Tedford v. Massachusetts Housing Finance Agency

• Citation: 390 Mass. 688,459 N.E.2d 780
• Parties: Althea TEDFORD et al. 1 v. MASSACHUSETTS HOUSING FINANCE AGENCY et al. 2 (and a consolidated case 3 ).
• Decision Date: 05 January 1984
• Court: United States State Supreme Judicial Court of Massachusetts

Page 780

459 N.E.2d 780

390 Mass. 688

Althea TEDFORD et al. ¹

v.

MASSACHUSETTS HOUSING FINANCE AGENCY et al. ² (and a consolidated case ³).

Supreme Judicial Court of Massachusetts Suffolk.

Argued Nov. 1, 1982.

Decided Jan. 5, 1984.

Raymond J. Brassard, Boston (Brian M. Hurley, Boston, with him), for Massachusetts Housing Finance Agency.

Barbara J. Rouse, Boston, for Piano Craft Guild Associates.

George A. O'Toole, Jr., Boston, for William Langelier & others.

Paul R. Collier, III, Boston (Deborah L. McCutcheon, Boston, with him), for Althea Tedford & others.

Michael D. Cutler, Boston, for Frankie Bunyard & others.

Before HENNESSEY, C.J., and WILKINS, ABRAMS, NOLAN, LYNCH and O'CONNOR, JJ.

HENNESSEY, Chief Justice.

The plaintiffs, residents of two housing complexes financed by the Massachusetts Housing Finance Agency (MHFA), St.1966, c. 708 (the Act ⁴ ), brought separate actions in the Housing Court, Boston Division, against the MHFA and the developers of the two complexes. ⁵ They sought injunctive and declaratory relief to prevent rent increases and the conversion of the complexes' master electrical metering systems to individual meters. Both the rent increases and the meter conversions had been approved by the MHFA pursuant to its duty, under § 6 of the Act, to approve the rents charged at developments financed by the MHFA. ⁶ By decisions dated November 18, 1981, and November 24, 1981, a judge of the Housing Court entered orders (1) granting preliminary injunctions as to the conversions of domestic electricity from master to individual metering, and (2) denying preliminary injunctions with respect to the rent increases. On December 15, 1981, the two actions were consolidated for purposes of appeal. A week later the judge allowed the parties' joint motion to report certain legal issues to the Appeals Court and to stay further proceedings pending appeal. G.L. c. 231, § 111. Mass.R.Civ.P. 64, 365 Mass. 831 (1974). We allowed the applications by all the parties for direct appellate review.

Althea Tedford is a tenant of Landfall West, a fifty-nine unit apartment complex financed by the MHFA. The MHFA offers mortgage loans at favorable interest rates to developers to construct rental housing in which at least one quarter of the tenants will be low income persons or families. In addition to MHFA financing, Landfall West receives an interest reduction subsidy from the Federal Department of Housing and Urban Development (HUD), reducing the mortgage loan interest rate to one per cent. 12 U.S.C. § 1715z-1(f) (1976 & Supp. III 1981) (section 236 program). As a result, the MHFA and the owners of Landfall West are subject to Federal regulations, codified at 24 C.F.R. 401.1-401.6, issued in connection with the section 236 program.

The MHFA has developed a "Policy and Operating Procedures Handbook" (handbook) governing many of its procedures under the Act. In particular, the handbook specifies the materials which an owner must prepare when requesting a rent increase, and the procedure to be followed in reviewing a request. The MHFA considers that, subject to any applicable Federal regulations, the handbook's provisions may be changed by the MHFA at any time. The MHFA asserts that the handbook was "formally adopted and published on July 7, 1981." However, it is not clear to what extent or how the handbook is made available to the public or to tenants of MHFA projects.

Since the spring of 1980, the owners and the MHFA have tried to remedy financial difficulties at Landfall West. In July, 1981, Peabody Properties, Inc., acting on behalf of the owners, submitted to the MHFA a request for a rent increase and a proposal for converting domestic electricity, not including heat, from master to individual metering. The parties agree that notice of the requests was given to the tenants and that a meeting with tenants was held at the Landfall West complex. The tenants were also permitted to submit written comments to the MHFA, and tenant representatives appeared and spoke before the MHFA Management Policy Review Committee (MPRC). The MHFA staff recommendation approving the proposal had been presented to the MPRC before the deadline for submission of, and receipt of, tenant comments. The MPRC approved both the rent increase and the meter conversion. At a later, regularly scheduled meeting, the MHFA board of directors, following the recommendation of the MPRC, approved the rent increase for Landfall West in a single vote approving rent increases for eleven developments.

