193 H.4726 Full Text of the Housing Bond Bill Tenant Opportunity to Purchase aka Right of First Refusal

The Tenant Opportunity to Purchase Act, or Right of First Refusal, passed by the House as Consolidated Amendment “B” to the Housing Bond Bill. This would allow any town or city to collapse its local real estate market, destroy an important source of municipal funding and make it much more expensive to borrow. This page provides three talking points up-front, and then explains the bill text line by line.

TOPA collapses the market by delaying closing, in some cases indefinitely.

Compared with a normal 30-day close, TOPA would require 160 days to close any market property, 240 days to close any short sale, and 180 days to close any sale at auction for each tenant group that wants to bring a claim. The use of a single word “a” where “the” should have been written results in overlapping groups of jockeying powers to create utter chaos. This creates structural uncertainty, not just now as we read the bill text but forever after with each proposed transaction. Long, uncertain closings will predictably lead investors to shop elsewhere. TOPA will sharply reduce or eliminate private investment.

TOPA shuts off the engine of municipal funding, which is local real estate taxes.

Reduced market prices lead to reduced assessments and reduced municipal tax revenue. The only ones who can operate in a TOPA town are the tax-exempt community development corporations (CDCs). Allowing a town to enact TOPA is as bad as allowing them to enact rent control: Either action is equivalent to shooting themselves in the foot. Although this particular language is unprecedented, we estimate a 10% to 20% reduction in local tax revenue based on similar draconian policies like rent control, which have been exhaustively studied. Our state aid redistribution system puts non-TOPA towns on the hook: Any town that suffers cataclysmic loss of revenue will require massive state aid transfers that would have gone to support other communities more equally. TOPA eliminates municipal tax revenue in both TOPA and non-TOPA towns.

TOPA makes it expensive if not impossible to lend on commercial multifamily buildings.

The bill requires filings and orders in foreclosure cases be copied to the renters. Foreclosures are the bank's last resort (formally, recourse) on every loan. Even if the tenant failed to purchase the property beforehand, a single defective notice could give the tenant the ability to go to court to compel a deed change after the foreclosure is done. In other words, foreclosures can be undone on tenant say-so. This creates enormous uncertainty about whether a lender can foreclose or short sell at all. No one can lend against multifamilies in such a climate, or if they operate at all, lenders will charge enormously high interest. Because of this, TOPA will be a gift to NIMBY towns, who will enact it to stop the financing of new rental housing.

TOPA represents a breakdown of process.

That TOPA passed the House is a shocking reminder of where democracy fails: While we have great respect for the representatives in public service who attempt to craft policy, at the end of the day each of us is too poorly educated to make decisions concerning complex markets and legal processes without extensive, transparent public debate together, with all voices at the table. Yet CDCs lobby without reporting, using public funds, in excess of allowable limits and with apparently total impunity. The TOPA bill text has been glommed together hastily with the housing bond bill and numerous completely unrelated ideas. This predilection for massive bills makes it impossible to do anything good (like spending on public housing) without letting something awful like TOPA come along for the ride.

Specific commentary is below.

TOPA Right of First Refusal Full Text Explained

 

 

SECTION 36D.

 

This section sits inside the 177-page bill, 193 H.4726 “An Act relative to the Affordable Homes Act,” passed by the House on June 5, 2024. The primary purpose of the bill is to authorize the commonwealth to borrow $6 billion for public housing and other housing-related nonprofit salaries.

 

 

 

Chapter 184 of the General Laws is hereby amended adding the following section:-

 

Chapter 184 is the law covering miscellaneous real estate topics like liens and encumbrances preventing owners from selling real estate.

 

 

 

 

Section 36.

 

(a) For the purposes of this section, the following words shall, unless the context clearly requires otherwise, have the following meanings:

“Affiliate”, an entity owned or controlled by an owner or under common control with an owner.

 

As used below, this definition attempts to exclude sale or transfer to another entity also owned or controlled by the seller.

 

 

 

“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.

 

 

 

 

 

 

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

 

This is the technical term for a short sale.

 

 

 

 

“Designee”, a nonprofit organization, established pursuant to chapter 180, which is selected by members of a tenant association.

 

Renters are often poorly prepared to purchase a property, so they can appoint a designee nonprofit, subject to city restrictions on which nonprofits are eligible. This is how the CDCs enter the picture: They will be the designee and the purchaser of all properties where renters cannot afford to become owners, which is to say, all TOPA properties.

 

 

 

 

“Elderly tenant household”, a tenant household in which 1 or more of the residents are age 65 or older.

 

 

 

 

 

 

“Executive office”, the executive office of housing and livable communities established in chapter 23B.

