US Regional Real Estate 2021 Comparisons

Last Updated May 14, 2021

Law and Practice


Greenberg Traurig, LLP has more than 400 attorneys in its real estate practice, which is a recognized leader in the industry, serving clients from key markets around the world. The Boston real estate team handles all aspects of real estate law, including acquisition, financing, planning, development, leasing, taxation, operation, foreclosure, restructurings and disposition of real estate. The Boston real estate team is particularly well known for handling complex zoning, environmental and land use matters, office, laboratory, hotel, research and development, industrial and retail transactions, eminent domain disputes, urban redevelopment issues and relocation.

Real estate law requires diversified skills which are tailored to specific transactions. Clients have different needs and approach deals with different goals and concerns. Real estate attorneys must be able to work with each client, explain the complexities and unique aspects of a transaction to the client, determine the client’s objectives and tolerance for risk, and then close the transaction in a way that satisfies the client’s goals.

This requires attention to detail, the ability to anticipate issues, and the ability to differentiate between likely and theoretical problems. Real estate law also requires that each deal be viewed holistically. Any transaction may involve land use, environmental law, government relations, tax law, corporate law, finance, construction, and bankruptcy and reorganization.

An understanding of the typical business practices in a variety of asset classes is critical, including hospitality, office, bioscience, retail, multi-family, and industrial.

Trends and deals occurring in Massachusetts cannot be shared at this time.

For personal income tax purposes, Massachusetts law defines income by reference to the Internal Revenue Code (IRC). In current law there are two sets of references.

Massachusetts generally conforms to the provisions of the IRC as amended on January 1, 2005 and in effect for the taxable year. Thus, any federal tax law changes incorporated into the IRC after January 1, 2005 are, as a general rule, not adopted. For example, Qualified Opportunity Zones (IRC Section 1400Z-1 and IRC Section 1400Z-2) added by the Tax Cuts and Jobs Act are not currently incorporated into Massachusetts law.

Accordingly, gain from the sale or exchange of property that is deferred under Subchapter Z for federal purposes must be recognized in the year of the sale or exchange for Massachusetts personal income tax purposes. In addition, the federal basis adjustments do not apply in calculating any future gain that may be recognized upon the sale or exchange of an investment in a qualified opportunity fund (Massachusetts Technical Information Release No 19-7, 06/17/2019).

Income Tax Provisions

Additionally, certain specific Massachusetts personal income tax provisions, as set forth in Massachusetts General Law Chapter 62Section 1, automatically conform to the current IRC. The provisions of the IRC currently adopted are (according to Massachusetts General Law Chapter 62 Section 1):

  • Roth IRAs;
  • IRAs;
  • the exclusion for gain on the sale of a principal residence;
  • trade or business expenses;
  • travel expenses;
  • meals and entertainment expenses;
  • the maximum deferral amount of government employees' deferred compensation plans;
  • the deduction for health insurance costs of self-employed taxpayers;
  • medical and dental expenses;
  • annuities;
  • health savings accounts;
  • employer-provided health insurance coverage; and
  • amounts received by an employee under a health and accident plan. 

There have been no recent changes in ownership structures in Massachusetts. The most prevalent form of real property ownership continues to be a limited liability company (LLC), either formed in Massachusetts or in another state and registered to transact business in Massachusetts with the Massachusetts Secretary of State. The protections available through ownership of an LLC in Massachusetts are similar to other jurisdictions, namely limitations on member liability, flexibility of structure and few corporate formality requirements.

A unique form of real estate ownership in Massachusetts is a nominee trust, which is a "pass-through" entity and provides some degree of anonymity regarding the beneficial owners of the real estate.

There are no express requirements that are applicable to the transfer of different types of real estate (eg, residential, retail, hotel, industrial) in Massachusetts (though, with hotels and other operating businesses, parties must consider labor laws, sales taxes, and requirements for the transfer of permits). Specific requirements apply to properties in shoreland and tidal areas, properties containing wetlands, and properties with environmental contamination.

The typical instrument of transfer in Massachusetts (for residential and commercial properties) is a quitclaim deed, which conveys real property with covenants to defend title to the real property from all others claiming by, through or under the grantor (this is similar to a limited or special warranty deed in other jurisdictions). What is typically known as a quitclaim deed in other jurisdictions (ie, a conveyance without any warranties) is a release deed in Massachusetts. All deeds in Massachusetts must recite the actual consideration for the transfer.


A deed must be signed by the grantor, acknowledged and signed by a notary in a properly-formatted notary acknowledgement, and contain an adequate real property description and the source of the grantor’s ownership (ie, recording information for grantor’s vesting deed). Deeds should be on white paper no larger than 8.5 inches by 14 inches, single-sided, and leave at least a 3-inch margin on the top right corner of the first page. For a grantor that is an entity, deeds are typically recorded along with a good standing certificate of such entity (obtained from the Massachusetts Secretary of State).

Registered Land

Massachusetts has a separate system for registering deeds and other title documents for what is called "registered land". Title to registered land is certified by the Massachusetts Land Court, and requires that a property owner has successfully petitioned the Land Court to obtain title certification, and that all documents to be "filed" on title to such land be subject to enhanced scrutiny by the Land Court staff before being accepted for filing. One advantage of registered land is that it is immune to claims of adverse possession. For a transaction involving registered land, it is important to work with a title company that has sufficient experience with registered land, as this adds a layer of complexity to a transaction.

