EOHLC Guidelines offer a Roadmap to Compliance
By Christopher R. Vaccaro
Special to Banker & Tradesman

A 2021 amendment to the Massachu­setts Zoning Act requires “MBTA com­munities” to establish zoning districts that facilitate multifamily housing development.

The amendment de­fines MBTA communities, in effect, as cities and towns that have commuter rail, subway, ferry or bus stations, or are adjacent to cit­ies and towns having those services. There are 177 MBTA communities in eastern Mas­sachusetts. Boston is excluded because its zoning code is authorized under a separate enabling act.

MBTA communities must create at least one zoning district “of reasonable size” where multifamily housing is “permitted as of right.” Districts must be located within a half-mile of transit stations and allow a min­imum gross density of 15 dwelling units per acre. The amendment has ambiguities. For example, what is a zoning district “of rea­sonable size,” and what does it mean for a project to be “permitted as of right”? Where are MBTA communities without public tran­sit stations expected to locate multifamily housing districts? When must MBTA com­munities comply with the statute?

The Executive Office of Housing and Liv­able Communities (EOHLC) promulgated guidelines last August addressing these is­sues. EOHLC is a cabinet-level secretariat created in 2023 to improve housing options in Massachusetts. Its guidelines recognize four classes of MBTA communities: rapid transit communities, commuter rail commu­nities, adjacent communities (cities and larger towns without nearby transit sta­tions) and adjacent small towns. Different requirements apply to each class.

A Direct Path to Approval

For multifamily housing to be allowed “as of right,” zoning districts must permit multifamily housing construction without variances, special permits or similar discre­tionary zoning relief. But communities can condition permitting on site plan reviews, if the review process does not impose unrea­sonable delays or conditions. Communities can also place limited affordable unit re­quirements on projects.

The guidelines regarding the “reasonable size” of multifamily districts are compli­cated. “Reasonableness” depends on both the acreage of the district and the district’s “multifamily unit capacity,” which is the po­tential number of multifamily housing units that are developable as of right in the dis­trict. For communities other than adjacent small towns, reasonably sized districts gen­erally must have at least 50 acres or 1.5 per­cent of the developable land in the MBTA community, whichever is less. There is no minimum area for adjacent small towns. Communities lacking transit stations should locate their districts near access to transit stations, or near downtown areas.

When determining the reasonable multi­family unit capacity for individual commu­nities, EOHLC assigns a percentage to the community, depending on its class. The per­centage is 25 percent for rapid transit com­munities, 15 percent for commuter rail com­munities, 10 percent for adjacent communities and 5 percent for adjacent small towns. EOHLC then calculates the minimum multifamily housing for each community based on whichever is greater: the number of housing units in the MBTA community, times the applicable percent­age; or the minimum land area for the multi­family district, times 15 units per acre.

However, minimum multifamily unit ca­pacity cannot exceed 25 percent of total housing in each community. The guidelines make special allowances for mixed-use de­velopment zoning districts. EOHLC has es­tablished minimum multifamily unit capaci­ties for every MBTA community, which is available online on the agency’s website.

State Grants Contingent on Compliance

EOHLC will issue determinations of com­pliance to communities that satisfy its guide­lines. These will be important to communi­ties seeking various forms of state funding and discretionary grants. MBTA communi­ties should also consider the statement is­sued last spring by the Massachusetts attor­ney general, warning that noncompliant communities risk liability under federal and state fair housing laws. EOHLC’s guidelines do not require communities to produce housing units, or meet a housing production target, to comply with the guidelines. Com­munities only need to show that their zoning allows multifamily housing as of right and that sufficient units can be added, even if such addition is unlikely.

EOHLC anticipates that all MBTA com­munities will adopt conforming zoning amendments and seek EOHLC determina­tions of compliance in the near future. The deadline for communities to submit applica­tions to EOHLC for determinations of com­pliance is Dec. 31 of this year for rapid tran­sit communities, Dec. 31, 2024 for commuter rail and adjacent communities and Dec. 31, 2025 for adjacent small towns.

Arlington, Brookline and Lexington are among several municipalities that recently changed their zoning laws to comply with the guidelines. Other MBTA communities are expected to follow over the next several months, creating opportunities for develop­ers to increase multifamily housing inven­tory in Massachusetts. The question re­mains as to how developers will finance projects, in a lending climate with high in­terest rates and reluctant bankers.

Download the article as seen in  Banker & Tradesman on June 26, 2023. Learn more about Christopher R. Vaccaro.