 

 

 

 

 

 

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

 

 

 

 

 

 

“Housing accommodation”, a building, structure or part thereof, rented or offered for rent for living or dwelling purposes, including, but not limited to, a house, apartment, condominium unit, cooperative unit and other multi-family residential dwelling;

 

 

All market rental housing is covered.

 

 

provided, that a housing accommodation shall not include a group residence, homeless shelter, lodging house, orphanage, temporary dwelling structure or transitional housing;

 

Sober houses and other nonprofit housing types are exempt.

 

 

 

and provided further, that a housing accommodation shall not include a borrower-occupied housing accommodation if the borrower is domiciled in the housing accommodation at the initiation of the short-sale, deed in lieu or foreclosure process.

 

It is unclear if the law intends to exempt owner-occupied buildings from the onerous foreclosure requirements detailed below. If that was the intent, it should have been worded differently to make clear that the entire building is exempt, not just the fractional value of the unit being owner occupied.

 

 

 

 

“Member”, a natural person who is a member of a tenant association.

 

 

 

 

 

 

“Minimum tenant participation percentage”, the minimum percentage of tenants who shall participate as members of a tenant association as defined by the city or town in a municipal ordinance or by-law;

 

 

 

 

 

provided, that the minimum tenant participation percentage shall be not less than 51 per cent of the tenant-occupied housing units.

 

At least 51% of tenants in a building will have to agree to buy a property. Note that the delays are required regardless of whether a tenant association even exists, let alone votes.

 

 

 

The percentage shall be calculated based on the number of tenant-occupied housing units in a property.

 

If you have three units in a building, then representatives from two units must vote yes for a majority.

 

 

 

If more than 1 person is a lessee in a unit, all of the tenants who are lessees for that unit shall participate as members of the tenant association for the unit to be counted toward the participating percentage of units.

 

However, if multiple people are signed to the tenancy (as recommended and required by court procedure), then something else happens.

It seems that the intent is every signer has rights in the tenant association.

It could be that unless every household is unanimous in participating, then they don't count.

This is unclear.

 

 

 

 

“Mortgagee”, an entity to whom property is mortgaged, 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.

 

aka “a bank.”

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

aka “a mortgage.”

“Owner”, a person, firm, partnership, corporation, trust, organization, limited liability company or other entity, or its successors or assigns that holds title to real property.

All owners are covered.

“Purchase contract”, a binding written agreement whereby an owner agrees to sell property, including, but not limited to, a purchase and sale agreement, contract of sale, purchase option or other similar instrument.

The intent is to cover all “purchase and sale” agreements in rental real estate.

“Purchaser”, a party who has entered into a purchase contract with an owner and who will, upon performance of the purchase contract, become the new owner of the property.

aka “the buyer.” Note that there is no exemption for elderly homeowners, veterans or first-time homebuyers. Anyone attempting to purchase a renter-occupied property, including a single-family home, will have their property swept out from under them by CDCs.

“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;

The intent is that all sales should be covered.

provided, that a disposition of housing by an owner to an affiliate of such owner shall not constitute a sale.

This attempts to exempt transactions that are not at arm’s length.

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

When a homeowner cannot afford the mortgage, they may want to sell. If the house value is less than the mortgage (e.g., due to a balloon payment that was missed), the owner may need permission from the bank to sell. The reason is because the bank would not be repaid fully at closing. This is called a “short sale.”

“Successor”, an entity through which a tenant association may take title to the property, which may be a corporation with the sole stockholder being the tenant association, a housing cooperative organized under chapter 157B, a limited liability company in which the tenant association is the member, a limited partnership in which the tenant association is a general partner or when permitted by the municipality’s ordinance, a joint venture between any of such entities and another party with: (i) the requisite experience in acquiring, developing and owning residential property;

This section prevents the purchaser being a third-party investor. The intent may be to prevent the failure of the Washington, D.C., system in which tenants shake down owners for the right to purchase, and then the owner is free to sell to a third-party investor.

and (ii) the financial capacity to guaranty financing of the purchase transaction.

This is another place where the CDCs lobby for this bill appear. They have written themselves into the bill text.

“Tenant”, a natural person who has: (i) entered into an express written lease or rental agreement with the owner for exclusive possession of the premises for at least 6 months;

The intent seems to be that commercial tenants or nonprofit renters are excluded.

or (ii)

paid rent to the owner and the owner has accepted said rent for at least 6 months.

The intent seems to be to include all verbal or handshake agreements even if not formally for more than six months, including tenancies at will.

“Tenant association”, an organization with a membership limited to present tenants of a property that is: (i) registered with the municipality that has adopted an ordinance or by-law consistent with this section;

There would need to be a new process for municipalities to register tenant associations. Normally, all registered associations are filed with the secretary of the commonwealth and towns only receive “doing business as” or “d/b/a” filings.

