Tag Archives: Boston

Airbnb Hosts Beware: City of Boston Proposes Regulations on Short Term Rental Industry

By on February 5, 2018

Boston Mayor, Marty Walsh, recently proposed a citywide ordinance that will, if adopted by City Council, subject short-term rentals – such as those advertised through the popular home-sharing website, Airbnb – to regulations and reporting requirements.

The proposed ordinance requires that all short-term-rentals register with the city and pay an annual fee based on a tiered rental classification system. The classification system additionally dictates how many days per year various properties may be rented and the maximum number of guests per night. The ordinance also imposes a room occupancy excise tax on all short-term rentals. Short-term-rentals that are noncompliant with city codes will be ineligible for registration. Further, beyond requiring individual owner/host compliance, the ordinance also places reporting requirements on the booking companies themselves. 

Specifically, the ordinance classifies three types of short-term rental units:

  1. Limited Share Units
  2. Home Share Units; and
  3. Investor Units

Limited Share Units are rentals that are the host’s primary residence such that the host is present through the duration of the short-term rental. Limited Share Units may be offered for short-term rent 365 days of the year and will be subject to an annual $25.00 registration fee.

Home Share Units are also rentals that are the host’s primary residence that may be offered for short-term rent 365 days of the year. The host, however, need not be present through the duration of the short-term rentals, so long as the number of days booked for rental when the host is not present does not exceed 90 (consecutive or nonconsecutive) per year. Home Share Units will be subject to an annual $100.00 registration fee.

Investor Units are rentals that are not the host’s primary residence. Investor Units may be offered for short-term rental for up to 90 days (consecutive or nonconsecutive) per year and will be subject to an annual $500.00 registration fee.

Boston residents who participate in the short-term-rental economy are well advised to understand, and keep an eye on, proposed changes in housing law as regulations begin to promulgate in response to a growing industry.

Renting Apartments to Multiple College Students? Lodging House Requirements No Longer Apply

By on August 23, 2017

Massachusetts law distinguishes rented dwellings from lodging houses with regard to the requirements, rights, and remedies for the landlord or owner of the property and the tenants or lodgers. By statute, when a dwelling unit is occupied by “four or more persons not within second degree of kindred” to each other, that unit is considered “lodging,” and not a rental unit. In order to legally operate a lodging house, the owner of such units must obtain the necessary licenses, subject to fines or imprisonment for failure to comply.

The lodging house act was enacted during World War I as a reaction to concerns over immoral conduct and the spread of sexually transmitted infections. The Act divided persons who reside with their nuclear families, or are related within a second degree to the person owning the premises, from other, unrelated individuals who reside with each other. The Act applies to fraternity houses and dormitories for educational institutions, with the exception of dormitories for philanthropic institutions or nursing homes. Lodging houses have separate standards for complying with Massachusetts law, which are separate from standards set against apartment buildings and units. In addition to the licensing requirement, lodging houses must comply with the applicable building codes, they must provide kitchen facilities equal to or greater than 150 square feet in area and include a gas or electric plate or stove, a refrigerator, and hot and cold water, unless the city or town where the building is located has contrary regulations or bylaws. Lodging homes are also subject to the requirement that they not be used for any “immoral purpose” and the owner of the lodge must keep a register of all persons occupying units in the premises.

More recently, the Massachusetts Supreme Judicial Court (“SJC”) addressed the implications of the act in City of Worcester v. College Hill Properties, LLC, relative to private rentals to college students. In that case, the defendant property owners owned several two- and three-family properties and leased each unit to four unrelated college students under annual lease agreements. After investigating the units, the City of Worcester cited the defendants and ordered them to cease and desist from operating unlicensed lodging houses. The defendants refused to comply with the order and the City filed suit in the Housing Court. The Housing Court held that the units, as occupied, constituted “lodgings” under the law and ordered injunctions against the defendants. This ruling was upheld by the Massachusetts Appeals Court and the defendants ultimately appealed to the SJC. The SJC reviewed the historical differences between “lodgings” and apartments and analyzed the plain dictionary definitions to determine whether the defendants’ buildings were apartments or lodging. The SJC overturned the Housing Court’s ruling, finding that the City of Worcester’s interpretation of “lodging” (that the plain meaning of “lodging” and “let” suggested that the statute applies to “any place to live in any house”) was myopic and would “lead to absurd results and selective enforcement.” The SJC therefore refused to adopt the interpretation put forth by the City of Worcester and followed by the Housing Court, holding that the defendants were not operating “lodgings” within the meaning of the act.

