HOUSE DOCKET, NO. 985        FILED ON: 1/18/2017

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 655

The Commonwealth of Massachusetts

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PRESENTED BY:

Daniel Cullinane

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To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
Court assembled:

The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:

An Act regarding right of first refusal in the event of foreclosure and short sales and deeds in lieu.

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PETITION OF:

HOUSE DOCKET, NO. 985        FILED ON: 1/18/2017

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 655

The Commonwealth of Massachusetts

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In the One Hundred and Ninetieth General Court
(2017-2018)

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An Act regarding right of first refusal in the event of foreclosure and short sales and deeds in lieu.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
 

SECTION 1.  (a) As used in these sections, the following words shall, unless the context clearly requires otherwise, have the following meanings:

“Auction” or “Public auction,” the sale of a housing accommodation, under power of sale in a mortgage loan, by public bidding.

“Borrower,” a mortgagor of a Mortgage Loan. 

“Mortgage loan,” a loan secured wholly or partially by a mortgage on a housing accommodation. 

“Mortgagee,”  an entity to whom property is mortgaged, the mortgage creditor or lender including, but not limited to, mortgage servicers, lenders in a mortgage agreement and any agent, servant or employee of the mortgagee or any successor in interest or assignee of the mortgagee's rights, interests or obligations under the mortgage agreement. 

“Housing accommodation,” a building or buildings, structure or structures, or part thereof, rented or offered for rent for living or dwelling purposes, including, without limitation, houses, apartments, condominium units, cooperative units and other multi-family residential dwellings, but excluding a group residence, homeless shelter, lodging house, orphanage, temporary dwelling structure, and transitional housing. The provisions of this section shall not apply to a borrower-occupied housing accommodation so long as the borrower is domiciled in the housing accommodation at the initiation of the short-sale, deed-in-lieu, or foreclosure process.

“Foreclosure,” a legal proceeding to terminate a borrower’s interest in property, instituted by the mortgagee, and regulated under chapter 244.

“Short-sale,” sale approved by the mortgagee to a bona fide purchaser at a price that is less than borrower’s existing debt on the housing accommodation.

“Deed in lieu,” a deed for the collateral property, the housing accommodation, that the mortgagee accepts from the borrower in exchange for the release of the borrower’s obligation under the mortgage loan.

“Tenant,” a person or group of persons who at the time of the short-sale or foreclosure is entitled to occupy the housing accommodation pursuant to a bona fide lease or tenancy at will, the right to occupy having been established for no less than one year at the time of short-sale or foreclosure process or deed-in-lieu transfer. This definition shall not exclude former owners who have a negotiated tenancy with a financial institution.

“Bona fide lease or bona fide tenancy,” a lease or tenancy shall not be considered bona fide unless: (1) the borrower, or the child, spouse or parent of the Borrower under the contract, is not the tenant; (2) the lease or tenancy was the result of an arms-length transaction, and (3) the tenant is current on all rental payments and there are no outstanding claims for breach of lease or property damage. 

“Notice of Sale,” a notice in the form specified in section 14 of chapter 244 of the General Laws.

“Notice of Intention to Foreclose,” a notice in the form specified in chapter 244, section 17B of chapter 244 of the General Laws.

“Third Party Offer,” an offer to purchase the mortgaged property for valuable consideration by an arm’s length purchaser, not including the borrower or the tenants.

“Owner,” a borrower who is not domiciled in the housing accommodation.  

SECTION 2.  Short-sales.

(a) An owner shall give notice to each tenant of a housing accommodation of the intention to sell the housing accommodation by way of short-sale to avoid foreclosure. Such notice shall be mailed by regular and certified mail, with a simultaneous copy to the attorney general and the director of housing and community development, within two (2) business days of the owner’s submission of a request or application to the mortgagee for permission to sell the housing accommodation by way of short-sale or to accept a deed in lieu.  This notice shall also include a notice of the rights provided by this section.

