CAVEAT EMPTOR: BEWARE OF POTENTIAL PITFALLS WHEN PURCHASING REAL PROPERTIES AT FORECLOSURE SALE

Posted in Business Law, Real Estate by on April 10th, 2017

By: Attorney Raymond C. Pelote | Partner

Massachusetts-Attorney-Foreclosure-salePurchasing real property at a foreclosure sale can be a great investment. Typically, properties are sold at 70-80 percent of market value. However, when you purchase a property at a foreclosure sale, expect the property to be in disarray. Rarely do former owners leave their foreclosed properties in prime condition.

Whenever you purchase a foreclosed property, it is important that you perform your due-diligence. You should contact the tax collector’s office for the city or town in which the property is located to ascertain the amount of taxes due and owing on the property. You should perform a preliminary title examination of the property to confirm that the foreclosing entity is foreclosing on a first mortgage. You may also want to look and see if any code violations or tax takings have been recorded against the property so that you know where you stand on correcting those issues if you decide to purchase the property at the foreclosure sale. I would also recommend that you drive by the property to ascertain the condition of the property so that you are not surprised when you appear at the foreclosure sale. Lastly, make sure that you confirm your bidding strategy and have your deposit in hand. If you do all these things, you are well on your way to being prepared to purchase a property at a foreclosure sale.

If you are the successful bidder at the foreclosure sale, you may have a former owner(s) who refuses to leave the property on his, her or their own volition. When that happens, you have to evict the former owner(s) from the property in order to truly possess the property. Before you proceed forward with the eviction process, it is important that you or your attorney determine whether or not you have good title to proceed forward with an eviction proceeding. If the foreclosing entity failed to comply with the foreclosure statute either by failing to record a necessary document with the registry of deeds or by failing to send out the appropriate foreclosure notices, you may face a long winded court battle with the former owner(s).

Before 2008, to obtain possession of a property after a foreclosure sale, you simply had to demonstrate that you had a superior right in title to the property over the former owner(s). Simply producing a certified copy of the foreclosure deed, affidavit and other associated documents to a court would typically be enough to entitle you to possession of the property. However, since 2008, courts are allowing former owner(s) to assert defenses to a purchaser’s superior right in title to the property by allowing the former owner(s) to question the foreclosure process and sale of the property. These defense(s) require a purchaser to invest time, effort, and money in proving, more so than previously, that the purchaser is the rightful owner of the property. In doing so, an eviction proceeding could take one to two years to complete or even more if the former owner(s) decides to appeal the case.

Although you can never prevent a former owner(s) from filing a defense or counterclaim in an eviction proceeding, you can limit their defenses or counterclaims to a minimum, if not dispel them entirely. You can do this by thoroughly reviewing the foreclosing entity’s foreclosure process in conjunction with the applicable foreclosure statutes to make sure that the foreclosing entity performed all that is required of it to consummate the foreclosure sale. Looking at a foreclosing entity’s foreclosure process and the applicable statutes may be overwhelming. If so, consult an attorney who is experienced in foreclosures to give you an opinion on whether or not the foreclosing entity followed the applicable foreclosure statutes to ensure that you are receiving clear title to the property without any potential defects that would prevent you from gaining possession to the property and keep you in litigation for years to come.

If you have any questions or would like assistance from an experienced attorney, please call Wynn & Wynn, P.C. at 1.800.852.5211 or request a free consultation.

Understanding Trusts in Massachusetts

Posted in Blog, Real Estate by on February 27th, 2017

By: Attorney William Rosa| Partner

Types-of-trust-in-massachusetts My last blog focused on the various forms of tenancies in which you can hold real estate in Massachusetts. This blog is an expansion of my previous blog dated September 6, 2016 in which we are going to discuss an alternative type of ownership which is commonly used today in Massachusetts.