Court Backs Acceleration Clauses
By Christopher R. Vaccaro
Special to Banker & Tradesman

The Massachusetts Supreme Judicial Court overruled the Appeals Court in Cummings Properties, LLC v. Hines last Sep­tember, and upheld the validity of a rent accel­eration clause in a com­mercial lease.

Rent acceleration clauses allow landlords to demand that evicted tenants immediately pay as liquidated damages all remaining un­paid rent through the end of the lease term, even if the lease term expires years after the tenant’s default. The defaulting tenant’s lia­bility is not offset by the rental value of the vacated premises or by rents paid by re­placement tenants.

Many landlords refrain from adding these clauses in their leases, and sophisticated tenants generally refuse to accept them. However, Cummings Properties, which often rents to smaller tenants, includes rent acceleration clauses in its standard lease form. Cummings is not shy about enforcing the clause against defaulting tenants, as Darryl Hines recently learned.

Hines founded Massachusetts Consta­ble’s Office Inc. (MCO), a civil process ser­vice firm that earned a reputation for using questionable tactics to serve process and make arrests. In 2016, MCO secured a con­tract with the Massachusetts Department of Revenue, and signed a five-year lease with Cummings for space in Woburn. Hines per­sonally guarantied the lease, which in­cluded a rent acceleration clause.

Less than a month into the lease, the De­partment of Revenue suspended its contract with MCO, and MCO defaulted on the lease. Cummings evicted MCO, and a year later signed a four-year lease with a new tenant for the space formerly occupied by MCO.

$69K Judgement

Despite securing the replacement tenant, Cummings sued Hines under the lease guar­anty for the entire accelerated rent through the end of the five-year term of MCO’s ter­minated lease. A Superior Court judge up­held the rent acceleration clause, and found that Hines had sufficient sophistication to understand the consequences of his per­sonal guaranty. It entered judgment against Hines for $69,000, the balance of the accel­erated rent owed after deducting prior pay­ments made by MCO.

The Appeals Court reversed that judgment. It noted that rent acceleration clauses may be enforceable as liquidated damages provisions if they are not punitive. In the case of Cum­mings’s lease, the acceleration clause al­lowed Cummings to evict the tenant, relet the premises to a new tenant, collect rent from that tenant, and still claim accelerated rent from MCO without deducting rent received from the new tenant. The Appeals Court ruled that the clause bore no reasonable rela­tionship to Cummings’s expected damages, rendering it an unenforceable penalty.

The Supreme Judicial Court granted Cummings’s application for further appel­late review. The SJC first considered whether the rent acceleration clause was enforceable as a liquidated damages clause. The SJC noted that liquidated damages clauses are generally enforceable, if they are not so disproportionate to anticipated damages that they constitute a penalty.

When Massachusetts courts consider whether to enforce liquidated damages clauses, they analyze the circumstances at the time the contract was entered into, with­out considering other circumstances that may arise later by the time of the breach.

Court’s ‘Single Look’ Approach

Under this “single look” approach, rent acceleration clauses are enforceable if the actual damages from a breach were difficult to ascertain when the lease was signed, and the accelerated rent is a “reasonable fore­cast” of damages expected to result from a breach. Courts are not required to consider rents that landlords might collect from re­placement tenants after breaches occur.

The SJC noted that Hines had the burden of proving facts that would render the clause unenforceable, and that he failed to meet that burden. According to the SJC, Hines did not present evidence supporting his claim that Cummings’s anticipated damages upon de­fault were ascertainable when Hines signed his guaranty. Hines also failed to show that the rent acceleration clause was an unrea­sonable forecast of the damages that Cum­mings might sustain if MCO breached the lease. The SJC found that the rent accelera­tion clause was not an unenforceable penalty.

The SJC also rejected Hines’s argument that he should be relieved from the burdens of the rent acceleration clause because he was not a sophisticated party. The SJC noted that Hines’s level of sophistication was a question of fact, not law, which the superior court properly determined based on Hines’s business experience. Therefore, the rent acceleration clause was enforce­able against Hines. The SJC affirmed the su­perior court’s $69,000 judgment against him.

The SJC’s decision may encourage other commercial landlords to add rent accelera­tion clauses to their leases. Tenants should be on the lookout for these clauses, and should be wary about entering into leases with landlords who utilize them.

Download the article as seen in  Banker & Tradesman on June 26, 2023. Learn more about Christopher R. Vaccaro.

