Future Policy » Bills » 193 H.4074 An Act authorizing the city of Somerville to enact Right to Purchase Legislation

193 H.4074 An Act authorizing the city of Somerville to enact Right to Purchase Legislation

Summary

Somerville's proposal would change the normal close process for multifamily housing in significant ways. It would require owners to negotiate the sale of each property at least twice -- first to a market rate buyer, and then with their renters or agents. Depending on how many renters or agents are involved, there could be several negotiations. The process will take at least 135 days and will take longer under common circumstances.

The primary advocates for this proposal are the Community Development Corporations (CDCs), who are likely to be among those nonprofits granted special powers to purchase.

This proposal has less to do with helping renters live in Somerville and more to do with nonprofits building their real estate empires. Remember: being nonprofit does not preclude management from taking a favorable salary. By preventing sellers selling on the open market, nonprofit buyers can ensure less competition, unfairly lower prices, and take control of seller properties.

How to submit testimony to the Joint Committee on Housing

For the hearing November 14, adapt the text below and email it to Luke O'Roark at luke.oroark@mahouse.gov and Christianna Golden at christianna.golden@masenate.gov. Official hearing page. here.

From: You

To: <Luke O'Roark> luke.oroark@mahouse.gov, <Christianna Golden> christianna.golden@masenate.gov

Subject: Testimony opposed to H.4074 Somerville's right of first refusal

Body:

Hi Joint Committee On Housing,

I'm a responsible owner and I'm asking you to vote against H.4074 Somerville's right to purchase. I would be happy to sell my home to my renters when it comes time. I know they care about the property and would value the chance to become landlords, even in Somerville, which has a history of being unfriendly to us.

But I should not have to suffer a reduced sales price, wait half a year to close or repeatedly renegotiate my sale. When I decide to sell, it will be time. No one should be a landlord past the point when they want to.

I agree with MassLandlords that it looks like the Community Development Corporations are the main beneficiaries of this scheme. If buyers can't shop in Somerville the way they can shop in Arlington or Medford, they will look there instead. I will be left with few buyers and a reduced value. And the nonprofit that buys my property will pay no real estate tax, so Somerville will be left with reduced value, too.

When a town or city reduces its assessed value, the entire commonwealth pays through increased State aid to that town. Please vote against this bill.

Sincerely,
(list your name and address, if not in their district, and where your own property in your district.)

Custom testimony is always better. If you want to read our notes here and comment on anything that particularly concerns you, please edit the note above.

Full Text Explained

The text below is what was filed and before the Joint Committee on Housing as of November 12, 2023. We have broken up the section to show where certain parts came from, what they mean and how they would play out. Note that sometimes what is most important is what is invisible. There is no input from landlords at all, except where drafters have listened to our testimony and tried to work around our objections. The CDCs wrote this bill to beat us down and buy our property at distressed asset prices.

Policy Idea Opposed by Membership

Our ongoing policy priorities survey shows a majority of members strongly oppose this policy proposal.

Bill Opposed by Staff

MassLandlords staff oppose bill text below.


