SUMMER/FALL 2013

3 MINUTES ON MASSACHUSETTS REAL ESTATE

SUMMER/FALL 2013

Attorney Kevin J. Joyce

617-542-8905    kjj@dohertylawoffices.net

www.thepermitlawyer.com

Energy conservation requirements increased for Statewide ‘base code’ construction

Developers, design professionals and builders are increasingly working under regulatory mandates for greater energy efficiency or 'green building.' This summer energy conservation standards were raised again with the Board of Building Regulations and Standards ("BBRS") officially voting to promulgate the International Energy Conservation Code 2012 as part of the Massachusetts 'base' building code. The BBRS is statutorily mandated under the Green Communities Act to update these conservation standards. The IECC 2012 will now apply concurrently with the IECC 2009 until July 1, 2014. Following the energy conservation standards under either IECC 2009 or 2012 will be deemed compliant until July 2014. After July 1, 2014, the IECC 2012 shall control exclusively.

NEW BOSTON ORDINANCE REQUIRES PROPERTY OWNERS TO REPORT ENERGY AND WATER USE

The Boston City Council recently passed the new Building Energy Disclosure Ordinance. It applies to commercial buildings with 35,000 square feet or more of gross building area and residential buildings consisting of thirty-five or more units. Under the Ordinance, approximately 1600 buildings citywide will be obligated to report on annual water and energy use, and participate in energy audits every five years. Non-compliance can carry penalties. Each properties' energy and water use information will also be publicly disclosed on a web-site. The Boston Air Pollution Control Commission will be charged with enforcement.

However, IECC 2012 will not apply in municipalities that have adopted the "Stretch Code." Since 2009, more than one third of the municipalities in the Commonwealth of Massachusetts. The Green Communities Act provided municipalities the option adopting 'greener', more stringent "Stretch Code" energy conservation standards than the standards set forth in the IECC 2009. The Stretch Code is set forth at 780 CMR 115.AA. Municipalities adopting the Stretch Code cab access grant funding benefits. The "Stretch Energy Code" seeks to achieve a 20% improvement in energy efficiency over the IECC 2009. However, with the adoption of the IECC 2012, municipalities following the 'base code' are now, in essence, on par with the energy conservation standards applicable in municipalities that have adopted the "Stretch Code". Therefore, there is an important question looming as to whether the "Stretch Code" requirements will now also be updated to exceed those of the new 'base code' requirements, especially if these "Stretch Code" communities are eligible for funding by electing to adopt what were more stringent energy standards under the Stretch Code. Unlike the statutory mandate to update the state building code with newer versions of the IECC, there is no requirement to also contemporaneously update the "Stretch Code". Organizations such as the NAIOP Massachusetts, Massachusetts Association of Realtors, Home Builders Association of Massachusetts, and the Greater Boston Real Estate Board have expressed their concerns about the obvious impacts greater compliance standards may have on a still recovering real estate and construction industry and economy overall.

Importantly, industry professionals should also note that, as with any regulatory code, there is a variance and appeals process that may be considered if certain new energy conservation requirements are not practical, create conflicts with other compliance requirements or present circumstances too onerous for compliance. Parties seeking a variance from "Stretch Code" provisions would then have the option, if successful, of following the IECC 2009 until July 1, 2014 instead of the more stringent IECC 2012. After July 1, 2014, a variance from the "Stretch Code" will require the applicant to follow the IECC 2012 requirements, which may not differ significantly from the "Stretch Code" as discussed above. Although the "Stretch Code" is adopted in accordance with each municipalities' legislative process, the authority to grant a variance from the standards adopted in the "Stretch Code" properly rests with the BBRS as the administrative agency that promulgated this code. The BBRS's statewide jurisdiction over such "Stretch Code" and IECC variances will help mitigate the administrative difficulties presented the Stretch Code moving away from a uniform statewide code for energy conservation.

In working on this patch work of regulatory applicability, real estate and construction professionals must now check the applicability of the Stretch Code on a municipality by municipality basis. Accordingly, professionals should monitor closely the direction of this regulatory issue.

Automatic Sprinkler System Requirements Create Cost and Ambiguity

A recent victory at the State Building Code Appeals Board ("SBCAB") highlights how the murky regulatory scheme applicable to automatic sprinkler installation requirements can create significant and unanticipated cost if not properly reviewed ahead of time. A residential client on Beacon Hill in Boston was refused a permit because plans did not include automatic sprinklers as part of the substantial alternations (more than 50% of the building floor area) to the client's residential townhome. The building was less than 70 feet tall, and was used for residential purposes only. The imposition of a sprinkler requirement presented a substantial and unanticipated cost to the property owner that was then successfully avoided through the appeal. In our appeal, the SBCAB ruled that the permit was denied after the improper State Building Code provision, 780 CMR 804.1, was applied to this specific townhouse project in a way that contradicted other applicable provisions and the general purposes of the State Building Code.