Note that there is no requirement that the tenant association have preapproval.

or (ii) a non-profit organization incorporated under chapter 180.

Any nonprofit could be a tenant association if its membership is limited to the tenants.

“Third-party offer”, an offer to purchase the mortgaged property for valuable consideration by an arm’s length purchaser;

 

provided, that a third-party offer shall not include an offer by the borrower or tenants.

“Third-party offer” appears only in the section related to foreclosures, so certain procedures exclude the borrower’s attempt to repurchase the property being foreclosed on.

“Third-party purchaser”, a purchaser who is not a tenant association, a designee or an affiliate.

All market rate offers are covered.

(b)(1) A city or town may accept this section, in the manner provided in section 4 of chapter 4, through ordinance or by-law, to establish a tenant right to purchase property.

This section shall take effect no later than 180 days after such acceptance.

Normally drafted bills would say “no sooner than” to give people time to plan and adjust.

The CDCs who drafted this are so hungry, they can't wait longer than six months. So they wrote “no later than.”

A city or town may at any time revoke its acceptance of this section by vote of the legislative body, subject to the charter of the municipality.

Anticipating TOPA may fail, the legislature granted towns the ability to revoke it.

The revocation shall not affect agreements relative to tenants’ right to purchase that have already been asserted prior to the revocation.

If a town revokes TOPA, TOPA rights already in effect are protected.

Note that no such protection exists for market deals in effect when TOPA is passed. Existing market deals in progress would become TOPA-impacted.

(2) A municipal ordinance or by-law may contain provisions that establish:

(i) tenancy protections for non-elderly tenant households that do not participate in the  tenant association;

This is a door to rent control, potentially. If a renter household doesn't want to be in the tenant association, they can have something else given to them. It's unclear what that something else would be.

(ii) exclusion of applicability to properties with fewer than a designated number of units;

Towns or cities could exempt properties of a certain small size.

provided, that different exclusion numbers may be adopted for owner-occupied properties and properties with no owner occupancy;

Owner-occupy could be exempted in different sized buildings, or not.

(iii) criteria for designees;

If the town wants to say, “Only the Jamaica Plain Neighborhood Development Corporation may coordinate TOPA deals,” they would be free to do so, provided they word it in a way that's more subtle.

This is another place where the CDCs rear their greedy heads.

(iv) a tenant association’s ability to exercise rights pursuant to this section through a joint venture or partnership with another entity with experience in developing, owning or operating residential real estate or an entity that has the financial capacity to guaranty the financing of the purchase transaction;

The CDCs are allowed to jointly become owners with the tenant associations.

This is another place showing self-lobbying by CDCs.

and

(v) exclusion of classes of properties in addition to the classes of properties enumerated in subsection (k).

Certain properties can be excluded from TOPA, like the rentals owned by the city council.

This opens the door to local corruption.

(c) In any city or town that votes to adopt this section, an owner of a residential building shall: (i) notify the municipality and each tenant household, in writing by hand delivery and United States mail, of the owner’s intention to sell the property, with copy of the municipality’s prepared summary of the ordinance adopted hereunder;

The moment you have intent to sell, you must notify the municipality and each renter household.

It's unclear what happens if one household leaves and another moves in during your “intent to sell” phase.

and (ii) provide a tenant association with the minimum tenant participation percentage an opportunity to make an offer to purchase the property prior to entering into an agreement to sell such property pursuant to the time periods in this section;

 

The intent is that a tenant association should have the ability to make an offer to purchase.

Tenants already have this right to purchase.

It's unclear what happens if the tenant association does not already exist.

Presumably, since the municipality is notified, CDCs would swoop in to form a tenant association or become a designee.

provided, that no owner shall be under any obligation to enter into an agreement to sell such property to the tenants.

This is distraction text.

The intent is to make TOPA look optional, by saying owners don't have to sell to renters.

The waiting periods below are not optional.

The rules of statutory construction require every phrase have meaning, and the delays specified below can have no meaning if the owner is able to “opt out.” Owners cannot “opt out.”

The intent of the waiting periods is to drive away other buyers.

The CDCs are advocating, “I'll make you an offer you can't refuse.”

(d) A tenant association with the minimum tenant participation percentage may select a successor or a designee to act on its behalf as purchaser of the property and shall give the owner and the municipality notice of its selection.

Tenants can be easily coerced or duped into signing away their rights to CDCs.

Past this point, we will no longer refer to the tenant association. It should be clear that tenants cannot participate in TOPA except with extraordinary ability and coordination. Only CDCs can take advantage of this law.

(e)(1) A tenant association with the minimum tenant participation percentage, or its successor or designee, may, within 15 days after receipt of the notice of the owner’s intention to sell, submit an offer to the owner to purchase the property.

