Tag Archives: #commercialrealestate

A Gateway to Clean Energy on Cape Cod

Offshore Wind Projects Face Rising Challenges

Massachusetts law defines “Gateway mu­nicipalities” as those with populations be­tween 35,000 and 250,000, where median household incomes and percentages of resi­dents with bachelor’s degrees are below the state average.

House Speaker Ronald Mariano speaks to House colleagues and wind energy advocates as he tours the Block Island Wind Farm located about four miles off the coast of Block Island in 2021.

Many are former manufacturing centers that offer “gateways” to better lives for lower income and immigrant families. Al­though the resort town of Barnstable fits the demographic requirements of a gateway municipality, it lacks the typical industrial history and immigrant cultures.

But as offshore wind turbine projects take root in federal waters south of Mar­tha’s Vineyard, Barnstable is becoming the gateway for hundreds of megawatts of clean electrical energy.

Offshore wind energy is connected to the regional power grid through undersea ca­bles. Barnstable’s coastline along Nantucket Sound is well-suited for cable landing sites.

There are three offshore wind projects in various stages of development and permit­ting that need cable landing sites in Barnsta­ble – Vineyard Wind 1 with a landing site at Covell’s Beach, New England Wind 1 with a future landing site at Craigville Beach, and New England Wind 2 with a proposed land­ing site at Dowses Beach. Transmission lines will carry electricity to substations within Barnstable, then to the regional grid. Avangrid Renewables is behind these proj­ects.

Offshore wind projects require numerous federal, state and local permits. Federal law requires environmental reviews by the Bu­reau of Ocean Energy Management (BOEM), the U.S. Army Corp of Engineers (USACE) and the Environmental Protection Agency (EPA).

In Massachusetts, the Department of En­vironmental Protection conducts its own project reviews, and the Energy Facilities Siting Board (EFSB), Department of Trans­portation, Department of Public Utilities and other state agencies also scrutinize these projects. Energy infrastructure lying within the borders of cities and towns requires wet­lands orders of conditions and often zoning relief. Proponents are also expected to enter into host community agreements that pro­vide economic benefits to municipalities that accommodate energy infrastructure.

Agreement Governs Relationship with Town

Vineyard Wind 1 has secured all required permits, and construction is underway 15 miles south of Martha’s Vineyard. The cable landing at Covell’s Beach and related on­shore infrastructure is in place. The com­pleted project is expected to generate 800 megawatts of electricity – enough for 400,000 homes. Damage to a turbine blade recently caused fiberglass shards to wash up on Cape and Islands beaches, delaying offshore construction, but there is optimism that this project will reach its full potential.

During the permitting process, Vineyard Wind 1 entered into a host community agreement (HCA) with Barnstable, provid­ing assurances that the project will not harm the town’s public water supply. Per­haps more importantly, the HCA requires Vineyard Wind 1 to make payments to the town of up to $16 million, spread out over a 25-year period, in addition to ad valorem tax payments. In exchange, the town must support the project’s local permitting appli­cations.

New England Wind 1 and 2 are going through separate permitting processes. To­gether they should generate 2,000 mega­watts of electricity when complete. Both projects received BOEM approvals last year.

New England Wind 1 is further along in obtaining permits. It already has permits from the USACE and EPA. For state per­mits, New England Wind 1 has approval from the EFSB, and its environmental im­pact statement has been accepted, allowing the project to proceed with state permitting. The project proponent entered into an HCA with Barnstable in 2022, offering the town similar financial incentives to those offered to Vineyard Wind 1. New England Wind 1 construction is expected to begin this year.

Uncertain Financial Prospects for Industry

New England Wind 2’s future is less cer­tain. This project suffered a setback last Oc­tober, when the Barnstable Town Council voted to oppose the cable landing site at Dowses Beach. The non-binding vote leaves open the possibility of town council support for a different landing site in Barnstable. Perhaps another HCA with generous finan­cial incentives can sweeten the pot enough to appease this opposition. Meanwhile, Avangrid Renewables continues to pursue state permits for New England Wind 2.

