On April 20, 2020, Massachusetts Governor Charlie Baker signed House Bill 4647 (the Act), which prohibits certain evictions and foreclosures due to the economic effects of the COVID-19 pandemic. Both commercial and residential evictions are covered, while the foreclosure protections extend only to residential owners of their primary dwelling unit. Residential evictions were already stayed by trial court orders issued in mid-March 2020, which halted summary process cases until the courts reopen to the public. Toward the end of March, the Land Court issued a notice that Servicemembers Civil Relief Act cases are not included in the emergency relief the court will provide, which effectively stopped standard residential foreclosure processes as well. This legislation expands and extends those stays. Because the Act is complex, we’ll provide the key takeaways first and then dive into some of the details.

Key Takeaways

Landlords

For landlords, the Act has little upside. If landlords occupy a property as a principal residence with four or fewer residential units, they can seek forbearance for mortgage payments. Commercial landlords can still send termination letters. Landlords also can access the last month’s rent obtained from residential tenants to pay mortgage obligations and utilities if they provide notice.

Commercial Tenants

The Act protects some smaller commercial businesses from eviction. Courts can’t process eviction cases. If tenants submit a written notice that their nonpayment is due to the COVID-19 outbreak, landlords can’t report the nonpayment to a credit agency.

Residential Tenants

The Act is broadly protective. Landlords cannot give a notice to quit or evict residential tenants. Courts can’t process existing eviction cases. If tenants submit a written notice that their nonpayment is due to the COVID-19 outbreak, landlords can’t report the nonpayment to a credit agency.

Financial Institutions 

The Act prevents foreclosure actions for certain residential properties and requires a grant of forbearance to those same mortgagors upon request. The forbearance can’t be reported to a credit agency, but length of forbearance and payment terms are negotiable. Reverse mortgage counseling is temporarily available by phone or videoconference.

The Details

Evictions

Certain evictions are excluded from the Act and can go forward. Residential and commercial evictions can proceed if there are allegations of “criminal activity” or “lease violations” that “may impact the health or safety of other residents, health care workers, emergency personnel, persons lawfully on the subject property, or the general public.” Some evictions that fall within this description would likely qualify as an emergency matter and could be heard by a judge, usually remotely, before the courts reopen to the public. A commercial eviction can also proceed in court if the lease term expired or the tenant defaulted under the lease before the governor declared the COVID-19 state of emergency. However, the orders currently in place in each trial court reducing operations may limit the relief available. By contrast, if a commercial tenancy ends or a commercial lease is breached after the state of emergency declaration on March 10, 2020, the tenancy continues even if the lease does not contemplate that circumstance.

Certain commercial tenants are not protected under the Act. Businesses are excluded if “the tenant or a party that controls, is controlled by or is in common control with the tenant: (i) operates multistate; (ii) operates multinationally; (iii) is publicly traded; or (iv) has not less than 150 full-time equivalent employees.” What it means to “operate” multistate or multinationally is unclear and could have significant implications. It is possible that this simply means staffed offices in more than one state or nation. Business models vary widely, and which businesses are excluded due to the extent of their out-of-state operations could be a source of contention. While it is not entirely clear from the text of the Act, the Executive Office of Housing and Economic Development may be able to give regulatory guidance regarding this term.

The Act does not clearly define what constitutes a “commercial” use of property, but in the broadest sense it would simply mean nonresidential. Covered premises are “occupied by a tenant for commercial purposes, whether for profit or nonprofit.” This definition arguably includes any entity renting property for nonresidential purposes that are not excluded. While the language of the Act referring to a “business premises unit” appears to reference discrete building space, ground leases are not explicitly carved out.  By contrast, the residential tenancy protections extend only to a “residential dwelling unit,” a term that, while undefined, is somewhat self-explanatory.

