M.G.L. c. 93A, Consumer Protection & Business Regulation
This course provides a comprehensive overview of the application, procedures and potential liability under M.G.L. c. 93A, the Consumer Protection Statute, widely referenced as merely “93A”. While this law has far reaching impact on all business activities, this course merely puts focus on those elements relevant to real estate practice.
A. "Caveat Emptor" (Let the) Buyer Beware prevailed
B. Consumer protection movement
C. 93A based upon the Federal Trade Commission Act
- The Federal Trade Commission Act prohibits unfair or deceptive acts or practices effecting commerce as federal law.
- FTC Act does not provide for private cause of action.
- Violation of federal statutes may constitute violation of 93A.
D. 93A or “Consumer Protection Act” first enacted in 1967
E. Prohibits use of "unfair and deceptive practices" in conduct of any trade or business
F. With 93A consumers enjoy right to bring claims against violators of statute, and recover attorney fees and, in some cases, multiple damages.
G. First protected consumers versus business. Now 93A includes business versus business.
H. Real estate licensee is a business within 93A.
II. EXEMPT FROM 93A
A. Consumer versus consumer such as home seller who sells to homebuyer with no licensee involvement.
B. Must be a business involved in unfair and deceptive practice for 93A to apply.
C. Non-material facts
III. DEFINITION OF UNFAIR AND DECEPTIVE PRACTICE
A. Offends public policy as established by law or other concept of fairness
B. Immoral, unethical, oppressive or unscrupulous
C. Causes substantial injury to consumers
IV. PURPOSE OF 93A – Three distinct objectives
A. Declares unfair methods of competition and unfair or deceptive business practices as unlawful.
B. Acknowledges and incorporates all interpretations of unfair and deceptive practices included in Federal Trade Commission Act.
C. Provides for MA Attorney General to create rules and regulations interpreting the provisions of M.G.L. c. 93A. (940 CMR 3.00)
V. MA Attorney General AND 93A
A. Attorney General authorized to provide rules and regulations defining conduct constituting unfair methods of competition and unfair or deceptive acts or practices.
B. Attorney General's regulations (940 CMR 3.00) not intended to be all-inclusive as types of unlawful activities.
C. Attorney General will only act on industry-wide practice or if large number of consumers involved. Private course of action usually required.
VI. ILLEGAL PRACTICES UNDER 93A –
A. Making conduct previously legal now unlawful
B. Fraudulent or willful intent need not be proven for 93A claim to be considered illegal.
C. Holds licensees responsible for making incorrect statements as well as failing to disclose relevant information.
D. Heightens licensee responsibility for statements and omissions
E. Licensees responsible for everything they know
F. Grey area of responsibility is what a licensee should have known
G. "Puffing' is now illegal. 93A does not distinguish between opinion and fact. -940 C.M.R. 3.05 (1)
H. Any oppressive or otherwise unconscionable act or statement
I. Failure to comply with laws meant for the protection of the public's health, safety or welfare
J. Fraud or misrepresentation such as misstatements of facts in negotiations that lead to a contract
K. Seller provides a licensee false information and licensee relates this to buyer, without identifying seller as licensee's sole source of information, then broker is liable.
L. Making false claims about a property's construction, durability, safety or strength
M. Making false claims concerning the ease with which a property can be repaired or maintained
N. Making false claims about financing terms or availability
O. Substituting something different than what is advertised ("bait and switch")
P. Offering guarantees without disclosing the nature and extent of the guarantees
Q. A broker may be held liable for a misstatement in advertising even if the broker later informs a prospective buyer of the error.
R. Claims or representations concerning any real or personal property that directly, or by omission, serves to deceive a buyer in any material respect.
S. Failing to disclose to a tenant or prospective tenant any fact that may have influenced the tenant not to enter into the transaction
T. Even though the true facts are subsequently made known to the buyer, the law is violated if the first contact or interview is secured by deception.
U. Generally, violation of M.G.L. c. 142A (Regulation of Home Improvement Contractors) automatically a violation of 93A
VII. AFFIRMATIVE DISCLOSURE - 940 CMR 3.16 (2)
". . . any person or other legal entity subject to this act, (specifically includes all real estate licensees) who fails to disclose to a buyer or prospective buyer any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction." Generally referenced as material defects
A. Licensee must disclose all facts to a buyer or prospective buyer that might influence their decision to buy WHETHER OR NOT buyer asks.
B. A previous sale that was aborted by a prospective buyer due to the content of a home inspection must be disclosed to all subsequent prospective buyers.
C. Such material facts that a broker should reasonably know must always be disclosed to a prospective buyer.
D. Seller's agent must disclose all such facts about the property even if seller advised broker in confidence, e.g., roofing problems, wet basements, zoning violations, underground oil tanks and structural problems.
E. There is a case to be made for affirmative disclosure by a buyer's agent to a seller.
F. Affirmative disclosure generally limited to licensees. Seller's only affirmative disclosure obligation relates to presence of lead paint.
