.talongroup.biz. sistent with those used in practice. defenses that it may have against the in- Continued on page 22

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The Real Estate Bar Association for Massachusetts 14 • REBA News Summer 2004 Examining tax titles and title references and descriptions

By Ward Graham To start with, cities and towns cus- tate, and the intent of the parties in mak- ell, 209 Mass. 111, 95 N.E. 412 (1911). tomarily take property for non-payment ing it, as if they had been expressly re- Like most cases in which the validity of of taxes by a description that is by refer- cited and enumerated in the deed. Mor- a tax title is being challenged, there were ence to lots on their assessor’s plans. gan v. Moore, 3 Gray 319, 322 (1855); a number of issues raised in the chal- TITLE Sometimes, the descriptions may include Fox v. Union Sugar Refinery Co., 109 lenge to the tax titles in this case, in- references to title vesting deeds, refer- Mass. 292, 296 (1872).” cluding, for our purposes, a challenge as ences to lots on recorded plans or plans Manifestly a reference in a deed, as- to the descriptions used. This case is in- STANDARD in other public records, abbreviated sessment or advertisement to a lot by structive because it involved takings of metes and bounds descriptions (rarely number on a plan recorded in the Registry several parcels and some of the de- SPOTLIGHT do you find full metes and bounds de- of Deeds would be a sufficient description. scriptions, while meager, were deemed scriptions used). Not a problem. It has been held that references to instru- sufficient but others were not. But sometimes, the descriptions are ments or plans not then but later record- The Court starts its analysis with the In this Title Standard Spotlight article, much more abbreviated, such as a mere ed were sufficient for descriptive purpos- notion that “[a]lthough the terms of a tax we’re going to depart a little from an in- reference to a lot or parcel with no plan es in a deed. Robinson v. Brennan, 115 deed need not show actual compliance depth analysis of an entire title standard or title references or a reference to a par- Mass. 583 (1874); Blaney v. Rice, 20 to a technical nicety with the minute par- as in the past and focus on portions of cel being a portion of a larger parcel with- Pick. 62, 32 Am. Dec. 204 (1838). Ref- ticulars of statutory requirements in mak- two title standards that interrelate: Item out any additional references establish- erences in deeds to plans apparently nev- ing the sale itself, yet they must satisfy a (2) of Title Standard No. 4, Tax Titles, ing what portion it is. The latter types of er made a matter of record have been held reasonable mind without resort to ex- and Item 1 of Title Standard No. 27, Ti- descriptions are very problematic but incorporated into the deeds and binding trinsic evidence that a valid cause of sale tle References and Descriptions. In addi- any description in a tax title must be re- upon the parties. Lunt v. Holland, 14 in fact existed.” Id., at 115-116. The tion, this will be a two-part “miniseries,” viewed with care because, while a de- Mass. 149 (1817); Magoun v. Lapham, Court then reviewed the recitals in the so you’ll have to come back next time scription might be acceptable for tax ti- 21 Pick. 135 (1838). taking instruments and tax deeds, in- for the exciting conclusion. tle purposes, it may not be adequate for An assessor’s plan, which shows the cluding the forms of description used in particular lot in connection with all neigh- the various takings involved in the case. Tax Titles “conveyance” purposes. Given that the customary practice in tax boring lands, affords a definite and ac- In one group of takings the lots in- In order to have a good tax title, Title taking situations is to use a description that curate description. It is easily found. It is volved were “described in the deeds by Standard No. 4 (2) establishes that, refers to a lot on the assessor’s plan, is that open to public inspection at reasonable lot numbers, the street and side of among other things, you need to have a also good enough for conveyance pur- times under rational limitations. G.L. street on which they were located, and description of the tax title property that poses under Title Standards 4 (2) and 27? c.35, §17. As a practical matter it affords the name of all abutting owners, with “is sufficient to convey title.” As stated in Section 244 of Park, Real Es- quite as certain and accessible informa- the general points of compass on which Well, what does that mean? None of tate Law, 2nd ed., 28 Mass. Prac. § 244 tion to anybody in interest as does a plan the land of abutting owners lay, but the Comments to Title Standard No. 4 in the registry of deeds. without further designation by metes give us any guidance. Where can we (West Publishing, 1981), “Where there is a reference to a plan in a deed, the cours- Reference to such a plan reaches the and bounds, and without reference to turn? Item 1 of Title Standard No. 27 is main end sought by advertisement in tax any plan upon which the lot as num- a good start. That portion of Title Stan- es, distances and lines as there set forth are regarded as the description by which sales, which is to enable the owner and bered may be found.” Id., at 120. dard No. 27 recites: The Court recited a sample description the limits of the grant are ascertained. The prospective bidders to locate the land to “In order to convey a good title, a de- be sold with substantial certainty. Con- as follows: “three thousand seven hun- plan is thereby incorporated in the deed. scription of a parcel of land must be ca- ners v. Lowell, 209 Mass. 111, 120, 95 dred fifty-five (3755) sq. feet of land, [Citations omitted.]” pable of referring to only one parcel. A N.E. 412, Ann. Cas. 1912B, 627 (1911); more or less, being lots 549-550 on the Note that Park doesn’t say anything description is not sufficient to convey ti- Williams v. Bowers, 197 Mass. 565, 84 east side of Tanner Street with land now about the plan being recorded at the Reg- tle if the land is described as part of a N.E. 317 (1908); Bemis v. Caldwell, 143 or formerly of Woonsocket Institution for istry of Deeds. Nonetheless, because we tract without a specific description of its Mass. 299, 9 N.E. 623 (1887). Savings on the north and south, Mer- are taught that a title examination does location within the tract.” Larsen, supra, at 57-58. This creates chants Street on the east, and Tanner not have to include a search of records Coincidentally, the sole case cited in an exception to the usual rule that a title Street on the west.” Id. outside the Registries of Deeds and Pro- the Comment in support for this provi- examination need only be limited to Despite the omissions from the de- bate, there remains a question even to- sion of Title Standard No. 27 is a case in- searching records at the Registries of scriptions of a reference to a plan or pre- day in some conveyancers’ minds as to volving a tax title, McHale v. Treworgy, Deeds and Probate. Thus, for purposes cise metes and bounds, the Court found 325 Mass. 381, 90 N.E.2d 908 (1950). whether the reference to a lot on an as- of Title Standard No. 27, reference to a that “[w]hile this description reached Indeed, McHale is a frequently cited case sessor’s plan, being a plan not recorded specific lot on an assessor’s plan incor- nearly to the line of indefiniteness, it is on the issue of descriptions both involving at the Registry of Deeds, can form the porates the description of that lot into the on the whole sufficient.” Id. tax titles and otherwise. Like many other basis for a sufficient title to real estate instrument as though set forth by metes The Court explained its conclusion that areas of the law, however, cases both be- that has been the subject of a tax title. and bounds and area, at least to the ex- such a description was sufficient as follows: fore and after McHale can go either way on Many years ago, in Larsen v. Dillen- tent those elements of a description are “It gives data enough to enable one to the sufficiency of a description depending schneider, 235 Mass. 56, 126 N.E. 363 shown on the plan. make a reasonable identification of the . many times on subtle factual distinctions (1920), the Supreme Judicial Court es- If an ambiguity or discrepancy appears property. It indicates a parcel of speci- In this article, we’ll compare some of those tablished the rule that assessor’s plans in some particular between the descrip- fied area, rectangular shape, lying be- cases so see how they fit with Title Standard may be relied upon for description pur- tion set forth in the tax title instruments tween two streets and between lots of No. 4 (2) and Title Standard No. 27. poses the same as a recorded plan. and the description of the lot as shown other defined owners, presumably a por- In explaining this rule, the Court put it on the plan referred to, the usual rules of tion of a large tract subdivided into small- Ward Graham is New England re- this way: “Now it is a well-settled rule of construction come into play. er parts. Practically the same informa- gional counsel for Stewart Title Guar- construction that where a plan is referred tion is conveyed in the instances when anty Company. He serves on REBA’s Ti- to in a deed, as containing a description Sufficiency Of Description the rear of the lots bound, not upon a tle Standards Committee and Legislation of an estate, the courses, distances and Let’s take a look at some of the cases street, but upon another named owner. Committee. He is the principal draftsman other particulars, appearing upon the that have grappled with the sufficiency As a matter of common knowledge it is of REBA’s recently filed mortgage dis- plan, are to be as much regarded, in as- of a description for tax title purposes. a kind of description not infrequently charge legislation. certaining the true description of the es- We start with Conners v. City Of Low- Continued on page 15