PREAMBLE The City of Somerville is herein authorized to enact a local ordinance for the purposes of preserving affordable housing, providing tenant stability, and maintaining the general welfare of Somerville residents.	Somerville needs permission from the state legislature because this ordinance would change state law around closings, curtail owner access to the courts and dramatically reduce the tax base, causing the state to pay in additional funds through State aid.
The ordinance will : (a) afford certain tenants and entities the right to purchase the residential property in which the tenant(s) reside(s), when that residential property is being offered for sale;	Without this bill, tenants and entities already have the right to purchase. The problem the bill drafters are trying to solve is they lose most bids, so rather than improve themselves, they seek to hobble the market.
and (b) set forth the manner in which that right to purchase shall be effectuated, as well as establish remedies for violations.	This is the only mention of "violations" in the bill. The legislature would be granting Somerville carte blanche to enact whatever penalty it wants by ordinance or regulation, up to and including eminent domain.
The ordinance shall contain substantially the same language set forth in this Act, and may also contain additional language, terms and provisions consistent with effectuating the purposes of this Act.	See previous point.
SECTION I: DEFINITIONS For purposes of this Act, the following words shall have the following meanings: “Bona Fide offer”- an offer made with honest and serious intent in an arm’s length transaction for a fixed consideration.	This definition demonstrates how unworkable TOPA remains and how little work its proponents have done to understand how real estate markets work. If a buyer makes a joke of an offer, not seriously expecting to get it, but the seller agrees, does that exempt the deal under the "honest and serious" requirement? It may. If an owner sells the property to someone they know, like their sister, or into an entity their control, like an LLC they create for the purpose, does that exempt it from the "arm's length" requirement? It should, and this seems to be the intent below. If two parties denominate the offer with any component tied to a variable stock exchange, federal reserve interest rate, or other, does that exempt it from the "fixed consideration" requirement? It will. There is no end of work-arounds the real estate market will pursue to undercut or invalidate TOPA. It is a waste of precious time in this housing crisis, advocated for primarily by community development corporations and land trusts, both of whom want the ability to purchase more real estate at discounted prices.
“City” - the City of Somerville, Massachusetts.
“City Designee” - a nonprofit organization established pursuant to chapter 180 of the General Laws, a public land trust, or other entity that has been designated by the City to acquire residential properties and to maintain those properties as affordable housing pursuant to a deed restriction, with terms as prescribed by the City.	Other versions of TOPA, especially past versions of this bill, allow or allowed any non-profit to be formed. This included brand-new associations of tenants living in the building. We criticized this as astroturfing, since the primary advocates for this legislation have been the community development corporations, in particular, via lobbying by the Massachusetts Association of Community Development Corporations. This version attempts to correct that by implying the City will own the property, but it will not. It is in fact a much more explicitly insider bill, as the nonprofit must first be chosen by the City to be eligible. That nonprofit is almost certain to be a CDC or a land trust run by an equivalently well-connected insider and potentially a lobbyist for this bill.
“Covered property” - residential property located in the City of Somerville that is not exempt from this Act pursuant to Section 4 of this Act.
“Owner” - a person, firm, partnership, corporation, trust, organization, limited liability company or other entity or its successors or assigns that holds title to Residential Property as defined herein.
“Purchase and Sale ” - a written agreement whereby an Owner agrees to sell property including, without limitation, a purchase and sale agreement, contract of sale, purchase option, or other similar instrument.
“Residential Property” - a building structure, or one or more units therein, designed and equipped for human habitation and located within the City of Somerville.	The intent is to include condos, but a condo is only from the walls in – absent the "building structure" – and technically exempt under this definition.
“Sale” - an act by which an Owner conveys, transfers or disposes of property by deed or otherwise, whether through a single transaction or a series of transactions;
provided that a disposition of housing by an Owner to an affiliate of such Owner shall not constitute a sale and a transfer.	"Affiliate" being undefined, the legislature would be granting carte blanche to the city to define affiliation. If an investor wants to use their property as buy-in to a real estate investment trust, out of which she will have the smallest fraction of ownership, will that count? It should, but this bill shows the City cannot be relied upon to understand all the ways in which market operators affiliate.