Recording Deeds

Deeds are typically recorded with the registry of deeds for the county in which the real estate lies (some counties are further divided geographically), and for registered land, deeds are filed with the Land Court in the same geographical jurisdictions. Recording and filing of deeds is typically done by a title company, which serves as an escrow agent for a transaction. It is rare to have in-person closings for commercial transactions, though residential transactions are still typically closed in person.

Notice Jurisdiction

Massachusetts is a "notice" jurisdiction, meaning that a subsequent bona fide purchaser prevails over a prior grantee which failed to record its deed, whether or not the subsequent bona fide purchaser records its deed. In most commercial transactions, and nearly all residential transactions, escrow is only broken once the deed and other documents are recorded. However, in commercial transactions, title companies also will break escrow based on a "gap indemnity" given by the grantor.

Buyers in Massachusetts typically engage third parties to conduct due diligence, ie, appraisals, property condition reports, environmental reports, zoning reports, surveys, and title searches. Often, attorneys will order and review the title searches, surveys, zoning reports, and sometimes environmental reports, while the clients typically order and review the appraisal and property condition reports.

Due diligence also typically involves a review of all financial information regarding the property (eg, budgets, operating statements, tax and other bills), as well as a review of all property agreements (eg, leases and service contracts), the latter of which are sometimes reviewed by attorneys. There have been no recent changes to the allocation of responsibility.

Representations and warranties vary widely by contract and type of property. However, most agreements include seller representations regarding authority, pending litigation, violations of laws, and payment of real and personal property taxes. Remedies for seller misrepresentations are generally also covered by contract, and typical contracts will include a cap on damages payable by a seller.

In cases of fraud, a buyer can generally sue for damages in excess of the cap, and in cases in which a buyer can show "unfair or deceptive" business practices under the Massachusetts Consumer Protection Statute (Massachusetts General Laws, Chapter 93A) a seller can be sued for triple damages, plus attorneys’ fees.

In residential transactions, Massachusetts law provides additional consumer protections for buyers, including sellers’ mandatory disclosure of the existence of lead paint (if known), and status of a septic system and other material issues. Brokers also have a duty to investigate and respond accurately to questions regarding the existence of any defects.

Foreign investors need to be concerned with federal and state tax issues. The ownership structure may have a great impact on taxes from operating income and from a sale of the property or an interest in the property. Foreign investors also need to understand if they will be subject to other federal or state regulatory laws, including securities regulations, environmental laws, foreign corrupt practices statutes and laws requiring the reporting of the acquisition of ownership of US real estate.

If foreign investors will have a controlling interest in the owner, the transaction may be reviewed by the federal government. The Foreign Investment in Real Property Tax Act can subject foreign investors to federal income tax liability and the withholding of proceeds from a sale or transfer. Recent changes to CFIUS have not had a major impact in Massachusetts.

Massachusetts General Laws, Chapter 21E, provides that if a release of hazardous materials occurs on a property, all past and present owners and operators of the property could be held liable for the release by the Commonwealth of Massachusetts. Purchasers of real estate could be liable for a release of hazardous materials or oil even if the purchaser did not cause the environmental contamination. Commercial real estate purchase and sale agreements typically include:

  • representations and warranties from the seller stating that the seller has made available all environmental site assessments in its possession and stating either that the seller knows of no environmental proceedings involving the property or that the seller has listed any such proceedings;
  • provisions allowing the purchaser to conduct an environmental site assessment, but not allowing any environmental testing without the seller’s approval;
  • provisions allowing the purchaser to terminate the agreement if the purchaser is not satisfied with the environmental condition of the property; and
  • a release of the seller of any claims by the purchaser for environmental issues if the transaction is consummated.

Zoning is governed by state laws and by municipal ordinances (cities) or by-laws (towns). Municipal zoning varies greatly. A buyer of commercial property typically has its counsel perform a zoning analysis of the property during due diligence. In many commercial transactions, buyers also obtain zoning endorsements to the owner’s policy of title insurance.

Some municipalities will provide a zoning letter certifying that a property is complies with current zoning, but most municipalities will provide only a statement of the existing zoning classification for a property, along with a statement that there are no known violations (if applicable).

Buyers or potential buyers who wish to change the zoning of a property may seek approvals and permits from local jurisdictions (with the consent of the then-current owner). See 4.5 Agreements with Local or Governmental Authorities.

Governmental takings of land may be effectuated by the state, a municipality, or a local redevelopment authority. The risk of a taking largely depends on the location of the land, with land that is adjacent to rights of way or located within a redevelopment area being more likely to be taken for a public purpose. Takings are generally accomplished by the recording of an order of taking by the taking authority, which essentially clears title to the property, with awards based on an appraised value of the interests in the property.

It is common for taking authorities to negotiate a taking (and the taking award) in exchange for a release from the landowner. When conducting its diligence, a buyer should inquire with the seller and the municipality regarding any proposed plans for a taking of the property. In general, an owner cannot prevent a taking, but can challenge the amount of the award.

All counties in Massachusetts, except Barnstable county, impose a transfer tax of USD4.56 per USD1,000 of consideration. Barnstable County imposes a transfer tax of USD6.48 per USD1,000 of consideration. Dukes County and Nantucket County also impose a land bank fee of 2% of a property’s purchase price.

By statute and custom, transfer taxes are the seller’s responsibility, but parties may provide in their agreement that a buyer will pay. The amount subject to a transfer tax is “exclusive of the value of any lien or encumbrance remaining thereon at the time of the sale”, so if a buyer is assuming an existing loan secured by the property, transfer taxes are due on the purchase price less the outstanding balance of the loan.

