Massachusetts Land Use Monitor - Real-time news & commentary on Massachusetts land use & real estate law

The Supreme Judicial Court (SJC) yesterday issued its decision in the closely-watched case of DeWolfe v. Hingham Centre, Ltd.  The SJC has concluded that a broker can be liable for a written misrepresentation regarding zoning, despite language in a commonly-used form purchase and sale agreement that some thought protected the broker from such liability.  We discussed the Appeals Court's 2011 decision in this case in this previous entry.

The facts are refreshingly simple.

The owner of a property in Norwell, Massachusetts told the defendant listing broker either that the property was zoned "Residential Business B" or that it was zoned "Business B."  The broker was not aware of any prior business use of the property.  Though she saw businesses located across the street, she observed only houses adjoining the property on either side.  Apparently without further investigation, the broker advertised the property in at least two newspapers as being zoned "Business B."

The plaintiff, DeWolfe, wanted to buy a property to which he could move his existing hair salon, and he contacted the broker after seeing one of the ads. DeWolfe also saw the Multiple Listing Service (MLS) listing that the broker had created, which also said the property was zoned "Business B."  Further, the broker placed at the property copies of pages from the town's zoning by-law that listed hair salons as "Permitted Business Uses" in the Business B District.  The plaintiff bought the property, and after the closing discovered that the property was in fact in a "Residential B" district, where the contemplated hair salon was not allowed.  Of course, he sued.

The broker relied on the following clause in the standard form purchase and sale agreement (P&S) published by the Greater Boston Real Estate Board (GBREB), which the parties had used for this transaction:  

The BUYER acknowledges that the BUYER has not been influenced to enter into this transaction nor has he relied upon any warranties or representations not set forth or incorporated in this agreement or previously made in writing, except for the following additional warranties and representations, if any, made by either the SELLER or the Broker(s): NONE.

The broker sought dismissal of the case on the ground that, in light of this language, she could not be held liable for the faulty written the seller had provided to her.  As we now know, the SJC disagrees.

The SJC begins its decision by noting that a broker ordinarily may rely on information provided by the seller in making representations about a property.  However, the court goes on to rule that, "where it is unreasonable in the circumstances for a broker to rely on information provided by the seller, the broker has a duty to investigate further before conveying such information to prospective buyers."

Here, the owner testified that he told the real estate broker that the property was zoned "Residential Business B."  The experienced broker apparently knew that there was no such zoning district in Norwell, and instead advertised the property as zoned "Business B."  In addition, the broker was aware of no prior business use of the property, and had observed houses – not businesses – adjoining the property on either side.  Based on these facts, the SJC concluded that a jury could find that the broker was on notice that the information provided by the owner was unreliable, and acted unreasonably in representing the property as zoned "Business B" without conducting any further investigation.

Turning to the language in the GBREB standard form P&S, the SJC held that, under the language quoted above, a buyer can rely on prior written representations that are not set forth or incorporated in the agreement.  Therefore, the agreement did not protect the broker from liability arising from the written misrepresentations in the newspaper ad, the MLS listing, and the inapplicable zoning by-law placed at the property.

The SJC has sent the case back to the trial court to resolve the factual question of whether the broker acted unreasonably (i.e. negligently) in misrepresenting the property's zoning status.

This decision reinforces that, in Massachusetts, the best policy for a broker (or a seller) is to say little, and say it carefully.  In the wake of this decision we may see changes to the GBREB form P&S in an effort to give future brokers the protection that many believed the current form already provided.

Should the Red Sox start Jackie Bradley, Jr. in left?  I don't know.  But I do know that the Boston Bar Association's Land Use and Development Committee, co-chaired by my colleague and fellow MLUM contributor Johanna Schneider, is co-sponsoring two lunch programs of interest to land use lawyers.  The first program, scheduled for April Fool's Day (but this is no prank), will feature Marc Wolman of the Massachusetts Department of Environmental Protection, who will discuss MassDEP's Noise Pollution Policy (the agency regulates noise as a form of air pollution).  Details can be found here.  The second program, scheduled for April 5, 2103, will feature Kay Doyle of Kopelman and Paige, P.C. and Roger Donoghue of Donoghue, Barrett & Singal, P.C., who will address issues arising from the implementation of the state's new medical marijuana law, with a focus on the scope of permissible local regulation of marijuana dispensaries.  Details can be found here.