CDCs can offer to purchase the property.

This is presently the case already, without TOPA.

(2) A tenant association, successor or designee’s failure to submit a timely offer under paragraph (1) shall constitute an irrevocable waiver of the tenants’ rights under this section.

The CDC has to submit any offer at all – even a bad faith lowball – to hold their place in line for future delays.

If the owner and the tenant association, successor or designee, have not entered into an agreement within 15 days after receipt of the notice of the owner’s intent to sell, the owner may enter into an agreement to sell the property to a third party, subject to subsections (f) to (i), inclusive.

Market Delay +15 days

After the CDCs' lowball offer and 15 days have elapsed, the owner may then attempt to sell the property on the market.

(f) Upon execution of any purchase contract with a third party, the owner shall, within 7 days, submit a copy of the contract along with a proposed purchase contract for execution by the tenant association, successor or designee.

If the owner completes a “purchase and sales” agreement, they have to give the P&S to one of the CDCs.

This is the section that flattens real estate markets.

No investor will spend time and money shopping for a property in a town that allows CDCs to take their deal. Without buyers, prices fall. When prices fall, so do assessed values and municipal tax revenues. Surrounding towns will have to pay in. Only the CDCs win.

If the tenant association, successor or designee elect to purchase the property, the tenant association, successor or designee shall within 30 days after the receipt of the third-party purchase contract and the proposed purchase contract, execute the proposed purchase contract or such other agreement as is acceptable to both parties.

CDCs have 30 days to decide whether they want to swap out the purchaser's name with their name.

It initially seems surprising that the bill says “shall” because it obligates CDCs to go through with the purchase. It is a meaningless “shall,” because (see below) the CDCs are exempted from earnest money requirements and can back out of the P&S for any reason.

The time periods set forth in this subsection may be extended by agreement between the owner and the tenant association, successor or designee.

If the owner is really being beaten down, the CDCs may extract additional delays for them to obtain financing.

Financing for CDCs is slow compared to market financing, which is why they advocate for TOPA.

Instead of TOPA, they should be asking for policy to help them compete with the market, instead of bending the market down to their level.

Except as otherwise specified in subsection (h), the terms and conditions of the proposed purchase contract offered to the tenant association, successor or designee shall be the same as those of the executed third-party purchase contract.

The owner cannot offer CDCs worse terms than they're getting from the market buyer.

(g) After receipt of the third-party purchase contract pursuant to subsection (f), the tenant association, successor or designee may, within the 15-day time period prescribed in said subsection (f), make a counteroffer by executing and submitting to the owner an amended proposed purchase contract.

Market Delay +15 days = 30 days’ total delay

After the P&S is signed, CDCs have 15 more days to take it or offer a new one.

Note that there is a serious drafting error here, as there is no 15-day time period in section (f).

Failure by the tenant association, successor or designee to execute the purchase contract or submit a counteroffer within the 15-day period in subsection (f) shall constitute a waiver of the tenants’ right to purchase.

CDCs need only submit a lowball counteroffer to hold their place in line.

If the tenant association, successor or designee submits a counteroffer, the owner shall have 15 days from the date it receives the amended proposed purchase contract to execute the amended proposed purchase contract or reject, in writing, the counteroffer;

The owner gets 15 days. Because the owner is trying to get rid of this property, they will decide quickly.

provided, however, that if the owner rejects a counteroffer, it shall not subsequently enter into any purchase contract with a third party on terms that are the same as, or materially more favorable to the proposed third party purchaser, than the economic terms and conditions in the counteroffer proposed by the tenant association, successor or designee, unless the owner first provides a copy of such new third-party purchase contract and a new proposed purchase contract for execution by the tenant association, successor or designee, which shall contain the same terms and conditions as the newly executed third party purchase contract, except as otherwise specified by subsection (h), and the tenant association, successor or designee shall have 30 days from the date they receive the third-party purchase contract and the proposed purchase contract to execute the proposed purchase contract or such other agreement as is acceptable to the owner and the tenant association, successor or designee.

Market Delay + 30 days = 60 days delay

If the owner goes back to the buyer and the buyer has walked, the owner will have to relist the property at a lower price. Now because this price is lower than what the CDCs were offered, the CDCs get another bite at the apple.

This section creates tremendous uncertainty because of contingencies in offers to purchase. Imagine the market rate offer is contingent on inspection but not financing. The CDCs offer contingent on financing but not inspection. The owner rejects the CDCs' offer. Now the CDCs can bring a suit for noncompliance claiming that their offer was actually better because of this-or-that reason, all related to the different contingencies.

