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Massachusetts: Supreme Judicial Court Rules that Municipal Foreclosure Ordinances are Preempted by State Law

Posted By USFN, Friday, February 6, 2015
Updated: Wednesday, September 23, 2015

February 6, 2015 


by Katerina A. Pestova
Harmon Law Offices, PC – USFN Member (Massachusetts, New Hampshire)

On December 19, 2014, the Massachusetts Supreme Judicial Court (SJC) ruled on two critical questions regarding a pair of foreclosure ordinances passed by the City of Springfield. The SJC concluded in Easthampton Savings Bank v. City of Springfield (470 Mass. 284) that the ordinances were preempted by state law.

The case concerned two ordinances enacted by Springfield in 2011. The first ordinance regulated the maintenance of vacant properties, as well as properties undergoing foreclosure. The ordinance required lenders to register these properties and pay a $10,000 bond, which would be used by the city to maintain foreclosed properties if the bank failed to do so. The second ordinance required mortgagees that were attempting to foreclose on owner-occupied residential properties to participate in a city-approved pre-foreclosure mediation program.

Six local banks challenged the ordinances in state court; the city removed the case to federal court. Following the banks’ appeal from a District Court ruling in favor of the city, the First Circuit Court of Appeals asked the SJC to decide whether the local foreclosure laws were preempted by state laws, and whether the bond requirement constituted an illegal tax.

The SJC ruled that Springfield’s property registration ordinance was preempted to the extent that it conflicts with state laws. The court cited the ordinance’s surety bond and hazardous materials disclosure requirement as being in conflict with the state sanitary code, and the Massachusetts Oil and Hazardous Material Release Prevention Act, respectively. Regarding the mandatory mediation requirement, the court concluded that the ordinance as a whole conflicted with Massachusetts foreclosure statutes.

The federal case, which prompted the SJC’s ruling, has since been dismissed on technical grounds. The dismissal means that there is no formal order directly invalidating the city’s ordinances. However, in light of the SJC’s ruling, Springfield will likely amend its property registration ordinance. It is expected that the city will substitute a flat annual registration fee in place of the surety bond component, bringing Springfield in line with approximately 20 other municipalities that also have property registration ordinances with annual fees.

Four cities have ordinances substantially similar to Springfield’s, although only two of these cities have sought to enforce any portion of the ordinances. The Essex County Registry of Deeds has refused to record foreclosure deeds without a certificate of mediation from the City of Lynn, which remains a defendant in a federal lawsuit challenging its ordinances. The ruling in Easthampton Savings may also prompt local lawmakers to turn to the state legislature to implement mandatory mediation.

However, the Easthampton Savings ruling is critical for lenders because it halts — at least for the moment — the proliferation of differing pre-foreclosure requirements at the municipal level in Massachusetts.

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