The Real Estate Bar Association for Massachusetts Summer 2004 REBA News • 15

Continued from page 14 The Court stated: rors or irregularities in the proceedings St.1915, c. 237. See now G.L. c.60, §64, found in deeds, especially of land in the “It differs from those discussed [above] of the collector which are neither sub- et seq. This clause appeared in section country. To require a greater particular- in that the names of no abutting owners stantial nor misleading.” The application 17 of the 1915 act. ity would impose upon the tax collector were given, nor was there anything to of this section was fully discussed in the After that revision the sale no longer the necessity of an expensive survey in show the shape of the parcel. The des- oft-quoted case of City Of Fall River v. transferred title at once to the purchaser, many cases. While the descriptions in a ignation of it by a lot number without Conanicut Mills, 294 Mass. 98, 1 N.E.2d but gave him merely a lien that could be tax advertisement must be such as to en- naming the plan or showing where it 36 (1936) and is a major reason for the enlarged into a complete title only after able both owner and bidder from its might be found or giving any other de- more deferential standard applied in lat- proceedings in court for foreclosure of the terms to locate with substantial certain- scriptive circumstance was too indefinite. er decisions reviewing the adequacy of right of redemption. Sections 1, 3, 4. ty the land to be sold, it need not be so . . . These deeds were therefore invalid tax title descriptions. The Court in Jenney v. Tilden, 270 detailed as to point out visually its pre- on their face and on inspection show that Rather than a description issue, the Mass. 92, 94, 169 N.E. 669, stated: cise boundaries so that an utter stranger they convey no title. . . . A tax deed Conanicut Mills case dealt with issues re- “Those changes in the statutes might unacquainted with the locality and igno- stands or falls on its own unaided mer- lated to the postponement of the subject be thought to give additional protection rant of the neighbors could find it with- its. It must be delivered and recorded tax sale to a time beyond the statutory to the taxpayer, so that the former strict- out inquiry.” Id. within thirty days from the sale. Its worth limit of seven days as then provided in ness could be relaxed. This does not As will be seen in later cases, the fail- is to be determined as of that date. It can- G.L. c.60, §44. Nonetheless, the court’s mean that the amendment which now ap- ure to recite precise metes and bounds not be supplemented or changed by sub- discussion of background and effect of pears at the end of the present section 37 has never been found, in and of itself, fa- sequent instruments. Its errors and inac- the “neither substantial nor misleading” (see St.1935, c. 269) renders useless or tal to a tax taking or tax deed. In Con- curacies cannot be corrected, nor can its sentence added to c.60, §37 is worth nugatory all those requirements of law ners, though, the failure to refer to a par- defects be supplied from any source. keeping in mind when dealing with tax failure to observe which could be found ticular plan in a description including a to be neither substantial nor misleading, recitation as to certain lots was saved by but it does mean that when this part of the fact that sufficient bounding refer- section 37 applies, such requirements be- ences to abutting owners and streets come directory in character and cease to gave enough information for the taxpayer In order to have a good tax title, Title be conditions precedent to a valid sale. and anyone else interested to determine … Whether an error or irregularity is sub- which precise parcel was involved. Standard No. 4 (2) establishes that, stantial or misleading must be decided Note, also, that, even with all the infor- according to the circumstances of each mation that was provided, the Court still among other things, you need to have a case.” Id., at 99-100. [Emphasis added.] felt that this form of description almost fell It is the latter statement, often quoted below the minimum level of definiteness. description of the tax title property that in later tax title cases, that puts us in a The case of City Of Boston v. Boston position, in some instances, of having to Port Dev. Co., 308 Mass. 72, 30 N.E.2d “is sufficient to convey title.” Well, what analyze a particular tax title description 896 (1941) is very similar except that, that looks like one of these marginal cas- in that case, there were also references does that mean? Where can we turn? Item es in order to determine if the description to plans upon which certain enumerat- is nonetheless sufficient and free from an ed lots were shown and as to another par- 1 of Title Standard No. 27 is a good start. error which is “neither substantial nor cel not shown on a plan, there were not misleading.” only abutting street and owner refer- As for the determination as to whether ences, but also square footage and a an error or irregularity is substantial or deed reference were recited. Clearly, misleading is fact driven “according to these situations would satisfy Item 1 of When by its terms it is obvious that it title description issues as well. the circumstances of each case,” Id., at Title Standard No. 27 and, therefore, Item does not convey a title, it fails utterly to In general, tax laws are construed 100. In close call situations, the con- (2) of Title Standard No. 4. affect the rights of the original owner.” strictly in favor of the taxpayer. Collector veyancer may not feel comfortable mak- As to other parcels that were the sub- Conners, supra, at 122-123. of Taxes of Boston v. Revere Building, ing the determination and the determi- ject of the challenged tax sales, the Court Thus, as you can see, some seeming- Inc., 276 Mass. 576, 177 N.E. 577, 79 nation may have to be made by a fact did find that the descriptions, while sim- ly minor factual distinctions between one A.L.R. 112. Before the enactment of what finder, i.e., either a judge or a jury. ilar to those described above, fell below description and another can take a min- is now that part of section 37 just quot- In such a situation, it is important to the minimum level of definiteness. imally sufficient description and render ed, this principle had been carried so far keep in mind, also, that the burden of In the case of these parcels, the de- it insufficient. On the other hand, Con- in relation to tax sales of real estate that proof on the issue of whether an error or scriptions included the lot numbers, the ners represents a stricter approach to tax failure to comply with statutory require- irregularity is neither substantial nor mis- street, the side of the street on which title descriptions than do later cases. At ments, even in minute particulars, inval- leading is on the municipality or on one they were located and the area. Howev- the same time, the case remains in- idated the sale. Charland v. Home for claiming under the tax title. Bartevian v. er, in these instances, not only was there structive with respect to what constitutes Aged Women, 204 Mass. 563, 567, 91 Cullen, 369 Mass. 819, 823, 343 N.E.2d no reference to a plan where the lots a “description sufficient to convey title” N.E. 146, 134 Am.St.Rep. 696; Shurtl- 851 (1976); Pass v. Town Of Seekonk, 4 might be shown, but also there was no for purposes of Title Standard No. 4 (2) eff v. Potter, 206 Mass. 286, 92 N.E. 331; Mass. App. Ct. 447, 450, 351 N.E.2d reference to other information by which and is often cited in later cases dealing Conners v. Lowell, 209 Mass. 111, 95 219 (1976). one could specifically locate the parcel, with the adequacy of descriptions, par- N.E. 412, Ann.Cas.1912B, 627; Koch v. (This is the end of Part I of this article. such as abutting monuments (other than ticularly for tax titles. Austin, 225 Mass. 215, 114 N.E. 308. With this background, in Part II we will the street) or abutting landowners. De- One thing to keep in mind when re- The purpose of the enactment was to take a look at several tax title description spite the fact that there was a plan on viewing tax title cases is that some of mitigate the severity of this rule as to er- cases to get a feel for where the courts record and a plan at the city engineer’s them, like Conners, predate a major rors and irregularities that were neither may draw the line between a sufficient office by which the lots could have been change in the statutes. In particular, G.L. substantial nor misleading. It was part of tax title description and a deficient one. identified, neither plan was referred to c.60, §37, was amended in 1915 to add an important revision of the law by which Please return to the fall issue of the REBA and the Court held that this type of de- a sentence providing, “No tax title shall fundamental changes were made in the News for the spellbinding conclusion of scription is insufficient. be held to be invalid by reason of any er- effect of sales for collection of taxes. “Tax Titles and Descriptions.”)

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The Real Estate Bar Association for Massachusetts 16 • REBA News Summer 2004 From the President’s desk

Continued from page 3 spective on the many significant issues June 11, 2004, Peter Wittenborg, Presi- torneys on the local and national level. tember 2004. that affect real estate in Massachusetts dent-elect Dan Ossoff and I met with Mar- Tom and Marv will be spending the rest I continue to be grateful to our friends with the editorial board and readers. vin Kushner and Tom Bussone, who have of this year organizing the committee and at Massachusetts Lawyers Weekly for the Finally, I would like to report on the first agreed to co-chair the new committee. holding preliminary meetings, with an ex- partnership that we have forged this year. REBA Opinion Leader Conference that The mission of the committee will be pected launch date for the new committee I would like to especially thank Jeff Bask- was held in May to discuss the unique is- to serve as support and to act as an ad- in January 2005. In the meantime, if you ies, David Yas, Paul Boynton, Scott sues that affect residential conveyancers vocate for real estate lawyers with a prac- have any ideas, or would like to volunteer Ziegler and Jason Scally for helping to in Massachusetts. By all accounts, the tice concentrating on representing resi- time to the committee, please feel free to nurture and grow our relationship while evening was a great success and includ- dential lenders. This group will work contact Marv or Tom at their offices. we implement REBA’s strategic plan to ed presentations by Joel Stein on nation- closely with the association’s Title Insur- It has been a busy and dynamic year make REBA the strongest and best real al issues, such as RESPA reform; Ed ance and National Affairs Committee, so far but much still needs to be accom- estate bar association in this country. I Smith, our legislative counsel, on pend- the Legislation Committee and the Prac- plished. I would like to leave you with one hope that all the members of REBA ap- ing legislation; and by Jon Davis on is- tice of Law by Non-Lawyers Committee final thought. Many of us have dreamed preciate the significant opportunity that sues concerning the unauthorized prac- to give a strong and consistent voice to of a time when missing and incorrect dis- Lawyers Weekly has offered us in pub- tice of law. Many prominent real estate Massachusetts lawyers in residential charges would be simply a memory, as lishing REBA News. attorneys and title underwriters attended conveyancing practice. opposed to a daily problem. Please help I am also especially grateful to David this event. I am very grateful to Marv and Tom for me realize this dream by contacting your Yas for selecting our Executive Director, The energy and enthusiasm from the accepting this leadership challenge and senators and representatives now. Don’t Peter Wittenborg, to join the editorial Opinion Leader Conference have led to for organizing and reenergizing the Res- wait for someone else to do it. Remem- board for Massachusetts Lawyers Week- discussions about the formation of the idential Conveyancing Bar to focus on ber the old adage: “If you want something ly. Peter will share his seasoned per- Residential Conveyancing Committee. On many of the issues that affect closing at- done right, do it yourself.” Thank you.