The Supreme Judicial Court (SJC) is soliciting amicus briefs in Galiastro v. Mortgage Electronic Registration System, Inc., an appeal that presents the issue of whether the defendant, MERS, has standing to foreclose in its own right as the named mortgagee in a mortgage, when it does not have any ownership interest or rights in the underlying promissory note.  The SJC will also decide whether its prospective 2012 holding in Eaton v. Fannie Mae, that a foreclosing mortgagee must either hold the promissory note or be acting on behalf of the note holder at the time of the foreclosure sale (see our analysis here), applies to cases (such as Galiastro) that were pending on appeal at the time of that decision.  Oral argument in Galiastro is scheduled for May, 2013.

The Supreme Judicial Court (SJC) recently turned its attention back to affordable housing under the state’s comprehensive permit law, M.G.L. c. 40B, §§ 20-23 (Chapter 40B).  Since a high point in 2008, when it decided four Chapter 40B cases, the SJC has been relatively quiet on this subject.  Quiet, that is, until the past few weeks, when the court issued two important opinions, Zoning Board of Appeals of Lunenburg v. Housing Appeals Committee and (a week later) Zoning Board of Appeals of Sunderland v. Sugarbush Meadow, LLC.

Tasked with administering Chapter 40B, the state's Housing Appeals Committee (HAC) has itself acknowledged that the statute “is not a model of clarity” and that every section “has required painstaking construction and interpretation over the years . . . ."  It’s surprising, then, that the boards of appeals in Lunenburg and Sunderland both found an argument that contravenes some of the plainest language in the statute, and ran with that argument all the way to the SJC. 

Both boards staked their bets on the assertion that the HAC could not overturn their denials of comprehensive permits because of the availability of affordable market-rate housing in Lunenburg, Sunderland, and their environs.  The SJC rejected this argument because it conflicts with the language of the act.  Section 20 of Chapter 40B limits a board to considering “the regional need for low and moderate income housing,” and defines “low or moderate income housing” as “any housing subsidized by the federal or state government . . .” (emphases added).  Market-rate housing, however lowly priced, is not subsidized.  The statute’s plain language would have been enough to silence this argument, but the SJC, appropriately, went on to point out some of the reasons why the statute says what it says. 

A market-rate house built in 1827, for instance, may sell for the same price as a new low-income unit, but the true cost of ownership differs greatly.  Moreover, as the SJC noted, some market-rate units are inexpensive because they're unsafe, and others are only temporarily priced low.  Their price will rise with the market.  Unlike subsidized housing, these units are not deed-restricted to limit their price.  In its discussion, the SJC can be heard echoing a sentiment expressed more than a decade ago in Zoning Board of Appeals of Wellesley v. Ardemore Apartments Limited Partnership: “if housing . . . is ‘affordable’ only temporarily . . . a city or town may never achieve the long-term statutory goals.”

Not all Chapter 40B projects are created equal; some are better than others.  And even in Lunenberg and Sunderland there were some complicating factors.  But when the SJC has to assert its direct review authority to address contentions such as the “market-rate” argument, one has to wonder if there is no end to the arguments that will be raised over the statute’s meaning.  Perhaps a direct appeal to a single justice of the SJC would better address the concern that delay “is often as effective as denial” and in “c. 40B proceedings . . . could . . . be more effective than denial.”  Milton Commons Assocs. v. Board Of Appeals of Milton, 14 Mass. App. Ct. 111, 117 n. 2 (1982).  Certainly every town and every aggrieved neighbor should have their day (or days) in court.  But those days should be a means to an end (the adjudication of legitimate grievances), not the end itself.

Looks like its last closing will be its own.  We've just learned that National Real Estate Information Services, Inc. (NREIS), a Pennsylvania company that once provided "real estate settlement services" (i.e. real estate closings with little or no attorney involvement) is closing its doors.  NREIS is the defendant in a long-running lawsuit brought by the Real Estate Bar Association of Massachusetts (REBA), which asserts that NREIS is engaged in the unauthorized practice of law (UPL).  That case, which remains pending in federal court in Boston (at least for the time being), spawned an important 2011 decision (pdf) by the Supreme Judicial Court (SJC), which clarified what it means to "practice law" in the context of a real estate transaction, and appeared to spell doom for NREIS's business model in Massachusetts.  See our prior post on NREIS, REBA's lawsuit, and the SJC's decision – in which we foreshadowed NREIS's demise – here.