Conducting Evictions After a Foreclosure Can be a Nightmare

David A. Marsocci, Esq.

Once a post-foreclosure eviction becomes strongly contested, clients will frequently inquire about the "worst case scenario." There appears to be a recent trend infecting what used to be an otherwise straightforward post-foreclosure procedure. Lenders, servicers, and all other purchasers at foreclosure auctions in Massachusetts must be aware that the rights and responsibilities of a residential landlord will be imputed to the successful bidder at the foreclosure auction.

Housing Court decisions interpreting state statutes have given occupants of foreclosed property enormous weapons. These decisions have essentially empowered the holdover tenants with the ability to force the new owner to incur large expenses in repairs -- and ultimately settlement.

Holdover Occupants May Receive Substantial Money Damages
Violations of the state Sanitary Code -- even slight or minor violations -- are extremely serious in Massachusetts. These violations can affect the right to recover possession. Under certain situations, various statutes in Massachusetts allow for the recovery of up to three times the monthly rental amount in damages. The statutes also allow for the recovery of reasonable attorneys’ fees and costs. If a number of the smaller violations are found in the aggregate to be serious enough to rise to the level of breaching the implied warranty of habitability or the covenant of quiet enjoyment, these can be treated as separate but additional counterclaims. Needless to say, the amount of potential damages in an eviction action can amass quickly.

Arguably, the most serious claim that is frequently pleaded is the violation of the state version of the consumer protection statute prohibiting unfair or deceptive acts. Massachusetts law provides that a failure to repair Sanitary Code violations within a reasonable time after notification is an unfair and deceptive act. What is a reasonable time is always a question of fact to be determined by the judge or jury. A general rule of thumb is that the fact finder will usually find any delay unreasonable if the repair could have or should have been made sooner. In short, the court will find liability if a reasonable person would have made the repairs in the time allotted.

A Question of Notice
Notification can sometimes be at issue. Massachusetts law, however, provides that written notification from the local Board of Health will create a presumption of actual notice by the owner. In addition, the reports by the Board of Health are also presumptive evidence establishing the facts contained in the reports. Occupants are becoming very skilled at calling the Board of Health as soon as they are notified of the eviction. Once the Board’s report is completed, a copy is sent to the owner and becomes public record, subject to inspection by any person.

The courts will impute the knowledge of the former owner to the current owner after the foreclosure based on the availability of the report through public records. The court will also assume the bank or its agent had the option of investigating the property after the foreclosure -- and chose not to do so.

A new burden of pro-action and investigation is becoming far more common in today’s tight real estate market. It appears courts are going to much greater lengths to keep people in their homes -- to the extreme detriment of the mortgagees. It is not uncommon for a court to hold the mortgagee accountable and liable for the existence of housing code violations reflected in a Board of Health report that it has never seen, based on the belief that "it could have been discovered with proper investigation."

Lenders and Servicers – Special Targets
Once it has been established that the violations exist (by the written report), it is a per se unfair and deceptive act to fail to make repairs. Because the statute allows for the doubling or trebling of a damage claim and the recovery of reasonable attorneys’ fees, more and more cases are becoming hotly contested and end up settling for many thousands of dollars. Attorneys for the occupants are far more likely to accept cases for tenants being evicted by banks or mortgage companies after a foreclosure, as it can be assumed that these parties are unaware of the property conditions. It is also presumed that even if apprised, it will usually take more that what is considered a reasonable amount of time for the mortgagee to make the repairs. Therefore, the attorney for the occupants will press the counterclaims with the threat that if the case goes to trial, his or her legal fees will undoubtedly be substantially more than the actual damages -- but nonetheless recoverable.

If the issue of substandard conditions is raised, it is not uncommon for a holdover occupant to be able to amass $6,000 to $10,000 in damages and potential attorneys’ fees before the case is concluded. Typical example: The person who claimed to be without heat or hot water for some period of time, had a leaky roof, a leaky toilet, a clogged or overflowing sink, a defective stove or a number of lesser property conditions for an extended period of time. These are the more common claims; and in a property with a fair market rental value of $500 per month, the occupant could claim and seek approximately $7,500 in damages and could probably amass $5,000 in attorneys’ fees to litigate the matter.

The calculation of $7,500 in potential damages is explained here: If the court finds in favor of the occupant on three counterclaims, it could award $4,500 as damages without even considering a violation of the consumer protection statute. This amount represents $1,500 for each of the three counterclaims ($1,500 is a tripling of the monthly rental amount). The second prong of the damage calculation involves the state version of the consumer protection statute prohibiting unfair or deceptive acts. After finding damages on the counterclaims, the court could then use one of the $1,500 counterclaims and double or triple that amount. If tripled to $4,500, this amount would then be added to the remaining two $1,500 counterclaims, and $4,500 + $1,500 + $1,500 = $7,500.

This is the "worst case scenario" that often shocks mortgagees when the subject is first broached. If the occupant is able to succeed and his damage claim matches or exceeds the owner’s claim for rent, he can also win on the issue of possession. This means that the owner may have to pay thousands of dollars, make all the necessary repairs -- and then still have to commence a new eviction action. This situation is truly only a function of improper planning and can be avoided.

Avoiding Liability and Obtaining Possession
There are ways to prevent liability and minimize the likelihood of encountering this situation. The suggested steps are as follows:

• Send a letter prior to the eviction by certified mail and regular mail explaining the eviction process and requesting an opportunity to inspect the property and make any repairs if necessary;
• Request copies of any reports from the local Board of Health;
• Hire a local management company;
• Give to the occupants the name, address and phone number of the company responsible for any and all repairs;
• Inspect the property with the occupants and ask them what they believe needs to be repaired;
• Ask them to sign a document, which states that it accurately reflects the only items the occupants believe to be problematic;
• Set up an immediate repair schedule with the occupants;
• Complete the repairs; and then
• Commence the eviction.

These actions will serve the dual purposes of decreasing the chances for defenses or counterclaims to the eviction, and they will establish open and productive lines of communication with the occupants. If the occupants feel less victimized by the situation, they may be more amenable to relocation.

Communication with the occupants is often the difference between a smooth settlement and a catastrophic breakdown. The "blame game" can quickly lead to the dreaded "worst case scenario." Lenders and servicers must always remember that they will be held to the same standard as the landlord who put the tenant into possession. As a Housing Court justice once said to me "…your client is in the business of loaning money and foreclosing when necessary … they have got to know that there are human beings living in these homes and they (the owner) will be held accountable like any other landowner."

David A. Marsocci, Esq. is a Massachusetts attorney also admitted to practice in New Hampshire. He has a diverse background in real estate law, including: land use, municipal law, landlord-tenant, litigation, foreclosure, bankruptcy, and closings. He is a member of the Boston Bar Association, American Bar Association, Massachusetts Bar Association, and New Hampshire Bar Association. David’s offices are located at:

Eastern Harbor Office Park
50 Redfield, Suite 202
Boston, Massachusetts 02122
Tel: (617) 265-1162
Fax: (617) 265-3101