Rent guarantee insurance

May 22, 2020:- Missed rental payments are on the rise in Massachusetts, but a market solution may be available.

Even though the eviction moratorium law (Chapter 65) says that tenants are required to pay rent, the lack of an enforcement mechanism is leading some to skip paying the rent with a sense of impunity. Housing providers still have to pay to maintain the property and keep it up to code even when they are not receiving rent. One way for providers to stay afloat might be rent-guarantee insurance, also known as rent default insurance, which promises coverage in the event that a tenant stops paying rent.

Unless and until the Massachusetts Legislature takes up the Fair and Equal Housing Guarantee surety-bond policy that MassLandlords is promoting, some housing providers may find this kind of product helpful. And I see that one company, Avail, has a short video on the subject.

If affordable, insurance might be a viable market solution to government failure. By “government failure” I mean the Commonwealth requiring one party to provide housing without being able to go to court to make the other party pay for said housing. This forces rental-property owners to either (a) provide free housing (not a great business model) or (b) exit the market, thereby reducing the amount of rental housing available.

Ideally, Governor Charlie Baker would let Chapter 65 expire on August 18 rather than exercising his option to extend it. But if he chooses to prolong the moratorium, insurance might do the trick.

Please note that I have no contractual, fiduciary, relationship with Avail or Steady Marketplace, either oral or written, and receive no remuneration of any kind from the companies, make no representations regarding them, and suspect that there are other entities out there that offer similar insurance products. In the vernacular, I am not shilling for Avail or Steady Marketplace, or any other insurance company for that matter.  I just think that for some housing providers, rent-guarantee insurance might be worth exploring.

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Maura Healey edits statute

May 12, 2020:-  On May 8, 2020, Attorney General Maura Healey issued an “advisory” on residential evictions. An advisory is not a law or regulation, but it indicates how the Attorney General will interpret the law and try to persuade the courts to apply it. This particular advisory includes a novel interpretation of Chapter 65, the statute that limits the right of access to the courts for one class of people, namely housing providers (landlords).

The statute also abridges freedom of speech by banning landlords from sending notices to quit. In addition, by preventing property owners from obtaining possession even when tenants stop paying rent (whether for reasons related to COVID 19 or not) it operates as a taking. I have addressed those violations before and will do so again in future posts. This post is about access to justice, and how Attorney General Healey’s advisory (mis)interprets what the statute has to say about it.

Chapter 65

Chapter 65 allows housing providers to file for summary process only where a tenant’s criminal activity or lease violations “may impact the health or safety” of another person lawfully on the property or of the general public. But it bars housing providers from taking tenants to court for non-payment of rent. Under Chapter 65 (as opposed to the Declaration of Rights) no access to the courts is the rule, and the health/safety provision is the exception.

Statute in Derogation of Liberty

Chapter 65 takes away a fundamental liberty, namely access to the courts, which (as I have mentioned elsewhere) is one of the liberties guaranteed by the Massachusetts Declaration of Rights. Here in Massachusetts it is well established that statutes in derogation of liberty should be strictly construed and interpreted narrowly. They should be narrowly tailored to serve a compelling and legitimate government interest and strictly construed to comply with requirements of substantive due process, as the Supreme Judicial Court held in the Mattter of E.C., 479 Mass. 113 (2018).

In other words, if a statute takes away a basic right, the courts should interpret it narrowly so as to confine the damage to the individual’s liberty interest.

But Attorney General Healey says the opposite, that it is the fundamental right that should be narrowly construed, not the exception to it.

Editing out, and editing in

“Evictions can be brought only where a tenant (1) violates lease terms or engages in criminal activity, and (2) the violation may impact the health or safety of others who are lawfully on the premises. This exception is narrow and should only be used where there is a serious health or safety concern that can’t otherwise be addressed.”

That is what the advisory says about the statute. But that is not what the statute itself says. Not at all. First, the statutory language about impacts on health/safety applies not only to people lawfully on the premises but also to the general public. It says so right there in Section 1 of the statute:

“… may impact the health or safety of other residents, health care workers, emergency personnel, persons lawfully on the subject property or the general public.”

