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Ryan v. Mary Ann Morse Healthcare Corp.

Supreme Judicial Court of Massachusetts, Middlesex

December 5, 2019

JAMES M. RYAN, executor, [1], [2]

          Heard: September 9, 2019.

          Civil action commenced in the Superior Court Department on August 24, 2016. A motion to dismiss was heard by Christopher K. Barry-Smith, J.

         The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court.

          Joshua N. Garick (Matthew T. LaMothe also present) for the plaintiff.

          AiVi Nguyen for the defendant.

         The following submitted briefs for amici curiae:

          Joseph M. Desmond & Justin L. Amos for Massachusetts Assisted Living Association.

          Lillian Glickman, pro se.

          Elizabeth A. Aniskevich & Susan A. Silverstein, of the District of Columbia, Richard M.W. Bauer, Liane Zeitz, & Rebecca J. Benson for AARP & others.

          Present: Gants, C.J., Lenk, Gaziano, Lowy, Budd, Cypher, & Kafker, JJ.

          KAFKER, J.

         At issue in this case is the extent to which Massachusetts assisted living residences (ALRs) are subject to the strictures of the security deposit statute, G. L. c. 186, § 15B. The defendant operates an ALR in Framingham that charges new residents an upfront "community fee," in addition to the first month's rent and the last month's rent permitted by G. L. c. 186, § 15B. The community fee was intended to cover upfront administrative costs, an initial service coordination plan, move-in assistance, and a replacement reserve for building improvements. The plaintiff alleges that the community fee violates G. L. c. 186, § 15B, as it exceeded the upfront costs allowed by the security deposit statute. The defendant moved to dismiss the suit, arguing that ALRs are not subject to G. L. c. 186, § 15B. The motion to dismiss was granted, and the plaintiff appealed.

         We conclude that G. L. c. 19D, the ALR statute, incorporates applicable consumer protection laws, including G. L. c. 186, § 15B, but allows for additional upfront charges for the distinctive services assisted living facilities provide that are not applicable to traditional landlord-tenant relationships. Indeed, the ALR statute and corresponding regulations expressly provide for the payment of particular fees related to initial assessments of residents to determine their suitability for placement in an assisted living facility. Such services and fees have no applicability to the traditional landlord-tenant relationship, and are thus not subject to the security deposit law. Accordingly, ALRs may institute upfront charges beyond those permitted by G. L. c. 186, § 15B (1) (b), to the extent that such charges correspond to the distinct services enumerated in G. L. c. 19D, § 13, or to other services designed specifically for assisted living residences. If, however, an ALR charges upfront fees that are not used to fund such distinct assisted living services, it does so in violation of § 15B.

         In the instant case, further factual development is required to determine whether the fee at issue was permissibly charged and used for services distinct to ALRs, and thus the motion to dismiss was not properly allowed. One or more components of the defendant's community fee appear to have been charged for initial assessments mandated by the ALR statute. Such a service and fee would be specific to assisted living facilities and not governed by the security deposit statute. However, further clarification and factual development as to the purpose and use of other components of the community fee is required, particularly for the replacement reserve fee for building improvements. We cannot discern on this record whether each component of the community fee was imposed and used for services distinct to assisted living facilities but inapplicable to the traditional landlord-tenant relationship. We therefore reverse the decision allowing the motion to dismiss and remand the case to the Superior Court for further proceedings consistent with our decision.[4]

         1. Background.

         a. Facts.

         We review the allowance of a motion to dismiss de novo, accepting as true all well-pleaded facts alleged in the complaint. See Calixto v. Coughlin, 481 Mass. 157, 158 (2018). We summarize the factual allegations as set forth in the complaint and the residency agreement referenced by both parties.[5] See Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43, 45 & n.4 (2004).

         In 2013, Julia Ryan entered into an agreement with Mary Ann Morse Healthcare Corp., doing business as Heritage at Framingham (Heritage), to lease an apartment in the defendant's ALR in Framingham. The agreement, titled "Residency Agreement," provided that Heritage "hereby leases to the Resident" an apartment at the Framingham facility.