(h) Any purchase contract offered to, or proposed by, the tenant association, successor or designee shall include at a minimum the following terms:

(i) the earnest money deposit shall not exceed the lesser of: (A) the deposit in the third party purchase contract;

The CDCs can't be made to pay more than the market deposit,

(B) 5 per cent of the sale price;

or 5% of the sale price,

or (C) $250,000;

or $250,000, whichever is lower.

provided, however, that the owner and the tenant association, successor or designee may agree to modify the terms of the earnest money deposit;

The CDCs can beat the owner down further.

and provided, further, that the earnest money deposit shall be held under commercially-reasonable terms by an escrow agent selected jointly by the owner and the tenant association, successor or designee;

 

(ii) the earnest money deposit shall be refundable for not less than 90 days from the date of execution of the purchase contract or such greater period as provided for in the third-party purchase contract;

No more earnest money deposits for sellers.

This section makes a mockery of an “earnest money deposit.”

It makes the “earnest money” fully refundable for any reason for 90 days.

provided, however, that if the owner unreasonably delays the buyer’s ability to conduct due diligence during the 90-day period, the earnest money deposit shall continue to be refundable for a period greater than 90 days.

Note that this bill substantially harms first-time homebuyers, elderly buyers and veterans who will have to pay for temporary housing waiting for the CDCs to decide if they get to buy the property or not.

After the expiration of the specified time period, the earnest money deposit shall be forfeited and the right to purchase of the tenant association, successor or designee shall be irrevocably waived.

 

(i) The tenant association, successor or designee shall have 160 days from execution of the purchase and sale agreement to perform all due diligence, secure financing and close on the purchase of the property.

Market Delay 160 days total from P&S = 220 days’ total delay

The cap of 160 days to close is misleading because we already had 60 days in the pre-P&S period. The total delay from the time an owner decides to sell to when they can actually sell is not less than 220 days.

This section further clobbers the housing market.

Imagine after 220 days a deal falls through for a private investor. Why would they continue to shop in that town? Their life is being wasted waiting for CDCs to get financing. Investors will go elsewhere.

Failure to exercise the purchase option within 160 days shall constitute a waiver of the purchase option by the tenant association, successor or designee.

You would think the CDCs would be done after 160 days, but wait, there's more.

(j) Any notice required by this section shall be deemed to have been provided when delivered in person or mailed by certified or registered mail, return receipt requested, to the party to whom notice is required.

If a notice is defective, the entire process may be restarted.

Note that this section conflicts with notice requirements through this bill, requiring in-person mailing for this set of notices only.

Notice shall be deemed to have been provided when either: (i) the notice is delivered in hand to the tenant or an adult member of the tenant’s household;

Defective notice is the number one reason landlord–tenant cases fail.

or (ii) the notice is sent by first class mail and a copy is left in, or under the door of, the tenant’s dwelling unit.

 

A notice to the affected municipality shall be sent to the chief executive officer of the municipality.

In addition to notifying the tenants, the would-be seller has to notify the town.

(k) This section shall not apply to:

(i) property that is the subject of a government taking by eminent domain or a negotiated purchase in lieu of eminent domain;

The government is exempt from TOPA.

(ii) a proposed sale to a purchaser pursuant to terms and conditions that preserve affordability, as determined by the executive office;

Affordable housing, as determined by the EOHLC, is exempt from TOPA.

(iii) any sale of publicly-assisted housing, as defined in section 1 of chapter 40T;

Affordable housing under Chapter 40T is exempt from TOPA.

(iv) rental units in any hospital, skilled nursing facility or health facility;

Hospitals are exempt from TOPA.

(v) rental units in a nonprofit facility that has the primary purpose of providing short-term treatment, assistance or therapy for alcohol, drug or other substance abuse;

Sober houses are exempt from TOPA, but only if...

provided, that such housing is incident to the recovery program;

... the sober houses actively provide treatment...

and provided further, that the client has been informed in writing of the temporary or transitional nature of the housing;

... and the sober house border is notified of this.

(vi) rental units in a nonprofit facility: (A) that provides a structured living environment that has the primary purpose of helping homeless persons obtain the skills necessary for independent living in permanent housing;

Nonprofit post-shelter facilities are exempt, provided...

(B) where occupancy is restricted to a limited and specific period of time of not more than 24 months;

...they evict people after 24 months...

and (C) where the client has been informed in writing of the temporary or transitional nature of the housing at its inception;

... and the renter has been notified.

(vii) public housing units managed by the local housing authority;

Housing authorities are exempt.

(viii) federal public housing units that are subsidized and regulated under federal law, to the extent such applicable federal law expressly preempts this section;

If federal law has another right of first refusal on a federally involved property, then that takes precedence.

