Most attorneys will tell you that
bad cases make bad law – usually, but not always. And
sometimes a judicial outcome that appears negative in theory can
be quite positive in its effects. A recent decision by the
Massachusetts Supreme Judicial Court (SJC) illustrates both
points.
The fact pattern certainly made New
Bedford Housing Authority v. Olan a textbook example of a “bad
case.” New Bedford police officers followed a fleeing
suspect onto the grounds of Presidential Heights, a public housing
project, and through the open door of a unit occupied by Elba
Olan, who had been a tenant in the development for about three
years. The tense encounter escalated quickly from shouting
to shoving, leading officers to arrest Olan (for striking one of
them) and then her daughter, who pushed the arresting officer and
Olan down the stairs.
The situation went from bad to
worse and before it ended, the State Police had to be called to
help disburse an angry crowd of about 100 rock-throwing project
residents, who had gathered outside the building to protest the
police actions.
The New Bedford Housing Authority
(NBHA) subsequently filed an action under Massachusetts General
Laws Chapter 139 Section 19, which allows a court to void a lease
immediately when a public housing tenant commits one of several
specified “nuisances,” including “acts involving the use or
threatened use of force or violence against the person of an
employee of the housing authority…or agents of any person
legally…on the premises.”
The Housing Court Judge who heard
the case rejected Olan’s request for a jury trial and granted the
NBHA’s request for an immediate eviction. Olan appealed and
the Appeals Court found that she was, in fact, entitled to a jury
trial – a decision the SJC affirmed.
Landlord Fears
The ruling prompted an outcry from
landlords, who complained that granting a jury trial would
essentially gut the purpose of the statute, which is to enable
landlords to deal expeditiously with tenants who are committing
illegal acts – typically drug-related – in rental housing.
| The process
usually works like this: Other tenants notice and
complain about the illegal activity to the landlord, who
notifies the police, or law enforcement officials become aware
of the problem on their own. A “bust” ensues, and the
offending occupants of the unit (who may or may not be the
tenants on the lease) are arrested, booked, and usually
released on bail pending a trial.
But the drug bust provides the
evidence of illegal activity that a landlord needs to bring a
successful action for removal of a tenant under Section 19,
which requires an arrest, but not a conviction. Armed
with the police report, the landlord or property manager files
a complaint seeking expedited action; the court schedules a
hearing within a few days under a “short order of notice.”
The detectives involved in the bust testify for the landlord
and the judge issues an order requiring the tenants to vacate
immediately, allowing some limited time for them to pack and
remove their belongings. |
|
A Well Oiled Machine
That is how the process was working
before the Olan decision, and landlords feared the jury trial
requirement would throw a large wrench into what had been, from
their perspective, a well-oiled legal machine. But as a
practical matter, the decision is more likely to grease the wheels
than to jam them. Two points are important:
| |
- A jury trial
will not necessarily delay the removal process inordinately, or
at all. As the SJC noted in its opinion, “The commencement
of Olan’s trial would have been delayed only by the time needed
to empanel a jury.” Equally significant, a jury trial
would not increase the odds of a decision favoring the tenant.
Section 19 cases usually involve such unpleasant people doing
such unpleasant things, that a jury is unlikely to do anything
other than what a judge would do—order the bad tenants out.
- While the SJC
in this decision said that defendants in a Section 19 proceeding
have a right to a jury trial, the court also noted that
landlords have a right to seek a preliminary injunction, barring
a tenant’s access to the unit in the interim. This is the
crucial point overlooked by those who see the decision as a blow
to the Section 19 remedy.
|
Temporary Order Remedy “Intact”
“Section 19 does not confer
equitable jurisdiction to abate a common nuisance, because its
purpose is to remove offending tenants, not remedy their conduct,”
Justice Francis Spina wrote in the majority opinion.
“However, equitable relief may be granted under Chapter 19 pending
trial to restrain a tenant’s continuing unlawful conduct.”
A concurring opinion makes this
point even more clearly. “Nothing in Article 15 (of the
Massachusetts Declaration of Rights) prevents a court from issuing
a preliminary injunction in those [Section 19] cases where even
the most expedited trial will not prevent the ongoing harm of
violence or threatened violence on public housing premises,” the
opinion notes. The decision upholding a tenant’s right to a
jury trial, the opinion continues, “leaves intact the remedy of a
preliminary injunction in those cases presenting an exigent need
to remove the offending tenant from the public housing presence
pending trial.”