Unit owners must work together to enforce condo claims for defective design and construction

Continued from page 6 generally not yet have been formed at analyzed, it will be necessary to isolate tained by the time the complaint is filed, potential causes of action relative to con- that point. It would therefore be unfair to any particularly technical issues with if not sooner. Construction litigation is struction, particularly with respect to allow the statute to commence to run which consultant assistance will be nec- document intensive and construction ex- those defects that impact the common during construction. essary. If there is any risk that the statute perts are quite useful during document areas, must be undertaken. If discovery of such defects occurs pri- of limitation poses a threat to a con- discovery. The statute of limitations begins to run or to substantial completion, the three- struction related claim, overtures must An expert will be most effective if he when the plaintiff has notice that an injury year statute of limitations for claims to be made to the developer, contractor and or she has been retained and has re- has occurred and is not delayed until the be advanced by a condominium associ- the design professional of record imme- viewed the alleged construction defects plaintiff is aware of all of the facts giving rise ation is triggered by the election of in- diately to execute tolling agreements. in a comprehensive and detailed fashion to the cause of action. As such, a condo- dependent managers to the association Demand should be made upon the de- prior to the inception of paper discovery; minium association’s knowledge of the ex- (as opposed to board members ap- veloper and the general contractor to issues identified by the expert will help istence of the defects rather than the cause pointed by the developer). remedy any defective construction, neu- frame the scope of any discovery re- or remedy for such defects (or knowledge In Beaconsfield Townhouse Condo- tralizing any potential failure to mitigate quests and will provide focus for the re- of the identity of the potential defendants) minium Trust v Zussman, et al., 49 Mass. defense that either could raise if litiga- viewers of the copious documents like- will ordinarily trigger the statute. App. Ct. 757, 761 (2000), the Massa- tion is ultimately instituted. Accordingly, ly to be produced. This may be problematic for a associ- chusetts Appeals Court made clear that estimates should be obtained as quick- Statutory deadlines like those imposed ation in that construction defects may be by “independent” it means persons “oth- ly as possible for the comprehensive pro- by M.G.L. c.260, §2B will deprive a con- observed by certain condominium own- er than [the developers] or their em- gram of remedial work that the associa- dominium association of a judicial rem- ers but are not promptly communicated ployees.” In some cases, a sophisticat- tion will be required to undertake to the edy for expensive construction defects to the individual or individuals that are ed condominium will be comprised of extent that neither the general contrac- for which the contractor or architect responsible for the prosecution of the as- several secondary condominiums. tor nor the developer is prepared to rem- would otherwise be responsible. The as- sociation’s claims. While courts may be The date the statute of limitation com- edy the items of defective construction. sociation’s fact-finding and claim analy- hesitant to dismiss a significant matter mences to run for common area claims These estimates will likely provide a sis must start as soon as is reasonably on the basis of the running of the statute in the secondary condominium units may starting point for any subsequent nego- possible in order to promptly identify all of limitations, it is critically important that vary according to the dates of the elec- tiations with the developer or the gener- known or knowable construction defects the association develop close commu- tion of independent managers for each al contractor. Again, as the association to assess the potential impact of the nication with each of the unit owners so such secondary condominium. If coordi- assesses its potential damages, every ef- three-year statute of limitations and six- that any discoverable common area nated action is being considered by the fort should be made to communicate year statute of repose on its claims. claim is reported to the association and primary and secondary condominium as- with the unit owners so that each poten- Such early planning will also likely in- acted upon in a timely fashion. sociations, litigation strategy must be dic- tial item of damage can be quantified. crease the association’s likelihood of Building defects that become known tated by the most imminent statute. In the event that it is necessary to in- success on the merits of its claims for during construction present an addition- After the initial identification of the po- stitute a lawsuit or lawsuits against the negligent design, construction, and al consideration, as the association re- tential construction claims has been developer, contractor or design profes- breach of the implied warranty of habit- sponsible for pursuing the claims will made and the accrual dates have been sional, technical experts ought to be re- ability if the case is ultimately tried.

The Real Estate Bar Association for Massachusetts Summer 2004 REBA News • 17 Right of first refusal has limited use where premises are packaged with other properties

