Real Estate

The Homestead exemption applies to a person’s principal residence and protects that residence against the claims of certain creditors, more particularly set forth in the statute, G.L. c. 188. A person can only have one principal residence, and thus, can only have one Homestead. Massachusetts has recently enacted changes to the Homestead statute which now provides for an automatic homestead exemption of $125,000 per owner, subject to certain limitations and requirements of the statute. However, the statute also now provides that a person can increase the Homestead exemption from $125,000 to $500,000 upon the recording of a Declaration of Homestead with the Registry of Deeds. Certain persons (such as disabled individuals, and elderly persons over 62 years of age) can, in some instances, increase the total Homestead exemption protection to $1,000,000. In order to take full benefit of the statute, a written Declaration of Homestead must be recorded in the appropriate Registry of Deeds or Registry District of the Land Court.

Statutory changes also now provide that two (2) Homesteads can be recorded by husband and wife owners (the statute formerly permitted only one such Declaration of Homestead by married individuals) and also provide that the Homestead exemption protection against certain claims of creditors, which claims were not in existence at the time the Homestead became effective, can now be carried forward for defined periods of time to protect the sale proceeds following the sale of the home, or to protect proceeds due following damage as a result of fire or another casualty, on a principal residence which formerly had the benefit of an estate of Homestead.

The Homestead no longer needs to be subordinated to a new (refinanced) mortgage being recorded against the principal residence, since by statute the Homestead now is automatically subordinated to a new (refinanced) mortgage.

There are now additional categories of persons (i.e., beneficiaries of trusts, tenants and other persons) who now can take advantage of the protection afforded by the Homestead statute. The Massachusetts Homestead statute is complicated, and a consultation with an attorney, at Coogan Smith, LLP, is highly recommended, to take full advantage of its protection.

An individual can own real estate in his or her individual name, and two or more individuals (subject to a special category for spouses which is addressed later on) can hold title either as joint tenants or as tenants in common. A tenancy in common affords each owner an undivided percentage interest in the real estate, as described in the deed pursuant to which title is acquired. For instance, if three individuals own property as tenants in common, and there is no percentage of ownership indicated in the grantee clause in the deed pursuant to which they acquired ownership to the property, then each such tenant in common holds a 1/3 undivided interest in the whole of the real estate. However, if the parties so elect, different percentages for each tenant in common can be set forth in the deed, such as for example, two of three tenants holding a 40% undivided interest in the property, and the remaining tenant in common holding a 20% undivided interest in the property.

There are no rights of survivorship with a tenancy in common, which means that upon the death of a tenant in common, his or her interest in the real estate does not pass to the surviving tenants in common, but rather passes either through the laws of intestacy to the heirs at law of the deceased tenant in common or in accordance with his or her devise under his or her last Will, if the person dies leaving a duly executed will which gets probated.

In the instance of a joint tenancy, each joint tenant acquires an undivided interest in the property as to his or her percentage interest. Similar to a tenancy in common, if three individuals own real estate as joint tenants, each owns an undivided 1/3 interest in the property. In the instance of a joint tenancy, and unlike a tenancy in common, upon the death of one of the joint tenants, the surviving joint tenant or tenants automatically take title to the deceased joint tenant’s real estate. In this instance, the deceased joint tenant’s interest in the real estate passes automatically to the surviving joint tenants and does not pass in accordance with laws of intestacy nor in accordance with a devise under a Will.

Most husbands and wives take title to real estate in a form of ownership known as a tenancy by the entirety, which is a form of joint tenancy, with rights of survivorship to the surviving spouse; however, the tenancy by the entirety form of ownership also affords the married owners additional protection against the claims of certain creditors. For instance, if a husband and wife owned a piece of property as tenants by the entirety, and one of the spouses incurred debt which resulted in a lien being placed against the property (provided that debt was not incurred to provide necessities to the other spouse or the spouses’ children), then upon the death of the debtor spouse, the lien is eliminated as to the non-debtor spouse by virtue of the automatic passage of title to the surviving spouse.