Offshore wind turbines projects have their challenges. Construction has stalled or halted on some projects, because of in­creased interest rates and costs, and supply chain difficulties. The newly-installed Trump administration is less supportive of clean energy projects than its predecessor, creating insecurity for an industry that re­lies heavily on government subsidies and tax credits, as well as offshore leases in fed­eral waters.

Nevertheless, Vineyard Wind is now par­tially up and running, and New England Wind 1 seems likely to proceed. Although New England Wind 2 remains on the draw­ing board, Barnstable already plays an im­portant role in meeting clean energy goals.

Download the article as seen in Banker & Tradesman on January 27, 2025. Learn more about Christopher R. Vaccaro.

‘Affordable Housing’ Has a Special Meaning in Massachusetts

State Regulations Set Definitions for Housing Category

Trinity Financial is proposing 700 apartments and condominiums in Charlestown, including 407 income-restricted units, on Austin Street parking lots offered by the city of Boston for a mixed-income development

 Massachusetts residents are familiar with entreaties for production of more “affordable housing” from well-meaning government leaders and housing advocates.

The commonwealth does indeed suffer from a shortage of reasonably priced dwelling units, but before joining the chorus of promoters of “affordable housing,” one might want to consider the meaning of that term, and the consequences of affordable housing initiatives.

The state Executive Office of Housing and Livable Communities (EOHLC) plays a major role in housing development and affordable housing programs. It is responsible for administering local housing authorities and overseeing state-aided housing projects, urban renewal regulations, housing voucher programs, low-income housing tax credits, smart growth zoning and comprehensive permits for affordable housing projects. It also determines whether municipalities are in compliance with the MBTA Communities law.

EOHLC regulations define “affordable housing” as “homeownership or rental housing which is restricted to occupancy by low- or moderate-income households and for which the sales prices or rents are affordable to such households.”  The regulations define “low- or moderate-income households” as those “with gross income at or less than 80 percent of area median household income as most recently determined by the U.S. Department of Housing and Urban Development (HUD) adjusted for household size.”

Housing production is the core of EOHLC’s mission.

Area median household income varies throughout Massachusetts, but it is generally in the vicinity of $100,000 per year. These definitions are essential to EOHLC’s affordable housing programs.

The city of Boston and many other municipalities have their own affordable housing requirements baked into their zoning ordinances and bylaws. Boston’s zoning mandate, known as “Inclusionary Zoning,” is particularly aggressive.

It requires new housing projects with seven or more dwelling units, to set aside up to 20 percent of units as income-re-stricted: 17 percent deed-restricted and another 3 percent set aside for holders of state or federal housing subsidy vouchers.

The Mayor’s Office of Housing (MOH) oversees compliance with Boston’s Inclusionary Zoning ordinance.

Boston Sets Minimum Requirement

In order for affordable housing programs to meet their goals, government agencies, such as EOHLC, MOH and local housing boards, must limit housing prices and rents on affordable units, and determine income eligibility of buyers and renters of those units. These monitoring agencies also must ensure that when affordable units are resold or relet, the household incomes of new occupants do not exceed eligibility limits.

These responsibilities require a lot of effort not only from monitoring agencies, but also from developers, landlords and property managers of affordable units.

To set pricing of affordable units and see that affordable units are only owned by or rented to income-eligible households, developers must accept deed restrictions under affordable housing agreements. These pricing and occupancy restrictions generally last for decades.

Developers intending to sell affordable units to homebuyers are expected to assemble and submit to monitoring agencies marketing plans directed at income-eligible buyers. Developers are sometimes required to give preferences to first-time home buyers, local residents or artists.
The deed restrictions limit resale prices on affordable units, to prevent owners from enjoying profits from a resale, and to verify that buyers meet income eligibility limits. Monitoring agencies must certify that resales meet these requirements.