Continued from page 4 pert economist” had opined to). Kenmore’s sole duty was to notify Uno of Boston Kenmore and Coles, it may have While the broker who presented Coles’ The trial judge further found that there the offer in accordance with its terms. Be- come to a different conclusion. offers to Boston Kenmore was related to had been no collusion between Boston cause (i) Boston Kenmore had not set a Nevertheless, the Court’s ruling demon- Boston Kenmore’s president, no evi- Kenmore and Coles, that their transac- price for the building, (ii) Coles’ offer was strates the limited value of a general right dence was presented at trial indicating tion was arm’s length, and that there was unsolicited, and (iii) there was no evidence of first refusal. The Court pointed out that that there was any collusion between no Chapter 93A violation. Both parties that Boston Kenmore attempted to influ- a prospective purchaser has no obligation Coles and Boston Kenmore with respect appealed these rulings and the SJC took ence Coles’ allocation of the price of Unit to offer a fair market price; and the exis- to allocation of the purchase price or any the case on direct appellate review. 103, Boston Kenmore did not breach any tence of a right of first refusal serves to en- attempt to defeat the right of first refusal. obligation to Uno. courage the buyer to offer the highest pos- Furthermore, Coles testified that it al- Court’s Reasoning The Court recognized that had there sible price. The Court stated, “[r]ights of located the purchase price between Unit The Court (rejecting the 93A claim) first been evidence of a gross degree of dis- first refusal provide the weakest protection 103 and the remaining units based on its distinguished between a right of first refusal proportion between the purchase price of all possible option arrangements.” Id. at own calculations of the value of the re- and an option to purchase, opining that a for Unit 103 and that for the other units, 389, citing Miller v. LeSea Broadcasting, spective units, rather than on an objec- right of first refusal merely requires a sell- a breach of the covenant of good faith Inc., 87 F.3d 224, 226 (7th Cir. 1996). tive appraisal. Boston Kenmore did have er to disclose to the holder of such right and fair dealing might have been found. The Court’s ruling in this case has ap- an appraisal completed for Unit 103, but any genuine bona fide offer to purchase However, the Court declined to opine as plicability not just in the condominium only after the purchase and sale agree- the subject premises. The Court found that to this issue because no evidence of such setting but also in any lease containing ment was executed. The appraisal so long as Coles intended to be bound by disproportion was presented. a right of first refusal. showed the value of Unit 103 to be be- its offer, such offer was bona fide. If an appraisal of all the units in the As more and more properties are tween $2,300,000 and $2,800,000. The Court, citing Mucci v. Brockton Boc- building (evidence of which was not of- bought and sold as part of multi-site pack- Once the purchase and sale agree- ce Club, Inc., 19 Mass. App. Ct. 155, 158 fered) had disclosed an obvious egre- age deals and multi-property sale lease- ments were executed, Boston Kenmore (1985), rejected Uno’s argument that gious disproportion in allocation of the back transactions, the lease drafter rep- gave the appropriate written notice to Coles’ offer was not bona fide because the purchase price, the Court may have seen resenting a tenant holding a right of first Uno of Coles’ offer to purchase Unit 103, offer for the remaining units in the building fit to find a breach of the covenant of refusal should consider including explicit including the purchase price and a copy was contingent on the sale of Unit 103, and good faith and fair dealing. Similarly, it requirements as to purchase price alloca- of the purchase and sale agreement. Uno determined that Coles, with no contractu- appears clear that had the Court found tion in the event the subject property is in- responded by “purporting to exercise its al relationship with Uno, had no obligation sufficient evidence of collusion between cluded in a multi-property transaction. right of first refusal by offering to pay to submit an offer within the limits of what $1,390,200 for Unit 103.” Id. at 381. Uno might have been willing to pay. Uno stated in its notice that the In fact, the Court stated that Coles was REBA Membership Application $2,800,000 purchase price represented a competitor for the property, and “[n]oth- ing precluded Coles from trying to outbid an “inflated allocation” of the total pur- New 2004 Membership Renewal of Existing Change of Address/ chase price to Unit 103, that was in- Uno by offering a price that Uno was un- Membership for 2004 Telephone/Fax Only tended to deny Uno its right to exercise likely to match.” Id. at 384. So long as the right of first refusal. Uno further stat- Coles was willing to close on its offer, the NAME: ______ed that the implied covenant of good faith offer was bona fide. FIRM: ______and fair dealing required Boston Ken- The Court then turned to the alleged ADDRESS: ______breach of the covenant of good faith and more to protect Uno’s ability to exercise CITY/TOWN: ______COUNTY: ______STATE: _____ ZIP: ______its right of first refusal effectively. fair dealing, addressing Uno’s contention TELEPHONE: ______FAX: ______Like Coles, Uno offered no evidence that Boston Kenmore had an obligation that its offer was based on the appraised to re-allocate the purchase price Coles E-MAIL: ______market value of Unit 103 or any ratio that offered for the entire building based on the appraised value of Unit 103 bore to the relative values of Unit 103 and the Check Membership Category: the remainder of the building, but rather remainder of the building. $ 195 Voting Member (Attorneys admitted to Massachusetts Bar) its offer represented 9.93 percent of the The Court stated that while the covenant Year Admitted to the Massachusetts Bar ______And BBO#______aggregate purchase price for Unit 103 of good faith and fair dealing is implied in $ 125 Voting Member (Attorneys admitted to Mass Bar w/i last 3 years) and the building, based on the ratio of all contracts, it “may not . . . be invoked to Year Admitted to the Massachusetts Bar ______And BBO#______create rights and duties not otherwise pro- the assessed value of Unit 103 to the as- $ 195 Associate sessed value of the entire building. vided for in the existing contractual rela- Profession: Paralegal, Librarian, Title Examiner, Surveyor, Other:______Uno commenced a civil action to en- tionship . . ..” Uno at 385. The Court stat- join the sale to Coles and, after injunctive ed that had Uno desired some degree of $ 75 Full-time Law Student (Include photocopy of current student ID card.) relief was denied, Boston Kenmore pro- certainty with regard to its right of first re- ceeded to close on the sale of Unit 103 fusal, Uno could have bargained for it. $ 10 Optional: Imprinted 3-ring binder. and the remaining units to Coles. Uno The Uno lease required only that Uno Large enough to hold all of the REBA Standards & Forms continued its action against Boston Ken- be notified of any offer and did not con- more, seeking contract damages for a tain any requirements or methodology for _____ Enclosed is my check for $ ______breach of the right of first refusal and the allocating an offer made on the entire _____ Please charge my _____ Master Card _____ Visa for $ ______covenant of good faith and fair dealing, building between Unit 103 and the other Card No: ______and also alleging a G.L. c. 93A violation. units. While Boston Kenmore may have Expiration Date:______Signature:______A jury found in favor of Uno on the had an obligation to allocate a certain per- count of breach of the covenant of good centage to Unit 103 of any purchase price Please send this completed application with appropriate fee to: faith and fair dealing, and also found that Boston Kenmore set for the building, it was Real Estate Bar Association for Massachusetts 50 Congress Street, Suite 600 Coles’ offer was not bona fide and award- not obligated to re-allocate an unsolicited Boston, Massachusetts 02109-4075 ed Uno $350,000 in damages (less than offer made by a third party. Tel: (617) 854-7555 or (800) 496-6799 Fax: (617) 854-7570 the $750,000 in damages that Uno’s “ex- Accordingly, the Court found that Boston

The Real Estate Bar Association for Massachusetts 18 • REBA News Summer 2004 Defeat of effort to allow non-lawyers to handle closings highlight of busy legislative year Continued from page 1 sions, as presented. provisions with federal law. The central mittee until this year, when he turned recording at registries of deeds, subject The Joint Committee on Taxation instead DOR registry continues to be under study. over the reins to Bob Kelley. The 2003- to data access by terminals at the reg- recommended H. 4728, to include REBA- REBA president-elect Dan Ossoff 2004 term has been a varied and active istries. REBA objected to these provi- recommended conformance of state lien served as chair of the legislation com- one for the committee. Status report of the 2003-2004 Massachusetts legislative session

Through REBA’s Legislation Committee ommends further study. See also S. 2386 REBA’s omnibus mortgage dis- mittee on Banks and Banking and Board of Directors a significant num- H. 2104 (REBA position: support) charge reform bill, co-spon- recommends ought to pass; ber of pending bills are reviewed and po- sored by Senators Andrea Nu- House Committee on Bills in S. 1011 Prohibits any claim other than sitions taken on behalf of REBA. Technical ciforo and Steven Panagiotakos Third Reading. (Similar provi- for fraud against any attorney advice is also made available to the Mass- and Representatives Robert sion appears in S. 2386, above) rendering a title opinion or any achusetts House and Senate from time to DeLeo, Christopher Fallon and prior record owner, by subro- H.4400, §§ 224, 225 (as appearing in time. Changes in bill status since the last James Vallee. Status: Referred gation or otherwise, on behalf House FY2004 Budget) incor- update are shown in bold type. to the Joint Committee on of a title insurer that has paid a porated H. 3732 For copies of legislation visit the Legisla- Banks and Banking claim. Status: Committee on the Governor’s Message to ex- ture’s website: www.state.ma.us/legis. Judiciary recommends further H. 177 Requires a mortgagee that has re- pand the scope of the state’s study. (REBA position: oppose) ceived payment in accordance lien for medical assistance Priority List with its payoff statement to record S. 1857 Proposes 50-year statute of lim- benefits (MassHealth) to in- S. 6 Makes execution authority re- the discharge of mortgage. Sta- itations under MGL c.40, §54A clude joint property and oth- quirements for subordination tus: Joint Committee on the Judi- relative to statutory restriction er non-probate estate proper- of mortgage parallel with those ciary recommends further study. on land in or appurtenant to old ty of a decedent recipient. for assignment or discharge of railroad rights-of-way. Status: H. 180 Permits certain corporations to Status: St. 2003, c. 26, §§ 329, mortgage. Status: Joint Com- Joint Committee on Trans- perform real estate closings, 330. (amended to include mittee on Banks and Banking portation recommends further notwithstanding statutory pro- REBA’s technical amendments recommended ought to pass; study. (REBA position: support) hibition on the practice of law limiting the lien to the dece- Senate Committee on Bills in by non-attorneys. Status: Com- dent’s interest in Third Reading. (REBA position: S. 1949 Supplemental Appropriations Bill, mittee on the Judiciary recom- and protecting record title- support) which included increases in mends further study (H. 4609). holders.); effective date post- recording fees and authorized the S. 118 Requires expanded disclosures (REBA position: oppose) poned to July 1, 2004. See St. use of single-member LLC’s in by sellers of residential proper- 2003, c.140, § 110. House Massachusetts. Status: St. 2003, ty and exonerates brokers and H. 743 Enacts a good and clear record and Senate have voted to re- c.4, which included REBA -sup- lenders from liability in the ab- and marketable title act. instate former limitation to ported provisions to: make sence of actual knowledge. Sta- (Landowners Title Protection probate estate, as an amend- recording/registration fees for un- Act). See also S. 966. Status: tus: Joint Committee on Com- ment to FY 2005 State Bud- registered land and registered Joint Committee on the Judi- merce & Labor. (REBA position: get, effective July 1, 2004. land uniform; simplify calculation oppose) ciary recommends ought to of fees (i.e. no more per-page fees pass. (REBA position: support) H.4485 Extends 6-year liens for state S. 983 Facilitates registration at the for deeds and mortgages); estab- taxes or child support to indef- H. 744 Requires a recital of the names Land Court of instruments ex- lish a $5 surcharge on fees to be inite duration; and creates cen- and addresses of owners of land ecuted on behalf of a corpora- dedicated to registry technology tral registry at state Department taken by eminent domain to be tion. Status: Joint Committee on and operating needs; delay effec- of Revenue for said liens in lieu included in the instrument of the Judiciary recommends tive date by 120 days (i.e., July 14, of recording at registries of taking. See also S. 960. Status: ought to pass; Senate Commit- 2003) for fee increases for mort- deeds, subject to data access Joint Committee on the Judicia- tee on Bills in Third Reading. gage discharges, releases and as- by terminals at the registries. ry recommends ought to pass; (REBA position: support) signments; establish a Registries See §§ 21-23, 25, 51, 66, 67. House Committee on Steering S. 985 Establishes a 50-year limitation Advisory Board, including all reg- Status: Joint Committee on Tax- & Policy. (REBA position: sup- on sand rights and other profits à isters of deeds. Two REBA repre- ation recommened H. 4728, port with amendments) prendre, subject to extension, ex- sentatives and representatives of to include REBA-recommend- cept that in no case shall any such other registry constituencies (e.g., H. 2731 Requires written payoff state- ed conformance of state lien interest in land expire any earlier banks, mortgage companies, title ment to be provided by a mort- provisions with Federal law. than three years from the legisla- insurers, real estate brokers) to ad- gagee or servicer within 5 days (REBA position: oppose H. tion’s effective date. Status: Joint vise both county and state regis- of a request by the mortgagor or 4485, as drafted.) Committee on the Judiciary rec- ters concerning technology plans. his designee. Status: Joint Com- Continued on page 19