The SJC’s interpretation in College Hill Properties has created a logical standard for distinguishing lodging houses from apartment buildings and has helped to facilitate the increased need for housing for college students in Massachusetts. If you are a property owner who rents to multiple unrelated persons or are considering renting in Massachusetts you should contact an experienced attorney to ensure compliance with all laws regulating rental apartments and lodging houses.

Strang Scott is Hiring — Office Manager

By on August 8, 2016

Strang, Scott, Giroux & Young, LLP, is seeking an experienced full-time office manager.  We are an up and coming business law and litigation firm with offices located Boston’s Kenmore Square and New London, New Hampshire.  The candidate should be detail oriented and able to balance multiple assignments.  Strong communication, administrative, organizational and computer skills are required.

Responsibilities include:

  • Managing attorneys’ schedules
  • Organizing and tracking client files
  • Communicating with clients, opposing counsel and court personnel
  • Drafting, formatting, and editing legal documents including correspondence, subpoenas, pleadings and financial statements
  • Office management
  • Managing client billing and payments
  • Managing office supplies
  • Vendor purchases and payments
  • Mail distribution
  • Answering phones
  • Managing client database

 

Qualifications/Experience:

  • Ability to work independently and as part of a team
  • Proficiency with Microsoft Office
  • Experience with QuickBooks or willingness to learn
  • Self starting

 

Must have prior experience working in a law office.  This position is located in the Firm’s Boston, Massachusetts office.  For further information regarding the Firm, please visit www.strangscott.com and please direct inquiries and correspondence to esantos@www.strangscott.com 

Defend Trade Secrets Act – Employment Implications

By on June 2, 2016

President Obama recently signed the Defend Trade Secrets Act (“DTSA”), which provides a federal private right of action for the misappropriation of trade secrets. Previously, trade secret claims were handled only at the state level. The DTSA does not preempt state law, but instead provides another avenue for recovery. Trade secret owners may pursue federal claims including property seizure (to prevent dissemination of trade secrets), injunctive relief, and damages for actual loss and unjust enrichment. Property seizure is not lightly granted, and the DTSA provides a detailed framework for when and how property may be seized. Further, if the trade secret is willfully and maliciously misappropriated, courts may award double damages and attorney’s fees.

In the employment context, employees are immune from liability under the DTSA (and arguably state laws as well given the DTSA’s specific wording) for disclosing trade secrets that are made in confidence to a government official or attorney for the purpose of reporting or investigating a violation of law. Employees are permitted to use trade secret information in a lawsuit alleging retaliation by an employer for reporting a trade secret violation, as long as any court document containing trade secrets is filed under seal.

Although the DTSA provides a powerful cause of action for employers, the DTSA also contains some employee protections. Employers must now provide notice to employees of the immunities contained in the DTSA in agreements with employees (such as nondisclosure agreements), which may be handled by including a cross-reference to a company policy containing notice of the immunity. Failure to provide such notice prevents employers from receiving multiple damages or attorney’s fees under the DTSA. While injunctions are available under the DTSA, any injunction may prevent actual or threatened misappropriation but must not prevent the employee from entering into an employment relationship or conflict with state laws concerning the restraint of trade.

In sum, employers may now bring a civil action against employees who misappropriate trade secrets that can lead to damages and injunctive relief including seizure. However, to receive the full benefits of the DTSA, employers must update their nondisclosure and similar agreements to inform employees of the immunities available under the DTSA.  The DTSA’s effect on the technology, biotechnology and pharmaceutical industries almost certainly will be far-reaching.  As a result, the DTSA is of particular importance to businesses in greater Boston, Cambridge and other emerging technical hubs in Masshachusetts and throughout New England.  Both employers and employees should contact a Massachusetts employment attorney to update their agreements and confirm their duties.