There are also other types of ownership of real estate, such as the corporate entity, a limited liability company, a partnership, or holding title in the name of a Trustee of a trust, or in the name of the trust, and all of these types of entities have their unique features and requirements. It is best to consult with legal counsel, at Coogan Smith, LLP, prior to acquiring ownership to a parcel of real estate in order to determine the best means by which title should be held by the party or parties acquiring the real estate.

When multiple owners of real estate, subject to some limitations as noted below, cannot agree to sell their real estate or to physically divide a parcel of real estate that is capable of being physically divided, then one or all of the owners of the property can bring a petition through the court (typically in either the Probate Court or the Land Court), pursuant to G.L. c. 241. The petitioning party requests that the court order that the real estate be sold, or that it be physically divided if the real estate is capable of being physically divided. Such a proceeding as described above is known as a partition action.

Certain types of real estate ownership or owners are not subject to having a petition to partition commenced against them, such as a husband or wife owning property as tenants by the entirety and such as real estate held in certain types of trusts.

While it is customary to acquire real estate by a deed or by devise through a probate estate, or under the laws of intestacy, a person can also acquire title to real estate under a theory of ownership based upon a statute of limitations, which is known as adverse possession, requiring that a person, or his or her predecessors, be in exclusive possession for a minimum of 20 years of real estate and also requiring that the person looking to establish title to real estate by adverse possession, establish in court that the use was open, notorious, exclusive, actual, nonpermissive and adverse to the claims of the owner of said real estate for the aforesaid minimum 20-year period of time. Any person looking to establish title to the real estate by adverse possession is charged with the burden of proving all of these elements, and thus, an action in court, either in the Superior Court or the Land Court, is the usual forum for such an adverse possession proceeding. If the person looking to establish title by adverse possession is using the subject property with the permission of the actual owner of the real estate, then an action for adverse possession will not be permissible, and furthermore, if the land that the claimant is looking to establish adverse possession to is registered land (sometimes known as Land Court property), then an action for adverse possession will not be possible either, since registered land is not subject to an adverse possession claim pursuant to long-established law in the Commonwealth of Massachusetts.

Adverse possession allows the claimant to “tack on” the use and activity of persons using the property prior to the claimant’s acquisition/use of the property. For instance, in a situation where a person looking to establish title to real estate by adverse possession, acquired the property from a grantor who also was in the process of acquiring the title by adverse possession, then the new owner/claimant can “tack on” the prior owner’s period of adverse possession and use for purposes of establishing the required nonpermissive and continuous 20 years of use.

When a person who owns real estate passes away, depending on the manner on which the title to the real estate was held, a number of issues become necessary to address following such a person’s death. If the title is held as a joint tenant or as a tenant by the entirety, the title to the real estate passes automatically to the surviving joint tenant (tenants) or the surviving spouse. In a tenancy by the entirety situation, there is no need for the deceased person’s estate to be probated in order to pass title to the real estate to the survivor. However, if the title to the real estate is held as a tenant in common, then the deceased person’s interest in the real estate will pass in accordance with a devise under the Will (if the person dies leaving a will – which would then require that the Will be probated), or the deceased tenant in common’s interest will pass in accordance with laws of intestacy, which will also require the probating of the deceased person’s estate, in order to establish the decedent’s heirs-at-law to whom the real estate passes.