The Real Estate Bar Association for Massachusetts Summer 2004 REBA News • 19

Continued from page 18 S. 1140 Establishes new procedural re- storage Status: St. 2003, c. 133, proceedings. Status: Passed by Executive Order No. 455 quirements in foreclosing resi- approved November 26, 2003. the House and Senate; returned by Governor Romney dential mortgages, including ex- by the Governor with an amend- Regulates conduct and duties of H. 191 Requires notice by a planning panded notice of debtor’s rights; ment that substitutes the text of notaries public, as revised, ef- board to interested parties of right to cure up to one day prior H. 3990; no further action. fective May 14, 2004. Estab- actions taken under § 81U of to the conduct of the foreclosure lishes the keeping of a Journal G. L. c. 41; and requires appli- H.1891 Provides new regulation of no- sale; non-responsibility of debtor by notaries public, but only as cants seeking approvals there- taries public, in part to curb the for mortgagee’s legal fees if de- a “best practice” for lawyers under by reason of failure of a unauthorized practice of law. fault is cured within 60 days of and for those employed by board to act, to notify the Status: Joint Committee on the mortgagee’s notice of intent to lawyers. See also amendment board and interested parties, Judiciary recommends further to FY 2005 State Budget, which foreclose; requirement of court in either case in time for ap- study. See also Romney Ad- exempted attorneys and their approval for foreclosure sale con- peals to be filed. Status: Joint ministration Executive Order staffs from the Journal require- ducted earlier than 180 days af- Committee on Local Affairs No. 455, above. ment. (REBA position: opposed ter notice of intent to foreclose; recommends ought to pass. H. 4059 Expands zoning protection for to the Journal requirement for requirement of a court determi- H. 381 Converts a Section 1 homestead lawful, non-conforming single- attorneys and their employees.) nation of fair market value of the property foreclosed in any suit for to a Section 1A homestead by family and two-family dwellings. deficiency; and post-foreclosure operation of law when the per- Status: Joint Committee on Local Other Legislation accounting requirements, in- son who has filed the Section 1 Affairs recommends ought to S. 103 Proposes new Massachusetts cluding relative to price upon any declaration of homestead reach- pass. resale by foreclosing mortgage es age 62. Status: Joint Com- Business Corporations Act. Sta- H.4217 Filed by the State Secretary, leg- holder within 18 months. Status: mittee on the Judiciary recom- tus: St. 2003, c.127, approved islation to authorize the use of November 26, 2003. (REBA rec- Joint Committee on the Judiciary mends further study. electronic notarization of in- ommended title-related amend- recommends further study. H. 893 Prohibits the use of plans pre- struments; passed by the House ments, which were included.) S. 1245 Sustainable Development Act. pared by unlicensed persons and Senate; vetoed by Governor. who purport to provide engi- S. 946 Establishes a Western Division Status: Joint Committee on Nat- (Veto Message, H. 4503, pend- neering or land surveying serv- of the Land Court, sitting in ural Resources. See also H. 4039: ing before the House for poten- ices. Status: Joint Committee on Worcester Status: Joint Com- Joint Committee on Local Affairs tial override vote.) See also Government Regulations rec- mittee on the Judiciary recommends ought to pass. Romney Administration Execu- ommends ought to pass; House tive Order No. 455, above. S. 964 Legislation relative to notice of S. 1250 Proposes a Massachusetts Land Committee on Bills in Third contract under M.G.L. c.254 Use Reform Act. Status: Joint Reading. H.4240 Omnibus legislation to amend and dissolution of mechanics Committee on Natural Re- M.G.L. c. 40B, to promote af- H. 1322 Establishes a recitation of statu- liens. Status: Joint Committee sources. See also S. 1174: Joint fordable housing and commu- tory powers for fiduciaries hav- on the Judiciary. Committee on Local Affairs rec- nity planning. Status: Recom- ing legal title to or control over ommends ought not to pass. mended by the Joint Committee S. 965 Legislation to relax the statute real or personal property for NOTE: Section 103 of Senate on Housing and Urban Devel- of limitations for use violations which there are environmental version of FY 2005 State Bud- opment; passed by the House under G.L. c. 40A, § 7. See also issues requiring action by the get includes new M.G.L. c. 40R, as H. 4715; Senate Committee H. 742. Status: Committee on fiduciary. Status: Joint Commit- which provides for local option on Ways & Means. the Judiciary. tee on the Judiciary recom- to authorize communities to mends further study. H.4320 Provides that the acquisition of S. 995 Increases the homestead exemption elect “smart growth” overlay a new homestead estate shall to $500,000. Status: Joint Com- districts with state incentives. H. 2192 Clarifies rights of mortgagees in not “defeat” or “discharge” a mittee on the Judiciary recom- assignments of rents and prof- S. 1251 Livable Communities Act. Sta- previous homestead of record. mended ought to pass; passed by its in real property. Status: Joint tus: Joint Committee on Natur- Status: Joint Committee on the the Senate; House Committee on Committee on Banks and al Resources. Banking recommended ought Judiciary recommends further Steering & Policy; also approved study (REBA position: opposed S. 2045 Recodifies certain statutory au- to pass; House Committee on by the Senate as an amendment as drafted.) to the Senate version of the FY thority of the Commissioner of Bills in Third Reading. 2005 State Budget. Banks in determining the pow- H. 2733 Requires as a precondition to H.4595 Directs the State Secretary to ers of state-chartered banks, in- promulgate regulations for the S. 1056 Creates an estate of homestead foreclosure of a mortgage on cluding by reference to the property owned by an individ- conductof notaries public and by operation of law and without Gramm-Leach-Bliley Act of ual age 62 or more, that a rep- the performance of their official the need for a recorded instru- 1999. Status: Joint Comm. on resentative of the mortgagee, duties; and requires certain dis- ment. See also H. 1319. Status: Banks and Banking recom- accompanied by an elders closures in advertising by non- Joint Committee on the Judicia- mended ought to pass; passed agency representative, visit the attorney notaries public. Status: ry recommends further study. by the Senate, with amend- property and explain the terms Joint Committee on the Judi- S. 1118 Requires construction mort- ments; House Committee on and conditions of the foreclo- ciary recommends ought to gage lien holders to fund ad- Ways and Means. sure. Status: Joint Committee pass; passed by the House. on Banks and Banking recom- vances for subcontractors, S. 2076 Gives legal effect to electronic mends ought to pass; House notwithstanding recording of signatures on contracts and oth- Robert H. Kelley, chairman of the REBA floor action pending. mechanics lien. Status: Joint er documents; and authorizes Legislation Committee and Edward J. Committee on the Judiciary governmental agencies to con- H. 3963 Establishes an Environmental Ap- Smith, REBA legislative counsel, compiled recommends further study. vert documents to electronic peals Board for review of DEP this status report.