Challenges in Upkeep and Monitoring

Similar restrictions apply to affordable rental units. Developers must present marketing plans acceptable to monitoring agencies, with limitations on rents and tenant incomes.

Affordable housing restrictions present interesting challenges.

For example, when properties inevitably require capital improvements or replacements, owners need the ability to recover their expenditures. Restrictions on resale prices and rents must be loosened to accommodate these expenditures, which owners of affordable units must verify with monitoring agencies.

Also, affordability restrictions on rental properties should be tailored to address increases to occupants’ income levels. Individuals who have low or moderate incomes when they first join the workforce often enjoy significant pay increases as they acquire skills, experience and responsibilities. Monitoring agencies should have mechanisms to prevent “over-income” households from enjoying the benefits of affordability restrictions intended for lower-income households.

Keeping track of tenant income, and moving over-income households out of affordable units to make room for income eligible households, can be difficult for monitoring agencies.

Affordable housing in Massachusetts has come to mean not inexpensive housing, but instead price-controlled housing set aside for lower-income individuals with associated governmental oversight. Imposing affordable housing requirements on developers might be good public policy, if combined with financial incentives that encourage production of more market-rate housing for the general public.

But, if local governments use overly restrictive zoning limitations to force developers to build affordable housing, and their restrictions result in less overall housing production, then it’s time to reevaluate those limitations.

Download the article as seen in Banker & Tradesman on December 30, 2024. Learn more about Christopher R. Vaccaro.

The Legal Changes CRE Executives Need to Know in 2025

Change Ripples from D.C. and Beacon Hill

By Christopher R. Vaccaro
Special to Banker & Tradesman

 The Greek philosopher Heraclitus stated centuries ago that change is the only constant in life. A few things expected to bring change to the Massachusetts real estate industry in 2025 are discussed below.

The MBTA Communities Act

The MBTA Communities Act requires 177 Massachusetts cities and towns with access to MBTA service, to create at least one zoning district where multifamily housing is permitted as of right. The Executive Office of Housing and Livable Communities’ guidelines set minimum multi-family unit capacities for these MBTA communities. EOHLC issues determinations of compliance to communities that meet its guidelines.

By January, another 130 Massachusetts cities and towns are required to add multifamily zoning districts, expanding development opportunities.

Most MBTA communities have achieved full or interim compliance with EOHLC guidelines, but not the town of Milton. The guidelines require Milton to establish a 50- acre zoning district accommodating at least 2,461 multi-family housing units. Milton’s town government tried to comply, but local opposition thwarted its efforts. The opposition organized a referendum, and Milton’s voters rejected the zoning change.

Attorney General Andrea Campbell promptly sued Milton in the Supreme Judicial Court, seeking an injunction requiring Milton to adopt a compliant zoning amendment.

The attorney general’s suit relies on provisions of the Zoning Act that give courts jurisdiction to enjoin zoning violations. Courts typically use this power against property owners who disregard zoning limitations on building dimensions or uses. The attorney general’s lawsuit to force a municipality to adopt a specific zoning bylaw is an unusual use of the Zoning Act.

The SJC heard arguments on this case in October. It is expected to issue a decision early next year. The real estate community and housing advocacy groups are standing by.

The Affordable Homes Act, enacted last August, includes numerous spending and housing production policies, many of which will take years to deliver results. But one component of the AHA is likely to have a meaningful impact soon.

Affordable Homes Act

The AHA requires that local zoning laws allow at least one accessory dwelling unit (ADU) as-of-right in single-family zoning districts throughout Massachusetts (but not in Boston).

Municipalities cannot require owner occupancy of either ADUs or principal dwellings. The size of an ADU is limited to the lesser of one-half the gross floor area of the principal dwelling or 900 square feet. Reasonable regulations for site plan review, building dimensions and short-term rentals are allowed.

This simple zoning law change has excellent potential to add badly needed dwelling units in Massachusetts.