Today’s subject is Trusts. For those of you not familiar with the concept of a Trust, a Trust is most commonly a written instrument in which one individual (the Trustee) holds title to real estate for the benefit of one or more other individuals (the Beneficiaries), for example: A and B (husband and wife) are the owners of real estate. A and B create a Trust in which A is named as Trustee, and A and B are each named as 50% Beneficiaries of the Trust, with the survivor of them being entitled to the entire 100% beneficial interest upon the death of the other.

The primary reason for the use of a Trust is to separate the legal ownership in the Trustee from the equitable ownership in the Beneficiaries. This separation of legal and equitable ownership may shield the Beneficiaries from third-party liability. Since the Schedule of Beneficiaries to a trust is not recorded with the Declaration of Trust at the Registry of Deeds, the identity of the Beneficiaries is not a matter of public record. Additionally, upon the death of the first of the Beneficiaries, the entire beneficial interest of the trust is held by the survivor Beneficiary and does not pass through the estate of the first deceased Beneficiary.

There are two types of Trusts in Massachusetts. The first is a Testamentary Trust which is a Trust created by will or other document dealing with the estate of a particular person and only comes into use upon the death of that individual. This type of Trust is better left to a discussion of estates and estate planning rather than real estate; so, beyond identifying this type of Trust, we will not delve into Testamentary Trusts at this time.

The second type of Trust is what is commonly referred to as an Intervivos Trust which means it comes into use while the person who creates the Trust is alive. Intervivos Trusts can take, basically, two forms. The first is a Trust that is only used in a very few states, Massachusetts being one of them. This Trust is loosely referred to as a Nominee Trust. A Nominee Trust says that A, as Trustee, holds legal title to the property for the benefit of A and B (using the example above); however, the Trustee has no authority or power to deal with the property in the Trust without the consent of the Beneficiaries. Based upon the terms of the Trust, consent must either be by unanimous or a majority vote of the Beneficiaries in order for the Trustee to sell, mortgage, or take any action relative to the property held in the Trust. The Trustee must receive, in writing, such consent of the beneficiaries.

The second type of Intervivos Trust used in Massachusetts is more closely akin to a “true” Trust. In this case, A, as Trustee, again holds property for the benefit of A and B but in this type of a Trust, A, as Trustee, has the full and complete authority to deal with the Trust property as he or she deems fit. The relationship between the Trustee and the Beneficiaries is one of a fiduciary nature. This means that the Trustee owes to the Beneficiaries upmost good faith in dealing with the Trust property; or, in other words, the Trustee will do nothing with the Trust property that would be detrimental to the Beneficiaries. The advantage of this type of Trust is the Trustee may deal with the property without the consent of the Beneficiaries as long as the action taken is in the best interest of the Beneficiaries. If the Trustee is selling or mortgaging the property, any buyer or bank mortgaging the property does not need to look to any other party for consent to consummate the transaction.

As in all matters of this nature, it is helpful, if not imperative, that you discuss the available options with an attorney and accountant well versed in taxation and real estate law in order to ensure that the Trust that you are selecting is the appropriate vehicle for the purpose you wish to accomplish.

I hope this information has been helpful in alerting you to the existence of this very flexible instrument that may be of benefit to you and your family. Additionally, if you have any questions, please call the attorneys at Wynn & Wynn, P.C. at 1.800.852.5211 or request a free consultation.

I AM BUYING/SELLING MY HOME, DO I NEED A REAL ESTATE ATTORNEY?

Posted in Blog, Real Estate by on January 9th, 2017

By: Attorney Patricia E. Couto| Associate

Massachusetts-Attorney-Buyer-and-Seller
Buying or selling a home is not an easy process and involves many different people, stacks of paperwork, complex legal documents, and occasionally several attorneys. Buying or selling your home will be one of the most important financial decisions that you face and it is important to make sure you know the parties involved, understand the documents you are signing and make yourself aware any legal obligations. Having an attorney present during your real estate transaction will ensure you know what is going on every step of the way and that the process runs as smoothly as possible.