The Real Estate Bar Association for Massachusetts 20 • REBA News Summer 2004 Potential pitfalls in special permit applications

Continued from page 9 the substantive issue was not before the perienced attorney can provide signifi- non-conforming dwellings that en- materials do not contain the certification court. Nevertheless, as that important is- cant value to the Board of Appeals croached upon the front-yard set-back of the town clerk required at the time of sue has been fully argued, we state our process. Failure to comply with statuto- requirement. The neighbors wished to filing by G.L. c. 40A, §9. Even where views thereon. See Wellesley College v. ry requirements could create costly and complete landswaps and reconstruct towns provide instructions to applicants, Attorney Gen., 313 Mass. 722, 731, 49 potentially irreversible damage. each of their homes so that the new the instructions do not always include N.E.2d 220; Paul, Livoli, Inc. v. Planning Sometimes it seems that zoning by- homes would conform with the applica- the requirement that the town clerk cer- Bd. of Marlborough, 347 Mass. 330, 336, laws (which vary from municipality to ble set-back requirements; but the lots tify the submission of the application. 197 N.E.2d 785.” municipality) are too esoteric for lay peo- would continue to be non-conforming Therefore, it is easy for a layperson to If an applicant is fortunate enough to ple to fully comprehend and appreciate. with regard to lot frontage. miss the requirement. receive a Special Permit, and the deci- Similarly, some attorneys who do not The attorney advised the client of the Procedural Steps Need sion is not appealed, the failure to obtain regularly practice in the area of land use necessity of having an Approval Not Re- the town clerk’s certification may be regulation may not appreciate some of quired plan prepared; the need for ap- To Be Followed cured by G.L. c.40A, §17, which states the eccentricities of the law. proval by the Board of Health of the sep- The leading handbook on zoning in that the judicial review afforded by the When I first entered private practice I tic system; the need for complete Massachusetts states, “Failure to ob- statute is an exclusive remedy. had the benefit of over ten years experi- estimates from the various contractors; serve the filing procedure set forth in the G.L. c.40A, §17. states: “[N]otwith- ence in state and local government, most the potential for a Special Permit from statute may have the effect of removing standing any defect of procedure or of recently as the town administrator in the the Board of Appeals to reconstruct a the matter from the jurisdiction of the notice other than notice by publication, town in which I practice. One of my first home on a non-conforming lot; and the granting authority.” Handbook of Mass- mailing or posting as required by this clients desired to expand his non-con- need for a comprehensive agreement be- achusetts Land Use and Planning Law, tween the two lot owners. The attorney 2nd Ed., Bobrowski, Mark, Aspen Law prepared a proposed landswap agree- & Business (2002) at page 298. ment and sent it to the client. Weeks lat- There is significant case law to support It is the rare layperson that can er the attorney heard that the client and the proposition that failure to meet the his neighbor had prepared and filed their procedural requirements for filing an ap- own Special Permit Application. When plication will render the permit invalid. comply with all of the statutory the attorney asked the client why they For example, the Supreme Judicial Court had chosen to proceed with the Special stated: “Since the notice did not meet the requirements regarding a Special Permit Application prior to the exchange standards of §17, the board’s action in of the landswap agreements, the client granting the permit was invalid and of no Permit Application. responded that he was trying to control effect.” Rousseau v. Building Inspector of legal fees and that the Building Inspec- Framingham, 349 Mass. 31, 37, 206 tor had informed him that it was unnec- N.E.2d 399, and cases cited. See also essary to engage an attorney to apply Planning Board of Peabody v. Board of chapter, and the validity of any action forming dwelling and I advised him that for the Special Permit. The attorney fol- Appeals of Peabody, 358 Mass 81, 260 shall not be questioned for matters re- it would be helpful to research the histo- lowed up with a cautionary letter to the N.E.2d 738 (1970). lating to defects in procedure or of no- ry of the zoning by-law as it applied to client and the attorney asked me if I The Supreme Judicial Court in Gal- tice in any other proceedings except with his house because there was the poten- thought he was being too persnickety. lagher v. Board of Appeals of Falmouth, respect to such publication, mailing or tial that his house was not lawfully pre- I responded that it is the rare lay per- 351 Mass 410, 221 N.E.2d 756 (1966), posting and then only by a proceeding existing. The Town did not maintain a son that can comply with all of the statu- stated: “Because of the lack of required commenced within ninety days after the comprehensive record of the history of tory requirements regarding a Special notice, the action by the selectmen was decision has been filed in the office of the zoning changes and I summarized how I Permit Application. Defects in the ap- invalid and without effect.” See also Kane city or town clerk, but the parties shall would conduct the research. plication could render the Special Permit v. Board of Appeals of City of Medford, have all rights of appeal and exception A month or so later I ran into the client invalid, or susceptible to challenge upon 273 Mass. 97, 104, 173 N.E. 1; Rousseau as in other equity cases.” and he explained that in order to avoid appeal. Naturally, there are other con- v. Building Inspector of Framingham, 349 A 1986 Supreme Judicial Court deci- additional legal fees, he had attempted to cerns about the parties proceeding with Mass. 31, 36-37, 206 N.E.2d 399.” sion reviewed the meaning of the above research the zoning history himself and landswaps without the prerequisite The court went to say, “a defect in the portion of Section 17, and determined that was upset that he had spent days trying agreement between the parties. general notice to the public cannot be the 90-day appeal period described in the to determine the applicable zoning. I ex- For example, a Special Permit appli- overcome by the appearance of some statute was “intended to limit the time for plained to him that I had never anticipat- cation will be defective if the application citizens and the absence of objection to filing a challenge to an action of a board ed that he would perform the research by materials do not contain the certification the notice. All citizens are entitled to the on the ground that a defect in procedure himself and that because of my familiar- of the town clerk required at the time of statutory notice and the opportunity to or notice had deprived the board of juris- ity with the Town’s records I could have filing by MGL Chapter 40A, Section 9. be heard after it is given. Compare Pit- diction over the matter.” Cappuccio v. Zon- conducted the research in a few hours. It Even where towns provide instructions man v. City of Medford, 312 Mass. 618, ing Board of Appeals of Spencer, 398 Mass was an important lesson in my early le- to applicants, the instructions do not al- 623, 45 N.E.2d 973 (defect in notice to 304, 496 N.E.2d 646 (1986). gal career. One has to be cautious about ways include the requirement that the certain persons all of whom appeared). Of course, there are other potential encouraging lay people to perform steps town clerk certify the submission of the “In the Rousseau case, supra, objection traps that could ensnare a lay applicant, that are best performed by an attorney application. Therefore, it is easy for a to the defective notice to an individual was including the failure to properly reference with appropriate experience. layperson to miss the requirement. The made at the hearing. There is no basis for the correct zoning provisions applicable I was reminded of this lesson when I leading handbook on zoning in Massa- contending that the hearing by the Fal- to the Special Permit (or Variance) ap- received a call from a colleague who was chusetts states that “Failure to observe mouth Board of Appeals cured the defect. plication. The curative provisions of Sec- concerned about a recent conversation the filing procedure set forth in the statute The Board of Appeals had no power to ex- tion 17 may not resolve such a defect. that he had had with a client. The client may have the effect of removing the mat- ercise the judgment granted to the Se- In summary, when one considers the and an abutter both had pre-existing ter from the jurisdiction of the granting lectmen and did not purport to do so. cost of real estate today, and the impor- non-conforming lots, both lots having in- authority.” Handbook of Massachusetts “Because of this jurisdictional defect tance of protecting one’s home, an ex- sufficient frontage. Both lots also had Continued on page 21

The Real Estate Bar Association for Massachusetts Summer 2004 REBA News • 21

Continued from page 20 ingham, 349 Mass. 31, 36-37, 206 N.E.2d 197 N.E.2d 785” Gallagher v. Board of Ap- sion reviewed the meaning of the above Land Use and Planning Law, 2nd Ed, Bo- 399. A defect in the general notice to the peals of Falmouth, 351 Mass 410, 221 portion of Section 17, and determined browski, Mark, Aspen Law & Business public cannot be overcome by the ap- NE2d 756 (1966). that the ninety (90) day appeal period (2002) at page 298. There is significant pearance of some citizens and the ab- If an applicant is fortunate enough to described in the statute was “intended to case law to support the proposition that sence of objection to the notice. All citi- receive a Special Permit, and the deci- limit the time for filing a challenge to an failure to meet the procedural require- zens are entitled to the statutory notice sion is not appealed, the failure to obtain action of a board on the ground that a ments for filing an application will ren- and the opportunity to be heard after it is the town clerk’s certification may be defect in procedure or notice had de- der the permit invalid. “Since the notice given. Compare Pitman v. City of Med- cured by MGL Chapter 40A, §17, which prived the board of jurisdiction over the did not meet the standards of §17, the ford, 312 Mass. 618, 623, 45 N.E.2d 973 states that the judicial review afforded by matter.” Cappuccio v. Zoning Bd of Ap- board’s action in granting the permit was (defect in notice to certain persons all of the statute is an exclusive remedy: peals of Spencer, 398 Mass 304, 496 invalid and of no effect. Rousseau v. whom appeared). In the Rousseau case, “…notwithstanding any defect of pro- NE2d 646 (1986). Building Inspector of Framingham, 349 supra, objection to the defective notice to cedure or of notice other than notice by Of course, there are other potential Mass. 31, 37, 206 N.E.2d 399, and cases an individual was made at the hearing. publication, mailing or posting as re- traps that could ensnare a lay applicant, cited. Gallagher v. Board of Appeals of There is no basis for contending that the quired by this chapter, and the validity of including the failure to properly reference Falmouth, 351 Mass. 410, 414, 221 hearing by the Falmouth Board of Appeals any action shall not be questioned for the correct zoning provisions applicable N.E.2d 756.” Planning Board of Peabody cured the defect. The Board of Appeals matters relating to defects in procedure to the Special Permit (or Variance) ap- v. Board of Appeals of Peabody, 358 had no power to exercise the judgment or of notice in any other proceedings ex- plication. The curative provisions of Sec- Mass 81,260 NE 2d 738 (1970). granted to the Selectmen and did not pur- cept with respect to such publication, tion 17 may not resolve such a defect. See Gallagher v. Board of Appeals of Fal- port to do so. Because of this jurisdictional mailing or posting and then only by a pro- In summary, when one considers the mouth, 351 Mass 410, 221 NE2d 756 defect the substantive issue is not before ceeding commenced within ninety days cost of real estate today, and the impor- (1966), which stated: “Because of the lack the court. Nevertheless, as that important after the decision has been filed in the of- tance of protecting one’s home, an ex- of required notice, the action by the se- issue has been fully argued, we state our fice of the city or town clerk, but the par- perienced attorney can provide signifi- lectmen was invalid and without effect. views thereon. See Wellesley College v. ties shall have all rights of appeal and ex- cant value to the Board of Appeals Kane v. Board of Appeals of City of Med- Attorney Gen., 313 Mass. 722, 731, 49 ception as in other equity cases.” MGL process. Failure to comply with statu- ford, 273 Mass. 97, 104, 173 N.E. 1. See N.E.2d 220; Paul, Livoli, Inc. v. Planning Ch 40A, §17. tory requirements could create costly Rousseau v. Building Inspector of Fram- Bd. of Marlborough, 347 Mass. 330, 336, A 1986 Supreme Judicial Court deci- and potentially irreversible damage. For REBA Members

