Appeals Court Decision a Boon to Affordable Housing

One of the ways cities and towns have increased their inventories of affordable housing is through the transfer of municipally owned property, usually tax title parcels, to the housing authority or a non-profit like Habitat for Humanity. Usually, these transfers are for nominal consideration in return for the eventual grant of an affordable housing restriction from the new homeowner to the city or town. To make sure that the property will be used for affordable housing in accordance with the wishes of the municipality, our deeds include the right of the municipality to take the property back (a right of reverter) if the property is not conveyed to an affordable buyer within a certain period of time, typically three years from the date of the deed.

We were certainly pleased that this language was approved by the Appeals Court in the recent decision in Faneuil Investors Group LP v. Board of Selectmen of Dennis, 75 Mass. App. Ct. 260 (2009). Faneuil Investors Group filed an action in the Land Court to reinstate the mortgage it held on property once owned by the Dennis Housing Authority. This property had reverted to the Town after the violation of a restriction in the deed from the Town to the Housing Authority. The particular provision of the deed from the Town reserved the right in the Town to enter the property and revest title to it if the Housing Authority ceased to exist or if the property was conveyed or transferred without the written consent of the Board of Selectmen. The Town exercised its right of reverter on the grounds that the Housing Authority had granted a mortgage to Citizens Bank without obtaining the written consent of the Board of Selectmen. (Faneuil purchased the note from Citizens Bank.) Faneuil argued that the mortgage was not a conveyance that would trigger the right of reverter, and further, even if the mortgage did trigger the reverter, the Board of Selectmen had no authority from Town Meeting to include a reverter provision in its deed. In its decision, the Appeals Court recited the many Massachusetts cases that have held that mortgages are conveyances of title and refused to treat the mortgage as a security interest. The Court further found that the provisions included in the deed were well within the authority given to the Board by Town Meeting and established a “reasonable mechanism by which the Board can execute the intent of the vote”, i.e., the continued use of the property for affordable housing.