The fee for recording a deed is typically USD155 and paid by the buyer, but fees for recording any authority documents or title-clearing documents (typically USD105) are paid by the seller. No transfer tax is due if the consideration exchanged is less than USD100.

The Massachusetts Department of Revenue has not adopted any policy requiring that a transfer tax be paid upon the transfer of a direct or indirect interest in an LLC, limited or general partnership or a corporation. Transfer taxes are due in connection with the transfer of a beneficial interest in a nominee trust.

See 2.6 Important Areas of Law for Foreign Investors.

Acquisitions of commercial real estate are generally financed with the sponsor and other equity investors providing a percentage of the acquisition cost and the remainder of the acquisition cost being provided by a lender or lenders. Most institutional lenders will not finance more than a percentage of a property’s value and will not lend more than a certain amount of money to a borrower and a borrower’s affiliates. In larger transactions, and transactions involving multiple properties, more than one lender is often involved.

The major lender makes a loan to the property owner, and the loan is secured by a mortgage on the owner’s interest in the property. Other lenders either make subordinate loans to the property owner, and receive junior mortgages, or make so-called "mezzanine loans" to entities which own an interest in the property owner. Mezzanine lenders typically receive as security a pledge of the mezzanine borrowers’ interests in the property owner.

If the borrower is a privately held entity, lenders also often receive a guaranty from the sponsor and other key individuals involved in the development. The guaranty may guaranty repayment of the loan, or it may only guaranty any damages the lender suffers as a result of "bad acts" by the borrower or the property owner, such as misallocation of rents, waste or bankruptcy filings.

A mortgage is the most common type of security interest created by a commercial real estate investor or entity which is borrowing funds to acquire or develop real estate. The property owner may grant more than one mortgage to a lender and it may grant different mortgages to different lenders.

Holders of interests in a property owner often pledge their interest in the property owner as security for loans from mezzanine lenders. Once funds are received by borrowers, they are invested by the borrowers in the property owner and are used to acquire, develop or operate the property. Generally, the relative rights between the holders of each mortgage and the holder of each pledge of an interest in the borrower are set forth in an intercreditor agreement executed by all lenders.

Absent an intercreditor agreement, the senior mortgage lender generally would prohibit the property owner from granting any other mortgages and would prevent owners of interests in the property owner from pledging those interests as security.

Mortgages are perfected by recording a mortgage in the applicable registry of deeds. With respect to a security interest created by a pledge of interests in the property owner, mezzanine lenders require that the property owner "opt in" to Article 8 of the Uniform Commercial Code and that interests in the property owner be represented by certificates. Mezzanine lenders take possession of the certificate issued to the mezzanine borrower and also record a Uniform Commercial Code as required under the laws of the mezzanine borrower’s state of organization.

A lender may be required to qualify to do business in Massachusetts based on its level of activity in Massachusetts. If a lender is required to qualify to do business in Massachusetts, but does not qualify to do business in Massachusetts, the failure to qualify may adversely affect the lender in connection with certain matters such as access to Massachusetts courts, and payment of Massachusetts taxes, fines and penalties. However, the lender can cure its failure to qualify to do business before taking any action to enforce its loan documents; see 2.6 Important Areas of Law for Foreign Investors.

Massachusetts does not assess mortgage recording taxes. The cost to record a mortgage is USD205. See 2.10 Taxes Applicable to a Transaction.

Generally, there are no legal rules and requirements that must be satisfied by a borrower before granting a security interest in real estate assets. However, the borrower must satisfy all requirements set forth in its organizational documents (articles of organization, by-laws, partnership agreement, LLC agreement, etc).

The procedural and other debtor protections that must be overcome before a lender is able to enforce its rights under a mortgage are different for commercial loans and residential loans.

Residential Loan

In the case of a residential loan, a lender must first give a borrower a default notice and a 90-150-day "right-to-cure" period. If the borrower is unable to cure, the borrower can use this period to apply for a loan modification. The Service Members’ Civil Relief Act (SCRA) of 2003 also protects residential owners.


Under the SCRA, if a service member is on active duty, a lender cannot foreclose on its mortgage until 90 days after the active duty ends. Lenders go through a procedure with the Land Court to determine whether a borrower is covered by the SCRA. A lender also records an affidavit attesting that it holds the note (or is acting on behalf of the holder of the note), that it holds the mortgage and that it has reviewed the mortgage to determine whether certain subprime characteristics are present. After all of these procedures are satisfied a lender can proceed to foreclose its mortgage.

Mortgage Foreclosure

Mortgage foreclosure typically occurs by making entry onto the mortgaged premises and by following a non-judicial foreclosure process. Foreclosure by entry typically occurs on the same day as the non-judicial foreclosure sale. If the lender maintains peaceable possession of the mortgaged premises for three years from the date of entry, the borrower no longer has a right to redeem the property.

Non-judicial foreclosure requires that the mortgage state that the mortgagee has the "statutory power of sale". If the mortgage contains the statutory power of sale, then the lender would proceed to foreclose by giving notice to the borrower and any guarantors and by publishing a notice once a week for three weeks in a newspaper published in the county where the property is located. The first publication must be at least 21 days before the sale. Following the sale of the property at the foreclosure sale, the borrower has no right to redeem the property.


In order for a lender to obtain a deficiency from a borrower or guarantor, a deficiency notice must be sent at least 21 days before the foreclosure sale and the lender must sign and swear to an affidavit within 30 days after the foreclosure sale. A deficiency action generally must be brought within two years after the foreclosure sale.