Offshore Wind Turbine Projects

Massachusetts is expected to be a major staging area for offshore wind turbine projects in federal waters south of Martha’s Vineyards. Vineyard Wind is already under construction, promising to generate clean energy for over 400,000 homes and businesses.

However, Avangrid’s Commonwealth Wind project stalled. That project was expected to generate enough clean energy for over 700,000 homes.

Avangrid originally entered into long-term power purchase agreements (PPAs) with several utility companies at set prices. Later, it sought to undo the PPAs, claiming that the project was now uneconomic because of inflation, higher interest rates, supply chain problems and other disruptions.

The Department of Public Utilities approved the PPAs over Avangrid’s objections, whereupon Avangrid withdrew from the project.

Another clean energy firm may build this project, but President-elect Donald Trump is no proponent of offshore wind turbines, which depend on leases and other financial incentives from the federal government. The growth of this industry in Massachusetts is at risk.

The End of Chevron Deference

Chevron deference is a legal doctrine that gave federal agencies broad latitude to interpret enabling legislation and promulgate regulations.

The U.S. Supreme Court formulated this doctrine four decades ago in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. In that case, the EPA issued new air pollution regulations that eased permit requirements for polluting industries that modify their plants.

The Supreme Court ruled against an environmental watchdog group that challenged the EPA, holding that when Congress implicitly delegates authority to an agency, courts cannot substitute their own construction of the enabling legislation for the reasonable interpretation of the agency’s administrator.

Last June, the Supreme Court overruled Chevron in Loper Bright Enterprises v. Raimondo. Owners of fishing vessels had challenged a National Marine Fisheries Service’s regulation requiring the fishing industry to pay for on-board observers enforcing the service’s fishery management plan.

Courts now must exercise independent judgment in deciding whether an agency acted within its statutory authority. They cannot readily defer to agency interpretations of ambiguous statutes.

Loper gives federal courts more scrutiny over federal agencies’ actions, which is expected to increase litigation involving those actions.

Download the article as seen in Banker & Tradesman on October 28th, 2024. Learn more about Christopher R. Vaccaro.

Historic Tax Credits Sweeten the Pot for Developers

Historic Tax Credits Sweeten the Pot for Developers

By Christopher R. Vaccaro
Special to Banker & Tradesman

Developers looking to reposition historic properties have a double advantage in Massachusetts – federal and state income tax credits based on qualifying historic rehabilitation costs.

The federal historic rehabilitation tax credit program is administered through the Internal Revenue Service and the National Park Service. The credit amounts to 20 percent of “qualified rehabilitation expenditures” on a “qualified rehabilitated building,” as determined by the National Park Service.

The credit is available for substantial rehabilitations of “certified historic structures,” which are buildings listed in the National Register of Historic Places or certified by the National Park Service as contributing to the significance of a registered historic district. In general, a building is considered “substantially rehabilitated” if, during a 24-month measuring period, the qualified rehabilitation expenditures exceed the greater of the adjusted basis of the building and its structural components, or $5,000. The U.S. Department of the Interior publishes detailed standards and guidelines governing rehabilitations that qualify for the tax credit.

State and federal historic tax credits generated $13.5 million in equity toward the first phase of the Eagle Mill
redevelopment in Lee which began construction this spring. Rees-Larkin Development and Berkshire Housing
Development Corp. are creating 56 affordable apartments in the complex, which operated as a paper mill from
1808 to 2008.

The federal credit is only available for capital expenditures on existing depreciable buildings that are income-producing. It is not available for personal residences. The federal credit is unavailable for acquisition costs, newly constructed buildings, and enlargements or additions to buildings, but it is available for qualified expenditures that increase floor area through interior remodeling. The federal credit cannot be claimed for landscaping, sidewalks, or parking lots. Unlike the Massachusetts historic rehabilitation tax credit discussed below, the federal credit generally is not transferable.