(b) No mortgagee may accept any third party offers or deem the owner’s application for short-sale submitted for review unless and until the mortgagee receives documentation in a form approved by the attorney general  demonstrating that the tenants of the housing accommodation have been informed of the owner’s intent to seek a short-sale or deed in lieu and the tenants have expressed their interest in exercising a right of first refusal within 60 days, assigning that right of first refusal, or the tenants have waived those rights.  If tenants have not affirmatively expressed their interest in exercising a right of first refusal or in assigning that right within 60 days, or have not affirmatively waived that right within 60 days, the tenants’ rights are deemed waived. 

(c) Before a housing accommodation may be transferred by short-sale or deed-in-lieu, the owner shall notify each tenant, with a simultaneous copy to the attorney general and the director of housing and community development, by regular and certified mail, of any bona fide offer that the mortgagee intends to accept.  Before any short-sale or transfer by deed-in-lieu, the owner shall give each tenant such a notice of the offer only if households constituting at least fifty-one percent of the households occupying the housing accommodation notify the owner, in writing, that they collectively desire to receive information relating to the proposed sale. Tenants may indicate this desire within the same notice described in paragraph (b).  Any notice of the offer required to be given under this subsection shall include the price, calculated as a single lump sum amount and of any promissory notes offered in lieu of cash payment.

(d) A tenant group representing at least fifty-one percent of the households occupying the housing accommodation which are entitled to notice under paragraph (c) shall have the collective right to purchase, in the case of a third party offer that the mortgagee intends to accept, provided it (1) submits to the owner reasonable evidence that the tenants of at least fifty-one percent of the occupied units in the housing accommodation have approved the purchase of the housing accommodation, (2) submits to the owner a proposed purchase and sale agreement on substantially equivalent terms and conditions within sixty days of receipt of notice of the offer made under subsection (c) of this section, (3) obtains a binding commitment for any necessary financing or guarantees within an additional ninety days after execution of the purchase and sale agreement, and (4) closes on such purchase within an additional ninety days after the end of the ninety-day period under clause (3).

No owner shall unreasonably refuse to enter into, or unreasonably delay the execution or closing on a purchase and sale with tenants who have made a bona fide offer to meet the price and substantially equivalent terms and conditions of an offer for which notice is required to be given pursuant to paragraph (c). Failure of the tenants to submit such a purchase and sale agreement within the first sixty day period, to obtain a binding commitment for financing within the additional ninety day period or to close on the purchase within the second ninety-day period, shall serve to terminate the rights of such tenants to purchase. The time periods herein provided may be extended by agreement. Nothing herein shall be construed to require an owner to provide financing to such tenants. A group or association of tenants which has the right to purchase hereunder, at its election, may assign its purchase right hereunder to the city or town in which the housing accommodation is located, or the housing authority of the city or town in which the housing accommodation is located, or an agency of the commonwealth, nonprofit, community development corporation, affordable housing developer, or land trust, for the purpose of continuing the use of the housing accommodation as permanently affordable rental housing.

(e) The right of first refusal created herein shall inure to the tenants for the time periods hereinbefore provided, beginning on the date of notice to the tenants under paragraph (a). The effective period for such right of first refusal shall begin anew for each different offer to purchase that the mortgagee intends to accept.  The right of first refusal shall not apply with respect to any offer received by the owner for which a notice is not required pursuant to said paragraph (c).

(f) In any instance where the tenants are not the successful purchaser of the housing accommodation, the mortgagee shall provide evidence of compliance with this section by filing an affidavit of compliance with the attorney general, the director of housing and community development, and the official records of the county where the property is located within seven days of the sale. 

(g) It is illegal for the owner to evict a tenant or tenants in order to avoid application of this law.

(h)   Aggrieved tenants may seek damages under chapter 93A and may file a complaint with the attorney general.  Tenants may seek damages including a percentage of the sales price and/ or injunctive relief in the form of specific performance to compel transfer of property.   Nothing in this act shall be construed to limit or constrain in any way the rights tenants currently have under applicable laws, including but not limited to chapters186 and 186A. At all times, all parties must negotiate in good faith.

(i) The attorney general shall enforce this section and shall promulgate rules and regulations necessary for enforcement.  The attorney general may seek injunctive, declaratory, and compensatory relief on behalf of tenants and the commonwealth in a court of competent jurisdiction. The attorney general shall post a sample intent to sell notice, sample proof of notice to tenants, sample notice of offer, and other necessary documents.