Also, upon the death of a person owning real estate, there is an automatic Massachusetts Estate Tax Lien and an automatic Federal Estate Tax Lien which is placed upon the property, to protect the Commonwealth of Massachusetts or the federal government getting its estate tax paid, if there is a Massachusetts or Federal Estate Tax due, resulting from the deceased person’s estate. The current (calendar year 2012) threshold amount of estate assets that would trigger a Massachusetts estate tax due is $1,000,000, and the current (calendar year 2012) threshold amount of estate assets that triggers a Federal Estate Tax due following the death is the amount of $5,125,000. Unless the decedent’s estate exceeds these thresholds, there generally is no need to file either a Massachusetts Estate Tax return or a Federal Estate Tax return; however, in both instances, there is a need to record an Affidavit/Certificate of No Estate Tax with the Registry of Deeds or Registry District of the Land Court, in which the decedent’s property is located, the effect of which Affidavit/Certificate will be to document that there is no Massachusetts Estate Tax Lien and no Federal Estate Tax Lien.

Where the real estate is held by a joint tenant or a spouse in a tenancy by the entirety situation, although the title of the deceased person’s interest in real estate passes automatically to the surviving spouse (in the instance of a tenancy by the entirety) or to the surviving joint tenant(s), in the instance of a joint tenancy, there is still a need to record in the Registry of Deeds or the Registry District of the Land Court, a certified copy of the decedent’s death certificate so as to document of record in the Registry and/or in the Registry District of the Land Court, the fact that the person has passed away. The death certificate is generally recorded at the same time that Affidavit/Certificate of No Estate Tax is recorded. When the real estate involved is registered land (also sometimes referred to as Land Court property), there may also be a need to record other documentation following a death in the chain of title, such as an Affidavit of No Divorce, and attested copies of certain probate related documents.

The usual situation where a life tenancy comes into existence is in conjunction with estate planning, such as where elderly persons convey their real estate to other persons (often to family members), reserving to themselves a life estate to continue to live in the transferred real estate for the duration of that person’s/grantor’s life. Life tenancies typically allow that person to remain in the property for his or her lifetime, and depending upon the extent and complexity of the language establishing the life tenancy, the life tenant may also continue to reserve the right to collect rents from the property (in the instances of it being a rental or investment property) and as well continue to be responsible for the real estate taxes and the maintenance of the property, and to retain the ability to mortgage the property, if the instrument or deed creating the life tenancy provides for same.

When the life tenant passes away (and assuming that the life tenant did not terminate the life tenancy prior to death, such as by conveying a deed of the life estate interest to the owner), there is also a need to record a death certificate for the life tenant and an Affidavit/Certificate attesting to the fact there were no Massachusetts Estate Taxes due nor Federal Estate Taxes due at the time of the life tenant’s passing.

The Buyer/Borrower’s Bank attorney typically issues the title insurance policy, insuring the quality of title to the real estate involved and which sets forth the exceptions to the title, following the closing and recording with the Registry of Deeds and/or with the Land Court. The Bank’s title policy is known as the Loan Policy and the Buyer/Borrower’s title insurance policy is known as the Owner’s Policy. Banks always require that the Buyer/Borrower obtain, and pay for, the Bank’s Loan Policy, and an Owner’s Policy is also available to be purchased by the Buyer/Borrower to acquire an Owner’s Policy. These policies are issued at the time of closing. The title policy insures the quality of the real estate being mortgaged and/or purchased, and it also sets forth in the Schedule of Exceptions to Title matters such as easements, restrictions, takings, reservations, covenants, and other encumbrances which affect the title to the real estate, and the title policy premium is paid for at closing by the Buyer/Borrower in a single/one-time premium. Experience indicates that most buyers do acquire the owner’s title insurance when they purchase their property. If their property is later refinanced, there is generally no need to again purchase an Owner’s title insurance policy, although the Lender will require a new Loan Policy at the time of refinance, since the title insurance policy insures the title to the property as of the date and time that the deed and/or mortgage is recorded.

The Offer to Purchase Real Estate document (Offer) is typically a preliminary document in the buy/sell transaction, which the parties enter into, which if properly drawn, is subject to the parties executing a subsequent, more detailed and comprehensive purchase and sale agreement (Agreement) for the purchase and sale of the real estate.