Before 2018, the entire 20-percent federal tax credit could be taken in a lump sum, but now it must be spread out over a 5-year period. The federal rehabilitation credit is one of the general business credits that taxpayers can claim against income tax. As such, if the available credit exceeds income taxes owed in a given year, taxpayers generally can carry back for one year and carry forward for up to 20 years the unused portions of the federal tax credit.

AHA Expands State Investment

The Massachusetts historic rehabilitation tax credit is available through the Massachusetts Historical Commission. The historic rehabilitation tax credit can offset state income taxes for up to 20 percent of a developer’s qualified expenditures to rehabilitate an historic building. Qualified buildings are those listed with the National Register of Historic Places or deemed eligible by the MHC for such listing. Qualifying projects must be certified by the MHC. The credit is earned when the completed project is placed in service.

This state tax incentive program originally was only in effect from 2005 through 2009, with a limit of $10 million in annual tax credits. The program became popular with developers and the state legislature, which amended the statute a few times. The annual limit was soon increased to $15 million, then to $50 million in 2006, and eventually to $55 million in 2018. The sunset provision of the program was steadily extended beyond 2009 to 2027.

Gov. Maura Healey’s Affordable Homes Act, enacted in August, significantly increased the commonwealth’s financial commitment to this tax incentive program, doubling the annual limit on the tax credit from $55 million to $110 million, and extending its expiration date to 2030. Because of the annual limit on the Massachusetts credit, investors must go through an approval process to qualify, and the MHC has discretion when allocating the available credit.

In making this allocation, state regulations require MHC to consider several enumerated factors, such as whether the project will create affordable housing, the historical significance of the building being rehabilitated, the availability of other beneficial funding sources to the taxpayer and the overall economic effect of the project on the surrounding community.

Similar to the federal tax credit, the Massachusetts credit is not available for personal residences, or for acquisition costs. But unlike the federal historic tax credit, taxpayers who qualify for the Massachusetts tax credit can transfer the credit to a different taxpayer without transferring the qualified historic structure itself. This is particularly useful for developers whose taxable income is less than the amount of the credit. Taxpayers can only carry forward unused credits for only up to five years, but taxpayers’ ability to transfer tax credits enables those who cannot utilize the full credit, to realize a financial benefit by selling the unused credit to a taxpayer who can use it.

Historic rehabilitation tax credits are attractive for those committed to preserving historic buildings, but taxpayers must use them with caution. There are numerous complexities that cannot be fully explained in a short column. Consultation with tax professionals is advised.

Download the article as seen in Banker & Tradesman on October 28th, 2024. Learn more about Christopher R. Vaccaro.

Serving Up a Smorgasbord of Housing Incentives

Serving Up a Smorgasbord of Housing Incentives

By Christopher R. Vaccaro
Special to Banker & Tradesman

How much new and rehabilitated housing can $5.16 billion buy? We will find out over the next five years when the results of the new Massachusetts Affordable Homes Act (AHA) become evident.

Enacted in August, the AHA offers a smorgasbord of spending and housing production policies. About $2.5 billion will be made available to the Executive Office of Housing and Livable Communities (EOHLC) for a wide range of initiatives related to housing, including programs supporting disabled individuals, capitalization of the Affordable Housing Trust Fund, climate change mitigation, and funding for low-income housing and innovative developments.

The AHA will provide $2 billion to upgrade thousands of state-aided public housing units across the Commonwealth. Another $426 million will be distributed among local housing authorities to promote, create, and renovate affordable housing. The state treasurer is authorized to issue up to $5.16 billion in bonds to pay for these programs.

Gov. Maura Healey, Lt. Gov. Kim Driscoll and Secretary of Housing and Livable Communities Secretary Ed Augustus during a press scrum following Healey’s signing of the Affordable Homes Act on Aug. 6, 2024.

New tax credits will encourage the construction of affordable dwelling units for first-time homebuyers with moderate incomes and conversions of commercial properties into mixed-use projects. Existing tax credits for community investment corporations and for historic rehabilitation projects are expanded.