Existing secured debt can be subordinated to newly created debt by an agreement between the lenders. Such agreements occur often in commercial real estate transactions.

With limited exceptions, any advance of funds made under an existing secured debt will not have the same priority as the original secured debt unless the advance was unconditionally required to be made. Most loan agreements require that some condition be satisfied before a lender is required to advance subsequent funds. Accordingly, most funds advanced under existing loans are not unconditional advances, and those subsequently advanced funds would be subject to any intervening liens that arose after the existing secured debt was originally recorded.

Massachusetts General Laws, Chapter 21E, provides that if a release of hazardous materials occurs on a property, all past and present owners and operators of the property could be held liable for the release by the Commonwealth of Massachusetts. The Commonwealth of Massachusetts has a first priority lien on the property to secure any response costs the Commonwealth incurs. The law also provides that a secured lender is excluded from the definition of owner or operator with respect to releases and threats of releases that first began before the lender acquired ownership or possession of the site if the lender satisfies certain requirements.

Those requirements include that the lender took no action which caused the release or compelled the borrower to cause the release, that the lender undertakes a response action, and that the lender acts diligently to sell or divest itself of ownership or possession of the site. The law also sets forth the criteria to determine if the lender acted diligently.

If a security interest is created by a borrower and the lender commences a foreclosure proceeding, but the borrower files for bankruptcy before the foreclosure sale is completed, then the foreclosure sale would be subject to the bankruptcy automatic stay and could not proceed unless the automatic stay was lifted.

If the foreclosure sale was completed (ie, the auction was finished and the winning bidder and the lender signed the purchase and sale agreement) before the bankruptcy was filed, then the borrower’s right of redemption would have been extinguished before the bankruptcy filing and the sale of the property could occur pursuant to the purchase and sale agreement notwithstanding the bankruptcy filing. If the sale was not completed in accordance with the purchase and sale agreement, and it became necessary to hold another foreclose sale, the subsequent foreclosure sale may be subject to the automatic stay.

Massachusetts does not impose any recording or similar tax in connection with a mezzanine loan.

Design and appearance of new buildings or refurbishment of existing buildings are commonly regulated at the local municipal level through zoning ordinances or by-laws. Zoning requirements for design and appearance generally involve a non-discretionary site plan or design review by a municipal planning board.

Additional non-zoning design requirements may also apply, including general ordinances and bylaws applicable to historic districts, neighborhood districts, earth removal, scenic roads, wetlands, signs and billboards, and public shade trees.

Methods of construction are governed by the State Building Code, enacted to eliminate local building codes in favor of a comprehensive code to be applied uniformly across the state. However, the State Building Code is administered by the municipal building inspectors.

The development and designated use of individual parcels of real estate in Massachusetts is primarily regulated at the local level through zoning. Of the 351 cities and towns in Massachusetts, all but the City of Boston are subject to the Zoning Act (Massachusetts General Law, Chapter 40A). Boston’s zoning enabling act is set forth in 1956 Massachusetts Acts, Chapter 665.

Zoning typically regulates uses, building dimensions, frontage requirements, site plan approval, impacts on water resources, parking and loading.

If a project is allowed by-right, then an applicant proceeds to obtain a building permit from the local building inspector. If a project is not allowed by-right, then an applicant must obtain relief from a municipal permit granting authority. Zoning relief is generally divided into two categories: variances and special permits.

Applications for special permits or variances must be filed with the city or town clerk and with the applicable municipal permit granting authority. Additional procedural requirements, include publication, posting and mailing notices to "parties in interest". The following provisions are generally applicable:

  • public hearing on a special permit must be held within 65 days after the filing of the application;
  • final action on an application for a special permit must be taken within 90 days after the close of the public hearing; and
  • final action on an application for a variance must be taken within 100 days after the filing of the application.

In either case, a copy of the decision must be filed within 14 days of the final action in the office of the city or town clerk.

Any "person aggrieved" (as defined by statute and as interpreted by  courts) or "any municipal officer or board", may appeal the grant of a special permit or variance. Appeals based on procedural defects must be filed within 90 days following the filing of the decision with the city or town clerk. Other appeals ("substantive" appeals) must be filed within 20 days of the filing of the decision with the clerk.

Agreements can be entered into with municipalities to facilitate developments, but must be fashioned to avoid being illegal "contract zoning" on the basis that a municipality may not contract away its police power. The preferred approach is to have agreements executed in advance without a promise by the governmental authority to grant the permit or enact the zoning change, but also to have the agreements be effective simultaneously with the granting of the permit or enactment of the zoning and expiration of any appeal periods.

Valid restrictions in special permits and variances are typically enforced by the municipal building inspector.

There are many entities available to acquire and hold real estate assets, including LLCs, corporations, partnerships, and trusts. LLCs are the most commonly used entity (see 2.1 Ownership Structures), but each entity type presents unique advantages and disadvantages, as discussed below.

Using a distinct entity to hold real estate may limit:

  • an owner’s liability for claims arising from the underlying premises;
  • the ability for a claimant to seek an owner’s assets held outside of the entity; and
  • non-controlling investors’ liability.

It is common for owners of real estate to create distinct "single purpose entities" for each property they own.