“Tenant” - a person or a household consisting of one or more persons that has entered into a written lease or rental agreement with the owner for possession of a dwelling unit, or a person or household consisting of persons that has paid rent to the owner of a lawful dwelling unit and whose rent payment has been accepted by said owner, and that is residing in said dwelling unit at the time of notification under Section 2(a) of this Act.	This would have the unintended consequence of encouraging landlords to enter verbal agreements with renters. As the courts have become unworkable and many landlords view “cash for keys” as our only option, handshake rental agreements are not unrealistic. The paper is already worthless with some types of evictions.
If there is more than one tenant or tenant household included in such a lease, or separately paying rent to the owner of a dwelling unit, each such tenant or tenant household may exercise the rights granted under this Act.	This is woeful text. Imagine the building has 10 tenants, each in sequence can seek to purchase? Or in competition with one another? The definition of a tenant association below does not restrict the right to associations.
“Tenant Association” - an unincorporated organization with a minimum participation of 35% of all Tenants within a building or group of buildings being sold as a single parcel.
The tenants of such building or buildings shall have signified their intent to participate in the Tenant Association by signing a form provided by the City.	When? Prior to the notice below?
“Tenant Association Designee” - a nonprofit organization established pursuant to chapter 180 of the General Laws, a public land trust, or a Tenant Cooperative as defined herein which has been duly selected by the members of a Tenant Association, as defined herein, for the purpose of acquiring the residential property occupied by the tenants.
“Tenant Cooperative” - a duly formed cooperative limited equity cooperative housing corporation as defined in Section 4 of chapter 157B of the General Laws.
SECTION 2: TENANT OPPORTUNITY TO PURCHASE (a)Notification of Tenants and the City: An owner of a covered property shall, within two (2) business days of accepting, subject to the provisions under this Act and any Ordinance promulgated hereunder, a bona fide offer to purchase that property, notify the municipality and each Tenant that resides in that property, in writing by hand delivery and U.S. mail, that said Owner (i) is selling the property, (ii) has received a bona fide offer for that property and (iii) is offering to sell the property to the Tenant, Tenant Association, Tenant Association Designee, the City, or City Designee for the price specified in the bona fide offer.	Imagine we have a building with 10 units, a tenant association with four units participating, another tenant association with another four units participating, and two hold-out units, each with two adults inside. Now the owner may potentially have six buyers to fight for the deal. Although this might seem favorable to an owner, we point this out to show the whole concept is poorly conceived by proponents.
Such notification shall include a copy of the City’s summary of this Act and any Ordinance promulgated hereunder and any associated forms.
Any receipt and conditional acceptance by an owner of an offer of a reduced price of a previously received bona fide offer shall be considered a new bona fide offer and all provisions of this Act in any Ordinance promulgated hereunder shall apply to such new bona fide offer.	This is one of the main points of the bill. Suppose the owner goes all the way through the process with the renters and they decline. The original buyer has long since walked away to shop in Medford. The seller asks them if they would be willing reconsider at a lower price. The buyer agrees. Now the renters start the TOPA process again and the buyer walks a second time. The purpose of TOPA is to beat down owners and reduce their asset value.
Nothing herein shall prohibit a Tenant, Tenant Association, the Tenant Association’s Designee, the City, or the City’s Designee from making the initial offer to purchase any property whether or not any previous offer on the property has been made.	Obviously. As mentioned above, renters already have the right to organize (MGL Chapter 186 Section 18) and to purchase.
In the event that the City or the City’s Designee makes the initial offer to purchase the property, the Tenant or the Tenant Association or Tenant Association’s Designee shall have the same right to purchase provided under this Act and shall have priority for such purpose over the City or City Designee.	This makes it clear the right of first refusal can be held by multiple renters and there will be some pecking order. The owner will have to go down the line with this process.
In the event that a unit is being converted to the condominium form of ownership such that the provisions of Ordinance No.
