Real Estate: Lack of Physical Possession Does Not Invalidate Foreclosure

A Land Court Judge held a mortgage lender established possession of property despite inactivity on the premises for almost 20 years.  The court found the lender, a now fee simple owner of property, had established possession by entering for the purpose of foreclosure, recording a certificate pursuant to Massachusetts’ statutory requirements, and maintaining peaceful possession for three years.

Judge Keith Long Stated, “After making peaceful entry following the breach of a mortgage condition, and recording his certificate, [the defendant] did “all that is necessary to affect a foreclosure.”

Currently, there are two methods of foreclosing property in Massachusetts — power of sale and foreclosure by entry.

Power of sale

Power of sale is the most common and quickest method of foreclosure in Massachusetts. Usually held at foreclosure auctions, power of sale requires that sales be made pursuant to the power of sale clause in the mortgage.  In Massachusetts, notice of the foreclosure must be published and mailed to the borrower. There is no requirement for the borrower to actually receive the notice, merely for the lender to make a diligent effort to locate the borrower.  The actual sale must be conducted at the date, time, and place specified in the notice.  A proper sale prevents the borrower from exercising any right to reclaim the property through redemption.

Foreclosure by entry

A less common method of foreclosure, foreclosure by entry, allows lenders to foreclose by lawfully taking possession of a premise for a statutory required 3 years. After which, the title will have the lenders name.  Lawful recovery of possession can be done in 3 ways:

  1. Lender may file a lawsuit and obtain a court order granting possession
  2. Lender may enter peaceably and take possession or
  3. Lender may obtain borrower’s proper consent to entry.

The statutory language of Massachusetts’ foreclosure by entry statute, G.L.c. 244 §1 allows recovery of possession “by an open and peaceable entry thereon, if not opposed by the mortgagor or other person claiming it … and possession so obtained, if continued peaceable for three years from the date of recording of the memorandum or certificate as provided … shall forever foreclose the right to redemption.

Judge Long concluded that though it was conceded that the defendant never had physical control over the property, under G.L.c. 244 §1 it wasn’t required.   Further in interpreting past court decisions, Long notes that courts “have long held that a mortgagee who has made peaceful entry on the property and duly recorded a certificate of entry need not do anything further to establish possession.”

“Long added, that once possession has been “acquired by peaceable entry and the recording of the certificate in the registry of deeds, that possession continues until the mortgagor takes some act that is adverse to the mortgagee’s possession.  Absent proof of some act done to defeat or interrupt the mortgagee’s possession, the mortgagor is treated as a tenant at will of the mortgagee, and ‘they are assumed to hold under him, and their possessions are his, during the three years, until the completion of the foreclosure.’”

Here, Plaintiff failed to establish an adverse possession claim or to prove that defendant’s possession was interrupted.  As a result, the court held that Defendant did all that was required to establish foreclosure proceedings despite inactivity on the premise.

 The Case is:HS Land Trust v. Gonzalez, Lawyers Weekly No.14-077-12

Advertisements

Social Impact Bonds Generate Buzz in New York and Massachusetts

New York City and Massachusetts have tapped into capital markets to fund social intervention programs by introducing social impact bonds.  A concept originating from the UK in 2010, Social Impact Bonds (SIBs) are a financing mechanism designed to support the efforts of government agencies that provide social services. In essence, they help transfer some of the risk in crime prevention or homelessness assistance, among many other social services, to private investors. They are just now beginning to gain recognition in the United States with the city of New York and the Commonwealth of Massachusetts bringing recent SIB deals to the market.

At its very core, the program enables the public sector to leverage upfront funding from private investors. Social Impact Bonds are commonly known as “pay for success” contracts, in which the government pays only if the program meets preset goals, resulting in all parties benefiting financially. However, the idea is in its infancy, with only a two-year-old prison program in Peterborough, U.K., serving as a model. “Assessing a nascent market — or one that isn’t clearly defined — is a tricky undertaking,” consultant McKinsey & Co. said in a report.

While “bonds” is a misnomer, SIBs could open doors for new funding mechanisms.  “This does not behave like a traditional municipal bond because of the risk transfer. The government only pays if the program is a success. The issuing entity is not the government, so this does not affect the credit rating of the state,” said Tracy Palandjian, co-founder of Social Finance US.

Philanthropically inclined investors are figured to be an easier initial sell as reaching profit-driven investors won’t come right away. Laura Callanan, a senior expert at McKinsey, said “as the SIB program grows, community development finance institutions and venture funds could repurpose themselves to serve as intermediaries.”