Lighthouse Property Tax fight Settled Against Hull
By Christopher R. Vaccaro
Special to Banker & Tradesman

Graves Ledge is a 10-acre rock formation at the edge of Boston Har­bor, miles from the mainland. A lighthouse there has guided ships entering Boston Har­bor since 1905. The United States owned and operated Graves Ledge and the lighthouse until it sold them to David Waller in 2013 for almost $1 mil­lion.

Waller acquired ownership of Graves Ledge and the lighthouse through a limited liability company, and recorded a deed with the Suffolk County Registry of Deeds. The deed describes Graves Ledge as “the outermost island in the Boston Harbor Na­tional Recreation Area, in Suffolk County, Massachusetts Bay.” The U.S. Coast Guard reserved the right to operate navigational aids on Graves Ledge, and the deed re­quires the new owner to preserve historic buildings. Waller is currently renovating the lighthouse and related structures.

After the purchase, Waller received a real estate tax bill from the Town of Hull, located in Plymouth County. Waller con­tested Hull’s jurisdiction in the land court. The court offered the municipalities of Boston, Winthrop and Nahant opportuni­ties to assert jurisdiction over Graves Ledge, but they hastily renounced any claim to it, probably hoping to avoid re­sponsibility for providing municipal ser­vices to the remote ledge. Last month, after a trial involving scores of documents and expert testimony from surveyors, the court ruled that Graves Ledge lies outside of Hull’s municipal boundaries.

Early Colonial Records Consulted

The land court’s decision relied on his­torical records for the Boston Harbor Is­lands and Hull. In 1641, the Massachusetts  Bay Colony established a fishing commu­nity known as “Nantascot” on the penin­sula and neighboring islands today known as Hull. The town was originally part of Suffolk County. Colonial records show that the Brewster Islands, a small archipelago north of Hull’s peninsula, had been awarded to Hull by 1662. Seventeenth cen­tury maps of Boston Harbor show the Brewster Islands as enclosed shapes, and Graves Ledge as a series of x’s northeast of the Brewster Islands.

Hull was annexed to Plymouth County in 1803. Decades later, the Massachusetts leg­islature created a commission to determine the seaward boundaries of coastal munici­palities. The commission issued a report in 1884 setting the marine boundaries of towns in Norfolk and Plymouth Counties, and showed Graves Ledge and the Brews­ter Islands outside of Hull’s boundaries.

What Counts as an Island?

In 1892, the Massachusetts Supreme Ju­dicial Court considered Hull’s marine boundary and the 1884 report in Russ v. Boston, where the city of Boston attempted to assess taxes on one of the Brewster Is­lands. The SJC ruled that although the re­port concluded that the island was located north of Hull’s marine boundary, the island itself remained part of Hull because of the seventeenth century colonial grant.

During the 20th century, numerous maps and documents were produced by private parties and government agencies regarding coastal municipalities near Boston Harbor. Many of these showed Graves Ledge within Plymouth County, but some showed it in Suffolk County. Because of these inconsis­tencies, the court focused on the seven­teenth century colonial grants involving the Brewster Islands.

The court observed that colonial maps and later maps labeled Graves Ledge sepa­rately from the Brewster Islands, and that no documents from colonial times in­cluded Graves Ledge in the Brewster Is­lands. The court cited Hull’s own records, which only mentioned four islands among the Brewster Islands, none of which was Graves Ledge. These records also de­scribed a “meadow” located on the north­ernmost Brewster Island. There are no meadows on rocky and barren Graves Ledge, which lies well north of the vege­tated Brewster Islands.

The court noted that Graves Ledge ap­parently was not considered an island dur­ing colonial times. Early maps do not label Graves Ledge as an island, and show it as a series of X’s, while showing the Brewster Islands as enclosed shapes designated as islands. The court also discussed Graves Ledge’s remoteness from the Brewster Is­lands, its uninhabitability before the light­house was built, and its location beyond the traditional outer boundary of Boston Harber running between Nahant and the Hull peninsula. Given these findings, the court ruled that Graves Ledge was outside of Hull’s corporate boundaries.

As to Boston, Winthrop and Nahant re­nouncing claims to Graves Ledge, the court speculated on whether it is possible for land within the boundaries of Massachu­setts to be outside the boundaries of all cit­ies and towns. The court declined to an­swer that question, because its rejection of Hull’s claim to Graves Ledge disposed of the case at hand. If the question arises later, the city of Boston may end up as a re­luctant party to its resolution.

Download the article as seen in  Banker & Tradesman on June 26, 2023. Learn more about Christopher R. Vaccaro.