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THE MASSACHUSETTS FORECLOSURE TITLE CLEARING STATUTE

On November 25, 2015 Chapter 141, Acts of 2015, An Act Clearing Titles to Foreclosed Properties, was signed into Massachusetts law by Governor Baker.  Massachusetts Senate Bill 2015 now Chapter 141 of the Acts of 2015 is commonly called the Massachusetts Foreclosure Title Clearing Statute and it became effective on December 31, 2015.  The general purpose of this new law was to alleviate uncertainty in titles to foreclosed properties after the Ibanez decision and establish a deadline by which challenges to them may be raised or forever barred.

commerce-acts-books-477966-mThe Act amended Mass. Gen. Law c. 244 s. 15 to include a three-year time limit for challenging a recorded foreclosure affidavit.  After three years from the date of recording, a foreclosure affidavit shall be conclusive evidence in favor of arm’s length purchasers for value against challenges by foreclosed borrowers who no longer occupy the subject property.  After that the affidavit of sale provides clear title to the arm’s length third party purchaser even if the underlying foreclosure contained certain defects.  In order to have a right to challenge the validity of a foreclosure sale in Massachusetts under the new act, an action (lawsuit) must commence  AND a correct copy of the complaint or pleading asserting the challenge must be recorded in the registry of deeds for the county in which the property lies, all within the three-year period.

The Statute also provided a one-year grace period for borrowers to challenge pre-2016 foreclosures that occurred under mortgagee’s power of sale in Massachusetts. Aggrieved parties who wished to challenge such a foreclosure had from January 1, 2016 through December 31, 2016 to comply with the terms of the new statutory requirements to preserve their challenge or they would be barred from doing so.

The statute was the subject of much debate before and after its enactment.  Proponents anticipated that the statute would provide relief for certain defective foreclosure titles where the foreclosed borrower no longer occupies the subject property.  Opponents believe that the statute “tries to sweep illegal foreclosures under the rug”.  Either way, Massachusetts folks have been anticipating Massachusetts cases interpreting the statute.  On July 27, 2017 the Land Court issued one of its first decisions interpreting the new law.  Kenney v. Brown et al, MISC 16-000530.

In Kenney the Borrower filed a Complaint challenging the validity of a 2007 foreclosure.  The Complaint was filed within the one-year grace period.  The Borrower challenged the validity of the foreclosure because the mortgage assignment to the foreclosing lender was recorded after the foreclosure sale.  An affidavit of sale pursuant to Mass. Gen. Laws c. 244, 15 was recorded in 2007.   In 2016 plaintiff recorded an affidavit pursuant to Mass. Gen. Laws c. 183 s. 5B identifying the record title documents including the post-sale Assignment that created the defect in title, but the Complaint was not recorded with the registry of deeds until January 19, 2017.  The Land Court evaluated whether or not an action challenging the foreclosure lies, notwithstanding that the Complaint was not recorded within the one-year grace period.

The Borrower claimed that the requirements of the Act were satisfied because the Complaint was filed within the one-year grace period and a c. 183 s. 5B Affidavit was recorded within the grace period.  The Borrower also argued that defendants had actual knowledge of the Complaint before the deadline; and that defendants’ defense based on the Act was waived because it was not asserted in pleadings as an affirmative defense.

The Land Court disagreed and concluded that the Complaint is barred by the Act.  The Court held that the 5B Affidavit does not satisfy the recording requirement of the Act.  The Court looked to the “plain language” of the statute.   Commencement of the action and recording the complaint are both required.  The recording of the Complaint with the registry of deeds is an unambiguous requirement that is necessary to file a timely suit.

The Land Court also ruled that the Act is a statute of repose, not an affirmative defense.  If a foreclosure challenge is not timely asserted and recorded, no cause of action lies.  It is an “outer limit” on the right to bring an action and is “measured from the date of recording the affidavit of sale, not from the date that a claim accrues”.

More cases involving the new Massachusetts Foreclosure Title Clearing Statute are certainly on the horizon.