The Homestead Law in Massachusetts

For many years, one of the most unsettled areas of Mass. real estate law was the meaning and application of the homestead protections offered by statute  (Mass. General Laws. Ch. 188).  Simply stated, the Homestead statute is intended to protect the equity a homeowner enjoys in his/her/their home from claims by unsecured creditors up to a statutorily established amount (the current upper threshold is $500,000.00). However, the previous statute left several open questions regarding this protection such as:  “Can both a husband and a wife declare a homestead?”, “What happens if both sign and record homestead declarations?”, “Does the protection only apply to married couples?”, “What happens to the homestead if a mortgage is recorded subsequent to the recording of a declaration?”, “Some states provide for automatic protection- why doesn’t Massachusetts?”

With the recent amendment to Chapter 188 by the Legislature, these questions are largely addressed. For one, homestead protection is offered to any owner (or owners) of a home or by someone who possesses real estate by lease and who occupies the property as their principal residence. This includes both traditional forms of ownership, (joint or single owner) as well as that held in trust if the trust property is the principal residence of the beneficiaries. In the case of joint ownership, both joint owners of a property may file separate homestead declarations, but the protection is capped at $500,000.00 (the protection doesn’t double as a result of the double filing).  Provision is also made for elderly or disabled individuals, regardless of marital status, as well as for owners of manufactured homes.  In an anomalous provision, elderly or disabled declarants may each file homestead declarations, and in that case, the protection is doubled in that each declarant receives $500,000.00 in homestead protections.

Mortgages executed after the declaration of a homestead are granted priority over the existing homestead, but the homestead otherwise remains effective (previously, there had been a questions as to whether the execution and recording of a subsequent mortgage terminated the Homestead).

In Massachusetts, homestead protection of up to $125,000.00 is automatic, in that no formal filing is required. In order to take advantage of the statutory provision allowing homestead protection of up to $500,000.00, a formal Declaration of Homestead must be signed and recorded in the registry district having jurisdiction over the real estate. The revised statute also outlines the ways in which a homestead may be terminated, including but not limited to a cessation of the use of the property as a principal residence.

A new requirement also became effective under the revised statute, requiring attorneys closing a mortgage transaction to provide notice to the mortgagor of the right to declare a homestead, together with an explanation of the difference between the automatic homestead and the declared homestead.

It is hoped that with these changes and clarifications homestead protection will become more accessible to the average homeowner. If you have more than $125,000.00 in equity in your principal residence, you should take advantage of this inexpensive form of protection for yourself and your family by contacting an attorney and making the necessary filing with the registry of deeds.

Any questions regarding Massachusetts Homestead Law can be directed to Attorney Michael Gatlin.

Posted in Framingham, Homestead, Leasing, Lending, Metrowest, Michael Gatlin, Real Estate Law, Residential Real Estate

Bankruptcy Court Underlines Centrality of Local and ABCC Approval of Security Interest in Liquor License

by Michael G. Gatlin

As collateral for a loan to a food service or beverage service operator, a lender often requires that the loan be collateralized with a pledge of the Borrower’s liquor license. While it may be standard operating procedure, in most cases, to file a UCC Financing Statement to protect a Lender’s interest in collateral, such a filing, by itself, is insufficient where the collateral includes a pledge of a liquor license. This point was discussed by the Bankruptcy Court in the recent case JoJo’s 10 Restaurant, LLC v. Devin Properties, LLC et al Lawyer’s WeeklyNo. 04-053-11 June 13, 2011

In that case, a creditor attempted to enforce what the creditor believed was a security interest in the debtor’s liquor license. The security interest had not been noted in the debtor’s application for transfer, filed with the local licensing board at the time the liquor license was obtained, nor was it noted on the documentation considered by the Alcoholic Beverage Control Commission (ABCC) at the time that body approved the transfer. In dismissing the claim by the creditor, the court stated: “…(A) debtor never acquires independent rights in a Massachusetts liquor license for purposes of satisfying UCC § 9-201(b)(ii) unless and until there is a pledge and that pledge has been approved by the required authorities under Mass. Gen. Laws ch. 138, § 23. As the debtor in this case failed to secure the necessary governmental approvals to pledge the liquor license to (Debtor), it did not acquire “rights in the collateral” within the meaning of § 9-203(b)(ii). (Debtor’s) security interest in the liquor license was, therefore, never enforceable against the (D)ebtor…”

Lenders making loans which include a pledge of a debtor’s liquor license should be certain that the lien the Lender seeks to acquire is properly noted both with the local authority and with the ABCC. Typically, such a process will require a public hearing at the local level, with requirements of proper public notice and an opportunity for public comment. While this process may take time the parties hadn’t originally envisioned, a loss of time, from the Lender’s view point, is better than a loss of collateral. As a practical matter, this issue comes up most often when a Lender is providing financing for the acquisition of a restaurant or beverage business, and a transfer of the license from the seller of the business to Lender’s customer is a part of the sale transaction which requires local and ABCC approval in and of itself; the pledge of the collateral can, and probably should, be considered at the same time.