Limited Liability Companies

Massachusetts LLCs are governed by the Limited Liability Company Act (Massachusetts General Laws, Chapter 156C). LLCs are managed either by their manager(s) or their member(s), which are listed in their operating agreements. Operating agreements for LLCs are generally more customizable than articles of organization of corporations. Operating agreements are not publicly filed.

Managers and members of LLCs can be natural persons or business entities. An LLC’s managers and members are typically not personally liable for the debts and actions of the LLC.

LLCs formed in other states can hold real estate in Massachusetts, provided they register with the Massachusetts Secretary of State. If a foreign entity is the manager of a Massachusetts LLC, it will need to register with the Secretary of State (unless the Massachusetts LLC is organized to do business wholly outside of Massachusetts). If a foreign entity is the manager of a foreign LLC doing business in Massachusetts, it will need to register with the Secretary of State.

However, the manager of the manager of an LLC does not need to register in Massachusetts if it does not do any business in Massachusetts, other than manage the manager of the LLC.


Massachusetts corporations are governed by the Massachusetts Business Corporation Act (Massachusetts General Laws, Chapter 156D). A Massachusetts corporation is formed by filing articles of organization with the Secretary of State. The names and addresses of a corporation’s directors and officers must be disclosed with the filing of the articles of organization (and subsequent annual reports) and are publicly available.

Directors and officers must be individuals. A corporation’s shareholders need not be publicly disclosed. A corporation will require a set of by-laws (which are not publicly filed) in addition to the articles of organization. An out-of-state corporation can hold real estate in Massachusetts, provided it registers in Massachusetts.

Corporations are owned by their shareholders, and managed by their directors and officers. A corporation’s shareholders are typically not personally liable for the debts and actions of the corporation. Although they manage the corporation, directors and officers are not personally liable for the corporation’s actions by merely holding positions. Massachusetts corporations indemnify their directors and officers for reasonable costs of defending claims brought against them personally because of their role within the corporation.

Corporations offer some flexibility, but are generally constrained by statutory requirements pertaining to their governing documents.

Limited Partnerships

Massachusetts partnerships are governed by the Uniform Partnership Act (Massachusetts General Laws, Chapter 108A). For purposes of holding real estate, a limited partnership (LP), governed by the Uniform Limited Partnership Act (Massachusetts General Laws, Chapter 109) is more commonly used. In LPs, there are general partner(s) and limited partner(s); the liability of the general partner(s) is not limited, but the limited partner(s) do have limited liability, provided they do not manage or control the LP. This structure is typically used where the general partner is the real estate professional, providing expertise and execution of a project, and the limited partner(s) provide the capital investment. LPs are formed by filing a certificate with the Commonwealth.

As general partners are liable in LPs, they are often structured as LLCs or corporations to limit their liability as well.

Nominee Trusts

Nominee trusts may also be used to hold title to real estate. A trust is created by a Declaration of Trust, which is publicly recorded and names the trustee(s), but not the beneficiaries; the beneficiaries are named in an unrecorded Schedule of Beneficiaries. A trustee of a nominee trust has no authority to act without the direction of the trust’s beneficiaries.

A nominee trust does not provide any limitation on liability.


A corporation in Massachusetts is typically subject to income tax at the corporate level; however, certain corporations, "S corporations", may make an election to eliminate the corporate level income tax and pass the income and losses directly to its shareholders. Entities that are S corporations for federal purposes are S corporations for Massachusetts purposes, with the exception of security corporations. All corporations in Massachusetts are subject to an excise tax.

Limited Liability Companies

LLCs have the same classification for Massachusetts tax purposes as they do for federal income tax purposes. A single-member LLC will be treated as an entity disregarded as separate from its owner for Massachusetts income tax purposes, if it is disregarded for federal tax purposes.

An LLC with two or more members will be treated as a partnership if it is treated as a partnership for federal tax purposes. An LLC will be treated as a corporation for Massachusetts income tax purposes if it is classified as such for federal tax purposes.


Massachusetts partnerships are generally not subject to income tax. Instead, the income and losses pass through to the partners who pay income tax on their share of the partnership income. There are no requirements or conditions on either the partnership or its partners to take advantage of this "pass-through" tax treatment.

Nominee Trusts

Nominee trusts are not taxable entities and should not have a separate tax ID number.

See 5.2 Main Features of the Constitution of Each Type of Entity.

There are various arrangements allowing the use of real estate owned by another party for a limited period of time.

  • Easement – an easement for a specified period is used when the use involves unimproved land. It can be exclusive or not exclusive, and may benefit an owner of adjacent land, in which case it typically runs with that land until expiration, or may benefit a party in gross, in which case it does not run with any land, and often is not transferable.
  • Life estate – typically established in estate planning, and is conferred on the benefited party by a will or a trust, running for life. Usually, it is not transferable, and may not be exclusive.
  • Lease – an agreement whereby a landlord confers upon a tenant an exclusive right to occupy some portion or all of the landlord’s property for a period of time. Commonly, leaseholds can be assigned to third parties, and typically survive the transfer of the property.
  • License – an agreement not involving an interest in real property whereby a licensor confers upon a licensee a limited right to use the licensor’s real property. Commonly, a license is not transferable, and typically does not confer sole possession. It may be terminable by the licensor prior to the stated expiration date.
  • Tenancy at will – an agreement similar to a lease; it can be written or oral, and in either case is terminable by the owner of the real property on short notice pursuant to statute unless a written arrangement specifies a different notice period.
  • Tenancy at sufferance – the form of arrangement which exists when a tenant holds over after expiration, and is governed by the form of lease in terms of payment of use and occupancy charges and other issues.