So in advising the general public, the Attorney General Healey left out that bit about the general public.

Second, if the Legislature had intended to say that housing providers may ask the courts to evict tenants only where the criminal activity or lease violations “are likely to seriously affect the health or safety of another person and cannot be addressed short of eviction” it would have said so. But it did not. Chapter 65 does not say “serious health or safety concerns” nor does it state that eviction must be the very last resort.

In addition to leaving out some words and adding others, the Attorney General’s interpretation is the opposite of the way to interpret a statute that derogates from liberty. The advisory says that the right of access to the courts that is the “narrow exception,”  which is not what the appellate decisions say about statutes in derogation of liberty. On the contrary, according to precedent it is the liberty that should be construed broadly, and the exception to that liberty (in this case the barring of the courtroom doors for all but health/safety cases) that should be construed narrowly.

Conclusion

As if it were not bad enough that we have a statute that abridges freedom speech, bars access to the courts for one class of people, operates as an unconstitutional taking without reasonable compensation, and grants the Governor the option of extending its duration, now the Commonwealth’s chief law-enforcement official says that she will read into that statute words that are not there and apply it n a way that flies in the face of precedent.

So now you know the opinion of Attorney General Healey about your right of access to the courts. Should you wish to share your opinion with Attorney General Maura Healey, here is a link to the Contact page.

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Peter Vickery, Esq.

Eviction Moratorium FAQs

Q. Is the eviction moratorium a federal law or a state law?

There are two moratoria. One is contained in the federal CARES Act. The other is a Massachusetts law, Chapter 65.

Q. Is the Massachusetts eviction moratorium a statute or an executive order?

The eviction moratorium is a statute, not an executive order. The Massachusetts Legislature passed it (and Governor Charlie Baker signed it) as an emergency law, Chapter 65 of the Acts of 2020, on April 20.

How long will the eviction moratorium last?

At present, Chapter 65 says that the eviction moratorium will last as long as the state of emergency plus 45 days. Governor Baker proclaimed the state of emergency on March 10, 2020, and his proclamation does not have an end date.

Even when Governor Baker does announce an end to the state of emergency, the Legislature could still amend the statute to extend the length of the moratorium.

Does the moratorium ban all evictions?

No, it allows housing providers to file summary process complaints where a tenant’s criminal activity or lease violation “may impact the health or safety” of another person. It prohibits no-cause evictions and evictions for nonpayment of rent.

In order for the court to accept a summary process summons and complaint, Standing Order 5-20 requires that the housing provider or attorney also file an affidavit swearing that the case qualifies as an “essential eviction” under Chapter 65, i.e. that it is based on a tenant’s criminal activity or lease violation “may impact the health or safety” of another person.

Q. Does the moratorium allow landlords to send notices to quit?

Yes, so long as the notice is for a tenant’s criminal activity or lease violation that “may impact the health or safety” of another person. Chapter 65 prohibits all other notices to quit, e.g. for nonpayment of rent. It also bans any notices that demand or request that a tenant vacate the premises. Landlords should take care not to write anything that could be construed as a request to vacate. For what to write in missed-rent notices, read on.

Q. Does the moratorium allow landlords to charge a late fee?

No, not if within 30 days after the missed rent payment the tenant gives the landlord a notice stating that the non-payment of rent was due to a financial impact from COVID-19. State government has published a notice for tenants to use.

 

Q. Does the moratorium allow a landlord to send notices of missed payments?

Yes, and landlords should do so, but the executive office of housing and economic development has issued regulations that specify what the notice must say including the following statement, which must appear on the first page.

“THIS IS NOT A NOTICE TO QUIT.  YOU ARE NOT BEING EVICTED, AND YOU DO NOT HAVE TO LEAVE YOUR HOME.  An emergency law temporarily protects tenants from eviction during the COVID-19 emergency.  The purpose of this notice is to make sure you understand the amount of rent you owe to your landlord. For information about resources that may help you pay your rent, you can contact your regional Housing Consumer Education Center.

