Real Estate Law FAQs
How Does the Residential Purchase & Sale Process Work in Massachusetts ?
The residential real estate transaction will begin on the making and acceptance of an offer. This is often done with only your real estate broker involved and prior to contacting an attorney. In a perfect world, your attorney would be involved at this stage. While the form of offer commonly used by real estate brokers qualifies the document so that it does not become a binding sale by itself, care must be given because in certain circumstances the offer can bind you to the transaction in and of itself. If you have any questions about an offer document prior to signing it, stop the process and consult with an attorney.
After the offer has been made and accepted, the next stage is the signing of the purchase and sale agreement, which will become the binding document of the transaction. The offer document probably will call for a home inspection to be conducted within a few days. Ideally this should occur before the purchase and sale agreement is signed so that any issues arising out of the inspection can be included in the agreement itself. If the inspection cannot occur first, not to worry – any items from the home inspection can still be negotiated into or otherwise condition the agreement.
The purchase and sale agreement, being the critical document in the transaction, should not be signed until you have consulted with an attorney. There are various little changes that need to be made to the form agreements used, but most critically there are negotiations that need to occur over items that came up in the home inspection or that otherwise affect when closing may occur. There also critical contingencies to be included regarding mortgages, other inspections that may occur, such as for radon, and regarding septic system inspections and possible repairs.
Once the purchase and sale agreement is signed, the next step is for the buyer getting approved by his/her lender for a mortgage. All purchase and sale agreements will have a financing contingency that will allow the buyer out of the deal if a mortgage commitment cannot be obtained by a certain date with notice to the seller. The seller’s activity during this time is to have an inspection of the septic system done, if one serves the property. The outcome of that inspection will likely also be a contingency that could void the deal.
Once the buyer has been approved for a mortgage, the attorney assigned by that lender to close the loan will get involved. He/she will obtain real estate tax information from the town, obtain a plot plan looking for encroachments over boundary lines or zoning issues, and will conduct a title search on the property to make sure there is a clear and marketable title to be passed. If there are any issues that arise from any of these, they will need to be rectified by the seller and/or could be grounds for termination of the transaction. The closing attorney will also arrange with the seller to get information by which payoffs of existing mortgages can be obtained. The broker in the interim will arrange for the necessary certifications for smoke and CO2 detectors, and on the eve of closing will arrange for final utility readings.
The transaction will be “closed” at the closing attorney’s office or at the Registry of Deeds. Buyers borrowing from a bank will have a lot of paper to sign; sellers relatively little. Sellers must show up with a deed to the buyers. Keys and funds will be exchanged, and once the transaction is recorded, it is done. With new Federal regulations coming into effect in 2015, the major issue with closings today is coordinating movers and multiple closings (selling one property, buying another). Patience is now very much a virtue by everyone involved.
What is the Law About Residential Tenancies in Massachusetts?
Residential tenancies are strictly regulated in Massachusetts. There is a perception that the law is extremely pro-tenant. I caution landlord clients that while that are many protections in the law for tenants, and many procedural hoops and “gotchas” for landlords, ultimately the property belongs to the landlord and possession will be re-gained. The key is a clear understanding of the law and following its various requirements to the letter.
Tenancies take two forms: “at will” or for a term. A tenancy at will means that it can be terminated, upon the proper means and form of notice required by statute, for any reason or no reason. The notice time period is no less than 30 days from the end of a rental period. A tenancy at will is usually not in writing, but can be. It is usually for a month-to-month term, but can be longer or shorter. A tenancy for a term is usually for a period longer than one month, and is usually created by a written lease. Written leases in Massachusetts often utilize forms created by the local real estate boards. Note that in written leases, many terms, such as notice requirements, may differ from that in the statute (MGL c. 186). The lease will govern unless it sets out lesser protections than the statute.
All tenancies, in writing or not, have with them two important “implied covenants” in the law – the covenant of habitability and the covenant of quiet enjoyment. The first means, obviously, that the property must be habitable and in code compliance. It means landlords must respond to legitimate repair requests promptly. Tenants can, and will, call local Boards of Health and building inspectors to get satisfaction, and then landlords will get orders they cannot ignore. There are prohibitions again retaliatory eviction after the event. The latter covenant means that although the landlord owns the property, once the tenant occupies it, it is his/her home, and he/she is entitled to privacy and to not be harassed by the landlord. The landlord cannot come onto the property without notice, and only for repairs or to show the property near the end of the tenancy.
There are strict rules about how last month’s rent and security deposits are to be taken, disclosed, held and managed IF a landlord wishes to collect either (a landlord is not obligated to). The failure to manage these items correctly ends up being the single major defense a tenant has when later being evicted and sued for non-payment of rent. These failures can mean forfeiture of the use of a security deposit and paying damages of 3x the amount of the deposit.
Even without security deposits, or where a security deposit does not cover all damages, a landlord can always sue for damages caused by a tenant. A security deposit only means there is a pot of money available to help pay for those damages, but it is not a cap on damages. However, a common scenario is that an eviction is caused by non-payment of rent, and thus the practical reality is that the tenant doesn’t have the resources to pay damages. Thus, landlords should always collect a deposit to potentially compensate themselves for damage caused – just follow the rules governing such deposits to the letter.
Eviction is a court process with its own strict rules. The initial court appearance, if you move quickly once the tenancy is deemed terminated, can be within 3 weeks, although other issues can arise to extend the court process. If a tenant is still in the property, the tenant is still liable for a “use & occupancy” charge (equal to what was the rent) until he/she leaves.
Rules for Landlords: NEVER engage in self-help – follow the law and procedures to the letter. Follow the security deposit law to the letter. Don’t harass even lousy tenants. Respond to tenant repair requests promptly.
Rules for Tenants: Respect the landlord’s property. Be upfront with the Landlord about any financial difficulties.
How Can One Hold Title to Real Estate in Massachusetts?
Both individuals and formal entities like corporations, LLCs and trusts can hold title to real estate in Massachusetts.
When there are two or more owners, it is critical to know how they hold title as to each other:
- Tenancy in Common – This means that each owner is deemed to own a separate share, that can be separately passed on through that owner’s estate – it does not automatically pass to the other owners. It is a common result if children and grandchildren inherit properties passing without a will being involved.
- Joint Tenancy, also expressed as Joint Tenancy With Right of Survivorship (JTWROS) and in Massachusetts when the owners are married as Tenancy by the Entirety – This means that each owner is deemed to own the whole, and thus when one owner passes, his/her title automatically passes to the other surviving owners, completely outside the estate of the deceased owner, even if he/she had a will.
- Where a deed is silent as to the type of tenancy amongst joint owners, a tenancy in common is presumed. Where there are no percentages of ownership interest stated, equal shares are presumed, although shares will differ between generation levels when the property interest has passed down through inheritance.
- These tenancies can be forcibly broken through a Petition to Partition process in the Probate & Family Court.
Multiple owners and corporate owners often hold title through Real Estate Trusts. (See FAQ regarding types of business entities in Massachusetts.