There are several types of commercial leases.

Ground Lease

The landlord leases only land to the tenant for a specified term, usually decades long. The tenant pays ground rent, covers all costs and expenses and is responsible for constructing and maintaining all improvements. Upon the expiration, possession of the land and ownership of any improvements revert to the landlord.

Net Lease

The landlord usually leases an entire building to the tenant, while the tenant pays rent as well as the operating expenses for the property, such as taxes, insurance, maintenance and utilities. The extent to which the tenant pays such operating expenses varies – for instance, the landlord sometimes retains responsibility for purchasing insurance of the building, or for making structural repairs to the exterior.

Gross Lease

The landlord usually leases just a portion of the real property, and provides some services to the tenants. In office buildings the landlord typically pays the existing or "base" operating expenses for the property, and those operating expenses are then built into the base rent, with the tenant paying in each year their proportionate share of escalation charges to the extent that the operating expenses increase above the base. However, in retail buildings, the tenants typically pay their proportionate share of all operating expenses, including the base amount.

Massachusetts does not regulate the rents charged or the duration or other terms of a lease in a commercial context. However, by statute there are requirements limiting the power of a landlord to disclaim liability for its actions, and requiring a tenant to file public notice of its leasehold in order to protect its tenancy where the duration including renewals exceeds seven years. Similarly, there is case law which affects the ability of landlords and tenants to seek certain remedies in the absence of provision in a lease – for instance, commercial lease covenants are now dependent unless the lease provides otherwise.

Commercial lease terms, whether net or gross leases, typically range from five to 15 years. Ground leases commonly have terms ranging from 40 to 99 years.

Net Lease

The tenant is commonly responsible for maintaining and repairing the improvements and the surrounding land, and for paying for the cost of insurance, but sometimes the landlord retains responsibility for maintenance of the structural elements of the building and of the surrounding property, and for purchasing the insurance for the property.

Gross Lease

The landlord is typically responsible for maintaining common areas within the building and the surrounding real property, and for purchasing insurance for the real property, with the costs being built into the base rent and escalations in an office context. The landlord commonly provides routine cleaning services to the tenant, but the tenant commonly remains liable for damages to the leased premises.

Rent Payments

Typically made monthly, although in a ground lease it is not unusual for rent to be paid annually or quarterly. Escalation charges are usually computed annually, with estimated payments made until actual expenses are known. Percentage rent is often payable in a retail context; typically, that computation is done on an annual basis, with payments on an estimated basis until actual sales figures are available.

Commercial rents commonly increase annually in accordance with negotiated increases. Office leases typically provide for rents to be adjusted to market at the point of a renewal or extension, or on a cost-of-living adjustment basis. Retail leases usually have fixed base rents, with a percentage rent payment that is tied to annual sales.

Annual base rent increases are commonly negotiated in advance. Increases can be expressed in terms of a fixed amount or square-foot amount based upon a formula, such as the Consumer Price Index. Where parties cannot agree upon the rent at the point of renewal or extension, parties usually agree to arbitrate the matter before brokers having at least ten years of experience.

VAT is not payable on commercial rents, although the rents paid to a landlord may be subject to income taxation assessed upon the owner.

The costs payable by a tenant at the start of a commercial lease depend in part on whether the lease is a ground lease, a net lease or a gross lease. In a ground lease, the tenant is usually responsible for all costs of construction of improvements on the land. In a net lease, the tenant is responsible for constructing or remodeling any existing improvements and for the payment of all related expenses. In a gross lease, landlords commonly deliver space with mechanical services stubbed to the premises, giving the tenant a dollar allowance for the construction of the tenant’s improvements.

Alternatively, the landlord may be responsible for building out the space to meet the tenant’s needs as set forth in plans of the premises. These "turnkey" leases may include a cap on the landlord’s construction costs, with the tenant responsible for the balance.

In a commercial ground lease and a net lease, the tenant is commonly responsible for all maintenance and repair costs. In a commercial gross lease the landlord commonly pays for maintenance and repair of the building structure, and common areas used by several tenants, such as lobbies, elevators, parking lots and gardens, while tenants are commonly responsible for maintenance and repair costs relating to the tenant’s premises.

However, commercial tenants are often responsible for reimbursing the landlord for their pro rata share of operating expenses, which includes the expenses incurred by the landlord in maintaining the building structure and the common areas.

In a commercial ground lease and a net lease, the tenant is commonly responsible for all costs of services, utilities and telecommunications.

In a commercial gross lease, the costs of services, utilities and telecommunications to the common areas are part of the base rent and escalation charges, and the costs of services, utilities and telecommunications to the premises are commonly paid for by tenants based  upon actual usage or estimated on a relatively predictable basis (for instance, each tenant’s space often is metered for electricity), or the tenant pays pursuant to a formula or a fixed electrical charge that is estimated at the commencement.

In a gross lease the payment for charges for heating, ventilation and air conditioning (HVAC) depends on how the property is designed. Often, tenants are all served by a single universal HVAC system during business hours (with the expenses built into the base rent and escalations), and such tenants are commonly subject to special charges for after-hours HVAC. In some buildings the HVAC system is designed so that each premises has its own HVAC system, with expenses charged to the respective tenant. In addition, tenants often have their own supplemental cooling system for data and telecom rooms with expenses charged to that tenant.

In a commercial ground lease and a net lease, the tenant is commonly responsible for all costs of insurance. In a commercial gross lease, the landlord is typically responsible for obtaining all insurance, and the costs are built into the base rent and escalations charged to the respective tenants. In addition, each tenant typically obtains insurance for its business fixtures and other personal property located in the premises.