Massachusetts Commercial Lease: The Rent

By on March 5, 2016

Each commercial lease provision is important in its own right.  Nevertheless, clients, real estate brokers and real estate attorneys instinctively look for what is commonly considered the most important provision to both the landlord and tenant:  the rent.  Although seemingly straightforward, calculating rent in a particular commercial lease lease can be cumbersome and often varies depending on whether the space is used as office, retail, restaurant, laboratory or industrial.

Base Rent and Triple Net Provisions

Rent is typically set at a price per square foot per year (commonly referred to as “base rent”), which is usually based upon rentable square feet (“RSF”) instead of usable square feet (“USF”).  For example, if a lease base rent is $10 per square foot for 4,500 RSF, the tenant will pay $45,000 in base rent per year, or $3,750 per month.  In oversimplified terms, RSF is the entire area of the interior space of premises and may include certain “unusable” portions of the premises like utility closets, building columns and the like. USF contains the entire area of the interior space of premises, but subtracting out certain portions that cannot be used by the tenant (i.e. utility closets, building columns, etc).  

Lease rental provisions are usually one of two forms: rent is either “gross” or “net.”  A “gross” lease means that the tenant’s base rent covers all of the costs associated with the tenant’s occupancy, with some exceptions like separately-metered utilities.  A “net” lease (also known as a “triple net lease”) means the tenant’s base rent covers only a portion of the costs associated with the tenant’s occupancy.  Other costs, such as taxes, insurance and building maintenance costs, are billed separately to a tenant.  Because the tenant covers the additional costs under a “net” lease, the base rent charged is typically lower for a “net” lease than a “gross” lease.    

Percentage Rent — Natural vs. Artificial Breakpoints

Regardless of whether a lease is “gross” or “net,” some commercial leases contain a “percentage rent” provision.  “Percentage rent” is rent paid in addition to base rent and is based upon a percentage of the tenant’s sales.  This type of structure is common for restaurants, multi-tenant commercial spaces and shopping center kiosks.  Landlords request percentage rent on the theory that certain commercial enterprises, like shopping centers, are a natural draw for customers.  Under this analysis, because the landlord’s rental income will increase if the tenant meets certain sales goals, the landlord is incentivized to increase traffic to the tenant’s business. If the tenant fails to obtain the applicable sales goals, however, the tenant will not owe any additional percentage rent.   

The point at which percentage rent is paid is call a “breakpoint,” which can be a “natural” or “artificial breakpoint.”  Artificial breakpoints are created based on a predetermined dollar amount of gross sales.  Continuing with the above example, assume the parties agree that if the tenant’s gross sales exceed $1,000,000, the landlord is entitled to 5% of the amount over that breakpoint. Under this scenario, if the tenant generates $1,200,000 in gross sales, the tenant would pay the landlord $10,000, or 5% of the $200,000 over the $1,000,000 breakpoint.  Natural breakpoints are calculated based on dividing the base rent by the percentage to be paid to the landlord. Using the same example, if the parties agreed to a natural breakpoint, the annual rent, $45,000, would be divided by the agreed upon percentage, 5%, which equals a natural breakpoint at $900,000 in gross sales. The justification for a natural breakpoint is that the tenant should only pay the percentage rent on sales over and above what is required under base rent.  Meaning, the landlord only receives a percentage of the tenant’s gross sales after the base rental amount is covered.

Deciding between an artificial breakpoint and natural breakpoint can be difficult, particularly when a tenant does not have past sales to analyze.  In general terms, a tenant may prefer a higher base rent with a higher breakpoint, which would enable the tenant to profit at a lower sales level before having to pay the percentage rent. Conversely, a landlord may be interested in accepting a lower base rent with a lower breakpoint if the landlord is confident that the tenant’s business will be particularly popular in the space.

Rent Increases – Extensions

At the end of the term of a lease, the landlord and tenant may agree to extend the term of for an additional period of time (e.g. five additional years).  Upon such extension, most leases state that rent will have a fixed increase for that extension.  A fixed increase is simple: the rent increases annually based on a previously agreed upon amount or percentage.  More common, however is a provision that rent will be adjusted to the then fair-market-value (“FMV”). Rent adjusted for FMV is generally based on comparable leases of comparable space.