The AHA requires EOHLC to use resources wisely. EOHLC may not spend more than 2 percent of authorized funding on administrative costs. It must promulgate guidance and regulations for its programs and then report its progress to the legislature within 18 months. EOHLC is also charged with delivering comprehensive housing plans every five years, covering supply and demand data, affordability challenges, and needs by region, as well as local zoning responses to housing needs. The Legislature and the governor’s office will have the ability to hold EOHLC accountable under the AHA.

A Roadmap for Regulatory Reform

The AHA makes noteworthy changes to the Massachusetts Zoning Act, which governs local zoning laws in every municipality except Boston.

At least one accessory dwelling unit (ADU) will be allowed as of right in single-family zoning districts throughout Massachusetts (but not in Boston), subject to reasonable regulations for site plan review and building dimensions, and restrictions on short-term rentals. Municipalities cannot require owner occupancy of either ADUs or principal dwellings. They can require one additional parking space for each ADU but not for ADUs located near MBTA stations.

In addition, the AHA amends the Zoning Act to restrict the merger doctrine applicable to undersized lots. Massachusetts courts invoked this doctrine to “merge” contiguous nonconforming lots that would otherwise be buildable lots if separately owned when such lots come under common ownership.

The merger doctrine rendered such lots non-buildable. Now, adjacent lots under common ownership cannot be treated as a single lot under local zoning, if the lots met existing dimensional requirements when established under a subdivision plan, have at least 10,000 square feet of area and 75 feet of frontage, and are located in a zoning district that allows single-family residences.

This amendment will enable home construction on these nonconforming lots. However, single-family homes built on such lots cannot exceed 1,850 square feet of heated living area, must contain at least three bedrooms, and cannot be used as seasonal homes or short-term rentals.

Abutters Discouraged

Other changes to the Zoning Act are intended to discourage abutters from filing court appeals against developers to delay or block projects.

Those appeals create significant and unpredictable financial problems for developers and often prevent worthy projects from coming to fruition. Such abutters now must sufficiently allege and plausibly demonstrate, using credible evidence, that specific measurable injury to a private legal interest will likely flow from the zoning decision. This requirement is likely to result in more dismissals of abutters’ appeals.

Also, the maximum amount of appeal bonds that courts may require from abutters was increased from $50,000 to $250,000. Appeal bonds are intended to indemnify and reimburse developers for damages and increased expenses if the court finds that the harm to the developer or the public interest caused by the appeal outweighs the financial burden on the abutter.

Courts may require a bond without determining that abutters are acting in bad faith or with malice. Courts may also assess a developer’s reasonable attorneys’ fees against abutters if they find that abutters acted in bad faith or with malice in making the appeal.

The AHA approaches the Massachusetts housing shortage from many different directions. But in the end, there is only one metric that matters when determining whether the AHA is successful – how many dwelling units are created or rehabilitated in Massachusetts over the next five years. That metric should be easy to determine.

Download the article as seen in Banker & Tradesman on September 30th, 2024. Learn more about Christopher R. Vaccaro.

Restaurant Claims Harvard Project Led to Demise

Restaurant Claims Harvard Project Led to Demise

By Christopher R. Vaccaro
Special to Banker & Tradesman

Classic Restaurant Concepts LLC had high hopes when it started building out what was intended to be a destination restaurant in Harvard Square in early 2016. Unfortunately, those hopes were dashed when its landlord, Harvard University, began renovations for its nearby Smith Campus Center.

Harvard disclosed the renovation project to Classic Restaurants Concepts before Classic committed to the lease. But soon after the renovation began, Harvard’s contractor, Consigli Construction Co., closed Holyoke Street to vehicular traffic and restricted pedestrian access. Consigli informed Harvard that it expected the closure to continue until August 2018.