There is usually a lease provision obliging each party to secure a waiver of subrogation from its respective insurer, although sometimes the language requires this only if such a waiver is available without additional premium.

Landlords commonly impose general restrictions on the tenant’s use of the premises via the permitted use provision. The tenant’s use can also be affected by restrictions relating to the office park, mall or industrial park within which the property is located, as well as zoning, building, health and environmental laws and regulations. Leases sometimes also grant specific exclusive use rights to individual tenants, particularly in the retail context.

In a ground lease and a net lease, the tenant commonly has the ability to alter or improve the real property with the landlord’s approval, including structural and non-structural changes.

In a gross lease, tenants are typically permitted to alter or improve the premises with the landlord’s prior approval, and landlords generally allow non-structural changes not affecting building system. A lease usually contains a limit on the cost and type of alterations a tenant can make without the landlord’s approval.

Commercial leases are generally governed by the lease terms. For instance, it is common for leases to include specific provisions regulating tenant behaviors so that a multi-tenanted property is utilized appropriately. There are also regulations at the state and municipal levels that would affect certain aspects of a tenancy and laws specific to particular uses, such as the operation of hotels, restaurants, bars, etc.

With respect to residential leases, see 6.3 Regulation of Rents or Lease Terms and 6.8 Costs Payable by Tenant at the Start of a Lease.

The effect of the tenant’s insolvency upon its lease obligations is governed by the applicable bankruptcy, insolvency and creditors’ rights statutes.

When the tenant files for bankruptcy under federal bankruptcy law, an automatic stay is imposed which initially restricts the enforcement of remedies or the termination of the lease by the landlord, absent relief from the bankruptcy courts. Thereafter, there are specific requirements under bankruptcy law with respect to whether a lease is to be assumed or rejected, and which establish the methods for calculation and recovery of rents unpaid as of the date of the bankruptcy filing.

At lease execution a landlord commonly requires a security deposit from the tenant to protect against default.

The amount of the security deposit is a matter of negotiation and may depend on the amount of rent, the landlord’s upfront costs and the tenant’s financial condition. The security deposit may be in the form of cash, a letter of credit, or a guaranty by a parent entity that controls the tenant.

A letter of credit or a parent guaranty is generally considered more desirable to a landlord than a cash security deposit as such forms of security deposit place the landlord in a better position in the event of the bankruptcy of the tenant.

Upon expiration or earlier termination of a commercial lease, the tenant’s rights are converted into a tenancy at sufferance, and the tenant commonly has no right to occupy.

Commercial leases in Massachusetts commonly have a "holdover" provision that states that if a tenant continues to occupy the premises after the expiration or termination of the lease, then the tenant must pay as use and occupancy charges for the holdover period a multiplier of the rent for the last month of the lease (typically 150% to 200%) and become a tenant at sufferance.

There are no generally applicable statutory rights pertaining to commercial lease termination, except in the context of the insolvency or bankruptcy of the tenant. The subject of termination rights is generally a matter of negotiation between the landlord and the tenant.

Termination by Tenant

Some events typically give a tenant the right to terminate the lease. For example, leases typically states that if the landlord fails to complete the build-out in a timely manner, the tenant has the right to terminate after a further specified delay. A tenant may also have termination rights in the event of a taking, or in the event of a casualty that materially impacts the use of the premises where the premises are not timely restored.

Tenants may negotiate the right to an early termination of the lease, but such early termination rights are often expensive, particularly where  landlords have made a significant investment in tenant improvements.

Termination by Landlord

Landlord also have the right to terminate in the event of a taking, or in the event of a casualty that cannot be timely restored, or where insurance proceeds are insufficient to cover restoration costs.  Landlords can commonly terminate if tenants default and fail to cure the default. Landlords may negotiate the right to relocate tenants to another space or terminate leases if Landlord are redeveloping the property.

Other Termination Options

Special provisions regarding termination exist for certain of governmental tenants, typically permitting such governmental tenants to terminate if the necessary funding becomes unavailable.

A tenant can be evicted in the event of default prior to expiration or in the event that a tenant holds over after the expiration date and becomes a tenant at sufferance. For example, a tenant can be evicted for failure to pay rent or for otherwise violating the lease. Statutes and rules applicable to summary process govern such eviction actions in Massachusetts.

A landlord in Massachusetts is not allowed to engage in self-help eviction of the tenant.

A lease may be terminated by the government through a taking for a public purpose. A tenant commonly receives no compensation, other than sums payable by the taking authority for business fixtures and for relocation benefits under law.

A lease also may be terminated by the effect of a foreclosure of a senior mortgage. Seniority may be established by the recording priority of the mortgage, or by the execution of a subordination agreement by the tenant in favor of the mortgagee. Many leases provide for the execution by the mortgagee of a subordination, non-disturbance and attornment agreement, which allows a tenant to remain in the event of the foreclosure of the mortgage as to the landlord’s interest in the premises.

Common pricing models for construction projects include fixed price (referred to as lump sum or stipulated price), and cost plus a fee – which may or may not be subject to a guaranteed maximum price. 

Often the architect leads the design team, employing additional core disciplines, although these disciplines and other consultants may also be separately engaged by an owner to work in co-ordination with an architect of record. For construction, the management of the project is often assigned to a construction manager. Other owners will engage a general contractor, and may engage a project manager or other owner’s representative to assist the owner with project oversight and management. 