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The Real Estate Bar Association for Massachusetts 22 • REBA News Summer 2004 ALTA adopts new form title insurance policy endorsements Continued from page 13 ers (equity holders) of the owning entity Endorsement Form 17 within the legal description of the land. This ership interests (direct or indirect) in the in exchange for a pledge of the equity “(Access and Entry) to either an Own- endorsement protects the insured against insured have been transferred to or ac- holder’s interest in the entity. er’s or Loan Policy loss if the land specifically identified is not quired by the Mezzanine Lender, either Since the real value of the equity hold- The Company insures against loss or assessed for real estate tax purposes un- on or after the Date of Policy. er’s interest in the entity is based upon damage sustained by the insured if, at der the tax identification numbers listed in 6. The Mezzanine Lender acknowl- the ownership by that entity of the real Date of Policy: (i) the land does not abut the endorsement or if those tax numbers edges: estate, the mezzanine lender wants to and have both actual vehicular and include any other land other than what is (a) that the amount of insurance un- make sure there is an Owner’s Policy in pedestrian access to and from [insert identified. This coverage should be rela- der this policy shall be reduced by any place and that the mezzanine lender is name of street, road, or highway] (the tively easy to underwrite. amount the Company may pay under somehow connected to the protections “Street”), (ii) the Street is not physical- any policy insuring a mortgage to which afforded by that policy. The mezzanine ly open and publicly maintained, or (iii) Endorsement Form 19 exception is taken in Schedule B or to lender does not have an insurable inter- the insured has no right to use existing “(Contiguity-Multiple Parcel) to either which the insured has agreed, assumed, est in the by the enti- curb cuts or entries along that portion of an Owner’s or Loan Policy or taken subject, or which is hereafter ex- ty so an owner’s policy cannot be given the Street abutting the land.” The Company insures against loss or ecuted by an insured and which is a to the mezzanine lender. This endorsement provides superior ac- damage sustained by the insured by rea- charge or lien on the estate or interest The mezzanine is not being granted a cess coverage than that provided by any son of: described or referred to in Schedule A, separate mortgage on the real estate to ALTA policy because it provides coverage (1) the failure [of the ______boundary and the amount so paid shall be deemed secure repayment of the mezzanine loan, for loss (a) if the insured doesn’t have both line of Parcel A] of the land to be con- a payment under this policy; and so a Loan Policy will not work either. Since actual vehicular and pedestrian access to tiguous to [the ______boundary line of (b) that the Company shall have the the entity has or is obtaining an owner’s and from a specifically identified street or Parcel B] [for more than two parcels, right to insure mortgages or other con- policy, the mezzanine lender will request road, and (b) if the street is not physical- continue as follows: “; of [the ______veyances of an interest in the land, with- this endorsement to the Owner’s Policy. ly open and publicly maintained. boundary line of Parcel B] of the land to out the consent of the Mezzanine Lender. The effect of issuing this endorsement is Additionally this endorsement provides be contiguous to [the ______boundary 7. If the insured, the Mezzanine Lender to assign to the mezzanine lender the right coverage for loss if the insured has no line of Parcel C] and so on until all con- or others have conflicting claims to all or to receive payments otherwise payable right to use the existing curb cuts or en- tiguous parcels described in the policy part of the loss payable under the Policy, to the insured under the policy. tries off of the street onto the land. This have been accounted for]; or the Company may interplead the amount The mezzanine lender is not an insured is much better coverage than the other (2) the presence of any gaps, strips or of the loss into Court. The insured and the but it stands to receive payments that would non-ALTA endorsements that have been gores separating any of the contiguous Mezzanine Lender shall be jointly and sev- otherwise go to the insured in settlement of in the marketplace for years. Our cus- boundary lines described above.” erally liable for the Company’s reason- a claim. If there is a title problem with the tomers should welcome this coverage. This endorsement is for use where the able cost for the interpleader and subse- land and the insurer decides to settle the When this endorsement is issued, spe- land described in the policy is made up quent proceedings, including attorneys’ claim, it would make that payment to the cial underwriting may be required. of several separately described parcels fees. The Company shall be entitled to mezzanine lender before the insured. that to have contiguous boundaries. What payment of the sums for which the in- The mezzanine lender should also ob- Endorsement Form 18 boundary of a given parcel is contiguous sured and Mezzanine Lender are liable un- tain a UCC title insurance policy with ap- “(Single Tax Parcel) to either an Own- to what boundary of another? There may der the preceding sentence from the funds propriate endorsements from one of the er’s or Loan Policy be strips, gaps, or gores between the re- deposited into Court, and it may apply to title insurers that offers that product so it The Company insures against loss or spective contiguous boundaries. the Court for their payment. is insured against loss if the equity hold- damage sustained by the insured by rea- This endorsement insures against loss 8. Whenever the Company has settled ers do not own the equity in the entity and son of the land being taxed as part of a if the boundaries described in the en- a claim and paid the Mezzanine Lender the mezzanine lender’s security interest larger parcel of land or failing to consti- dorsement are not contiguous and if pursuant to this endorsement, the Com- in the equity does not attach or have the tute a separate tax parcel for real estate there are any strips, gaps, or gores sep- arating the contiguous boundaries de- pany shall be subrogated and entitled to priority as insured. This endorsement tax purposes.” scribed in the endorsement. Many con- all rights and remedies that the Mezza- does not provide any UCC protections. This endorsement provides that the land nine Lender may have against any per- tiguity endorsements that have been in This endorsement provides mezzanine described in the policy is a single and sep- son or property arising from the Mezza- the industry for years do not adequate- lender greater coverage under certain cir- arate tax parcel and not part of a larger nine Loan. However, the Company ly describe the coverage sought or giv- cumstances than the Owner’s Policy be- parcel of land. It should be relatively easy agrees with the Mezzanine Lender that it to issue from an underwriting perspective. en. Whether a survey will be required to cause it contains “nonimputation cover- shall only exercise these rights, or any give this coverage is something that each age” and “fairway coverage” that are not right of the Company to indemnification, Endorsement Form 18.1 underwriter will have to determine based typically part of the owner’s coverage. against the insured, the Mezzanine Loan “(Multiple Tax Parcel) to either an upon his or her underwriting standards. borrower, or any guarantors of the Mez- This endorsement also has a signature Owner’s or Loan Policy zanine Loan after the Mezzanine Lender block for the insured to consent to issu- 1. The Company insures against loss Endorsement Form 19.1 has recovered its principal, interest, and ing this endorsement that assigns to the or damage sustained by the insured by “(Contiguity-Single Parcel) to either an costs of collection.” mezzanine lender the benefits the insured reason of: Owner’s or Loan Policy This endorsement may be used either would otherwise receive for payment of those portions of the land identified be- The Company insures against loss or with an existing Owner’s Policy or a new loss. This poses the same issue dis- low not being assessed for real estate tax damage sustained by the insured by Owner’s Policy in a transaction where an cussed regarding the Form 15.1 en- purposes under the listed tax identifica- reason of: entity owns the land and is borrowing dorsement. Make sure the consent block tion numbers or those tax identification (1) the failure of the land to be con- money. The entity may be giving a mort- is signed by the insured. numbers including any additional land; tiguous along its ______boundary line to gage on the land and providing a loan ti- This endorsement to the Owner’s Title the easements, if any, described in [describe the land that is contiguous to tle insurance policy for the mortgage. Insurance Policy, together with a UCC ti- Schedule A being cut off or disturbed by the “land” as defined in the policy by its There may also be a mezzanine loan tle insurance policy covering the owner- the non-payment of real estate taxes or legal description or by reference to a given either to the same lender making ship of and security interest in the equi- assessments imposed on the servient es- recorded instrument – e.g. “ . . . that cer- the real estate loan or to a totally differ- ty holder’s interest in the entity is tate by a governmental authority.” tain parcel of real property legally de- ent lender. The mezzanine loan is made something that all mezzanine lenders will The Form 18.1 is similar to Form 18 but scribed in the deed recorded as Instru- to the partners, members, or sharehold- need to have well-rounded coverage. deals with multiple tax parcels included Continued on page 23