For a list of agencies, see https://www.masshousinginfo.org/regional-agencies.

Additional information about resources for tenants is available at https://www.mhp.net/news/2020/resources-for-tenants-during-covid-19-pandemic.

You will not be subject to late fees or a negative report to a credit bureau if you certify to your landlord in writing within 30 days from the missed payment that your non-payment of rent is due to a financial impact from COVID-19.  If possible, you should use the approved form at: https://www.mass.gov/lists/moratorium-on-evictions-and-foreclosures-forms-and-other-resources.  If you cannot access the form on this website, you can ask your landlord to provide the form to you.  You may also send a letter or email so long as it contains a detailed explanation of your household loss in income or increase in expenses due to COVID-19.”

Landlords should also include the following, “This is important notice. Please have it translated.” The State government notice for tenants (see above) contains translations of that statement in 10 languages:

THIS IS AN IMPORTANT NOTICE. PLEASE HAVE IT TRANSLATED.

Questa é una notizia molto importante. Per piacere falla tradurre.

Este es un aviso importante. Sírvase mandarlo traducir.

C’est important. Veuillez faire traduire.

ĐÂY LÀ MỘT BẢN THÔNG CÁO QUAN TRỌNG.

XIN VUI LÒNG CHO DỊCH LẠI THÔNG CÁO NÀY.

Este é um aviso importante. Por favor mande traduzi-lo.

Es ê un avizu importanti. Di favor, manda traduzil.

Se yon anons ki enpòtan anpil. Sou Ple, fè tradwi li pou w.

Σπουδαιε Πληροφορεια − Παρακαλω να το µεταφρασετε.

MassLandlords has a sample notice available for members. Landlords should not send missed-payment notices that fail to comply with the regulations.

Q. Is Chapter 65 constitutional?

Some people believe that by prohibiting owners from going to court to try to regain possession of their property Chapter 65 violates the constitutional guarantee of access to justice, and that by requiring owners to provide housing with no guarantee of payment it may operate as a taking without compensation. Neither the Legislature nor the Governor asked the Supreme Judicial Court for an advisory opinion prior to enactment, and so far there are no judicial decisions one way or the other.

Q.  If landlords wish to seek compensation for the alleged taking, what law could they rely on?

For owners whose real estate the Commonwealth has taken for public use during a state of emergency, the Civil Defense Act of 1950 sets forth the steps to follow. In a nutshell, the Act allows aggrieved property owners to file claims in Superior Court. Potential claimants should note the one-year statute of limitations.

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Peter Vickery, Esq.

“Essential” evictions: Housing Court issues new order

May 1, 2020:-  Today the Housing Court issued Standing Order 5-20, which sets out the steps for property-owners and attorneys to take in summary process cases that the Legislature deems “essential.”

Along with the summary process summons and complaint, the owner/attorney must file an Affidavit of Cause affirming under oath that the eviction is “for cause,” as defined in the moratorium law, Chapter 65, i.e. that the tenant’s criminal activity/lease violation “may impact the health or safety” of another person.

This new standing order provides some much-needed clarity for court staff, litigants, and practitioners. It also serves as a reminder that the moratorium does not prohibit all evictions, only some.

Of course, how prohibiting evictions for non-payment of rent but not evictions for health/safety reasons could in any way help “flatten the curve” or otherwise reduce the spread of COVID19 is not at all clear.

Chamber legislative breakfast_with Lindsey and Silvia (3)
Peter Vickery, Esq.

Dear Governor: One housing provider’s message to Charlie Baker

April 29, 2020:- Massachusetts law now bans property owners from seeking summary process except where a tenant’s criminal activity/lease violations “may impact the health or safety” of others.  It forces some landlords to extend credit that they cannot afford to give. This near-barring of the courthouse doors to one particular class of people (plus its forced-loan feature) prompted Frederik Winsser to write a letter to Massachusetts Governor Charlie Baker, which Mr. Winsser kindly gave me permission to publish here.

______

Dear Governor Baker:

I am writing about the effect that the COVID-19 epidemic is having on housing in the Commonwealth of Massachusetts.