SECTION 3.  Foreclosures. (a) When a mortgagee seeks judicial determination of the right to foreclose, then the mortgagee shall provide a copy of the complaint by regular and certified mail to the tenants of the housing accommodation.  The mortgagee shall also provide tenants, by regular and certified mail, with a copy of any Order of Notice issued by the Land Court, if applicable, within five (5) days of issuance.

(b) The mortgagee shall provide each tenant, by regular and certified mail, a copy of any and all Notices of Sale published pursuant to Section 14 of chapter 244.  A copy should be provided simultaneously with the successive publication notices.

(c) No later than five (5) business days before the auction of a housing accommodation, the tenants shall inform the mortgagee, in writing, if a group of tenants representing at least fifty-one percent of the households occupying the housing accommodation intend to exercise their collective right of first refusal at auction and desire to receive information relating to the proposed auction.

(d)  A group of tenants representing at least fifty-one percent of the households occupying the housing accommodation may exercise their collective right to purchase the housing accommodation, in the event of a third party offer at auction that the mortgagee receives, provided that the group of tenants (1) submits to the mortgagee reasonable evidence that the tenants of at least fifty-one percent of the occupied homes in the housing accommodation have approved the purchase of the housing accommodation, (2) submits to the mortgagee a proposed purchase and sale agreement on substantially equivalent terms and conditions to that received by the mortgagee in the third party offer within sixty days of receipt of notice of the bid made under subsection (c) of this section, (3) obtains a binding commitment for any necessary financing or guarantees within an additional ninety days after execution of the purchase and sale agreement, and (4) closes on such purchase within an additional ninety days after the end of the ninety-day period under clause (3).

No mortgagee shall unreasonably refuse to enter into, or unreasonably delay the execution or closing on a purchase and sale with tenants who have made a bona fide offer to meet the price and substantially equivalent terms and conditions of a bid received at auction. Failure of the tenants to submit such a purchase and sale agreement within the first sixty day period, to obtain a binding commitment for financing within the additional ninety day period or to close on the purchase within the second ninety-day period, shall serve to terminate the rights of such tenants to purchase. The time periods herein provided may be extended by agreement. Nothing herein shall be construed to require a mortgagee to provide financing to such tenants. A group or association of tenants which has the right to purchase hereunder, at its election, may assign its purchase right hereunder to the city, town, housing authority, or agency of the commonwealth, nonprofit, community development corporation, affordable housing developer, or land trust for the purpose of continuing the use of the housing accommodation as permanently affordable rental housing.

If there are no third party bids at auction for the housing accommodation, the tenants shall have a right of first refusal whenever the mortgagee seeks to sell the housing accommodation. The tenants shall be notified of any offers the mortgagee intends to accept and shall be given an opportunity to meet the price and substantially the terms of a third-party offer based on the same time line described in paragraph (d).

(e) The right of first refusal created herein shall inure to the tenants for the time periods hereinbefore provided, beginning on the date of notice to the tenants under paragraph (a). 

(f) In any instance where the tenants are not the successful purchaser of the housing accommodation, the seller of such unit shall provide evidence of compliance with this section by filing an affidavit of compliance with the attorney general, the director of housing and community development, and the official records of the county where the property is located within seven days of the sale.

(g) It is illegal for the owner to evict a tenant or tenants in order to avoid application of this law.

(h)   Aggrieved tenants may seek damages under General Law Chapter 93A and may file a complaint with the attorney general.  Tenants may seek damages including a percentage of the sales price and/or injunctive relief in the form of specific performance to compel transfer of property.   Nothing in this Act shall be construed to limit or constrain in any way the rights tenants currently have under applicable laws, including but not limited to chapters 186 and 186A. At all times, all parties must negotiate in good faith.

(i) The attorney general shall enforce this section and shall promulgate rules and regulations necessary for enforcement.  The attorney general may seek injunctive, declaratory, and compensatory relief on behalf of tenants and the Commonwealth in a court of competent jurisdiction. The attorney general shall post a sample intent to sell notice, sample proof of notice to tenants, sample notice of offer, and other necessary documents.