The Real Estate Bar Association for Massachusetts Summer 2004 REBA News • 23

Continued from page 22 describe the adjacent uninsured parcel and pleted. The Forms Committee is also ALTA 1992 Loan Policy that will give even ment No. ______, records of ______describe what boundary of the insured land working on some other endorsements as better coverage to our insureds. County, State of ______]; or is contiguous to what boundary of the unin- well as policy revisions, which hopeful- As the needs and demands of our cus- (2)the presence of any gaps, strips or sured parcel described in this endorse- ly will be completed and approved for tomers change with time, it is very impor- gores separating the contiguous bound- ment. This endorsement also provides cov- adoption by the ALTA Board of Gover- tant for the industry to keep moving forward ary line described above.” erage if there are any strips, gaps, or gores nors in the near future. with the development of new and innova- This endorsement is issued only when separating the two parcels along the con- There is another access endorsement tive forms. The ALTA Forms Committee will there is a single parcel described in the tiguous boundaries described. dealing with access to a public street over continue to be responsive to those needs. policy and the insured wants coverage a private easement. Yet another deals with that the land described in the policy is What’s Next? first-loss issues. We are also working on contiguous to some other land that is not While the creation and adoption of mobile home issues and modifications to www.massrelaw.org described or insured in the policy. these new forms will help move our in- the ALTA Form 7 endorsement. We are It is necessary for the endorsement to dustry forward, our task is not yet com- also working on a major revision to the

‘Predatory lending’ a priority for lawmakers

Continued from page 5 high-cost loan shall be subject to all af- before the date fixed for payment, any ad- 3 percent of the amount of principal and quent high cost home mortgage loan un- firmative claims and defenses. There are ditional amount to be paid shall be the interest overdue. less the lender reasonably believes that at specific situations where the subsection balance of the first year’s interest, or three Chapter 183, Section 66, is amended the time the loan is consummated, that the shall not apply. months’ interest, which ever is less. by eliminating add-ons that a lender may borrower will be able to make the sched- Section 18 of the Bill requires the lender However, if prepayment is made with- finance such as life or disability insurance. uled payments to repay the obligation. making a high-cost home mortgage loan in 36 months from the date of the note Chapter 183 is further amended by The high cost home mortgage loan to obtain a declaratory judgment in a for the purpose of refinancing with an- adding Section 69, 70 and 71. shall not contain any provision for pre- court of competent jurisdiction prior to in- other financial institution, an additional The new Section 69 prohibits a mort- payment fees or penalties. voking a non-judicial power of sale. payment not in excess of three months’ gagee from charging simple interest on The high cost home mortgage loan shall The declaratory judgment must pro- interest may be required. a mortgage loan. Simple interest is de- not include the financing of points and fees fined as interest, which is computed on in excess of 5 percent of the total loan the principal balance of a mortgage loan amount or $800, whichever is greater. The REBA Legislation Committee is following from time to time outstanding. A high cost home mortgage loan shall As payments are received, interest is not contain a provision that increases the the bill pending in the Legislature that would charged for the number of days since the interest rate after default. last payment with the remainder of any A high cost home mortgage loan shall prohibit abusive home mortgage lending payment, if any, applied to the principal not contain a scheduled payment that is balance. more than twice as large as the average practices, and will offer input on sections Section 70 notes that a lender making of earlier scheduled payments. a home mortgage loan shall report both A high cost home mortgage loan shall impacting foreclosure and conveyancing issues. the favorable and unfavorable payment not contain a demand feature that permits history of the borrower to a national rec- the lender to terminate the loan in advance ognized consumer credit bureau at last of the original maturity date, except in spe- vide that the lender is the proper party No prepayment fee or additional penal- annually if the lender regularly reports cific circumstances such as fraud by the in interest to invoke the power of sale or ty of any kind shall be payable by a mort- information to a credit bureau. consumer or failure by the consumer to other remedy and that the grounds for gagor if the mortgage note is paid in full Section 71 provides that the lender meet repayment terms of the agreement exercising the power of sale or other rem- after 36 months from the date of the note. shall not compensate, coerce or intimi- for an outstanding balance. edy have been fully satisfied. The proposed Section 56 also notes date an appraiser for the purpose of in- A lender shall not charge a borrower a In this case, the borrower will have the that whenever a prepayment penalty fluencing the independent judgment of fee or other charge to modify or amend right to assert in the proceeding the may be charged on a mortgage loan, the the appraiser with respect to determin- a high cost home mortgage loan. nonexistence of a default or any claim or lender shall provide to the borrower at ing the value of real estate to be covered A high cost home mortgage loan shall defense to the foreclosure, including vi- settlement a disclosure statement that by a mortgage loan. not include terms pursuant to which olations of this Chapter 167I. describes the prepayment penalty; sets Section 2 of Chapter 255D is amend- more than two periodic payments re- forth the circumstances in which a pre- ed by adding a paragraph which provides quired under the loan are consolidated Further Amendments payment penalty will be assessed; and that any person who sells or agrees to and paid in advance from the loan pro- The Bill further amends the following states the amount of the prepayment sell goods or services or both or mer- ceeds provided to the borrower. statutes. penalty that would be required if the loan chandise certificates and such sale is se- No lender shall make a high cost home Chapter 183 is amended by adding was paid in full within 36 months of the cured by a mortgage shall first obtain mortgage loan that provides for manda- Section 28C which provides that a lender date of the note. from the Commissioner a license under tory arbitration or limits the right of the shall not knowingly make a home loan Chapter 183 is amended by striking Chapter 255E. borrower to seek judicial relief. if the home loan pays off all or part of an out Section 59 and inserting a new Sec- Section 8 of Chapter 255E is amend- A lender shall not pay a contractor un- existing home loan or other debt of the tion 59 which states that there will be no ed by requiring mortgage lender that has der a home improvement contract from borrower, unless the refinancing is in the late charge or late payment penalty un- made 50 or more home mortgage loans the proceeds of a high cost home mort- borrower’s interest. The section lists spe- less such penalty is authorized in the loan in the last calendar year to be examined gage loan unless the loan is jointly made cific factors to be taken into account to documents. It further states that no mort- for its compliance with fair lending laws. to the borrower and contractor or at the determine if the refinancing is in the bor- gagee may assess a late charge for any The REBA Legislation Committee has election of the borrower through a third rower’s interest. payment paid within 15 days or, in the been following the course of this legisla- party escrow agent. Chapter 183 is amended by striking out case of a bi-weekly mortgage, paid with- tion and will offer input particularly on The statute further provides that any Section 56 and inserting a new Section in 10 days from the date such payment those sections which impact foreclosure person who purchases or is assigned a 56 which provides that if the note is paid is due. Further, no penalty may exceed and conveyancing issues.

The Real Estate Bar Association for Massachusetts 24 • REBA News Summer 2004 SJC ruling dramatically alters rights between landowners and easement holders

Continued from page 7 the decision and sought direct appellate location meets the criteria set forth in not prevent parties to any future ease- landowner filed an action in the Massa- review by the SJC. the Restatement Rule and the ease- ment from incorporating consent re- chusetts Land Court seeking a declara- In rendering its decision, the SJC ment holder would then have an op- quirements into their agreement at the tion from the court that it had the right made it clear that, if the parties are un- portunity to demonstrate to the court time the easement is created. to relocate the easement, but the Land able to reach a meeting of the minds whether the proposed alterations will In addition, under existing Massachu- Court judge ruled against the landown- on the relocation of an easement, the cause it damage. setts common law, an easement holder er stating that, once the location of an landowner may not resort to self-help The holding of this case will not affect may not unilaterally relocate an ease- easement has been fixed, it cannot be remedies. Instead, the SJC ruled that any existing easement that specifically ment and nothing in this decision changed without the consent of the ease- the landowner should seek a declara- provides it cannot be relocated without changes that obvious and sensible re- ment holder. The landowner appealed tion from a court that the proposed re- the easement holder’s consent and does striction on an easement holder’s rights.

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The Real Estate Bar Association for Massachusetts