2019-06, the Somerville Condominium/Cooperative Conversion Ordinance are triggered and provide the tenant with the right to purchase the unit they are living in, the provisions of Ordinance No. 2019-06, the Somerville Condominium/Cooperative Conversion Ordinance shall apply instead of the right to purchase provisions herein.	The condo conversion ordinance was challenged in court for being an unlawful form of rent control, among other problems. Anticipating landlords paying attention for the possibility of TOPA to override the detested conversion ordinance, Somerville states their intent to have their cake and eat it too.
(b)Statement of Interest (i) In the case of a covered property being sold as an individual condominium unit, the Tenant shall, within fifteen (15) business days of said notification, notify the Owner and the City using a Statement of Interest form approved by the City (“Statement of Interest”) as to whether or not that Tenant wishes to purchase the property at the price specified in the bona fide offer, or wishes to delegate its rights under this Ordinance to the City or City Designee.	These timeframes are smokescreen timing. The true delay to a closing is not 15 days; it is the sum total of all delays below times the number of all rightsholders.
(ii) In the case of a covered property consisting of more than one but less than seven dwelling units, a Tenant Association shall within fifteen (15) business days of said notification, notify the Owner and the City using a Statement of Interest form as to whether or not that Tenant Association wishes to purchase the property at the price specified in the bona fide offer, or wishes to delegate its rights under this Ordinance to a Tenant Association Designee.
(iii) In the case of a covered property consisting of seven (7) or more dwelling units, a Tenant Association shall within thirty (30) days of said notification, notify the Owner and the City using a Statement of Interest form as to whether or not that Tenant Association wishes to purchase the property at the price specified in the bona fide offer, or wishes to delegate its rights under this Ordinance to a Tenant Association Designee.
(iv) In regards to any covered property, the City or City Designee shall have the same amount of time as provided herein to a Tenant or Tenant Association or Tenant Association Designee to notify an owner of its interest in purchasing a covered property at the price specified in the bona fide offer, using the Statement of Interest form.	Again, we wish to emphasize the owner will be wading through this process with each rightsholder.
SECTION 3: PURCHASE AND CLOSING ON THE PROPERTY (a)The Tenant or Tenant Association or Tenant Association Designee filing a Statement of Interest with respect to a covered property shall have ten (10) business days from the due date for filing its Statement of Interest to negotiate a purchase and sale agreement with that owner and to notify the City of the outcome of that negotiation.	After notifying the owner, renters have additional time to file with the City. Total delays: 25 days for 1 – 6 units, 40 days for 7+ units.
Both the Owner and the Tenant or Tenant Association or Tenant Association Designee shall be obligated to negotiate in good faith.	Or what? If the nonprofit negotiates in bad faith, do they have to pay the owner the cost of the sale they missed? This seems unlikely ever to actually help anyone.
(b)The City or the City Designee shall have twenty (20) business days from the due date for filing its Statement of Interest to negotiate a purchase and sale agreement with that owner.	Total delays: 45 days for 1 – 6 units, 60 days for 7+ units.
This extended period allows the City or City Designee to negotiate a purchase and sale agreement at the point that the Tenant, Tenant Association, or Tenant Association Designee has declined or otherwise failed to do so.	This could indicate the intent is to run the process in parallel, except previously it clearly states who has priority.
Both the Owner and the City or the City Designee shall be obligated to negotiate in good faith.	Again, hardly likely to ever help, as no owner can be adequately reimbursed for a missed sale. Think about what happened when interest rates rose over the space of a closing in 2022.
(c)A purchase and sale agreement negotiated pursuant to subparagraph (a) or (b) shall allow for contingencies including, at a minimum, that (i) the agreement is subject to inspection of the property, and (ii) the agreement is subject to the ability of the buyer to obtain financing.	This is interference in the market. In some markets, contingencies are impossible. The City, its designee or the tenants should be prepared to compete, same as everyone else.
(d)A purchase and sale agreement negotiated by the owner and a Tenant, Tenant Association, or Tenant Association Designee may be assignable to the City or City Designee with the consent of that Tenant, Tenant Association, or Tenant Association Designee and the City or City Designee.	The assignment right has been particularly problematic in Washington D.C., where renters are often enticed to sign away rights by those who would purchase. Remember the City designee is not guaranteed to be a public-spirited body. It can be a nonprofit of the type of the Southern Middlesex Opportunity Coalition, whose previous Executive Director, Jim Cuddy, made close to $400,000 in his last year there. TOPA creates an opportunity to purchase assets at distressed prices, pay no real estate tax, collect small-"A" affordable market rents, and pay yourself a favorable salary.