         Ryan's rent was $4, 000 per month. Prior to the commencement of Ryan's residency, Heritage required her to pay the first and last month's rent. In addition to the first and last month's rent, Heritage also charged Ryan a nonrefundable, one-time "community fee" of $2, 800. According to the residency agreement, the community fee was "intended to cover upfront staff administrative costs, the Resident's initial service coordination plan and move-in assistance, and establish a replacement reserve for building improvements." The agreement also provided that "the Community is required to pay interest to the Resident annually in keeping with the Landlord/Tenant Law Chapter 186, Section 151B(2)(a)."[6]

         In 2016, James Ryan, the executor of Julia Ryan's estate, commenced this putative class action, alleging that Heritage violated G. L. c. 186, § 15B, and G. L. c. 93A by charging new residents the community fee. Heritage moved to dismiss the plaintiff's complaint, claiming that, as an ALR, it was not subject to the security deposit statute. On March 5, 2018, a judge in the Superior Court granted the motion, concluding that the Legislature did not intend for ALRs to be subject to the security deposit statute. The plaintiff appealed.

         In May 2017, while the motion to dismiss was still pending, a different judge in the Superior Court concluded that the security deposit statute did apply to ALRs. See Gowen v. Benchmark Senior Living LLC, Mass. Super. Ct., No. 1684CV03972- BLS2 (Suffolk County May 9, 2017). The Gowen decision recognized, however, a possible exception to the fee restrictions imposed by G. L. c. 186, § 15B, in the context of ALRs, stating:

"The statutory limitation on fees imposed by residential landlords only governs fees charged for a 'tenancy.' To the extent that [the defendant] or another assisted living facility operator provides its residents with services that are beyond the scope of a typical residential tenancy, it is entitled to charge for those services and may do so without running afoul of § 15B." (Citation omitted.)

Id. at 3-4. The judge went on to conclude, however, that the plaintiff had plausibly alleged facts suggesting that the community fee "was assessed at least in part as a charge for her residential tenancy, and not for separate activities or services." Id. at 4. That judge reached a similar conclusion again in another case in August 2018. See Hennessy v. Brookdale Senior Living Communities, Inc., Mass. Super. Ct., No. 1784CV04215-BLS2 (Suffolk County Aug. 1, 2018). In light of the conflicting reasoning and outcomes on this issue by judges in the Superior Court, we transferred the plaintiff's appeal to this court on our own motion.

         b. Relevant statutes.

         i. The security deposit statute.

         The Legislature enacted the security deposit statute "as part of an elaborate scheme of rights and duties to prevent abuses and to insure fairness to the tenant." Meikle v. Nurse, 474 Mass. 207, 212 (2016) . "In passing the [security deposit statute], the Legislature recognized that tenants have less bargaining power than landlords and are less able to vindicate their rights in court." Phillips v. Equity Residential Mgt., L.L.C., 478 Mass. 251, 254 (2017). See Mellor v. Berman, 390 Mass. 275, 282 (1983) (explaining that § 15B manifests Legislature's "concern for the welfare of tenants in residential property who, as a practical matter, are generally in inferior bargaining positions and find traditional avenues of redress relatively useless"). Accordingly, § 15B "protects tenants by providing clear guidelines for landlords to follow with regard to handling security deposits." Phillips, supra.

         Section 15B provides, inter alia, that "[a]t or prior to the commencement of any tenancy, no lessor may require a tenant or prospective tenant to pay any amount in excess of" four enumerated charges. G. L. c. 186, § 15B (2) (b). Specifically, lessors are limited to charging the first month's rent, the last month's rent, a security deposit equal to the first month's rent, and the purchase and installation cost for a key and lock. Id. Charging any amount in excess of those four permissible fees is considered an unfair or deceptive practice in violation of G. L. c. 93A. See 940 Code Mass. Regs. § 3.17(4)(a) (1993).

         To the extent that a landlord charges a permissible upfront fee, § 15B also imposes specific requirements as to the handling of those fees. If a landlord chooses to require a security deposit, the landlord must hold the deposit in a "separate, interest-bearing account in a bank, located within the commonwealth under such terms as will place such deposit beyond the claim of creditors of the lessor." G. L. c. 186, § 15B (3) (a.) . If a landlord chooses to require the last month's rent upfront, the landlord must "pay interest at the rate of five per cent per year or other such lesser amount of interest as has been received from the bank where the deposit has been held." G. L. c. 186, § 15B (2) (a). The landlord must also provide the tenant with yearly receipts as to the amount of interest ...

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