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Law of the Land – Real Estate Litigation Newsletter – November 2022 – Volume I, Issue XV | Goulston & Storrs PC

CASES OF NOTE

LESSOR IS UNABLE TO EVICT DESPITE TENANT DEFAULTS

Varano v. PDJM Land Trust LLC, et al. No. 1884CV02662, (Mass. Super. Ct. June 16, 2022)

The Massachusetts Supreme Court held that a commercial landlord could not evict a tenant who breached his lease by repeatedly failing to pay rent on time and maintain the premises in good condition and in compliance with the building code. The Court found that the tenant’s breaches were neither material to the lease nor significant enough to justify or permit the enforcement of the lease’s default provisions.

In Varano v. PDJM Land Trust LLCplaintiff Nicola Varano (“Varano”), owner of a restaurant in Boston’s North End, sued his landlord, PDJM Land Trust, LLC (“Landlord”), alleging that the landlord improperly terminated a Notice, appealing on a contractual right to terminate Varano’s employment. lease, and fabricated pretext violations by Varano to justify an eviction that would allow the landlord’s restaurant to expand into Varano’s space.

The lease required Varano to pay his rent “in advance in monthly installments,” meaning on or before the first of each month, and to comply with specific cleanliness and maintenance conditions while complying with “any applicable law, statute, ordinance, rule , regulation, or code.” However, despite numerous warnings, Varano typically paid after the first of the month and failed to meet the lease’s maintenance and code requirements. The Landlord sought to terminate Varano’s lease and repossess the premises due to these violations.

After a bench trial, the Court (Gordon, J.) found that Varano had in fact breached the lease. Nevertheless, the Court found that the eviction was improper because Varano’s breach of the lease was not material or significant enough to warrant a forfeiture of the lease under the principles set forth by the Massachusetts Court of Appeals in Dibella v. Fiumara.

In Dibella, the Court of Appeal identified the following five factors that courts must consider in determining whether a breach of a lease is material or significant: (1) the extent to which the non-breaching party has been or will be deprived of the benefit it reasonably expected; (2) the extent to which the non-breaching party can be adequately compensated for the share of that benefit it has been and/or will be deprived of; (3) the extent to which the breaching/non-performing party will suffer a forfeiture; (4) the likelihood that the breaching/non-performing party will cure its failure, taking into account all relevant circumstances (including assurance of performance); and (5) the extent to which the conduct of the breaching/non-performing party conforms to standards of good faith and fair dealing.

Applying these factors to the facts of the case, the Court concluded that the Landlord was not deprived of an “essential and inducing feature” of its contract with Varano. Namely, the Court found that, notwithstanding the late payments, the Landlord always received the rent to which he was entitled and was never impaired in meeting his own obligations to creditors or otherwise conducting his financial affairs. The Court also found that Varano’s violations regarding the condition of the Premises never resulted in adverse operational consequences or imposed economic burdens on the Landlord. Additionally, while the court acknowledged that Varano was not an ideal tenant, it concluded that Varano’s violations were not made in “bad faith” and, given the circumstances of a challenging cash management environment, Varano did the best he could to run his restaurant in ways that were not uncommon in the industry. The Court also found that the eviction of Varano from the premises with years remaining on the Lease and after Varano had invested a substantial amount in improvements was an excessive consequence in light of the nature of his lease violations. “A commercial death penalty, for crimes as trivial as [Varano’s] is a consequence that equity simply will not occur.”

WHEN A DEP REPLACEMENT ORDER REPLACES A LOCAL BY-LAW ORDER OF CONDITIONS

City of Boston v. Conservation Commission of Quincy, et al.490 Mass. 342 (2022)

The Supreme Court (“SJC”) held that a decision by the Quincy Conservation Commission denying the City of Boston (“Boston”) permission to build a bridge was preempted by the DEP’s superseding order of conditions that the project allow to continue.

In 2014, Boston closed a bridge to Long Island (located in Boston Harbor) for safety reasons and removed all but the bridge’s piers in 2015. In 2018, Boston filed a notice of intent with Quincy’s Conservation Commission (the “Commission” ) filed and notified the Commission that it intended to rebuild and reopen the bridge to restore access to rehabilitation facilities on the Island (the “Project”). According to the notice of intent, Boston would do work in Quincy to rebuild the bridge and since the Project would impact wetlands in Quincy, Boston needed the Commission’s approval to proceed. The Commission denied the notice of intent pursuant to the Massachusetts Wetlands Protection Act (“WPA”) and Quincy’s local wetlands ordinance. Boston appealed the Commission’s decision and also applied to the DEP for a superseding order of conditions. The DEP issued a superseding order that allowed the project to proceed. The Commission asserted that the DEP order did not preempt its decision. The Supreme Court and the SJC disagreed.