(ix) any residential property where the owner is a natural person who owns not more than 6 residential rental units in the municipality and who resides in the commonwealth;

A landlord who resides in Massachusetts and owns six or fewer units is exempted. The wording of this clause does not protect owners who own real estate through an LLC (common), nor does it protect the owner's primary residence.

The CDCs don't want our crummy stick buildings, they want the big, juicy ones.

(x) any unit that is held in trust on behalf of a disabled individual who permanently occupies the unit, or a unit that is permanently occupied by a disabled parent, sibling, child or grandparent of the owner of that unit;

TOPA is a building-centric law, but inexplicably here we exempt just the fractional portion of the building that is a unit occupied by people related to someone who is disabled.

It is unclear how this would work in practice. Presumably the building would need to be converted to condos and each unit deeded separately to comply.

or

(xi) any rental unit that is owned or managed by a college or university for the express purpose of housing students.

Universities are exempt provided they claim (regardless of whether it's true) that the building is intended to house students.

(l) The tenant association, successor or designee shall ensure that its purchase of the property will not result in the displacement of any elderly tenant households that choose not to participate in the purchase of the property.

CDCs who buy property have to do something (what exactly remains unclear) to displace renters who didn't help buy the place.

(m)(1) An owner shall give notice to each tenant household of a housing accommodation of the intention to sell the housing accommodation by way of short-sale to avoid foreclosure or its intention of accepting a deed in lieu.

Short sales are delayed.

When an owner talks to a bank about a short sale, they also must notify the renter.

Such notice shall be mailed by regular and certified mail, with a simultaneous copy to the attorney general, the secretary of the executive office and to the municipality adopting this section, within 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.

For reasons that are unclear, this section calls for mailing the notice twice two different ways.

Notices must go to each renter, to the Attorney General and to the secretary of EOHLC.

This notice shall also include a statement of the rights provided by this section.

(2) No mortgagee shall 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.

 

Short Sale Delay + 60 days = 60 days' total delay

A bank cannot even begin to consider a short sale unless the renters have been notified and the owner tells the bank as much.

Renters have 60 days to decide.

This harms owners looking to exit a property. Short sales usually have to be carried out much faster than 60 days or the owner continues to sink underwater.

If the 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 shall be deemed waived.

Tenants merely have to express interest, or point to the CDCs, to hold their place in line.

(3) Before a housing accommodation may be transferred by short-sale or deed in lieu, the owner shall notify each tenant household, with a simultaneous copy to the attorney general, the secretary of the executive office and the municipality adopting this section, by regular and certified mail, of any bona fide offer that the mortgagee intends to accept.

If a short sale is approved and an offer made to the owner, the owner must notify the renters, the AG and the secretary of EOHLC.

Before any short-sale or transfer by deed in lieu, the owner shall give each tenant household such a notice of the offer only if households constituting at least 51 per cent of the households occupying the housing accommodation notify the owner, in writing, that they collectively desire to receive information relating to the proposed sale.

If a short sale offer is accepted, the owner must again notify the tenants, if they want that information.

 

Tenants may indicate this desire within the same notice described in paragraph (2).

Use of the word “may” shows tenants are not required to communicate with the owner in any particular way.

Any notice of the offer required to be given under this subsection shall include the price, calculated as a single lump sum amount, of any promissory notes offered in lieu of cash payment.

 

 

(4) A group of tenants representing at least 51 per cent of the households occupying the

housing accommodation that are entitled to notice under paragraph (3) shall have the collective right to purchase, in the case of a third party offer that the mortgagee intends to accept, provided that the group of tenants shall:

(A) submit to the owner reasonable evidence that the tenants of at least 51 per cent of the occupied units in the housing accommodation have approved the purchase of the housing accommodation;

At the end of the short sale process, after the owner and the bank have done all the work to make the deal, the CDCs can come in to derail it.

They must provide “reasonable evidence” that they voted. There is no standard for what this means.

(B) submit to the owner a proposed purchase and sale agreement on substantially equivalent terms and conditions within 60 days of receipt of notice of the offer made under paragraph (3);

Short Sale Delay + 60 days = 120 days' total delay

CDCs have 60 days to swap out the buyer's name on the short sale agreement.

(C) obtain a binding commitment for any necessary financing or guarantees within an additional 90 days after execution of the purchase and sale agreement;

Short Sale Delay + 90 days = 210 days' total delay

CDCs have an additional 90 days to finance

and

(D) close on such purchase within an additional 90 days after the end of the 90-day period in clause (C).

Short Sale Delay + 90 days = 300 days' total delay

CDCs have an additional 90 days to close.

Remember the owner is drowning underwater all this time, unable to pay their mortgage. The bank is also losing. The property may be sliding into decay all this time, with code violations, unmowed lawns or worse from a year's ownership by people who don't want the property.