However, courts have determined that the Offer document, if it does not have the necessary language setting forth that it is only a preliminary document, can be binding on the parties as an enforceable contract. The Offer usually does not contain all of the necessary terms, conditions and provisions that should be contained in a properly drawn Agreement, when parties are either selling real estate or buying real estate, thus the reason why the Offer document should always clearly set forth that the Offer is contingent upon and subject to the parties’ executing a mutually satisfactory Agreement.

Many times parties skip over the signing of an Offer document and instead go immediately into executing the Agreement. As noted above, the Agreement is one of the most critical documents in a real estate transaction, since it establishes both the Buyer’s and the Seller’s rights, remedies, obligations, etc. going forward in the transaction. Oftentimes, the Agreement is drawn/prepared in such a way that it is more favorable to either the Seller or to the Buyer. For that reason, whether you are buying real estate or selling real estate, the Agreement should be reviewed by legal counsel, at Coogan Smith, LLP, to be sure that the proper and necessary provisions are set forth in the Agreement which will protect your rights (either as a Buyer or Seller) and provide you with the necessary rights and remedies, to adequately protect all of your interests, in the event that the Agreement falls apart, or the transaction does not go forward. Otherwise, you may find yourself in jeopardy of losing your deposit funds, as a Buyer, or facing a lawsuit for specific performance, either as a Buyer or Seller.

The closing is the final stage of the real estate transaction for both the Buyer/Borrower and Seller, and it is the event at which the parties “pass papers”. At the closing, the documents which the Seller needs to execute in order for the transaction to close and the real estate to be sold, such as title insurance company affidavits, settlement statement detailing the financial terms of the transaction, the tax reporting documents and the deed conveying title to the real estate, get signed, executed, acknowledged and eventually, in the instance of the deed, recorded with the Registry of Deeds or the Registry District of the Land Court.

At the closing, on the Buyer/Borrower’s side of the closing table, the Buyer/Borrower lender’s attorney typically conducts the transaction at which both the Buyer/Borrower and Seller execute these closing documents. The Buyer/Borrower is obligated at the closing to also execute the settlement statement, the title company affidavits and other similar type affidavits, but more importantly, the Buyer/Borrower at the closing executes the promissory note and mortgage to his or her bank/lender, as well as other bank generated documents, which the bank requires the Buyer/Borrower execute at the closing, in order for the bank to provide funding for the purchase or the refinance of the mortgage. The promissory note is the document pursuant to which the Buyer/Borrower is obligated to repay the loan to the lender. The bank’s written security for the Buyer/Borrower’s promise to repay the loan amount, as set forth in the promissory note, is the mortgage, which is the security interest the Buyer/Borrower executes at the closing and which eventually gets recorded with the Land Court or with the Registry of Deeds. The Mortgage secures the Buyer/Borrower’s aforesaid promise to repay the bank loan, pursuant to the promissory note.

At the closing, Buyer/Borrower needs to be assured that the terms and conditions of their Commitment Letter, which is the bank’s written commitment to loan the Buyer/Borrower the money necessary to purchase or refinance the home, is in accordance with the expectations of the Buyer/Borrower. The Commitment Letter contains such critical matters as the interest rate that the Buyer/Borrower will be paying on the promissory note, the term of the loan and promissory note (i.e., a 15-year term or a 20-30 year mortgage), whether the interest rate on the promissory note is a fixed/conventional rate, or an adjustable rate, and whether the Buyer/Borrower will be charged with a prepayment penalty in the event that the promissory note is paid off sooner than the term of the loan. All of these terms and conditions are typically set forth in an outline form by the Bank in its Commitment Letter, and are then more particularly set forth and contained in the Bank’s documents signed at closing.