The protections for all covered tenants are expansive, but residential tenants are given additional protections. Landlords of residential units cannot terminate a tenancy or even send a notice to quit. This rule does not apply to commercial tenants, which allows commercial landlords to send termination letters as needed. The distinction is helpful for commercial landlords who may need to terminate leases even if they can’t evict to avoid being tied to a tenant in bankruptcy.

For both commercial and residential tenants, courts cannot accept complaints that would lead to eviction, or enter default judgments in eviction cases. A court cannot issue an execution for possession of a covered property, nor can it deny a request to stay an execution or continue a summary process case. The deadlines in any existing eviction cases are tolled until the protections afforded by the Act end. A sheriff or constable can’t act on an execution for possession while the Act is in effect.

If the business or resident submits notice and documentation that rent payments were missed due to the impact of COVID-19, the landlord or owner cannot report rent nonpayment to a consumer reporting agency. The Act does allow landlords with residential leases that require advance payment of the last month’s rent to use those funds to cover mortgage payments, repairs, upkeep, and utilities. This can only be done if notice is given to the tenant, and the money used is still deemed the last month’s rent. The interest that would have been due remains an obligation of a landlord who chooses this option.

The protections for tenants initially run for 120 days from the passage of the Act or 45 days after the COVID-19 state of emergency is lifted, whichever is sooner. The governor can extend the protections for increments of up to 90 days, but not more than 45 days after the end of the state of emergency. Any deadlines in eviction cases, tolled by operation of the Act, will begin to run again when the protections are lifted.

The Executive Office of Housing and Economic Development will issue regulations regarding tenant protections, and will issue regulations and guidance regarding the landlord’s ability to use the last month’s rent. While the Act states that no one is relieved of their obligation to pay rent or restricted in their ability to collect rent, most of the leverage that landlords typically use is temporarily unavailable. The regulations may help explain what landlords can do to collect rent if they believe their tenants are refusing to pay without good cause.

Foreclosures

Foreclosure protections provided by the Act are limited to certain homeowners. Residential properties covered are only those defined in Massachusetts General Laws Chapter 244, Section 35B. This subset of residential properties must, among other things, be a dwelling house of no more than four units that is the principal residence of the owner. The property must not be vacant or abandoned.

The residential foreclosure protections flow to both passive and active homeowners who are not paying their mortgage. For the passive homeowner – one who simply stops paying without communicating any difficulty – a mortgage holder cannot:

• Cause notice of a foreclosure sale to be published [. . .]
• Exercise a power of sale
• Exercise a right of entry
• Initiate a judicial or nonjudicial foreclosure process; or
• File a complaint to determine the military status of a mortgagor under the federal Servicemembers Civil Relief Act

Nothing prevents a financial institution from reporting the nonpayment of a homeowner who does not try to negotiate new payment terms. The foreclosure protections expire 120 days after the passage of the Act or 45 days after the COVID-19 state of emergency is lifted, whichever is sooner. The governor can extend the protections for increments of up to 90 days, but not more than 45 days after the state of emergency ends.

Homeowners who reach out to their financial institutions fare better. If a covered homeowner submits a request for forbearance while the protections of the Act are in place, the “creditor or mortgagee shall grant a forbearance to a mortgagor of a mortgage loan [. . .] for not more than 180 days.” Information about the forbearance cannot be submitted to a consumer reporting agency, and no fees, penalties, or interest can accrue due to the loan forbearance. The mortgage payments that would have been made are added as a single payment at the end of the term unless the parties come to a different payment agreement. The Act does not set a minimum time frame for the forbearance. The Act explicitly allows financial institutions to work with covered homeowners on payment terms, but sets a floor for the negotiations. If forbearance is not requested before the protections of the Act are lifted, then the financial institution has no obligation to grant forbearance.

The Act does not relieve anyone of their obligation to pay a mortgage or otherwise limit the rights of a mortgage holder to try to collect payment. One benefit it provides to financial institutions (and homeowners facing financial hardship) is the use of real-time video or telephone conferences to conduct so-called reverse mortgage counseling.