Social impact bonds could also provide new means to gauge performances of government programs. “Government has always been motion without progress. But now you can put people’s feet to the fire and force them to pay attention to metrics,” said Anthony Figliola, vice president of Uniondale, N.Y., lobbying group Empire Government Strategies.

Is Promoting Diversity and Inclusion Within the Legal Profession an Ethical Responsibility for all Lawyers?

The Institute for Inclusion in the Legal Profession believes so! This past month, the institute asked the ABA to amend its Model Rules of Professional Conduct to declare that lawyers have an obligation to promote diversity and inclusion.

The Model Rules of Professional conduct lay out the ethical and professional standards for all lawyers in the United States. Since 1986 the ABA rules have maintained a non-binding goal of eliminating bias in the profession and enhancing diversity.  Though the ABA’s rules only represent recommendations, corresponding state rules, which are binding, often mirror the ABA’s suggestions.  With that in mind the institute hopes the ABA’s adoption of a diversity rule will produce a “ripple effect” throughout the country.

The institute envisions a rule that promotes diversity based on race, sex, sexual orientation, disability and religion. It is believed that the general concept of making diversity and inclusion an ethical responsibility will likely achieve some support, while giving the  ABA a chance to examine how different states have approached the issue and perhaps lead to some uniformity.

The institute asked that the ABA’s Standing Committee on Ethics and Professional Responsibility to develop a resolution for consideration by the House of Delegates in 2013.

“The legal profession continues to lag behind other professions in terms of diversity,” the institute wrote. “Given the importance of our justice system, and the roles and responsibilities that lawyers and judges bear, it is critical for our profession to affirmatively address diversity in the Model Rules of Professional Conduct.”

E-Verify and Its Implications for Employers and Foreign Employees

E-Verify is an Internet-based employment authorization verification system operated by the United States Citizen and Immigration Services (USCIS) and the Social Security Administration.  The system allows employers to confirm the eligibility of newly hired workers by comparing information from the worker’s Form I-9 with information in the Department of Homeland Security and SSA databases.

In an effort to reduce the incentive for employment-related illegal immigration, on September 21, 2011, E-verify was approved as a nationwide mandate under the Legal Workforce Act. Though Congress has taken steps to develop a reliable and accurate system for employers to verify the work eligibility of their workers, numerous federal agencies have taken the initiative to improve E-verify and prepare it for mandatory implementation.

At the forefront of the reform, USCIS and the Social Security Administration launched a nationwide “Photo Screening” and “Self Check” service.  Photo Screening is a supplemental verification tool for employers to compare a worker’s photos in certain documents to those stored in government databases. Photo Screening is only activated when a worker presents a permanent resident card or employment authorization card for I-9 purposes. For that reason, the tool is available only in about 4 percent of cases and has improved E-Verify’s ability to detect fraudulent documents by only about 0.2 percent.

Alternatively, Self Check is a free, voluntary and Internet-based feature that allows individuals in the United States to check their own employment eligibility status before formally seeking employment. If Self Check works as expected, it will greatly benefit workers by providing meaningful access and transparency to the E-Verify process. It will also help prevent tentative non-confirmations — or TNCs — that could otherwise cause workers to lose their jobs, even if only temporarily. It may even help reduce employers’ administrative burdens resulting from TNCs.  However, Self Check does not substitute for employers’ I-9 compliance obligations. Employers may not require employees to use Self Check, and employees who receive “possible mismatches” through Self Check are not obligated to take corrective action. Though helpful, Self Check and Photo Screening are not a cure all, and do not fully prepare E-Verify for nationwide mandatory implementation.

Implications

The Government Accountability Office (GAO) recommends further development for E-Verify after a 2011 GAO report confirmed that E-Verify remains vulnerable to identity theft and employer noncompliance.  Further the GAO recognizes, E-Verify enhancements such as Self Check do not address the complicity of dishonest employers in identity-fraud schemes or detect employers’ failure to screen some or all of the workers they hire.  In addition to inaccuracies, Self Check creates disproportionate disadvantages to low income and minority users who do not have internet access. Furthermore, because of the “identity assurance quiz” which uses background credit information, if a user lacks a U.S. credit history, he or she will not be able to proceed to the employment verification phase of Self Check.

Until all of these issues are addressed and E-Verify’s reliability and accuracy are improved, mandatory nationwide implementation would risk harming numerous employers and authorized workers, and may do little to prevent unauthorized workers from entering the U.S. labor market.

 
 
Immigration Law is a complex area of the law and, thus, the above post should not be construed as legal advice.  If you have any questions or would like more information, please contact Dhar Law LLP at (617)880-6155 or wassem@dharlawllp.com