Job creation held not a sufficiently compelling government interest to justify refusing to rezone industrial property for church use

/ Antidiscrimination Law, Religious Freedom, Zoning

The Religious Land Use-Institutionalized Persons Act, 42 U.S.C. §2000cc, prohibits enforcing local zoning laws against religious institutions if those laws impose a “substantial burden” on the free exercise of religion and not justified by a compelling government interest that cannot be achieved in a less burdensome manner. The Ninth Circuit applied this statute to deny a city the power to exclude a church from moving to a larger building located in an area zoned for industrial use in the case of International Church of the Foursquare Gospel v. City of San Leandro, 2011 WL 1518980 (9th Cir. 2011). Read article. The church had become bigger over time and was looking for a new facility and hoped to move into an abandoned industrial building. The city hoped to attract a business to the site that would employ city residents and argued that its interest in promoting jobs was a compelling government interest justifying refusal […]

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Court enforces acceleration clause in a commercial lease without regard to whether landlord mitigated damages

/ Leaseholds, Real Estate Transactions

Many courts uphold acceleration clauses in commercial leases that require tenants to pay the rest of the rent due for the remainder of the lease term if the tenant breaches the lease. Such clauses are usually not enforced in the context of residential leases because they disclaim the duty to mitigate damages. The only issue for acceleration clauses in commercial leases is whether the amount exceeds a reasonable estimate of the likely damages from breach and thus constitute an invalid “penalty” rather than a valid liquidated damages clause. See, e.g., Cummings Properties, LLC v. National Communications Corp., 869 N.E.2d 617 (Mass. 2007). Many courts make this determination by assuming that the landlord still has a duty to mitigate damages by attempting to relet the premises and thus the remaining rent will be invalid if it far exceeds the damages that would be sustained if the landlord found a replacement tenant. See HealthSouth Rehabilitation Corp.

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Massachusetts high court voids title when a buyer purchases property from an owner who obtained title through an improper foreclosure

/ Consumer Protection, Mortgages, Real Estate Transactions, Statute of Frauds

In an important but almost inevitable case, Bevilacqua v. Rodriguez,  2011 WL 4908845 (Mass. 2011), the Supreme Judicial Court of the Commonwealth of Massachusetts held that a lender who does not follow proper procedures to foreclose on property cannot pass good title to a subsequent purchaser. The court’s earlier ruling in U.S. Bank Nat’l Ass’n v. Ibanez, 941 N.E.2d 40 (Mass. 2011) had held that a nonjudicial foreclosure cannot lawfully happen unless the party conducting the foreclosure can show requisite assignments of the mortgage given it the right to foreclose. In Bevilacqua, the original buyer Rodriguez granted a mortgage to MERS (Mortgage Electronic Registration Systems, Inc.) as nominee for the real lender Finance America, LLC. At the time of the private foreclosure proceedings, MERS had not formally assigned the mortgage from the original lender to U.S. Bank National Association (US Bank); for that reason, the foreclosure brought by US Bank was invalid. The buyer at

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Register of Deeds in Essex County, Massachusetts refuses to record robo-signed documents

/ Mortgages, Real Estate Transactions, Statute of Frauds, Title Issues

A dispute has arisen between South Essex Register of Deeds John O’Brien and the Massachusetts Real Estate Bar Association (REBA) over O’Brien’s refusal to allow seemingly “robo-signed” mortgage documents to be recorded in the Registry of Deeds. REBA contends that state law allows the recording of any document “purporting” to be signed by an authorized signatory to a mortgage or a mortgage assignment. Mass. Gen. Laws ch. 183, § 54B. But Register O’Brien points to 1,300 documents received that were signed “Linda Green” but which exhibit different handwriting styles and different titles, and some were filed after 2010 when it was believed that Green stopped working for a mortgage company. O’Brien takes the position that he will not record documents signed by “known robo-signers” and he will also forward suspicious documents to the Attorney General’s office for investigation of mortgage fraud. Scott Pitman & MIchael Pill, To record or not to

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Third Circuit finds prima facie evidence of disparate impact from municipal redevelopment plan

/ Antidiscrimination Law, Fair Housing Act

The Third Circuit has ruled in Mount Holly Gardens Citizens in Action Inc. v. Mount Holly, N.J., 2011 U.S. App. LEXIS 18840 (3d Cir. 2011) that plaintiffs presented sufficient statistical evidence to constitute a prima facie case that displacement of low-income residents from an area slated for redevelopment would have a disparate impact on African American and Latino residents. The court clarified that no evidence of intent to discriminate was needed to bring a disparate impact claim, clarifying ambiguities on this score created by the Third Circuit’s earlier decision, Resident Advisory Bd. v. Rizzo, 564 F.2d 126 (3d Cir. 1977). The court accepted the town’s justification that its redevelopment plan was geared to remove blight but held that the town had a duty to show that no less discriminatory alternative could achieve that goal.