The closing attorney supervises the “passing of the papers” between the Buyer/Borrower and Seller and the real estate broker, and eventually, the bank attorney is charged with the responsibility of disbursing the loan and/or sales proceeds, and with making sure that the Seller’s Deed and the Buyer’s/Borrower’s mortgage are recorded with the Registry of Deeds or the Land Court, as well as with the recording of any other accompanying documents which may be required to be recorded in order to clear title to the real estate. Such other documents which may get recorded by the closing attorney to clear up issues affecting the title may include instruments such as discharges of mortgages; certificates of compliance for municipal orders such as conservation commission’s wetlands orders of conditions; or releases or certificates of compliance of established private restrictions, all of which, if not recorded, may otherwise impact the quality of the title to the real estate which the Buyer/Borrower is acquiring from the Seller and/or which title the bank/lender is acquiring by virtue of its mortgage on the real estate.

While the term “Superlien” may be a misnomer, it refers to the priority lien a condominium association has under Massachusetts state law. The lien has priority, meaning it jumps ahead of a first mortgage, to the extent of six months of condominium common area charges as well as reasonable attorney’s fees and costs involved in collecting these charges, provided certain steps are taken by the association.

There are certain steps that a condominium association should take, including notifying the unit owner and holder of a first mortgage of a delinquency in the payment of common area expenses. The association should also send the first mortgagee a notice of its intent to institute a lawsuit should the matter not be resolved. Sometimes a lawsuit is necessary to preserve and enforce the lien. There are strict time frames involved and a lawyer should be retained to best protect the association’s interests.

Lien claims are usually resolved either by payment by the unit owner or the first mortgagee. When the mortgagee pays off the lien, it is restored to its first priority lien position. On occasion, a unit is sold and the condominium association receives payment from the proceeds of the sale.

A board is responsible for enforcing the terms of the condominium master deed, declaration of trust, including by-laws, and other rules and regulations. A board’s powers can include fining and, if necessary, obtaining a court order prohibiting certain behavior. A board should make sure that its restrictions are reasonable and uniformly enforced.

By law, a condominium association must keep certain records and make them available for a unit owner to review.  The law specifies which records must be kept and made available for a unit owner to review and copy.  These include certain records of receipts and expenditures, invoices and vouchers, bank statements, contracts and current insurance policies.

This is a frequent occurrence. If the association takes appropriate steps, it should get most, if not all, of the money it is owed from a unit owner who files for bankruptcy.

When a unit owner files for bankruptcy protection, an automatic stay immediately goes into effect. This means that all collection action against that unit owner is stopped until the bankruptcy court gives permission to the association to proceed with its collection efforts. In a Chapter 7 bankruptcy, condominium associations usually request, and are granted, relief from stay so they can proceed with a priority lien claim.

A Chapter 13 bankruptcy involves an effort by the unit owner to reorganize their financial situation by way of a plan to pay back some or all of their creditors. Since condominium fees are considered a secured priority lien, they must be paid by the unit owner as part of a plan. While it may take time, the association should get all of the money it is owed through payment under a plan.

While it is generally not good news when a unit owner files for bankruptcy, since condominium fees are a statutory lien, they are considered a “secured” debt by the Bankruptcy Court. This means that while an individual unit owner may be released from the personal liability for the debt, the priority lien will remain on the unit in a Chapter 7 bankruptcy.

When a unit owner in arrears of condominium fees files for bankruptcy, the association should contact a lawyer trained in this area to assist them with requisite bankruptcy filings. If appropriate steps are taken with the bankruptcy court, an association should be fully protected to enforce its lien, and to be paid everything it is owed, including its attorney’s fees.

While a master deed could prohibit smoking of any kind at a condominium, such governing documentation is rare. Smoking could be prohibited by a board in or on common areas by an appropriate restriction within the condominium documents though prohibiting a unit owner or tenant from smoking within their own unit has not, as yet, been allowed by a Massachusetts court. Smoking within a unit involves a difficult balance between an owner’s right to enjoy his unit by smoking and a unit owner who claims the enjoyment of their unit is hindered by their neighbor’s smoking. These disputes are sometimes resolved through smoke mitigation measures which allow a unit owner to continue smoking and a neighbor to get relief from second-hand smoke.

