Practice Areas
Commercial and residential real estateResidential
In Massachusetts, the Standard Form Purchase and Sale Agreement is almost always the contract between and buyer and seller. Buyers and Sellers typically sign this agreement after an Offer to Purchase is accepted and inspection contingencies have been addressed. The Agreement contains all of the essential terms of the deal. The word "standard" can be deceiving, however, because there are changes that an experienced real estate attorney will require and which can substantially impact an outcome. For example, in most instances the Agreement will provide that the buyer's deposit is forfeit if the buyer defaults. Consider the impact in two scenarios. In the first, the buyer deposits 5% toward a purchase price of $750,000, or a total of $37,500. In the second, the same buyer deposits $10,000. Which scenario would you prefer as seller if the buyer defaults? Or turn it around: what is more advantageous to the buyer? The results are vastly different. Sellers want the ability to retain the most money and buyers the least. It only makes sense.
Consider next a mortgage contingency. This clause gives buyers a predictable amount of time during which the buyer can obtain a commitment for the loan. IF the buyer can't get it on time, the buyer can terminate and retain her deposit. If, however, a lender issues a commitment that is conditioned on items that are beyond a buyer's control, the buyer can find herself in a very difficult situation if the condition (notwithstanding the "commitment") can't be satisfied. In that instance, the buyer's deposit is at risk. A simple way to address this (which is not part of the "standard" form) is for the buyer's attorney to add language suggesting that the buyer's commitment can only be conditioned on matters within the buyer's reasonable control. This effectively protects the buyer's deposit and gives the buyer a much better chance at getting it back.
Third, consider what is commonly known as TRID. TRID is the acronym for a law that requires, among other things, that lenders disclose all closing costs to a buyer. If the costs differ too much from what was originally estimated, the law requires that the lender re-disclose. Buyers can't close within the 3-day disclosure period. In that instance, a closing date (thus a deposit) is at risk. It is entirely possible that a seller will care very little about the buyer's conundrum (can close but not on the agreed date because of the re-disclosure), which in turn, may result in the loss of a buyer's deposit.
The good news is that an experienced attorney can help a buyer mitigate these risks by including language that isn't found in the "standard" form. Counsel can attach a Rider to the Agreement with more protections for a Buyer.
Commercial
Commercial leasing in Massachusetts (at least in comparison to residential) is a bit like the wild, wild west. A recent decision underscores the importance of carefully reviewing a lease before it is signed.
Just the facts: Briefly, a landlord leased space to a dentist for 12 years. A year later, the dentist went out of business and told the landlord that he could not pay rent. The landlord found another tenant for 10 years but at a vastly reduced rental (net difference of $1,000,000). The landlord sued the dentist to recover the $1m difference.
The lease contained a standard indemnification clause that reads as follows: "The Lessee shall indemnify the Lessor against all loss of rent and other payments which the Lessor may incur by reason of such termination during the residue of the term. If the Lessee shall default, after reasonable notice thereof, in the…performance of any covenant on Lessee's part..., the Lessor, without being under any obligation to do so and without waiving such default, may remedy such default for the account and at the expense of the Lessee."
In ruling against the Landlord's request for the $1m difference, the Massachusetts Supreme Judicial Court reasoned that our common law does not provide "benefit of the bargain" damages. Once a landlord terminates a lease, the tenant no longer must pay the rent, unless the lease provides otherwise, and the landlord is not entitled to post-termination damages.
hat was missing that an attorney could have included before it was signed? An acceleration clause was missing. The practice tip is this: commercial landlords should include a rent acceleration and liquidated damages clause. It is also wise to include a provision allowing a landlord to recover build-out expenses if the Lessee defaults early in the term.
Business creation and planning.
A business owner has multiple options. There are corporations, partnerships, limited partnerships, limited liability companies, sole proprietorships and more. This article will focus on incorporation.
PROS
Owner Protection from Legal Liability: Once a new business's owner(s) successfully completes the incorporation process, the owner(s) have a limited amount of legal liability for the corporation's business activities and debts, because in the eyes of the law the corporation is a separate entity. To maintain this limited liability, the corporation's owners must follow a number of legally required corporate formalities. These include regular meetings, votes and proper record-keeping.
Ability to Attract Investors: The corporation's ability to issue stock is a strong selling point to those willing to invest capital in a business venture.
Power Structure: The corporate business form has an established power and management structure: directors, officers, and shareholders. Each group has its own set of clearly-defined roles and responsibilities within the corporate framework.
Stock and Stock Options for Employees: Especially for larger businesses, the corporate business structure offers an appealing opportunity to potential employees -- stock benefits and stock options (the employee's right to buy stock at a locked-in price).
CONS
Time and Cost of Incorporation: The incorporation process can be expensive and time-consuming. A number of documents must be prepared (including the new corporation's articles of incorporation and bylaws), and filing fees must be paid to your state's Secretary of State office (or similar business filing agency).
Following Corporate Formalities: All corporations are required by law to observe a number of corporate formalities to ensure that the corporation is operating as a separate entity, independent of the business's owners. These steps include holding regular meetings of directors, keeping records of corporate activity, and maintaining the corporation's ongoing financial independence.