An applicant aggrieved by an order of a local conservation commission relating to wetlands may ask the DEP to issue its own order, which will supersede the decision of the conservation commission, unless the conservation commission bases its determination solely on provisions of a local ordinance that is more protective than the WPA. The SJC held that a local conservation commission seeking to rely on a more stringent local ordinance or ordinance must explain how the ordinance or ordinance applies to the facts presented. “[I]fa town conservation commission simply refers to an ordinance without providing any indication that it actually relied on it or how it did so, any comparison of the statute and the ordinance to determine which is more protective is made difficult or impossible. A town’s ordinance may contain some exceptionally protective provisions, and a commission’s general reference to the ordinance in its decision, without elaboration, will allow it to insulate the decision from scrutiny.”

In this case, the Commission asserted that it relied on its local ordinance’s reference to “cumulative adverse effect[s] on wetland values” and argued that this language alone is stricter than the language in the WPA. According to the Commission, it did not have enough information to determine the cumulative effect of the work in relation to the Project. The SJC was not persuaded by these arguments and concluded that the Commission failed to explain in its decision denying Boston’s notice of intent how its analysis differed from the analysis DEP was authorized to perform . The SJC found that the factors considered by the Commission in its analysis did not differ from the factors and standards provided for in the WPA. As such, the Commission’s determination was not based on provisions of its local ordinance that were stricter or different than those under the WPA. Since the DEP concluded that the Project met the WPA requirements and performance standards, the SJC held that the superseding order DEP issued for the Project would apply.

TURN SQUARE CORNERS FOR A LIST PENDING AND WATCH OUT FOR OFFERS THAT BIND

Stonegate Grp. Mgmt, LLC v. Tucard LLC, 101 Mass. App. Ct. 1108 (2022)

In 2020, Plaintiff Stonegate Group Management, LLC (“Stonegate”) attempted to purchase commercial property (the “Property”) in Dracut, MA from Defendant Tucard, LLC (“Tucard”). Tucard accepted Stonegate’s offer to purchase the Property and the parties. exchanged drafts of a purchase and sale agreement for several months with Stonegate which accepted all of Tucard’s requested changes. Nevertheless, Tucard refused to sign the agreement. Litigation by Stonegate resulted.

Stonegate filed a motion for endorsement of a memorandum of lis pendens seeking damages and specific performance in the complaint filed against Tucard and its individual members. Tucard countered with a special motion to dismiss pursuant to GL c. 184, § 15(c). The Supreme Court denied Tucard’s special motion and endorsed the memorandum of lis pendens. The Court of Appeals concluded that the Supreme Court erred in endorsing the memorandum of lis pendens, but affirmed the denial of the special motion.

The Court of Appeal found that Stonegate failed to meet the strict requirements of the Lis Pendens statute because it did not name the commercial tenants of the property as defendants. The appeals court noted that requirements of the Lis Pendens statute, including naming in the complaint as defendants “all owners of record and any party in occupation under a written lease,” must be strictly met to obtain a lis pendens. Although Stonegate argued that it could not name the commercial tenants because Tucard had failed to provide that information, the Court of Appeal found that Stonegate had not made sufficient efforts to identify and name these tenants and, as such, had failed to do this the list means. pendens was issued in error.

The Court of Appeals then addressed Tucard’s special motion to dismiss pursuant to the Lis Pendens statute. A special motion to dismiss may be granted if a defendant can show by a preponderance of the evidence that a plaintiff’s claims are completely lacking in reasonable factual support or any arguable basis in law. Tucard argued that Stonegate’s complaint lacked any reasonable factual support because Stonegate’s offer was not a valid contract and therefore not binding. Tucard also argued that Stonegate’s claims were barred by the Statute of Frauds. The Court of Appeal was not persuaded by these arguments.

First, the Court of Appeal concluded that the offer for the Property was negotiated by sophisticated parties and included the essentials of the parties’ agreement, in particular a negotiated purchase price. The Court of Appeal also held that the language used in the offer regarding execution of the mutually satisfactory P&S did not compel a determination that the signed offer was a binding contract, or a finding that performance was conditioned on the execution of a mutually satisfactory satisfactory P&S not. The Court of Appeal further held that a provision in the offer limiting the parties’ remedies to the deposit did not preclude the right to specific performance. The Court of Appeals also found that the requirements of the Statute of Frauds for purposes of the special motion to dismiss were met because the offer described the terms of the sale and the purchase price, contained a description of the property, and was reasonably consistent with the final draft of the P&S agreement.

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