(5) 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 (3).

Why would any owner want to cause further delay?

This is spiteful drafting by the CDCs.

Failure of the tenants to submit such a purchase and sale agreement within the first 60-day period, to obtain a binding commitment for financing within the additional 90-day period or to close on the purchase within the second 90-day period, shall serve to terminate the rights of such tenants to purchase.

Renters have to do things to hold their place in line.

The time periods provided in this paragraph may be extended by agreement.

If the owner is beat down very badly, the CDCs can have more time.

Nothing herein shall be construed to require an owner to provide financing to such tenants.

 

A group or association of tenants that has the right to purchase pursuant to this subsection, at its election, may assign its purchase right pursuant to this subsection 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 permanently continuing the use of the housing accommodation as affordable rental housing.

Here the CDCs have written themselves into the law again.

(6) The right of first refusal created in this subsection shall inure to the tenants for the time periods provided in paragraph (4), beginning on the date of notice to the tenants under paragraph (1).

This explicitly creates a legislative intent for a right of first refusal, in case anything was unclear.

The effective period for such right of first refusal shall begin anew for each different offer to purchase that the mortgagee intends to accept.

This creates an open-ended, never-ending loop of offers. The more short sale offers the bank intends to accept, the more it has to wait.

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 paragraph (3).

This exempts mortgage adjustments or offers from the bank for the owner to refinance.

(7) 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 secretary of the executive office and the registry of deeds for the county and district where the property is located within 7 days of the sale.

After the right of first refusal seems to have finally lapsed, it's still not over. There must be a public notice of all short sales.

(8) An owner shall not evict a tenant to avoid application of this subsection.

Any renter evicted in the past at any time could have a claim that they were evicted so that the owner wouldn't have to give them a right of first refusal.

 

 

(9) An aggrieved tenant may seek damages under chapter 93A and may file a complaint with the attorney general.

Chapter 93A is the consumer protection law. It guarantees triple damages plus attorneys' fees for practices that are “unfair or deceptive.”

Triple damages on someone who loses a property would be 3x the value of the property.

A tenant may seek damages, including compensatory relief in the form of a percentage of the sales price, injunctive relief in the form of specific performance to compel transfer of the property or both compensatory and injunctive relief.

A tenant can ask for anything, up to and including that the courts order the property be given to them instead.

This is where the notice requirement creates terrible uncertainty. Any defective notice would be, as established by lots of case law from the landlord–tenant space, grounds for a 93A complaint even if the renter was not otherwise harmed.

This is the section that ends multifamily lending and housing creation.

This bill will undo sales willy-nilly based on prior renter claims of improper notice, eviction to avoid TOPA, or any other unfair or deceptive practice. No one with a recently aquired deed will be able to rely on it until the civil statute of limitations has run out, six years for contracts. Because lenders are without recourse, loans to finance new construction will be much more expensive or impossible.

Nothing in this subsection shall be construed to limit or constrain the rights tenants currently have under applicable laws, including, but not limited to, chapters 186 and 186A.

A tenant asserting their right of first refusal can also use right of first refusal to stop an eviction.

At all times, all parties shall negotiate in good faith.

In theory, a court could be asked to stop TOPA or to force a sale to renters if the renter or the landlord appears to be acting in bad faith.

(10) The attorney general shall enforce this subsection and shall promulgate rules and regulations necessary for enforcement.

The attorney general is tasked with inventing policy and procedure for consumer protection. Since this is a CDCs protection bill, regulatory authority should be given to EOHLC instead.

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 can sue anyone for anything TOPA related under this section.

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.

Forms required to comply with TOPA will be presented on the AG's website.

(n)(1) When a mortgagee seeks judicial determination of the right to foreclose, the mortgagee shall provide a copy of the complaint by regular and certified mail to the tenants of the housing accommodation and to the municipality adopting this section.

Any foreclosing bank must copy the tenants.

Many foreclosing banks have no idea who their renters are. Imagine a scenario where the owner used to reside in the property, then moved out and started renting it.

CDCs must be notified by two types of mail.

The mortgagee shall also provide tenants and the municipality, by regular and certified mail, with a copy of any order of notice issued by the land court, if applicable, within 5 days of issuance.

The bank has to copy the city and the CDCs on any court order.

There is probably a drafting error here: “order of notice” might have been meant as “order or notice.”

(2) The mortgagee shall provide each tenant household and the municipality adopting this section, by regular and certified mail, a copy of all notices of sale published pursuant to section 14 of chapter 244.

This is the only reference in the bill to the foreclosure statute. It is probably a serious omission not to modify this statute directly, because many timelines and provisions there would be in conflict with this.

A copy shall be provided simultaneously with the successive publication notices.

