LawFlash

Massachusetts Limits Foreclosures, Evictions; Requires Forbearance

April 22, 2020

Governor Charlie Baker signed emergency legislation on April 20 limiting evictions for residential and small business properties, and limiting foreclosures and requiring forbearance for residential properties. This legislation follows a number of actions by Governor Baker and the City of Boston to protect renters, homeowners, and small businesses during the coronavirus (COVID-19) pandemic.

Massachusetts Legislation

Landlords of premises occupied by residential or small business tenants are prohibited from taking court actions to evict the tenant except for causes involving allegations of criminal activity or lease violations that may impact the health or safety of others. Eviction of the tenant of a small business premises unit is also permitted if the lease term expired prior to the governor’s March 30 declaration of the COVID-19 emergency. The legislation extends deadlines for court filings relating to eviction proceedings. Landlords are also prohibited from charging late fees for nonpayment of rent or furnishing rental payment data to a consumer credit reporting agency if within 30 days after the missed payment, the tenant provides notice and documentation to the landlord that the missed payment was due to a financial impact from COVID-19. The Executive Office of Housing and Development is required to issue regulations to implement these provisions.

A “small business premises unit” is defined as premises occupied by a tenant for commercial purposes, whether for profit or not for profit. The definition does not include commercial tenants if the tenant, or a party that controls, or is in common control with the tenant, operates nationally or multistate, is publicly traded, or has no less than 150 full time equivalent employees.

Subject to the exception for criminal activity and lease violations that may impact the health and safety of others, landlords of residential properties are also prohibited from terminating tenancies, or giving tenants notices requiring them to vacate the premises.

Except for properties that are vacant or abandoned, lenders holding mortgages on residential properties are prohibited from foreclosing. Mortgage lenders are required to grant forbearance to residential borrowers for a 180-day period if, prior to the expiration of the statutory forbearance period, the borrower submits a request to the mortgage servicer affirming that the borrower has experienced financial impact from COVID-19. Lenders are not permitted to charge fees or penalties or interest beyond the amounts scheduled and calculated as if the borrower has made all scheduled payments in full and on time. Missed payments are to be added at the end of the term of the loan, unless the parties agree to an alternative arrangement.

The provisions limiting evictions and foreclosures expire on the earlier of the date that is 120 days after the effective date of the act, or 45 days after the governor’s COVID-19 emergency declaration has been lifted, whichever is earlier. The governor may extend the expiration date in 90-day increments, but not later than 45 days after the emergency declaration is lifted.

To the extent that a landlord received rent in advance for the last month of tenancy, the act permits landlords to utilize such funds to pay for expenses, including mortgage payments, utilities, repairs, and upkeep, so long as the landlord does not deduct any amount to account for tenant’s nonpayment of rent; provided further that certain notice requirements are met by the landlord.

The act expressly states that nothing in its provisions is intended to release a tenant from its obligation to pay rent or a borrower from its obligation to make mortgage payments.

Massachusetts Housing Court

Consistent with the Massachusetts Supreme Judicial Court’s March 17 and April 1, 2020, orders regarding court operations during the COVID-19 pandemic, the Massachusetts Housing Court also adopted Standing Orders 3-20 and 4-20 limiting the Housing Court to only hearing emergency matters. The Housing Court has clarified that any nonessential eviction proceedings are not considered emergency matters. Additionally, any default judgment entered between March 1, 2020, through May 4, 2020, will be vacated, upon motion.

City of Boston

A number of the largest housing lenders in Boston have agreed to defer mortgage payments by at least three months (with the option to extend, if needed) for homeowners who contact them and demonstrate a financial impact by the current health pandemic. They have also committed to approving deferment applications within 21 days of receiving the application and with only essential paperwork needed from homeowners. In addition, the lenders have agreed to: not charging late fees on the late loan payments or deferments, not reporting the workout/loan as “troubled debt restructuring” (per Section 4013 of the CARES Act), nor reporting nonpayments to the credit bureaus. Once the deferment period comes to an end, homeowners will not be required to pay the total deferment/forbearance amount in a lump sum and will instead be able to work with their lenders on a repayment plan.

The City of Boston has also extended the due date for property tax bills in Boston from May 1, 2020, to June 1, 2020, and waived interest on late property tax payments that were originally due after March 10, 2020.

The city has also established a Rental Relief Fund and Small Business Relief Fund to assist residential and small business tenants.

On March 14, Boston Mayor Marty Walsh announced a partnership with the Greater Boston Real Estate Board and its entity, the Massachusetts Apartment Association, and the Massachusetts Association of Community Development Corporations to impose a moratorium on residential evictions while Massachusetts is under a state of emergency. The partnership encourages property owners to implement a moratorium on evictions that could be in effect for 90 days, with reviews every 30 days. A number of major landlords and real estate groups in the Boston area have supported the moratorium.

Coronavirus COVID-19 Task Force

For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge, which includes the Real Estate COVID -19 Task Force to focus on the issues specifically impacting our real estate industry clients.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please the contact any of the following Morgan Lewis lawyers:

Boston
Richard A. Toelke
Henry S. Healy
Natacha Massih