To obtain an injunction, a public
housing authority must demonstrate:
- “That it will
likely prevail on its underlying claim to void the lease or
tenancy on account of the defendant’s past violent criminal
conduct;
- That the
defendant’s continued presence on the public housing premises
pending trial on the merits poses a risk of irreparable harm
(e.g., that the tenant is likely to injure or threaten housing
authority personnel or the tenants, is likely to destroy housing
authority or other tenants’ property likely to interfere with
other tenants’ quite enjoyment, or likely to interfere with
housing authority operations); and
- “That the risk
of irreparable harm outweighs the harm that the tenant would
suffer as a result of the injunction….”
Courts granting injunctions under
that framework can tailor the order “to satisfy the need
demonstrated by the housing authority, and to minimize the harm to
the defendant, the opinion notes.
Better than an Eviction
The decision does not break
significant new legal ground in this area, but it does clarify the
court’s authority to issue a preliminary order in Section 19
cases. That remedy was not clearly defined before, and it is
extremely effective. The injunctions we have sought and won since
the Olan decision (and before) do not terminate the tenancy, but
they do achieve the primary goal, which is to get the tenant off
the property. Whether a jury trial takes a few weeks or a
year after that does not matter, because the tenant is gone and
cannot return without risking a contempt finding (and a
likely eviction order) for violating the court order barring
access to the property. In this respect, a temporary order
has the same effect as an eviction judgment, only it is better,
because you don’t actually have to try the case.
Property owners should not
underestimate the power of one of these orders. If a drug
arrest occurs on Monday and the court enters a temporary removal
order on Friday, that sends a clear message that the property has
a zero tolerance policy and enforces it. This will please
other tenants, by demonstrating that the landlord is taking action
to create a safe environment for them. And it will make drug
dealers less likely to live in the property and less likely to
deal drugs from there if they do. It is like a police car
parked on the side of the highway to warn speeders—it definitely
has a deterrent effect.
While the Olan decision discusses
the temporary order option in the context of public housing, the
broad principles outlined in the decision and the concurring
opinion apply equally to the Section 19 remedies available to
owners or mangers seeking to remove tenants from private rental
properties. The right to a jury trial in these proceedings
does not do very much for tenants trying to fight drug-related
eviction orders, but the temporary order option makes Section 19
an even more powerful weapon for landlords than it has been in the
past.
LEGAL BRIEFS
A Jury
Case. The right to a jury trial—the focus of
this month’s legal alert—also is the central issue in a recent
Chapter 21E suit in which a Massachusetts Superior Court ruled
that a property owner seeking to recover environmental clean-up
costs from the prior owner was entitled to a jury trial on his
claim. The defendant in Newly Weds Foods, Inc. v.
Westvaco Corp. argued that the state environmental law, like
its federal counterpart (the Comprehensive Environmental Response
Compensation and Liability Act) should treat cost recovery suits
as “equitable actions” that are not entitled to a jury trial. But
Superior Court Judge Peter Lauriat concluded otherwise.
Although the state law is modeled on the federal statute, he
agreed, “given the more dynamic jury trial standard in
Massachusetts, even if [21E] were an exact transliteration of
CERCLA (which it is not), an analysis of whether the right to a
jury trial on this cause of action exists in Massachusetts will
yield a different result than a similar analysis under the Seventh
Amendment.” The Massachusetts Supreme Judicial Court has
ruled previously that there is no constitutional right a jury
trial in a 21E proceeding, but Judge Lauriat concluded, “While
there is no constitutional right to a jury [in these cases], it
remains within the court’s discretion to commit such an action to
jury deliberation.”
Double
Takings.
Continuing its exploration of the “takings” landscape, the U.S.
Supreme Court has agreed to consider whether a “temporary”
building moratorium violates the Fifth Amendment rule prohibiting
government from taking property without compensating the owners.
The property owners in Tahoe Sierra Preservation v. Tahoe
Regional Planning Agency are challenging a building moratorium
that the agency imposed originally in 1981 to address concerns
about water quality damage to Lake Tahoe. The agency has
extended the initial two-year ban several times; as a result,
owners who purchased property in the area have been unable to
build on their land. The agency contends that a temporary
ban does not require compensation; the owners counter that there
should be a point at which a ban that extends for several years no
longer qualifies as temporary. The Bush Administration,
usually more inclined to defend property rights than to champion
government regulation, has sided with the planning agency in this
case, arguing that government planners should have sufficient time
to craft a reasonable development strategy, without being required
to compensate property owners in the interim. Analysts
predict a divided court, but they aren’t sure which way it will
come down.