Potential Tax Liability: The profits from traditional corporations may be "double-taxed." That is, the corporation itself is taxed for any profits earned, and any individual stockholder who earned profits from the corporation (in the form of paid "dividends") are also taxed. This occurs most often in larger corporations, and may not be an issue for stockholders and owners of smaller corporations, who often work for the business itself and are paid salaries (which are tax-deductible for the corporation) rather than dividends. One solution to the double-taxation problem is electing "S" corporation tax status.
Condominium law:
Common expense fees. The Massachusetts Condominium Act, M.G.L. 183A Section 6(c) provides condominium associations with a priority or "super-lien." This allows associations to mitigate some of the financial harm associated with unit owners who do not pay their monthly fees. The "super-lien" includes six months of common expense fees plus reasonable attorney's fees and costs of collection. It does not include late fees, fines or special assessments. Counsel for the association must follow a very specific procedure. It involves certain statutory notices to the owner, lender(s) and anyone else holding an interest of record. Once the notices have been sent, counsel files suit (typically in a District Court), records an attested copy of the Complaint and proceeds to judgement.
Often, Attorney Lovely will convince the lender holding the first mortgage on the unit to pay at least the super-lien amount. In some instances, lenders will pay the entire amount owed on the lien, even though they are not legally required to do so, so that the lien is discharged. In some cases, they will pay the priority portion, but not the rest of it. A recent case now allows associations to "stack" the super-lien increments. In either instance, it is critical to start the process early to maximize an association's protection.
Another protection available to an association relates to rent paid by tenants of the delinquent owner. Again, the statute provides a framework which, when followed properly, will allow an association to collect monthly rent from a tenant an apply it to the delinquency. Monthly rent payments can quickly reduce and eliminate serious financial problems.
Unit owners must pay their condominium fees on time or they risk serious consequence. There is no such thing as a "right of set-off." The Appeals Court held in Blood v. Edgar's, Inc., 36 Mass.App.Ct. 402, 632 N.E.2d 419 (1994), that:
"In view of the importance placed by the Legislature on prompt collection of common expenses, we conclude that in the context of the condominium act, absent prior judicial determination of illegality, a unit owner must pay its share of the assessed common expenses. Self-help remedies, such as withholding condominium common expense assessments, are not available.
We add that a unit owner is not without remedy or recourse to challenge the propriety of common expense assessments. We suggest that aggrieved unit owners should timely pay--under protest--the common expense assessment. Thereafter, a judicial determination of the legality of the assessment, and the suitable reimbursement, may be sought . . . . In this respect, the condominium unit owner stands in much the same position as an owner of real estate, who is bound to pay the tax assessed before challenging it. See G.L. c. 58A, § 6. If appropriate, the unit owner may also petition the court for equitable relief." Blood v. Edgar's, Inc., 36 Mass.App.Ct. 402, 632 N.E.2d 419 (1994).
Before buying a condominium.
People who are purchasing or selling a condominium, or going through the condominium conversion process, should consult an experienced condominium lawyer. Counsel should include important protections in the Purchase and Sale Agreement to allow buyers the time they need to make an informed decision. A few suggestions for buyers are outlined here:
1. READ the Master Deed, Trust, By-Laws, Rules/Regulations and amendments (make sure the Registry of Deeds book and page numbers are stamped in the margin);
2. conduct an investigation into the financial health of the association and ask for budgets, minutes of meetings and votes;
3. confirm that the board of trustees has been properly elected and evidence recorded at the Registry of Deeds;
4. confirm that the board of trustees is following the requirements of the Master Deed and Trust (voting, governance and the like).
Probate and estates
A basic estate plan is comprised of 5 documents:
Last Will and Testament;
Health Proxy;
Living Will;
Power of Attorney; and
Guardianship Proxy (when minor children are involved).
Why do I need a Will?
1. You decide how your assets will be distributed. A properly drafted Will is legally binding and allows you to dictate the "who, what and when" of your estate.
2. You can minimize the chances of a lengthy and contested probate process. You can add language that effectively disinherits someone if he contests your Will.
3. Minimize estate taxes.
4. You decide who handles your affairs.
5. You can disinherit individuals who would otherwise stand to inherit your property.
6. Minimize legal challenges.
7. You can make gifts and donations to valued charities.
Why do I need a Health Proxy?
The Health Proxy allows you to designate a trusted individual to effectively stand in your shoes at times when important decisions about your health are required. Working hand-in-hand with the Living Will, you can instruct your proxy about how you would like things to be handled. You take control of your life.
Why do I need a Guardianship Proxy?
You can decide who will care for your children.
Why do I need a Power of Attorney?
While not always utilized, this instrument empowers your attorney to deal with property issues at times when you may not be able to do so. During times of partial disability, this can save time and money.
As Attorney Lovely views it, an estate plan is a living concept. Especially with modern technology, the documents can be changed quickly and easily. As you age, your plans may change. Consider a review at periodic intervals. This insures that your wishes are followed.
Why do I need an Estate Plan? Peace of mind.
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