BUYER’S ATTORNEY

The buyer’s attorney represents the interest of the buyer’s during the real estate transaction. The responsibilities of a buyer’s attorney include:

  • Reviewing and amending the Offer to Purchase and Purchase and Sales Agreement with the seller, the seller’s realtor and the seller’s attorney
  • Negotiating the terms of the Offer to Purchase and Purchase and Sales Agreement with the seller, the seller’s realtor and the seller’s attorney
  • Communicating with the buyer’s lender, the lender’s attorney, the realtors and the seller’s attorney to resolve any issues between the buyers and sellers or the buyers and the lender and to confirm that any requirements from the buyer’s lender have been met
  • Review the buyer’s closing disclosure and any documents the buyer’s may sign at the closing
  • Attend the closing with and explain all the closing documents to be signed

Depending on the lender, buyers can sometimes choose their own attorney to represent both their lender and themselves at their closing. The role of the Lender’s Attorney or “Closing Attorney” is generally to represent only the lender. However, Massachusetts allows one attorney to represent both the lender and the buyer at the closing as long as there are no apparent unresolved disqualifying conflicts between borrower and the lender.  This is because both parties are interested in protecting their interests to ensure marketable title and that the seller has discharged all liens and mortgages. Working with one attorney benefits the buyers by saving them money on legal fees.  The buyers only pay one attorney to review the title, communicate with all the parties, obtain any documentation needed for the closing and prepare and review all buyer closing documents.

SELLER’S ATTORNEY

The seller’s attorney represents the seller’s interest in the real estate transaction. The duties of a sellers’ attorney includes:

  • Creating the Purchase and Sales Agreement
  • Reviewing and amending  the Offer to Purchase and Purchase and Sales Agreement with the buyer, the buyer’s realtor and the buyer’s attorney
  • Negotiating the terms of the Offer to Purchase and Purchase and Sales Agreement with the buyer, the buyer’s realtor and the buyer’s attorney
  • Resolving any title issues that may be discovered during the title examination. NOTE: As the sellers, you are obligated by the purchase and sales agreement to deliver marketable title, meaning it is your responsibility to remove any defects in title.
  • Coordinating with the realtor or with the sellers to obtain a smoke certificate, any final utility readings, or a 6d certificate if a condominium is involved
  • Obtain mortgage payoffs or provide the closing attorney with authorization to obtain the payoff
  • Draft the quitclaim deed or any other legal documents that the sellers may need for the closing
  • Reviewing the sellers’ closing disclosure and any other documents that the sellers may have to sign at closing
  • Attending the closing

If you are thinking of buying or selling your home and have questions or would like assistance, from an experienced attorney, please call Wynn & Wynn, P.C. or request a free consultation.

MASSACHUSETTS RESIDENTIAL LANDLORD MISTAKES TO AVOID

Posted in Blog, Business Law, Real Estate by on April 4th, 2016

By: Attorney Ryan Prophett | Associate

 

Massachusetts-landlord-law-attorney-Taunton-Hyannis

Many individuals in Massachusetts view buying rental property as a good investment and an alternative to putting their money in the stock market where they have no control.  However, most new landlords do not hire an attorney to advise them and create the necessary lease documents to protect their interests.  The two biggest mistakes that we see new landlords make are:  (1) failing to comply with the Massachusetts Security Deposit Law, M.G.L.c 186 ’15b; and (2) waiting too long to send a Notice to Quit after a tenant defaults for the first time.

 

 

 1.Failure to Comply With the Massachusetts Security Deposit Law.

To a new landlord, the Massachusetts Security Deposit Law can be complex and confusing.  While some new landlords are able to research and figure out that they are required to put the security deposit in an interest bearing account, most fail to comply with the other technical aspects of the law. This can result in the immediate forfeiture of the security deposit and, more importantly, the potential for an award of treble damages and attorneys’ fees in the tenant’s favor.

First, a landlord must always give a tenant a receipt when they receive a security deposit.  When a landlord receives a security deposit from a tenant or prospective tenant, they must provide a receipt indicating the amount of the deposit, the name of the person who received it, the date in which it was received, a description of the premises and the receipt should be signed by the person receiving the security deposit.  Second, either upon receipt of the security deposit or no later than ten (10) days after the commencement of the tenancy, the landlord must provide to the tenant a separate written statement indicating the present condition of the premises.  The Statement of Condition must be a comprehensive list of all damages in the premises including sanitary and building code violations, must contain the statutory required language, and must be signed by the landlord.  The tenant is then to submit a list of separate damages and has fifteen (15) days to return the list to the landlord.