Whether a lease or space is “comparable” is generally determined using factors listed in the lease.  A “comparable space” involves a number of criteria, including the location and size of the space; the use of the space; prominence within the area; and the age of the building and its amenities. Determining the FMV, of course, can be subjective.  It is not uncommon for any three real estate appraisers to come up with three substantially different FMV valuations. As such, it is critical to draft lease extension provisions with as much detail as possible for the determination of FMV.   

The above is a simplified summary of different approaches to rent for a commercial space.  Each situation is different, and often different locations will have differing “standards” for how leases are structured.  For example, in the Boston area, the standard provisions for commercial leases in Cambridge often differ from those in Boston.  In fact, the standards in different neighborhoods in Cambridge (e.g. Kendall Square) often deviate from other neighborhoods (e.g. Harvard Square).  As such, it is critical that both landlords and tenants speak with a Boston commercial real estate attorney before executing a commercial lease. 

Proposed Bill Allows Massachusetts Landlords to Collect Application Fees

By on May 11, 2015

As mentioned in one of our recent articles , the United States District Court for the District of Massachusetts ruled that Equity Residential Management violated MGL 186 § 15B when it collected application fees, amenity fees, community fees and pet fees. See Perry v. Equity Residential Management, LLC. In short, the Court ruled that landlords may only collect fees and/or deposits specifically listed under MGL 186 § 15B. Because that list does not include application fees, the Court ruled that it was illegal for Equity Residential Management to collect application fees.

In an apparent response to Perry v. Equity Residential Management, as well as other Massachusetts state court decisions on this issue, Massachusetts Senator Donald Humason recently sponsored Senate Bill 840, which would amend MGL 186 § 15B to allow landlords to collect an “application screening fee.” The proposed change to MGL 186 § 15B is similar to other states’ laws, like California. S.B. 840 provides that landlords may charge an “application screening fee” so long as the fee is not greater than the actual cost incurred by the landlord. That fee must not exceed $50 per applicant.

On May 12, 2015, the Massachusetts Legislature’s Joint Committee on the Judiciary will review the proposed Bill. Given that S.B. 840 would provide much needed relief and clarification for landlords, Strang Scott will continue to monitor its progress.

Application Fees, Move-in Fees and Pet Fees – Landlords Beware

By on February 11, 2015

It is common practice in the property management business for landlords to charge certain move-in fees, such as an application fee or pet fee, prior to a tenant moving in. This practice, however, is illegal in Massachusetts.

Late last year, in Perry v. Equity Residential Management, LLC, the United States District Court for the District of Massachusetts ruled that Equity Residential Management violated MGL 186 § 15B when it collected from tenants an application fee, amenity fee, community fee and initial pet fee. Under MGL 186 § 15B, a landlord is only allowed to collect, as up-front charges to a tenant, (1) first month’s rent; (2) last month’s rent; (3) a security deposit equal to the first month’s rent; and (4) the purchase and installation cost for a key and lock. While MGL 186 § 15B does not explicitly forbid application fees, move-in fees or pet fees, it does state that “no lessor may require a tenant or prospective tenant to pay any amount in excess of” the four permissible charges mentioned in the statute. Noting this restrictive language, and analyzing similar Massachusetts case law, the Federal District Judge in Perry ruled that the collection of these fees violates both MGL 186 § 15B and Massachusetts’s Consumer Protection Act (MGL 93a). A violation of MGL 93a exposes a defendant to triple damages and attorney fees. Thus, something as small as a $50 application fee could expose a landlord to thousands of dollars in damages.

Many property management companies and landlords throughout the country charge additional fees as a matter of course. It is doubtful that any of them think twice about the practice. After all, these additional fees help defray costs and sometimes add additional revenue for landlords. Even so, the collection of application fees, move-in fees and pet fees is impermissible in Massachusetts and given the recent decision in Perry v. Equity Residential Management, LLC, it is likely that this will become a much larger, and expensive, issue for landlords in the near future.