Posted in Commercial Real Estate, Corporate, Lending, Massachusetts, Small Business

Financial Assistance Is Available for 21E Testing

By Michael G. Gatlin

We are all hopeful of improving conditions in the commercial real estate market, but, given the economy, we are all going to have to work hard to make deals come together.  Fortunately, if you are involved in real estate transactions in the Town of Framingham, particularly commercial real estate transactions, there is some good news which you may find helpful in making deals work.

The Town of Framingham recently received a significant sum of federal money to provide reimbursements to property owners for the cost of conducting environmental evaluations of their real estate.  The funds are available through the Community and Economic Development Office of the Town of Framingham; the contact person is Erika Jerram.  I am unaware of any significant limitations so long as the funds are used for 21E evaluations.  The application process, which is initiated through the Town, takes about 4 weeks from beginning to end.  The scope of work must be authorized before the approval can issue, so an extended due diligence/financing contingency should be worked into in any sales agreement if this funding is to be sought.

While many factors go into a decision to buy or sell property, if some of the costs can be eliminated or at least reimbursed, there may be more incentive to take action.  If this office can be of any assistance to you or your clients, either in seeking information about the above grant program, or any other aspect of the buy/sell transaction.


Posted in Commercial Real Estate, Economic Development, Framingham, Michael Gatlin, Real Estate Law, Residential Real Estate

How Cutting Medicaid Funding May Affect You

by Julie Ladimer

Medicaid is a federal and state funded program which helps cover the cost of in-home and skilled nursing care for the elderly and the disabled.  However, in today’s economy, the cost of in-home care and skilled nursing care are increasing dramatically, and the number of people who need these services are increasing exponentially.  Therefore, the debate on whether to cut federal funding to the Medicaid program or to increase revenue to continue funding the program has become a hot topic.

According to the American Health Care Association, 63% of all Massachusetts nursing home residents are covered by Medicaid.  The United States Census Bureau states that the number of people turning 65 will increase by 36% by the year 2020.  These numbers reflect that there will be an increase in need for skilled nursing care and therefore a need for more workers in the industry.  The skilled nursing care fields is not known for its high pay, nor does it provide above average benefits as an incentive.  The purse strings at skilled nursing facilities are stretched tight.

However, since Medicaid is a federally funded and state funded program, discussion of cutting funding is tricky.  If the federal government cuts spending on Medicaid, the states would have to make up the loss through one of two ways.  The states could either raise taxes, or they could cut benefits.  If Massachusetts raises taxes to pay for the medicaid program (MassHealth here in Massachusetts), then the tax payers will be picking up the loss as a result of the budget cuts.  If Massachusetts cuts the benefits for MassHealth, or tightens up the eligibility criteria for benefits, it will become harder for nursing home applicants to pay for nursing home care.  The applicants or their children will pay out of pocket.

These scenarios lead to many unanswered questions.  What happens if an applicant spends all of their money on nursing home care, and become eligible for MassHealth, but there are no funds available in the MassHealth program, who bares this burden.  Does the nursing home cover the cost?  Does the elder become homeless?  Does the government go into a deeper deficit to cover the costs?  Will the children be forced into financial struggles to cover the costs of their parents’ care?

These questions make it clear that the debate on how to fund Medicaid and MassHealth effects everyone, whether you are a tax payer, a caretaker child, an elder who needs care.  It future of Medicaid and MassHealth also effect the economy on a greater scale because of the funds affect the in-home services and the skilled facilities.  If there are means to pay for employees, who will be taking care of the elderly?  In addition, if caretaker children are either leaving their jobs or taking time off to care for their aging parent, the caretaker child’s employer will suffer a loss from their absence, either by paying someone else to cover for the job, or by not having the expected work accomplished.   In conclusion, it seems there is a cyclical effect as a result of the increase in cost of long-term care for the elderly and disabled.

Posted in Elder Law, Estate Planning, Framingham, MassHealth, Medicaid, Metrowest | Tagged as: ,
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    Attorney Michael Gatlin
    61 Nicholas Road, Suite B5,
    Framingham, MA 01701
    (508) 788-0020
    (508) 788-6668 (telefax)