Tedford then filed an action contending that the process used by the MHFA to consider the proposals was defective because it was a sham, and because the MHFA was operating in violation of the Act, and the Massachusetts Administrative Procedure Act, G.L. c. 30A, in failing to adopt regulations establishing standards for making rental determinations.

Frankie Bunyard is a tenant of the Piano Craft Guild, a 174 unit apartment complex financed by the MHFA in 1974. In addition to MHFA financing, the Piano Craft Guild receives an interest reduction subsidy, funded by the Commonwealth's Department of Community Affairs and administered by the MHFA. Section 13A of the Act. On August 17, 1981, The Shoreline Corporation, acting on behalf of the owners, submitted two alternative rent increase proposals to the MHFA. The first proposal requested a six per cent rent increase and individual meter conversion, excluding heat. The second proposal sought a seventeen per cent increase.

Notices were posted in the building stating that the MHFA would vote on the proposals at its October, 1981, meeting. Bunyard alleges that the tenants were never notified that the proposals would first be considered by the MPRC and that this would be the tenants' sole opportunity, other than by letter, to contest the requests. Bunyard further alleges that the tenants were never informed of the existence of the MHFA handbook. There was a meeting at the complex at which tenants were able to direct some comments and questions to representatives of the managing company.

On September 16, 1981, a tenant inadvertently learned of the September 21, 1981, MPRC meeting. Despite the short notice, at least one tenant appeared and was allowed to make a brief statement. On October 6, 1981, the MHFA board approved the owner's request for a six per cent rent increase and conversion to individual electric metering.

Bunyard then filed an action contending that the meter conversion was an agency policy illegally adopted and implemented, and that the procedure used to consider the rent increase request was invalid because it deprived tenants of a meaningful opportunity to participate, and because the agency had no standards or criteria for approving such requests.

The judge has reported several issues for our consideration, which we summarize as follows. (1) Is the MHFA an "agency" within the meaning of the Administrative Procedure Act, G.L. c. 30A, § 1(2)? (2) Is the MHFA required to adopt and promulgate regulations establishing criteria for evaluating proposals for changing rent levels or for conversion of utility metering to an individual metering system at an MHFA development by the Administrative Procedure Act, by the Act, or by the United States or Massachusetts Constitution? (3) Is the MHFA required to conduct an adjudicatory hearing, as defined in the Administrative Procedure Act, with respect to a proposal for changing rent levels or for conversion of utility metering at an MHFA development, by the Administrative Procedure Act, by the Act, or by the United States or Massachusetts Constitution? In addition, both sides challenge the judge's decision to enjoin the meter conversions and not to enjoin the rent increases. ⁷

After the Housing Court's decisions in the instant cases, the Legislature passed an amendment to § 3 of the Act, providing, inter alia, that "the MHFA shall not be subject to the provisions of chapter thirty A of the General Laws." St.1981, c. 789, § 8. The amendment was effective January 11, 1982.

Statutory Provisions as to Rent.

The plaintiffs' principal argument is that the challenged rent adjustments were not made in accordance with regulations required by statute. The plaintiffs contend that regulations were required both by the Administrative Procedure Act, G.L. c. 30A, and by the Act. As to c. 30A, we disagree. The Administrative Procedure Act does not require an agency to promulgate regulations. Rather, it specifies the procedures to be used in promulgating regulations otherwise required. G.L. c. 30A, §§ 2 and 3. As to the Act, § 6 ⁸ discloses that regulations are required in only a narrow area, namely, certain "determinations" relating to "market rate rental," "below-market rate rental," and "adjusted rental." See § 6(a ). Nowhere else in the statute are there words mandating the adoption of regulations pertaining to rents. ⁹ See, in § 6(b ) and (c ), the references to "rents to be charged" and "rentals," without reference to regulations. Nevertheless, we think that § 6(a ) requires regulations as to any determinations under § 6(a ) which affect low income rents approved under § 6(b ).

The plaintiffs argue, and the defendants appear to concede, that if the Administrative Procedure Act, G.L. c. 30A, is applicable to MHFA, then any regulations required by the Act were invalid in at least the failure of MHFA to publicize and seek comment upon the regulations before they were adopted. See G.L. c. 30A, §§ 1 and 3. It is clear to us that c. 30A was, but is not now, applicable to MHFA. ¹⁰ From this, the plaintiffs urge that the rent adjustments fail. We have said that decisions made without required regulations are invalid (see Massachusetts Gen. Hosp. v. Commissioner of Pub. Welfare, 346 Mass. 739, 196 N.E.2d 181 [1964] ), but this principle is to be applied here with reference to the special provisions of § 6 of the Act, which establish the kind of highly specific...