By: Michael Stanley
April 22, 2020
On April 20, 2020, Governor Baker signed House Bill 4647, “An Act Providing for a Moratorium on Evictions and Foreclosures during the COVID-19 Emergency” (the “Act”). As an emergency act, its provision became effective immediately. The eviction provisions discussed below expire either in 120 days or 30 days after state of emergency is lifted, while the residential foreclosure moratorium expires in 120 days or 45 days after state of emergency is lifted. In short, the Act provides much needed reprieve for residential tenants, and small businesses that would face eviction due to an inability to pay rent, and prevents mortgagees from initiating any type of residential foreclosure.
Tenancies & Evictions
First: The Act restricts property owners from conducting “non-essential evictions,” meaning evictions for failure to pay rent, to holdover occupants of foreclosed properties, or other no-fault evictions. Accordingly, a property owner may not send a notice to quit to a residential tenant or occupant demanding they vacate a property for these non-essential reasons. Notably, the Act preserves a property owner’s right to terminate a tenancy where there is criminal activity at the property or for health and safety reasons.
Second: The Act stops all summary process eviction cases against occupants of residential dwellings and “small business premises units.” Thus, courts may not: (1) accept summary process complaints; (2) enter judgment for a summary process plaintiff for possession; (3) for cases that have reached judgment, a court may not issue an execution for possession or deny a motion to stay an execution for possession; and (4) schedule any court event. Additionally, sheriffs may not levy upon any execution in their possession. Finally, the Act tolls all case-specific and statutory deadlines related to existing summary process actions.
Third: The Act attempts to provide landlords some relief by allowing them to tap into last-month’s rental deposit payments in advance. A property owner may use a tenant’s last month’s rent deposit to pay for “expenses,” including mortgage payments, utilities, repairs, and required upkeep. To utilize these funds, the landlord must notify the tenant in writing of its intention to use the last month rent, apply the money used as last month’s rent, and account for interest due to the tenant.
Fourth: The Act does not “relieve a tenant from the obligation to pay rent or restrict a landlord’s ability to recover rent.” It does, however, prevent property owner’s from taking remedial actions related to a tenant’s failure to pay. Landlords may not impose late fees or furnish payment information to consumer credit reporting agencies where a tenant’s failure to pay rent is due to the financial harm caused by COVID-19.
Residential Foreclosures & Loss Mitigation
First: The Act prevents mortgagees from initiating any type of foreclosure proceeding against occupied residential property as defined by G.L. c. 244, § 35B. Thus, a mortgagee cannot publish a notice of foreclosure sale, exercise the power of sale by conducting a foreclosure auction, foreclosure by entry, or file a judicial foreclosure complaint. And while the Land Court’s Standing Order 4-20 stated the Court would not process actions to determine the military status of a mortgagor under the federal Servicemembers Civil Relief Act, the Act prohibits a mortgagee from filing a complaint for this relief.
Second: The Act requires a mortgagor to grant a 180-day loan forbearance to owners of residential property. To obtain the forbearance, an owner must simply affirm that there has been a financial impact due to COVID-19 and must make the request prior to the expiration of the Act. The mortgagee may not impose any additional fees or interests or make any negative reporting to consumer credit reporting agencies during the forbearance. The payments subject to the forbearance must be added to the end of the loan terms, unless otherwise agreed by the mortgagee and mortgagor. Additionally, the Act does not relieve a mortgagor from the obligation to pay their mortgage or restrict the ability of a mortgagee from recovering missed payments.
Commercial Property Owners
Neither the residential foreclosure moratorium nor the required forbearance is available to commercial property owners. In other words, mortgagees may continue to foreclose on commercial properties and such creditors are not required to grant a loan forbearance. However, as discussed above, commercial property owners may not remove a nonpaying tenant from the property if such tenant qualifies for the protection of the Act (i.e., falls within the definition of “a small business premises unit”). This may create issues for commercial property owners that depend upon monthly rent payments to satisfy mortgage payments. In the event that a commercial property owner has a non-paying tenant that is protected by the Act, communication with its lender is crucial and a best practice to navigate the COVID-19 emergency. https://www.sheehan.com/news/the-importance-of-being-proactive-for-tenants-landlords-and-lenders/
 “Small business premises unit” is defines as:
premises occupied by a tenant for commercial purposes, whether for-profit or not-for-profit; provided, however, that a small business premises unit shall not include a premises occupied by a tenant if the tenant or a party that controls, is controlled by or is in common control with the tenant: (i) operates multi-state; (ii) operates multi-nationally; (iii) is publicly traded; or (iv) has not less than 150 full-time equivalent employees.
 G.L. c. 244, § 35B defines residential property as:
real property located in the commonwealth, on which there is a dwelling house with accommodations for 4 or fewer separate households and occupied, or to be occupied, in whole or in part by the obligor on the mortgage debt.
G.L. c. 244 § 35B exempts from this definition properties that are not the debtor’s principal residence, that are investments, or residential property taken as collateral for a commercial loan.
 As to the validity of this moratorium, during the Great Depression the Supreme Court held that a state’s law placing a foreclosure moratorium did not violate the Contract Clause of the Constitution, when enacted pursuant to the state’s police power for purposes of preventing harm to the state’s “economic interests.” Home Bldg. & Loan Asso. v. Blaisdell, 290 U.S. 398, 437 (1934). Massachusetts foreclosure moratorium, likely meets this criterion.
 This provision of the Act may be on less solid footing than the foreclosure moratorium. Court have found statutes that require loan modification to run afoul with the Contract Clause. See Wells Fargo Bank, N.A. v. Meyers, 108 A.D.3d 9 (N.Y. App. Div. 2d Dep’t 2013). Here, the Act does not require modification of the loan’s terms, but grants a forbearance for a limited period. Thus, there is an argument that the Act does not “substantially interfere” with the lender’s contractual rights. General Motors Corp v. Romein, 503 U.S. 181, 186 (1992) (There must be “‘substantial interference’ with the contract in order for it to be a violation of the Contract Clause.”).