Construction risk is often managed by indemnification, warranties, limitations of liability, delay damage limitations and other waivers of damages, provisions relating to insurance, bonding and subcontractor default insurance, subcontract pass-through provisions, contingency (in the case of a guaranteed maximum price contracts) and other economic provisions and controls (such as shared savings or other incentives), and liquidated damages. Massachusetts law prohibits an indemnification clause that makes a subcontractor liable for a general contractor’s negligence.

Contract provisions require contractors and subcontractors to adhere to schedules prepared by the contractor or construction manager. The contractor’s work should be subject to a "time is of the essence" clause, and construction schedules should identify key interim and completion milestones, as well as critical path activities. Delay events should be subject to notice with an obligation to substantiate impact to the critical path of the work.

Owners should consider the extent of weather events that may be assumed within the contractor’s construction schedule, and clearly define force majeure events. Owners can receive compensation for delays if provided for in the contract. Contractors rarely receive a bonus for early completion. Often, in cost-plus contracts, owners and contractors will share any savings below an established guaranteed maximum price.

The most common form of additional security to guarantee a contractor’s performance is a performance bond, which are required for most public projects. In private projects, there may also be completion guarantees provided from parent or related companies, depending on the nature of the transaction and the parties involved.

Massachusetts construction lien law is codified as Massachusetts General Laws, Chapter 254. Under this law, a person who has entered into a written contract with an owner (or a person acting on behalf of the owner) for the “erection, alteration, repair or removal of a building, structure or other improvement to real property, or for furnishing material or rental equipment, appliances or tools” has a lien upon the real property upon recording a Notice of Contract with the appropriate registry of deeds. Subcontractors, design professionals and subcontractors of design professionals also can record Notices of Contract and obtain liens on the real property.

Liens can be removed by filing bonds. In addition, if a contractor is providing payment and performance bonds, then the owner should also have the contractor provide a statutory lien bond pursuant to Massachusetts General Laws, Chapter 254, Section 12. Typically, there is no additional cost to obtain a statutory lien bond. The statutory lien bond should prevent any of the contractor’s subcontractors from filing a lien against the project.

In general, a Certificate of Occupancy must be obtained before a building may be occupied following any new construction. 

A seller of real property in Massachusetts that is a corporation (or another entity that is taxed as a corporation), and selling all or substantially all of its assets located in Massachusetts other than in the ordinary course of business, must, at least five days before the sale or transfer, file a corporate tax return with the Massachusetts Department of Revenue, notifying the Commissioner of Revenue of the proposed sale or transfer, the price, terms and conditions and the character and location of the assets. All corporate excise returns must be filed and any taxes due must be paid at or prior to the sale. Failure to notify the Commissioner of Revenue of the proposed sale, and to pay the tax or receive a waiver, creates a three-year lien against assets of the corporation to the extent necessary to pay any taxes due.

If a seller is a corporation or an entity electing to be taxed as a corporation for federal tax purposes, notice is given to the Commissioner of Revenue, and a Tax Good Standing Certificate is delivered as promptly as possible. The transfer of real estate raises problems in this regard because a lien attaches to the real property until the taxes are paid. An escrow of payment funds can be held to pay or assure payment of the seller’s taxes.

If a seller is not a corporation (or taxed as a corporation), or if the sale of the property is not the sale of all or substantially all of its assets located in Massachusetts, then the seller must state the same on the deed, and no funds need be escrowed for the payment of such taxes.

There is no mortgage tax in Massachusetts, so there is no need to mitigate mortgage taxes. Regarding transfer taxes, see 2.10 Taxes Applicable to a Transaction.

Municipal taxes are based on the assessed value of the real and personal property as assessed on January 1st each year. The fiscal property tax year in Massachusetts runs from July 1st to June 30th. Each municipality in Massachusetts may choose from three different taxing schedules under Massachusetts General Laws, Chapter 59.

In the City of Boston, for example, the bills for the first two quarters are based on the assessed value of the property (both real property and personal property) for the previous year. Bills for the second two quarters are based on the current year, and adjustments for any shortfall or overage paid during the first two quarters are included.

See 2.6 Important Areas of Law for Foreign Investors.

Taxpayers who own real property used in a trade or business may avail themselves of beneficial tax rules, including the ability to take depreciation deductions with respect to constructed improvements. Interest expenses may also be eligible for deduction.

Tax credits may be available for the construction of improvements on real property, depending on its condition, use, or location, including historic buildings and low-income housing, and opportunity zones. Chapter 121A allows cities and towns to stop imposing real estate taxes on properties which have been determined to be blighted and encourages development of the properties by “Chapter 121A corporations”. Tax increment financing may also be available, under which municipalities may grant property tax exemptions to landowners of up to 100% of the tax increment for a fixed period. District improvement financing is another economic tool and allows municipalities to pledge all or a portion of tax increments to fund district improvements over time.

See 1.3 Impact of New US Tax Law Changes.

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Greenberg Traurig, LLP has more than 400 attorneys in its real estate practice, which is a recognized leader in the industry, serving clients from key markets around the world. The Boston real estate team handles all aspects of real estate law, including acquisition, financing, planning, development, leasing, taxation, operation, foreclosure, restructurings and disposition of real estate. The Boston real estate team is particularly well known for handling complex zoning, environmental and land use matters, office, laboratory, hotel, research and development, industrial and retail transactions, eminent domain disputes, urban redevelopment issues and relocation.