A tenancy at will is an agreement to rent from one rental period to the next. It can be either verbal or in writing. In this situation, a tenant generally rents the property monthly and either the landlord or tenant can end the relationship with approximately 30 days advance notice.

A tenancy with a lease is a written agreement that specifies a start and end date of the tenancy. It provides a tenant the right to remain at the property through the full lease period provided that rent is timely paid and the lease terms are complied with.

• Rent for the first month
• Rent for the last month
• A security deposit equivalent to one month’s rent
• The cost of purchasing and installing a door lock

The law requires that a landlord give a residential tenant a written receipt when accepting last month’s rent. A tenant is entitled to receive 5% interest on the last month’s rent payment every year, except that if the landlord keeps the money in a bank and the bank pays less than 5%, then a tenant is only entitled to the amount actually earned.

The law requires the landlord give a residential tenant a written receipt when accepting a security deposit. The landlord must place the security deposit in an appropriately labeled escrow account. The receipt must show the amount of the deposit, the landlord’s name, the address of the premises, and the name of the bank and the account number where it is being held.

Within 10 days of the landlord accepting the security deposit, the landlord must provide a document called a statement of condition. The statement of condition must be signed by the landlord and list all damage existing in the rental unit.

Thereafter, a landlord must pay interest on the security deposit each year. Within 30 days of the end of the tenancy, the landlord must account for the deposit and return any portion due to the tenant.

Under certain circumstances, a tenant can withhold rent. The following conditions must be met:

• Defective conditions exist in the rental unit
• These conditions “endanger or materially impair” the health, safety or well-being of someone living in the rental unit
• The landlord knows about the defective conditions
• The conditions were caused by someone or something other than the tenant or someone under the tenant’s control
• The landlord can make repairs without the tenant having to permanently move out

An additional step for tenants to protect themselves while withholding rent is to take the withheld rental funds and set them aside in a separate bank account. Although the law does not require a tenant to put the withheld rent in a bank account, it does confer some advantages. Most importantly, if the landlord tries to evict, the tenant can demonstrate to the court that the tenant had the funds to pay rent and did not simply stop paying due to the inability to pay.

Under federal law, a tenant with a valid lease can continue to live in the property for the term of the lease. Foreclosure does not change the status of the lease. A tenant at will, or a tenant whose lease has expired, can be made to vacate the property following foreclosure, as long as the lender, or purchaser at auction, gives the tenant a 90-day written notice to vacate the property.

Under state law, within 30 days of the foreclosure, the new owner must give tenants a notice with the name, address and telephone of the person in charge of the building; the place where a tenant should send the rent; and a statement informing each tenant that the tenant has the right to a court hearing before eviction. The new owner must give a tenant at least 30 days’ notice to quit. However, if the new owner is a bank, mortgage company or similar financial institution, a tenant can only be evicted for “just cause” or if the new owner has signed a binding purchase and sale agreement with a third party.

First, the landlord must serve the tenant with a notice to quit. The most common notices to quit are the 14-day notice to quit for nonpayment of rent and the 30-day notice to quit a tenancy at will. If the tenant does not quit the premises in the timeframe set forth in the notice to quit, a landlord must file a summary process complaint to evict the tenant and regain possession of the rental unit. The landlord cannot resort to self-help and must go through the judicial system. The landlord generally has the option of filing the summary process complaint in either the District Court or the Housing Court.

The Housing Court is a specialized court that has jurisdiction over civil and criminal actions, including equitable relief, which involves the health, safety, or welfare of the occupants or owners of residential housing. One advantage of proceeding in Housing Court is that it holds mediation sessions with housing specialists who are often successful at settling cases, thereby eliminating the cost and expense of proceeding to trial.