Massachusetts Enacts Moratorium on Residential and Small Business Evictions and Foreclosures
- Excepting certain "emergency-like" circumstances to protect public health and safety, a moratorium has been enacted for residential and small business evictions in the Commonwealth.
- Generally, the moratorium lasts for 120 days, or until 45 days after the COVID-19 state of emergency is lifted, whichever is sooner, and prevents landlords, courts and other officials such as constables from taking any actions to allow for residential and small business evictions.
- Certain types of commercial evictions do not receive protections, including small business commercial evictions involving term expirations and/or lease defaults prior to the commencement of the emergency declaration.
- Massachusetts House Bill 4647 equally implicates a similar moratorium on foreclosures for owner-occupied residential homes and provides certain forbearance protections in favor of mortgagees.
Massachusetts Gov. Charlie Baker signed on April 20, 2020, House Bill 4647, "An Act Providing for a Moratorium on Evictions and Foreclosures During the COVID-19 Emergency," which had been approved by the Massachusetts Legislature on April 17, 2020. The Act, which became effective immediately, has temporary and far-reaching effects in the Commonwealth regarding evictions in both the residential and small business context. Specifically, the emergency law halts "non-essential" residential and small business commercial evictions as a result of the COVID-19 emergency. Equally, it places a temporary hold on foreclosures in the Commonwealth for owner-occupied residential premises. While neither renters nor mortgagees are absolved of their payment obligations as a result of the moratorium, protections were granted for the avoidance of late fees and credit reporting upon providing defined notice and documentation of an inability to pay as a result of the COVID-19 emergency. The moratorium lasts for 120 days, which can be extended for one 90-day period or until 45 days after Gov. Baker lifts the state of emergency, whichever is sooner.
Given the scope of the new law, it is prudent for landlords and mortgagors with property affected in the Commonwealth to ensure proper compliance during the moratorium.1
Types of Properties Affected – Residential and "Small Business" Commercial Entities
The Act temporarily freezes "non-essential evictions" against both residential tenants and "small business" commercial tenants whether for profit or not-for-profit. "Non-essential evictions" implicates evictions for nonpayment of rent, those resulting from a foreclosure, "no-fault" evictions and "cause" evictions wherein the alleged cause does not involve allegations of criminal activity or lease violations that impact the health and safety of other residents, healthcare workers, emergency personnel, persons lawfully on the property or the general public.
The "small business" protections do not apply to a premises occupied by a commercial tenant if the tenant (or an entity that controls or is in common with the tenant) operates in multiple states/nations, is publicly traded and/or has more than 150 full-time equivalent employees.
Specific Limitations for Landlords, Courts and Sheriffs/Constables During the Moratorium
- Landlords may not take any action to "terminate" a residential tenancy. Equally, a landlord may not send any notice, including a "notice to quit," demanding that a residential tenant vacate the premises.
- For both residential and commercial non-essential evictions, courts may not: 1) accept for filing a writ, summons or complaint for eviction, 2) enter a judgment or default judgment for possession, 3) issue an execution for possession, 4) deny a stay of execution and/or continuance of a summary process case or 5) schedule an eviction event, including a summary process trial. Relative to other pending non-essential eviction actions, all deadlines are stayed.
- A Massachusetts sheriff, constable or other official is prohibited from enforcing any order for possession for a non-essential eviction of a residential or small business premises.
Penalty Protections for Tenants
Landlords may not impose a late fee for nonpayment of rent against a residential or small business tenant, or report the tenant to a consumer credit agency if, within 30 days of missing a rent payment, the tenant provides "notice and documentation" that the payment delay is the result of financial hardship from COVID-19. Tenants are not, however, excused from their rental obligations nor is the landlord's ability to recover rent owed impacted once the moratorium has expired. The Executive Office of Housing and Economic Development shall provide forms and recommendations for the notice and documentation required to be submitted to a landlord.
Landlord's Right to Use Last Month's Rent
Where last month's rent was collected from a residential tenant, the landlord may use the same to cover certain expenses including, without limitation, mortgage payments, utility charges, repairs and/or required upkeep. However, a landlord must notify the tenant in writing that: 1) the funds were utilized before the last month, 2) the landlord is required to apply the amount collected to rent for the last month of the tenancy and 3) the tenant is entitled to the same amount of interest it would have accrued had the landlord not chosen to use the money. Given these requirements, a landlord should exercise caution before employing this relief.
Commercial Eviction Exceptions
The Act specifically excepts from its protections any commercial eviction involving a small business because of the expiration of the term of the lease or any default by the commercial tenant under the terms of its lease which occurred prior to the declaration of the COVID-19 emergency. Further, the Act provides no protections to commercial entities that do not qualify as "small businesses." In other words, a business that operates nationally or globally and is publicly traded, or which has more than 150 employees, cannot use the Act as a defense to a commercial eviction proceeding.
Mortgagors for owner-occupied one-to-four family dwellings are prohibited from initiating or pursuing foreclosure proceedings. This prohibition includes the publication of a notice of sale, the exercise of a power of sale, exercise of a right or entry, institution of judicial or non-judicial foreclosure proceedings, and/or the filing of an action to determine the military status of a mortgagor.
Borrowers, who have experienced a financial impact from COVID-19, may obtain a forbearance for up to 180 days. Fees, penalties or interest beyond amounts scheduled and calculated as if mortgagor made all contractual payment timely shall not accrue during the forbearance period. Any payment subject to forbearance must be made at the end of the term of the loan unless otherwise agreed. The mortgagor may not report missed payments covered by the forbearance to a consumer credit agency.
How Holland & Knight Can Help
For questions, comments or additional information regarding the impact of the eviction and foreclosure moratorium in the Commonwealth, please contact Philip S. Lapatin, who concentrates his practice in representing landlords and tenants in commercial leasing transactions, or Brett D. Carroll, who has significant commercial litigation experience, including both residential and commercial landlord/tenant matters.
DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact your responsible Holland & Knight lawyer or the author of this alert for timely advice.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.
1 Previously, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed into law on March 27, 2020, introduced serious limitations and restrictions on evictions and foreclosures relative to a "Covered Property," which includes all property that has a federally backed mortgage loan or federally backed multifamily mortgage loan. For more information, see Holland & Knight's COVID-19 Focus on Real Estate webpage.