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

 

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

 

 

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

 

 

 

 

 

 

 

 

This is the technical term for a short sale.

 

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

All market rental housing is covered.

 

Sober houses and other nonprofit housing types are exempt.

 

 

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.

 

 

 

 

 

 

 

 

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.

 

 

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

 

 

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.

 

 

aka “a bank.”

aka “a mortgage.”

All owners are covered.

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

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.

The intent is that all sales should be covered.

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

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.”

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.

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

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

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.

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.

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

All market rate offers are covered.

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.”

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

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.

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.

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

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

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.

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

This is another place showing self-lobbying by CDCs.

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

This opens the door to local corruption.

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.

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.

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.”

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.

CDCs can offer to purchase the property.

This is presently the case already, without TOPA.

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

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.

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.

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.

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.

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

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).

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

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

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.

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

or 5% of the sale price,

or $250,000, whichever is lower.

The CDCs can beat the owner down further.

 

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.

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.

 

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.

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

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.

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

 

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

The government is exempt from TOPA.

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

Affordable housing under Chapter 40T is exempt from TOPA.

Hospitals are exempt from TOPA.

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

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

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

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

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

... and the renter has been notified.

Housing authorities are exempt.

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

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.

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.

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

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

Short sales are delayed.

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

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.

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.

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

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.

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

 

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

 

 

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.

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.

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

CDCs have an additional 90 days to finance

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.

Why would any owner want to cause further delay?

This is spiteful drafting by the CDCs.

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

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

 

Here the CDCs have written themselves into the law again.

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

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.

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

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.

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.

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 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.

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

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.

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 can sue anyone for anything TOPA related under this section.

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

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 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.”

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.

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

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

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

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

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.

Foreclosure Delay + 90 days = 150 days' total delay

The CDCs have 90 additional days to get finance.

Foreclosure Delay + 90 days = 240 days' total delay

The CDCs have an additional 90 days to close.

Why would any bank delay?

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

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

 

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

There is additional notice required post-failed auction.

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

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

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

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.

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.

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

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

The AG is again in charge of regulating CDCs.

The AG can sue anyone for anything TOPA related.

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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