VIII. NON-MATERIAL PROPERTY DEFECTS
A. Affirmative disclosure generally relates to material facts. Non-material defects in MA include circumstances such as:
- crimes or suicide having taken place in the home
- the presence of a high crime rate in the neighborhood
- barking dogs or rooster wake up calls
- frequent late night loud parties by a neighbor
- future plans to build a nearby power plant
B. Psychological Impacts - M.G.L. c. 93, § 114 - "The fact or suspicion that real property may be or is psychologically impacted shall not be deemed to be a material fact required to be disclosed in a real estate transaction....
1. MA law specifically excludes from disclosure requirements, non-material defects identified as psychological impacts.
2. Applies to all commercial or residential real property.
3. Such non-material facts would include:
- The property was the site of a felony, homicide or suicide
- The property has been site of alleged ghosts or other supernatural phenomenon
- Human immunodeficiency virus (HIV), acquired immune deficiency syndrome (AIDS) or other disease unlikely of being transmitted through occupancy
- AIDS or HIV significant barrier to honest response. Licensee may not disclose this fact even if buyer asks.
4. Neither seller nor lessor of real property or licensee has duty to investigate, disclose, or be liable to buyer or tenant
5. No obligation to disclose psychological impacts unless buyer asks. Response must be honest.
IX. MASSACHUSETTS “MEGAN’S LAW” - M.G.L. c. 6 § 178D
Megan’s Law federally embodied in M.G.L. c. 6 § 178C through § 178P.
- Massachusetts anti-discrimination law (M.G.L. c. 151B) protected class of sexual orientation - “sexualorientation which shall not include persons whose sexual orientation involves minor children as the sex object. . ."
- M.G.L. c. 6, § 178N provides strict penalties for misuse of sex offender registry information
- Sex Offender Registry- 803 CMR § 1
- Convicted sex offenders classified
- Level-1 (low risk)
- Level-2 (moderate risk)
- Level 3 (high risk) - Level 3 offenders are posted on an official government web site).
- Information available at local police departments
X. LANDLORD/TENANT RELATIONSHIPS - 940 CMR 3.17
A. Unfair and deceptive practices may result from conditions of dwelling.
B. Unfair and deceptive practices may result from failure of landlord to meet obligations to tenant.
C. Unfair and deceptive practices may result from imposing requirements of tenant not required by lease agreement.
D. Unfair and deceptive practices may result from providing a lease agreement that is not simple and understandable.
E. Lease agreement must state fully and conspicuously names, addresses and telephone numbers of landlord and others responsible for care and maintenance.
F. Generally, violation of M.G.L. c. 186 (Estates for Years and at Will) is automatically a violation of M.G.L. c. 93A.
G. Generally, violation of the State Sanitary Code (105 CMR 410) is automatically a violation of M.G.L. c. 93A.
H. Generally, violation of lead paint laws automatically a violation of 93A.
XI. ENFORCEMENT M.G.L. c. 93A, § 9
The mechanics of proceeding with 93A consumer complaints differs from the process required for business-to-business complaints. M.G.L. c. 93A, § 11 provides somewhat different remedies for the resolution of disputes strictly between businesses.
A. 30-day demand letter
- prerequisite to filing a claim in a court
- many claims are settled or resolved in this process without creating a burden for the courts.
- 30-Day Demand Letter is not a prerequisite to a lawsuit for business to business. (M.G.L. c. 93A, § 9)
- reasonably describe unfair or deceptive act or practice relied upon
- identify the complainants' role is, in fact, that of a consumer
- include a description of the loss and identify all damages
- describe any harm or injury suffered
- define how the consumer wants the problem resolved
- Business required to make written good faith response within 30 days or be perhaps subject the alleged violator to triple damages.
B. Double or treble damages
C. Attorney fees and costs of collection
D. No prerequisite that damages require a loss of money
E. Damages may be emotional distress
F. An actual purchase or contract is not required for an unfair or deceptive practice to occur.
G. Small claims court
- Claims of actual damages under $7,000,
- Small claims venue is less formal than other courts,
- Lower filing fee
- May still provide double or treble damages plus attorney fees.
XII. ADVERTISING - 940 CMR 6.00
A. Bait and switch
B. Must be bona fide effort to rent or sell
C. Misleading statements or photos
D. Misrepresentations related to construction, durability, safety, strength or condition
E. Advertising a property has a quality, value or usability that it does not actually have
F. Misrepresenting the ease with which the advertised property may be repaired or maintained
G . Misleading financing terms or availability
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Statutes and Regulations
M.G.L. c. 93A
M.G.L. c. 186, § 15B
940 CMR 3.00
M.G.L. c. 112, Section 87PP - 87DDD1/2
254 CMR 2.00-7.00
M.G.L. c. 6 § 178D
Cases for Discussion
Commonwealth v. DeCotis, 366 Mass. 234 (1974)
Lantner v. Carson 374 Mass. 606 (1978)
Nei v. Burley 388 Mass. 307 (1983)
Piccuirro v. Gaitenby, 20 Mass. App. Ct. 286, 292 (1985)
Underwood v. Risman 414 Mass. 96 (1993)
Urman v. South Boston Savings Bank 424 Mass. 165 (1997