Tag Archives: landlord

Actions Speak Louder Than (Written) Words: When Strict Compliance is not a Defense to Actual Notice in Commercial Leasing

By on October 11, 2018

The Massachusetts Superior Court (Essex) recently held that failure to strictly comply with commercial lease notice requirements did not invalidate a tenant’s email and verbal notice of its intent to terminate a lease.  Specifically, the tenant wanted to avoid triggering the automatic extension clause in the lease but did not send notice in the manner required by the lease. In SpineFrontier v Cummings (2018), the Court held that the tenant’s email and verbal notice, although not in strict compliance with the lease, sufficiently conveyed to the landlord that the tenant did not intend to renew its lease.  

The Court went on to state that setting the sufficiency of actual rather than lease-prescribed notice aside, the landlord waived its right to assert the necessity of strict compliance with the written lease language. The landlord, by its own history of action, acted as though the Tenant’s Notice was sufficient notice to terminate the lease. The Court noted:

At no point following the [email or verbal notice] did Cummings notify SpineFrontier that its notice failed to comply with the requirements of SpineFrontier’s lease…Moreover, in the several months that followed, Cummings acted as if proper notice had been provided, repeatedly attempting to strike a deal with SpineFrontier on different terms for office space…

We consistently remind commercial tenants and landlords to strictly comply with their lease obligations.  If a lease states that notice must be given in a certain way (e.g. certified mail, overnight delivery, etc), then a landlord or tenant should always follow that, even if it seems unnecessary.  The “notice” provision is often overlooked at the beginning negotiations of a lease, but tenants and landlords should take the time to make sure it is workable.  Even so, SpineFrontier v Cummings makes it clear that strict compliance does not always win the day.  

Therefore, if you are a tenant that has failed to strictly follow your lease, you should speak with a commercial real estate attorney to determine if you may still have options.  Likewise, if you are a landlord and your tenant has not strictly followed the lease, do not assume that such failure is automatically in your favor.  You too should consult with a lawyer to determine your options. 

Commercial Leasing Series: Decoding SNDAs

By on March 12, 2018

Subordination Non Disturbance and Attornment Agreements (SNDAs) often seem like afterthoughts in commercial leasing as they govern the potential future relationship between a tenant and the landlord’s lender rather than the current relationship between the tenant and landlord. SNDA’s, however, should not be overlooked, as they are crucial to protecting a tenant’s interests in the event that a landlord is foreclosed upon and its lender takes over in its place. In the absence of an SNDA, a tenant may find itself at the mercy of a new landlord that has little obligation to honor the terms of tenant’s original lease. Thus, commercial tenants should be aware that SNDA’s exist to protect their rights and should have a basic understanding of how they operate.

As a quick overview, SNDA’s are comprised of three (3) main components, the:

Subordination: Where the Tenant agrees that Lender’s interest in the leased property takes precedence over Tenant’s lease interest in the event of a foreclosure;

Non-Disturbance: Where the Lender agrees to honor Tenant’s lease in the event Lender takes over for Landlord; and

Attornment: Where the Tenant agrees to recognize Lender as its new Landlord.

While most SNDA’s contain largely standard language, there is almost always room for some negotiation. This could be as simple as negotiating for clear tenant protections relative to potential lease defaults, or as complicated as negotiating for protections with regard to promised funding per the lease between a tenant and original landlord. Regardless, it is important that tenants take the time to understand SNDAs in their entirety in order to ensure that their rights are sufficiently protected. Thus, commercial tenants, particularly those seeking long term leases, would be well advised to consult with a knowledgeable real estate attorney both when deciding whether to seek an SNDA and when negotiating the same.

Landlord’s Security Deposit Violation Does Not Warrant Triple Damages

By on October 26, 2017

The Massachusetts Supreme Judicial Court (“SJC”) recently addressed the scope and interpretation of the Massachusetts Security Deposit Act, MGL c. 186, § 15B, in Phillips v. Equity Residential Management, LLCStrang Scott previously discussed the implications of landlords’ failure to comply with MGL c. 186 (“the Act”).  

The dispute centered around four different provisions of the Act.

  • First, Section 15B(4)(iii) requires landlords seeking to retain all or a portion of a security deposit to submit a written itemized list of damages to the rental unit, including precise detail of the nature of the damage and the necessary repairs and copies of estimates, bills, invoices, receipts, or other evidence to validate the amount deducted, sworn to by the landlord under the pains and penalties of perjury.  Failure to comply with the requirements of Section 15B(4)(iii) forfeits the landlord’s right to deduct any amount from the security deposit for damage or repairs.
  • Second, Section 15B(6)(b) states that a landlord loses its right to retain any portion of the deposit for any reason, if the landlord fails to furnish the itemized list of damages in compliance with the requirements of the Act. 
  • Third, Section 15B(6)(e) states that a landlord cannot retain any portion of the deposit for any reason if the landlord fails to return the deposit, or any balance after deductions, within 30 days after termination of the tenancy. 
  • Finally, Section 15B(7) provides triple damages, interest, court costs, and attorneys’ fees to successful tenants where their landlord violated Section 15B(6)(a), (d), or (e).

The Federal District Court of Massachusetts awarded the tenant damages in the amount of his security deposit under Sections 15B(4)(iii) and 15B(6)(b), but denied an award of triple damages. On appeal, the First Circuit Court of Appeals submitted a certified question to the SJC, requesting clarification on the treble damages provision under Section 15B and whether a landlord’s violation of the itemized list requirement, which forfeits the landlord’s right to retain any portion of the deposit for any reason, also constitutes a violation of the Act.

The SJC answered “no” to the Circuit Court’s question. In its decision, the SJC ruled that the triple damages provision under Section 15B(7) does not apply to claims for violation of the itemized list requirement of Section 15B(4)(iii) or to forfeiture of the deposit under Section 15B(6)(b). The SJC did find, however, that improper deductions under the first sentence of Section 15B(4), or the failure to return a deposit or account for any portion within 30 days, would constitute violations entitling a tenant to an award of triple damages and attorneys’ fees.

If you have questions regarding whether your security deposit practices comply with Massachusetts law, contact experienced landlord counsel to evaluate your practices and to limit your exposure.

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.