Underscoring its
interest in the takings area, the High Court has also agreed to
hear a Florida Case—Franconia Associates v. United States—dealing
with the constitutionality of a 1998 federal law prohibiting
owners of low-income from prepaying their Farmers Home
Administration mortgages in order to eliminate the low-income rent
restrictions on their properties. In this case, the court is
considering whether a statute barring the exercise of a
contractual prepayment right constitutes a Fifth Amendment taking.
|
Community Control. In a decision that has cheered
by condominium residents and infuriated non-resident
investor-owners, the Florida Supreme Court ruled recently that
a community association can vote to restrict or ban rentals,
even if that action forces long-time renters to leave and
despite any possible financial harmful effects on owners who
purchased their units as investments. “This decision is
critical; it shows that condominium communities can decide how
they want to be governed,” Gary Poliakoff, the Florida
attorney who handled the case for the community association,
said in press reports. The decision in Woodside
Village Condominium Association, Inc. v. Jahren also
highlights a point condominium purchasers often ignore – that
the association rules may change over time. In its
unanimous opinion, the Florida court focused on the unique
nature of the condominium structure and the need for community
associations to control their environment, even when those
controls restrict private property rights. |
|
“Given the unique
problems of condominium living in general and the special problems
endemic to a tourist oriented community in South Florida in
particular,” the court observed, “appellant’s avowed objective—to
inhibit transience and to impart a certain degree of continuity of
residence and residential character to their community—is, we
believe, a reasonable one, achieved in a not unreasonable manner
by means of the restrictive provision in question. The
attainment of this community goal outweighs the social value of
retaining for the individual unit owner the absolutely unqualified
right to dispose of his property in any way and for such duration
or purpose as he alone so desires.”
No-Doc
Fees. Consumers are finding new ways to
challenge real estate transaction fees. A Wisconsin
homebuyer has filed suit against Shelter Mortgage Company charging
that the lender’s collection of a “document preparation fee”
constitutes the unauthorized practice of law. The plaintiff
Is seeking class action status for his suit, which contends that
the lender “routinely charges a documentation preparation fee for
drafting, designing, completing, preparing, and/or selecting”
standardized legal documents used for mortgage loans.
|
|
Ruling last year
on a similar action, the Michigan Court of Appeals agreed that
Ameribank’s $400 documentation preparation fee was illegal,
even though it was disclosed on the borrower’s settlement
statement. Courts in a few states (Minnesota and
Washington among them) have ruled otherwise. But the
Michigan court, siding with what it termed “the majority” of
states, held that in charging a separate documentation
preparation fee, “a bank crosses the threshold of providing
services for the bank’s own benefit and engaging in a business
where profit is made from manufacturing legal documents
without the requirement of licensure from the state bar.”
Ameribank is appealing the decision to the Michigan Supreme
Court. |
One Deal -
-Two Loans. A U.S. Court of Appeals has ruled that the
Truth-in-Lending Act (TILA) does not prevent a lender from issuing
two loans to finance a single piece of property as long as that
arrangement is not inconsistent with the borrower’s expectations.
That ruling (in
Rendler v. Corus Bank, N.A.) came in a suit filed by borrowers
who applied for a loan to purchase a condominium. The bank
approved an adjustable rate note secured by a first mortgage and a
home equity line of credit secured by a second mortgage under a
program the bank offered to investors. This structure enabled them
to purchase property without making a down payment and avoid
paying for private mortgage insurance. The borrower
(Rendler) sued the bank, claiming that the disclosures for the two
loans were deceptive, because they failed to detail the true cost
of the loans and thus prevented her from comparing the Corus
program with other lenders. She also said the bank violated
the TILA by treating the financing of a single piece of property
as two separate transactions. But the court ruled that the
official commentary to Regulation Z provides considerable
flexibility for lenders, and specifically allows them to allow
separate financing of a down payment. As a result, the bank
“had the discretion” to issue two disclosure statements.
Other lower courts have found that loan splitting violates the
TILA in situations where the borrower specifically requested a
single loan consummated in one transaction, the court
acknowledged. But in this case, the lender disclosed and
documented that two transactions were involved. The bank’s
program did not violate the statute, the court concluded, because
“the disclosures provided were adequate and there is no per se
requirement in the Act that disclosures for multiple transactions
be combined into one statement. Additionally,” the court
concluded, “the TILA does not prevent a lender from issuing two
loans to a consumer to finance a single piece of property when the
expectations of the consumer are not frustrated."
|