Likewise, a purchase and sale agreement negotiated by the owner and the City or City Designee may be assignable to a Tenant, Tenant Association, or Tenant Association Designee with the consent of that Tenant, Tenant Association, or Tenant Association Designee and the City or City Designee.	See above comments on wheeler-dealer assignment transacting. The TOPA right will be enormously valuable.
(e)The parties to a purchase and sale agreement shall have ninety (90) days to close on the sale of the property unless such period of time is extended by mutual agreement of the parties.	A normal market close time is 30 days from time of offer. Total delays: 135 days for 1 – 6 units, 150 days for 7+ units.
(f)If the Tenant or Tenant Association has entered into a purchase and sale agreement with the Owner but is unable to close on the sale of the property, the contract may be assigned to the City or City Designee, at the option of the City or City Designee.
In such case, the Owner and the City or City Designee may, by mutual agreement, extend the deadline for closing.	Remember the owner is being beaten down, forced to landlord a property they wanted to sell months ago. They will have to extend the deadline, they have no choice. Total delays: Incalculable.
SECTION 4: EXEMPTIONS For the purposes of this Act, the term “covered property” shall not apply to the following: (a)One, two or three unit residential properties which are owner occupied as the owner’s principle place of residence;	If the owner is a senior headed for assisted living across the street, she had better sell while she still resides in her property or else TOPA will cruelly apply to her.
(b)Any sale of property by an Owner to a spouse, sibling, parent, child, or grandchild;	This puts the State in the business of endorsing Somerville's particular family and interpersonal values. It is a particularly cruel bill for its exclusion of polyamorous couples, which the city purported to be first to support. And for more frequent occurrences, what if an aunt wants the apartment for her niece? In Somerville, the aunt–niece relationship is not important enough; she cannot sell her property to her niece. What about a soul mate who has shared their life with another since high school? This is equally unvalued. In Somerville, the renters you barely know matter more than the people you love or the buyer who promises to keep the oak you planted 40 years ago. Sellers should be free to choose from among their potential buyers.
(c)Property that is the subject of a government taking by eminent domain or a negotiated purchase in lieu of eminent domain;	Here we see eminent domain is on their mind. Very concerning.
(d)Any sale of publicly assisted housing, as defined in section 1 of chapter 40T of the General Laws;
(e)Rental units in any hospital, skilled nursing facility or health facility;
(f)Rental units in a non-profit facility that has the primary purpose of providing short term treatment, assistance, or therapy for alcohol, drug or other substance abuse providing that such housing is incident to the recovery program, and where the client has been informed in writing of the temporary or transitional nature of the housing;
(g)Rental units in a nonprofit facility which provides a structured living environments that has the primary purpose of helping homeless persons obtain the skills necessary for independent living in permanent housing and where occupancy is restricted to a limited and specific period of time not more than twenty-four months and where the client has been informed in writing of the temporary or transitional nature of the housing at the inception;
(h)Public housing units managed by Somerville Housing Authority;
(i)Any units which are held in trust on behalf of a disabled individual who permanently occupies the unit, or a unit that is permanent occupied by a developmentally disabled parent, sibling, child or grandparent of the owner of the unit;	Again, Somerville is putting its value on some relationships but not others.
and (j)Any rental unit that is owned or managed by a college or university exclusively for the express purpose of housing students.
SECTION 5: TENANT STABILITY An owner shall not evict a tenant or tenants or otherwise terminate a tenancy without just cause if such eviction is for the purpose of avoiding application of this law.	This asks the legislature to change access to the courts at Somerville's whim. What is to stop the Office of Housing Stability claiming every eviction is an attempt to avoid TOPA?
Any rights provided under this act are not waivable except as provided in this Act and any provision of any lease or other written agreement to the contrary shall be null and void.
SECTION 6: EFFECTIVE DATE This act shall take effect upon its passage.

What's the alternative?

Compete! Renters already have the right to purchase, and so nonprofits. Find a way to compete on a normal 30 day close, like the rest of the investors out there. Don't kneecap someone just because you yourself haven't trained to skate.