Each time notice of foreclosure is posted, the CDCs and town must be copied again, each being mailed twice at the same time.

(3) Not later than 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 51 per cent of the households occupying the housing accommodation or an entity to which they have assigned their right of first refusal intend to exercise their right of first refusal at auction and desire to receive information relating to the proposed auction.

CDCs have a right to request information about any foreclosure auction.

(4) A group of tenants representing at least 51 per cent of the households occupying the housing accommodation or an entity to which they have assigned their right of first refusal may exercise their collective right to purchase the housing accommodation, in the event of a third party offer at auction that the mortgagee receives;

If a buyer attending the auction makes a winning bid, CDCs can swap out the buyer's name with theirs, provided:

provided, that the group of tenants shall:

(i) submit to the mortgagee reasonable evidence that the tenants of at least 51 per cent of the occupied homes in the housing accommodation have approved the purchase of the housing accommodation;

... there's some kind of evidence of a vote, ...

(ii) submit 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 60 days of receipt of notice of the bid made under paragraph (3);

Foreclosure Delay + 60 days = 60 days' total delay

The CDCs have 60 days after the auction to offer the bank a new purchase and sale.

Note that the use of the indefinite article “a group of tenants” (instead of “the tenant association”) is extremely concerning, as competing and partially overlapping tenant groups or CDCs could have separate intents and timelines.

(iii) obtain a binding commitment for any necessary financing or guarantees within an additional 90 days after execution of the purchase and sale agreement;

Foreclosure Delay + 90 days = 150 days' total delay

The CDCs have 90 additional days to get finance.

and (iv) close on such purchase within an additional 90 days after the end of the 90-day period under clause (iii).

Foreclosure Delay + 90 days = 240 days' total delay

The CDCs have an additional 90 days to close.

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.

Why would any bank delay?

Failure of the tenants to submit such a purchase and sale agreement within the first 60-day period, to obtain a binding commitment for financing within the additional 90-day period or to close on the purchase within the second 90-day period, shall serve to terminate the rights of such tenants to purchase.

The CDCs must take action at certain steps to hold their place in line.

The time periods provided in this paragraph may be extended by agreement.

If the bank or seller are beaten down very badly, the CDCs can make them wait longer.

Nothing herein shall be construed to require a mortgagee to provide financing to such tenants.

 

A group or association of tenants that 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 permanently continuing the use of the housing accommodation as affordable rental housing.

Here again the CDCs have written themselves into the law.

This repeats the failures of the Washington, D.C., TOPA law, where renters end up getting paid for their rights so that an owner can transact on a market timeline.

Note also that "affordable housing developer" potentially includes any number of for-profit companies.

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.

If the foreclosure auction ends without a bid, the tenants still have a right of first refusal.

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 timeline described in paragraph (4).

There is additional notice required post-failed auction.

(5) The right of first refusal created herein shall inure to the tenants for the time periods herein before provided, beginning on the date of notice to the tenants under paragraph (1).

This is more explicit intent to create a right of first refusal, in case anyone is not clear.

(6) 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 secretary of the executive office and the registry of deeds for the county and district where the property is located within 7 days of the sale.

Even after the timeline is exhausted, it's not over because there is one final notice.

(7) An owner shall not evict a tenant to avoid application of this subsection.

Any previous renter can come back to claim they were wrongly denied the right of first refusal by an eviction.

(8) An aggrieved tenant may seek damages under chapter 93A and may file a complaint with the attorney general.

Here again we have 3x the home value and attorneys' fees as the penalty for failure to receive notice.

Against whom do the CDCs file? The previous owner? The new owner? The bank? This law is particularly unclear.

A tenant may seek damages including a percentage of the sales price or injunctive relief in the form of specific performance to compel transfer of property, or both compensatory and injunctive relief.

The tenant can ask the courts to order the buyers to give them the property.

This section invalidates title assurance and buyer attorney representation.

As stated above, title insurers and buyer attorneys will have no way to protect their client from post-deed claims.

Nothing in this subsection 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.

Tenants can stop evictions if they did not receive notice of right of first refusal.

At all times, all parties shall negotiate in good faith.

Again, we have more potential for litigation with one party alleging another has not acted in good faith.

(9) The attorney general shall enforce this subsection and shall promulgate rules and regulations necessary for enforcement.

The AG is again in charge of regulating CDCs.

The attorney general may seek injunctive, declaratory, and compensatory relief on behalf of tenants and the commonwealth in a court of competent jurisdiction.

The AG can sue anyone for anything TOPA related.

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.

The AG will post model forms on their site.

Contact Your Senator Now

The house voted overwhelmingly for this. They listened to the wrong people. The senate can stop it. Make them listen to you.

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