I am Housing Provider – a ‘Mom and Pop’ small property owner/landlord in Massachusetts. I am a retired senior and receive a small pension, a limited social security benefit, and a small VA service connected disability payment. I depend upon my rental income to pay for my medical expenses, my mortgages, property taxes, insurance, and other bills.

Thirty years ago, I purchased my first house, a two family in Waltham. Over the years, I was working as an Electrical Engineer and invested work income as well as a tremendous amount of sweat equity into the house. My hard work allowed me to purchase additional rental properties, the most recent being a four family house fifteen years ago needing a lot of work.

Over the years I have invested a significant amount of time and money to improve the apartments with new kitchens, bathrooms, refinished interiors, high efficiency heating systems, and much more. For my four family house, after fifteen years of sweat equity and money invested, I still have a net $94,223.00 negative cash flow balance on my original investment. Only in 2019 did I finally have a small positive cash flow of $10,800.00.

I very well understand that there currently is a housing crisis in the country. A large number of people have lost their jobs and are unsure of their future financial security. I do understand that their ability to pay for the necessities of shelter, food, and health care are being seriously impacted.

There are programs such as Section 8, SNAP, etc., but placing the burden on the housing providers is unfair. Speaking for myself and other housing providers, we still have to pay mortgages, taxes, insurance, utilities, and expenses. If we don’t pay the property taxes, the city will place a lien on the property. With the current eviction moratorium, there is no practical remedy for us if the renters cannot or will not pay their rent. Yes, we can take them to court in three to six months for the back rent and hope to be able to collect the rent. By way of an example, last year I went to court to evict a tenant for repeated non payment of rent. In July she moved out with no forwarding address, still owing me over $3,500.00 in rent and legal expenses. Neither the police nor I can locate her.

In closing, would someone go to the supermarket, fill up a shopping cart full of groceries, and at the checkout counter say ‘I’ll pay for the groceries after the COVID crisis is over’. I don’t think so. Please do consider the plight of the housing providers as well.

Sincerely,

Frederik C. Winsser

What should you tell tenants who do not pay rent?

April 27, 2020:- Since March 23, 2020, when Governor Baker issued COVID 19 Order No. 13, closing businesses across Massachusetts, about half-a-million Bay Staters have been thrown out of work. Some are renters who will find it difficult–or impossible–to pay rent. In ordinary times, landlords would have had the option of sending them a notice to quit and then going to court for summary process.

On April 20 the Governor signed the eviction moratorium that the Legislature had passed, which will last as long as the state of emergency plus 45 days, namely Acts of 2020 Chapter 65. The new law prohibits property-owners from going to court for summary process (except where a tenant’s criminal activity/lease violations  “may impact the health or safety of other residents, health care workers, emergency personnel, persons lawfully on the subject property or the general public”). So landlords with tenants who can’t or won’t pay rent have no legal recourse. They are, however, allowed to remind tenants of the duty to pay rent.

Question

If you are a property owner, what should you tell the tenant who misses rent?

Answer

Do not worry: the Executive Office of Housing and Economic Development of  has decided for you. It has issued regulations that state not only what you may write but what you must write. These are emergency regulations, so did not have to go through the process of notice and comment that allows the public to have a say. Here are the precise words that your State government requires you to utter:

THIS IS NOT A NOTICE TO QUIT.  YOU ARE NOT BEING EVICTED, AND YOU DO NOT HAVE TO LEAVE YOUR HOME.  An emergency law temporarily protects tenants from eviction during the COVID-19 emergency.  The purpose of this notice is to make sure you understand the amount of rent you owe to your landlord.
For information about resources that may help you pay your rent, you can contact your regional Housing Consumer Education Center.  For a list of agencies, see https://www.masshousinginfo.org/regional-agencies.
Additional information about resources for tenants is available at https://www.mhp.net/news/2020/resources-for-tenants-during-covid-19-pandemic. You will not be subject to late fees or a negative report to a credit bureau if you certify to your landlord in writing within 30 days from the missed payment that your non-payment of rent is due to a financial impact from COVID-19.  If possible, you should use the approved form at: https://www.mass.gov/lists/moratorium-on-evictions-and-foreclosures-forms-and-other-resources.
If you cannot access the form on this website, you can ask your landlord to provide the form to you.  You may also send a letter or email so long as it contains a detailed explanation of your household loss in income or increase in expenses due to COVID-19.
The regulation adds:
The notice may also include other information that will promote the prompt and non-judicial resolution of such matters, such as the total balance due, the months remaining and the total of lease payments expected to be made on a lease for a term of years, information on how to contact the landlord to work out a revised payment arrangement, and a reminder that after the state of emergency ends the tenant may face eviction if rent remains unpaid.
The term “non-judicial resolution” is a bit pointless in the absence of any possibility of judicial resolution (Chapter 65 effectively barred the courthouse doors). But anyway,  at least they are letting you say how much the tenants owe you and what may happen after the emergency.
The regulation goes on to add something that you should do, and also mentions something it “encourages” you to do.
If a landlord knows that the tenant is not proficient in English, the landlord should use reasonable efforts to deliver the notice in a language that the tenant understands.
Not a mandate, of course, just a suggestion. Then some more hortatory language.
Landlords are encouraged to include with the notice a statement that the notice is important and should be translated, a form of which is available on the EOHED website.
“Should” is not “shall” and “encouraged” is not exactly the same as “directly ordered to,” but you do not need a particularly vivid imagination to foresee what will happen to the landlord who chooses not to translate the notice and not to include the translated statement about the notice’s importance.

Conclusion

State government now permits you to inform non-paying tenants how much they owe and that after the state of emergency they may face eviction for non-payment. If you do choose to communicate with tenants on this subject, State government requires you to write the words set forth in the regulation. For some additional legal text that I consider relevant, click here.
Compelled speech 2
Editorial advice from State Government

Not a rent moratorium

April 23, 2020:- The new law is a moratorium on some (not all) evictions, not on rent. The law expressly states:

Nothing in this section shall relieve a tenant from the obligation to pay rent or restrict a landlord’s ability to recover rent.

Are landlords allowed to remind tenants of this fact? Yes.

Certainly, landlords who choose to provide a written reminder need to take care not to say anything that could construed as a request to vacate or as a threat to initiate a debt-collection lawsuit, nor should they visit the tenant. Sending the reminder to some tenants but not to others would invite a charge of discrimination, so an all-or-none approach would be wiser.

Statute

The eviction moratorium statute prohibits landlords from sending, for the purposes of a “non-essential eviction,” any notice, including a notice to quit, requesting or demanding that a tenant of a residential dwelling unit vacate the premises.”

Regulations

The Attorney General’s emergency debt-collection regulations prohibit “creditors” from threatening to initiate a collection lawsuit. Is a landlord who is trying to collect rent owed (overdue by 30+ days) under a lease a “creditor” within the meaning of the debt-collection regulations?

The emergency regulation states, at s. 35.03(2), that the prohibitions do not apply to “an attempt to collect a debt owed by a tenant to an owner.” The applicable regulation defines “tenant” as a person who occupies a dwelling unit “under a rental agreement,” which term the regulation defines as “an express or implied agreement for use and occupancy of a dwelling unit.” Is a tenant-at-sufferance someone who is occupying a dwelling unit “under an express or implied agreement”?  No; on the contrary, the tenant-at-sufferance is occupying the unit without the owner’s agreement, after any express or implied agreement has expired or been terminated.

This is somewhat convoluted, but bear with me: It is all too easy to imagine someone whose lease/rental agreement has expired or been terminated claiming to be a tenant-at-sufferance and, therefore, not a “tenant” within the meaning of the regulation and, therefore, outside the scope of the landlord-tenant exception to the ban on creditor-debtor communication. So tread carefully.

Takeaway

Sending a simple reminder to all tenants that the new law states that “nothing in this section shall relieve a tenant from the obligation to pay rent or restrict a landlord’s ability to recover rent” would not, in my opinion, violate the statute or the regulations.

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Peter Vickery, Esq.