Although Harvard had advised Classic of the renovation project in advance, it had not warned Classic about the street closure. After the closure occurred in early 2016, Harvard assured Classic that the street would reopen before school started that fall, when Classic planned to open its restaurant.

A court allowed Classic Restaurant Concepts to pursue claims against Harvard University for a construction project
at the Smith Campus Center (background, left) that allegedly contributed to the failure of the En Boca restaurant.

Classic spent about $470,000 in pre-opening expenses, mostly on hiring and training staff, managers and chefs. The En Boca restaurant opened that fall, but quickly failed. Classic ceased operations in June of 2017, after paying Harvard only two months’ rent. Holyoke Street remained closed until 2018, as Consigli had predicted.

Classic blamed the street closure for the restaurant failure, and sued Harvard in Superior Court for fraud, negligent misrepresentation, nuisance, breach of the implied covenant of good faith and fair dealing, breach of the covenant of quiet enjoyment of its leased premises, unfair and deceptive trade practices in violation of Massachusetts General Laws Chapter 93A and a declaratory judgment that it owed no rent to Harvard under its lease. Harvard counter-claimed against Classic for lost rent.

Harvard filed a motion for summary judgment, seeking a Superior Court disposition of the lawsuit in its favor without a trial. The Superior Court accepted Harvard’s arguments, dismissed all of Classic’s claims and entered judgment for Harvard on its counterclaim for lost rent of $1.4 million plus $300,000 in costs and attorneys’ fees. Classic appealed most of this judgment, but not the dismissal of its negligent misrepresentation and nuisance claims.

Fraud Claim Not Substantiated

Because the Superior Court had ruled for Harvard on summary judgment without a trial, the Appeals Court was required to draw all reasonable inferences from the evidence brought before the Superior Court in favor of Classic. The Appeals Court had to determine whether Harvard showed that there was no genuine factual dispute between the parties, and that Harvard was entitled to judgment as a matter of law.

The Appeals Court agreed with the dismissal of Classic’s fraud claim, noting that Classic offered no evidence that Harvard knew, before Classic signed the lease, the extent to which Holyoke Street would be closed.

However, the Appeals Court ruled that genuine issues of material fact existed on all of Classic’s remaining claims against Harvard.

The court first considered Classic’s claim that Harvard breached the implied covenant of good faith and fair dealing. Massachusetts courts read that covenant into all leases and contracts. The implied covenant protects each party’s contractual expectations from being defeated by inconsistent acts by the other party.

The court found that the closure of Holyoke Street could reasonably be expected to impair Classic’s restaurant operations, thus defeating the purpose of Classic’s lease. According to the court, there was evidence that Harvard breached the implied covenant when its contractor closed Holyoke Street.

Restaurant Gets Second Try

The court also noted that the street closure blocked vehicles and restricted pedestrian access to Classic’s restaurant. This amounted to evidence that Harvard breached its covenant of quiet enjoyment in the lease, under which landlords cannot interfere with tenants’ use and enjoyment of their leased premises.

As to Classic’s Chapter 93A claim, the court ruled that Harvard’s understatement
of the length of time for the street closure, despite the information provided by Consigli, was evidence that Harvard may have violated that statute. Finally, the court found evidence that the street closure may have amounted to a constructive eviction of Classic, absolving Classic of its obligation to pay Harvard rent.

The Appeals Court upheld the Superior Court’s dismissal of Classic’s claims for fraud, misrepresentation and nuisance, but vacated the dismissal of Classic’s claims for breach of the implied covenant of good faith and fair dealing, breach of the covenant of quiet enjoyment, violation of Chapter 93A and the judgment awarding Harvard lost rent plus costs and attorneys’ fees.

Classic’s appeal succeeded, but this case is far from over. Classic still must prove sufficient facts in Superior Court to prevail on its claims against Harvard and defeat Harvard’s counterclaim for lost rent.

Download the article as seen in Banker & Tradesman on August 26, 2024. Learn more about Christopher R. Vaccaro.

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