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More states prohibit transfer fee covenants

/ Consumer Protection, Real Estate Transactions, Restraints on Alienation, Servitudes, Title Issues

Idaho, Indiana, Mississippi and Montana have all passed statutes prohibiting enforcement of any transfer fee covenants entered into after the dates the legislation goes into effect. See 2011 Idaho Sess. Laws 107; 2011 Ind. Acts 136; 2010 Miss. Gen. Laws 348; 2011 Mont. Laws 259. Transfer fee covenants are promises inserted in deeds to pay a fee to the original seller of the property any time it is sold in the future. Such fees were abolished in New York State in 1852 in the case of DePeyster v. Michael, 6 N.Y. 467 (1852) as a vestige of feudalism.

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Bank cannot suggest a homeowner stop mortgage payments as part of modification negotiations and then foreclose on the basis of that failure to pay

/ Mortgages, Real Estate Transactions, Statute of Frauds

A federal District Court judge in Massachusetts has ruled in the case of Dixon v. Wells Fargo Bank, 2011 WL 2945795 (D. Mass. 2011), that a ban cannot induce a homeowner to stop making mortgage payments as a prerequisite to negotiations to modify the mortgage and then use that failure to make the mortgage payments as a predicate for foreclosing on the property and evicting the owner. The bank’s representation that it would renegotiate following the borrower’s cessation of mortgage payments constituted a promise on which the borrower reasonably relied and that promise could be equitably enforced by denying the bank the right to foreclose in the circumstances. The court did not find a promise by the bank to modify the mortgage but it did have a duty to negotiate the modification in good faith before foreclosing.

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Massachusetts Attorney General settles lawsuit with subprime mortgage lender, requiring $115 million of loan modifications

/ Antidiscrimination Law, Consumer Protection, Fair Housing Act, Mortgages, Real Estate Transactions

Attorney General Martha Coakley announced that the Commonwealth of Massachusetts settled a lawsuit with a subprime mortgage lender that originated subprime mortgages it knew were likely to fail and which not only targeted African American and Latino borrowers but gave its employees discretion to charge higher fees to such borrowers. The company will pay a penalty of almost $10 million to the Commonwealth and will direct its mortgage servicer to modify $115 million in loans either by writing down the principal balance of lowering interest rates. read article The settlement is based on the legal ruling in the earlier case of Commonwealth v. Fremont Inv. & Loan, 897 N.E.2d 548 (Mass. 2008), which held that it might violate the state consumer protection act to market mortgages that were almost certain to end in foreclosure.

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Massachusetts high court denies eviction from a home foreclosed in a private sale unless there is proof of a right to foreclose

/ Mortgages, Real Estate Transactions, Statute of Frauds, Title Issues

In an extension of its earlier ruling in U.S. Bank Nat’l Ass’n v. Ibanez, 941 N.E.2d 40 (Mass. 2011) that a foreclosure is invalid unless the party seeking foreclosure proves that it owns the mortgage (has the right to foreclose) at the time of the foreclosure, the Supreme Judicial Court of the Commonwealth of Massachusetts ruled in the case of Bank of New York v. KV Bailey, 2011 WL 3307553 (Mass. 2011),  that a homeowner could challenge an eviction from his home even though it was foreclosed in a private sale to determine whether the mortgagor/lender had the power to foreclose. Because Massachusetts uses private foreclosure rather than court-supervised foreclosure, the ruling extends court supervision of foreclosure to homeowners by effectively requiring foreclosing parties to have proof of the right to foreclose before the foreclosure sale. It does so by denying power to evict an occupying homeowner without proof of the right to possession of

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Connecticut Supreme Court refuses to enforce unconscionable post-nuptial agreement

/ Marital Property

The Connecticut Supreme Court ruled in Bedrick v. Bedrick, 17 A.3d 17 (Conn. 2011) that post-nuptial agreements may be enforceable but that they are subject to stricter standards than premartial agreements. Moreover, in this case, the court found the contract unconscionable at the time of trial and thus void and unenforceable. Such agreements must be examined to ensure that they are fair and equitable at the time of divorce and whether enforcement would “work an injustice.”

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