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SJC Says Springfield Foreclosure Ordinances Are Preempted

In a decision handed down earlier this month, the Supreme Judicial Court (the "SJC") has held that two foreclosure-related local ordinances enacted by the City of Springfield (the "City") are preempted by existing Massachusetts statutes.

In Easthampton Savings Bank & Others v. City of Springfield, six banks challenged the two ordinances, titled, respectively, (i) "Regulating the Maintenance of Vacant and/or Foreclosing Residential Properties and Foreclosures of Owner Occupied Residential Properties" (the "Foreclosure Ordinance"), and (ii) "Facilitating Mediation of Foreclosures of Owner Occupied Residential Properties" (the "Mediation Ordinance").  

According to the SJC, the Foreclosure Ordinance: (i) requires owners of buildings that are vacant or undergoing foreclosure to register with the City; (ii) defines "owners" as including mortgagees whose mortgages expressly authorize entry to make repairs; (iii) specifies that an "owner" is responsible for maintaining the property (and lists the maintenance requirements); and (iv) requires owners to post a $10,000 bond against non-compliance.  The Foreclosure Ordinance also: (i) empowers the City to enter the property to bring it into compliance with the enumerated maintenance requirements - at the owner's expense; (ii) allows the City to retain an unspecified portion of the posted bond as an administrative fee; (iii) imposes a $300 per day fine for non-compliance.

The Mediation Ordinance requires mandatory, pre-foreclosure mediation between mortgagors and mortgagees, with a $300 per day fine imposed on mortgagees who fail to comply. 

After the banks challenged the ordinances in state court, the City removed the case to federal court and obtained summary judgment in its favor.  On appeal, the First Circuit certified two questions to the SJC.  The First Circuit asked: (i) whether either ordinance is preempted in part or in whole by certain Massachusetts statues (i.e., c. 21E, the Massachusetts Oil and Hazardous Material Release Prevention Act; c. 244, concerning foreclosure procedure; and c. 111, the state sanitary code), and (ii) whether the Foreclosure Ordinance imposes an unlawful tax.

As the SJC explained, quoting Wendell v. Attorney General, 394 Mass. 518, 524 (1985), a municipal ordinance is preempted by statewide statute where "'legislation on a subject is so comprehensive that an inference would be justified that the Legislature intended to preempt the field.'"  Ultimately, the SJC held that the Mediation Ordinance is preempted by G.L. c. 244, while the Foreclosure Ordinance is preempted by G.L. c. 21E and G.L. c. 211 (but not G.L. c. 244).  The Court noted in Footnote 8 that "[a]lthough we determine that State law preempts the foreclosure ordinance, the effect of this preemption vis-à-vis a general severability clause is not before us."  The SJC also held that the Foreclosure Ordinance does not impose an unlawful tax, and instructed its Clerk to send the decision to the First Circuit.

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