Town, DHCD lose challenge to status of 40B unit

Jun 15, 2017 by

Published in the June 14, 2017 edition

By MAUREEN DOHERTY

LYNNFIELD — The town has one less affordable housing unit following a ruling by the state Appeals Court issued in favor of the mortgagee, Citibank.

The case, known as the “Partridge Lane Unit Owners’ Trust vs. Lisa Peachey and others,” involves what the trust identified as being one of the six affordable units at the 24-unit condo complex.

Partridge Lane was built under the state’s chapter 40B statute that allows developers to override local zoning, such as density restrictions and setbacks, provided a certain percentage of the homes – typically 20 percent – are sold and maintained in perpetuity at a reduced price to those who meet low to moderate income guidelines.

The master deed for the Town Homes at Partridge Lane Condominiums and its regulatory agreement were recorded with the Registry of Deeds in 1994 identifying three two-bedroom units and three three-bedroom units as “low and moderate income units,” according to the court document. However, which specific units were designated to be sold to low and moderate income buyers was not specified in either document.

Instead, among the requirements of buyers and sellers of such units was an agreement that the maximum sale price would be $84,000 for a three-bedroom unit and a condition that the “project sponsor shall execute and shall as a condition of sale cause the purchaser of the low and moderate income unit to execute a deed rider…” at the Registry of Deeds identifying it as a low or moderate income unit.

According to the Appeals Court decision, five of the Partridge Lane units have the required deed riders and in 1995, Lisa Peachey (also known as Lisa Flanagan) and Shaun J. Flanagan purchased unit 4-3, a three-bedroom unit, for $84,000. Its deed recorded at the Registry of Deeds did not include a deed rider identifying it as a low and moderate income unit. A series of mortgages were taken out on the unit by the owners and in 2008, they granted a mortgage of $237,498.47 to Citibank. The others have since been discharged.

The Partridge Lane Unit Owners’ Trust filed action against Peachey and Flanagan in 2012 seeking a declaratory judgment that unit 4-3 was “subject to affordable housing restrictions along with other equitable remedies.” Citibank, the state Department of Housing and Community Development (DHCD) and the town of Lynnfield were joined as “interested parties.”

The state Superior Court ruled in favor of Partridge Lane, DHCD and the town. Citibank appealed, seeking to have the mortgage treated as an ordinary mortgage and maintaining that “at the time the Flanagans granted it a mortgage on unit 4-3, nothing in the chain of title indicated that the unit was subject to an affordable housing restriction; therefore …it lacked actual or constructive notice of the deed restriction.”

The Appeals Court decision reverses the decision of the Superior Court, Town Counsel Tom Mullen told the Board of Selectmen Monday night.

“We had two cases pending before the Appeals Court concerning 40B units. One, I had been candid with you in executive session. Now, there is no reason for candor, and bracing you for the fact that there was virtually no way the town could keep the Peachey unit as an affordable unit,” Mullen said.

“That’s because when the unit was created in the early 1990s there was no affordability restriction placed on it. The deed rider that should have been recorded was not… and the unit was actually re-financed several times, and the current mortgagee, Citibank, sued to have the right to treat it as a non-affordable unit,” Mullen said.

“We actually prevailed in the Superior Court on summary judgment. We made the strategic error of winning. The judge did not explain…why a mortgagee should be limited as if there were a deed rider when in fact there was no deed rider and there was no evidence that the mortgagee ever learned that there was a deed rider or that they should have learned (of it)…so the Appeals Court made short work of it,” Mullen added.

The Appeals Court decision concludes: “Where neither the unit 4-3 deed, the master deed, nor the regulatory agreement identified the encumbrance, Citibank lacked constructive notice of the affordable housing restriction. There is no genuine dispute of material fact preventing the case from being resolved on the summary judgment record. Accordingly, we reverse the judgment and order the entry of a new judgment in favor of Citibank.”

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