Third, the security deposit must be placed in a separate, interest bearing Massachusetts account.  The security deposit cannot be comingled with the lessor’s assets.  Many landlords make the mistake of putting the security deposit in an interest bearing account and fail to separate the same into an identifiable separate account.  The Security Deposit Law was written this way so that the security deposit is not subject to attachment by the landlord’s creditors.  Finally, after putting the security deposit into a separate account, the landlord must give the tenant a receipt indicating the name and location of the bank, the deposit amount and the account number within thirty (30) days.

If the landlord fails to comply with any of the aforementioned steps, the same will require an immediate return of the security deposit to the tenant if they so demand pursuant to M.G.L.c. 186 ’16B(3)(a).  If after demand, the landlord continues to refuse to turn over the security deposit, Massachusetts Law provides that the tenant may be entitled to three times the amount of the security deposit and their attorneys’ fees incurred in enforcing that claim.  Massachusetts Courts consider this law strictly even if tenant has failed to comply with the provisions of the lease or they owe any back rent to the landlord.

As an attorney representing landlords, we see this time and time again.  A landlord, who has complied with its obligations under a Lease Agreement, is still required to return the security deposit to a tenant who breached the Lease. However, Wynn & Wynn, P.C. can prepare these documents and can assist a landlord in protecting their rights and their properties.

 2. Failure to Immediately Send Out a 14 Day Notice to Quit After the First Instance a Tenant is Late With its Monthly Payment.

Most new landlords do not realize that the eviction process can take months to reach completion.  Even the simplest eviction can be continued due to no fault of the landlord. This allows a tenant who has failed or refused to pay their rent, to continue to live in the property rent free.

All eviction actions are governed by the Uniform Summary Process Rules of Massachusetts General Law 186.  All procedures that are not governed by the Uniform Summary Process Rules are governed by the Massachusetts Rules of  Civil Procedure.  When a tenant fails or refuses to pay rent as is required by a Lease, the landlord may terminate the Lease either (i) in accordance with the provisions of the Lease; or (ii) in the absence of such Lease provisions by a 14 Day Notice to Quit given in writing to the tenant.  The Notice to Quit should be served upon the tenant/defendant by a person authorized to make service of process such as a Constable or Sheriff.  The 14 Day Notice to Quit must include statutory language that informs the tenant that if they have not received a Notice to Quit for nonpayment of rent within the last twelve (12) months, they have the right to prevent termination of their tenancy by paying the landlord the full amount of rent due within ten (10) days of the receipt of the 14 Day Notice to Quit.  This safeguard provision gives the tenant the right to prevent a termination of the Lease by paying or tendering to the landlord the full amount of rent due within ten (10) days after the receipt of the Notice to Quit.  The tenant may only cure if they have not received the Notice within the last twelve (12) months.

Many landlords wait too long to serve a 14 Day Notice to Quit.  Landlords want to believe tenants who indicate that they will have the full amount of rent the following month or at a later point in time.  While the tenant may be telling the truth, a landlord may potentially waste valuable time if they fail to serve a 14 Day Notice to Quit and the tenant does not pay.  The safer option is to serve the tenant with the above-referenced 14 Day Notice to Quit the first time the tenant is late on paying their rent.  This will begin the eviction process in the event the tenant does not pay their rent in the following months.

While owning an investment property can be profitable, landlords should be aware of the potential risks they take on when entering into Lease Agreements with prospective tenants.  One bad tenant can significantly hurt your investment and therefore, we always recommend that landlords hire legal representation to assist them with all matters involving their property.

If you are a landlord and have any questions or would like assistance, please call the attorneys at Wynn & Wynn, P.C. at 1.800.852.5211 or request a free consultation.