While this important ruling was crucial to the project, it highlights an even more crucial regulatory point that must be considered when preparing plans for a project. There are several regulatory provisions governing automatic sprinkler installation under both the State Building Code, Massachusetts General Laws and the Fire Prevention Code. In more recent years, the applicable Sprinkler Law, Section 26G of chapter 148 of the Massachusetts General Laws, was amended to expand the reach of the automatic sprinkler requirements. There has no been further judicial or other clarification to this amendment since it was passed. Accordingly, industry professionals have been discussing the amended statute's ambiguity or uncertainty as to how far the new statute will extend until such further clarification is made. The amendment to Section 26G changed the threshold floor area calculation used to determine when automatic sprinklers are required. The latest amendment to Section 26G modifies the floor area requirement-bringing more buildings within the scope of the act. Now, when an addition to a building is made with at least 7,500 gross square feet, an automatic sprinkler system must be installed in the entire building not just the addition. The law does provide for some exemptions for residential uses and open parking garages.

Automatic sprinkler systems, while an important life safety feature, are governed by a murky regulatory scheme. The requirements surrounding this costly building component should be thoroughly reviewed prior to the permitting phase of the Project to avoid learning of this requirement once the project has already been financed and the work commenced.

SEPTEMBER RENTAL TURNOVER'S SHOULD BE MET WITH CAUTIONARY NOTE UNDER RECENT DECISIONS IMPOSING CONSUMER PROTECTION LIABILITY ON COMMERCIAL PROPERTY OWNERs

September marks the annual 'turn over' season for rental properties in this area. Those property owners leasing commercial or residential units should heed a string or recent decisions that show an increasing trend of liability imposed on the owners of property beset with sanitary or building code violations that cause serious or fatal injury to those on the property. Just weeks ago, a Chinatown property owner in Kuong, et al. v. Wong, et al., Suffolk Superior Court No. 10-0285-BLS, was found liable for attorneys fees and treble damages under the Massachusetts Consumer Protection Act, G.L. c. 93A, for failing to remedy on-going sanitary and other violations despite representations to tenants that the conditions would be remedied. The decision relied heavily upon an earlier Superior Court decision in Klairmont v. Gainsborough Restaurant Inc, that was written about in a previous edition of this newsletter last year.

In Klairmont, a patron was fatally injured in a local bar room after he fell down a stairwell maintained in violation of the Massachusetts State Building Code. Although the jury found for the defendant on the negligence claims, the Court held that the defendant was liable under G.L. c. 93A because the injury was related to the violations. The Court applied a 'catch all' regulation applicable to defining what constitutes an "unfair or deceptive act" that would give rise to liability under G.L. c. 93A. The Massachusetts Consumer Protection Act provides that a party found liable for engaging in unfair and deceptive acts may be liable treble damages (damages multiplied by 3) as well as paying the other party's attorneys' fees and costs. Here, the Courts are finding in "limited" circumstances properties maintained in violation of applicable codes to be "unfair and deceptive acts." In this forum, we also previously discussed the Court imposing liability on a commercial landlord of a mixed use building after an occupant in a residential unit of that building fell from a balcony maintained in violation of the State Building Code. These cases, when read together, should given thoughtful risk management consideration by the residential and commercial landlord alike. The underlying message of these three cases is enforcement action from local officials is no longer the primary basis for concern and liability in non-compliant properties. Properties used for commercial purposes and maintained in violation of state or local codes are now subject to the growing risk of treble damages and attorneys fees under G.L. c. 93A, the Massachusetts Consumer Protection Act. As new tenants begin to occupy properties maintained as a commercial purpose on investment property, special care should be taken to acknowledge the risks presented in these decisions. ***

CITY OF BOSTON RENTAL INSPECTION ORDINANCE
NOW IN EFFECT

Property owners should also know the City of Boston has also updated its Rental Inspection Ordinance. The registration period under the new ordinance recently ended on August 31, 2013 and will require inspection every five years instead of annually each year.  Chronic offenders will be subject to annual inspection.  Property owners may also use approved private inspectors to certify compliance.  The new Ordinance may also serve as an important risk mitigation measure from the increasing area of liability that comes will maintaining property for a commercial purpose. The City of Boston Inspectional Services web page:  www.cityofboston.gov is a good resource for property owners seeking information regarding the Ordinance.