KATHERINE DANT & Another v. MOBILE HOME RENT CONTROL BOARD OF CHICOPEE & Another

APPEALS COURT

KATHERINE DANT & another[1] vs. MOBILE HOME RENT CONTROL BOARD OF CHICOPEE & another[2]

Docket:

24-P-857

Dates:

April 8, 2025 – August 15, 2025

Present:

Massing, Englander, & D'Angelo, JJ.

County:

Hampden

Keywords:

Mobile Home. Rent Control, Mobile home, Rent increase. Sewer. Attorney General. Regulation. Statute, Construction. Practice, Civil, Judgment on the pleadings, Reconsideration, Review of action of rent control board.

Civil action commenced in the Western

Division of the Housing Court Department on June 28, 2022.

The case was heard by Jonathan J. Kane,

J., on motions for judgment on the pleadings, and a motion for reconsideration

was also heard by him.

Daniel Ordorica for the plaintiffs.

Timothy J. Ryan for the defendant.

John Moran for the intervener.

Andrea Joy Campbell, Attorney General,

& Ellen J. Peterson, Assistant Attorney General, for the Attorney General,

amicus curiae, submitted a brief.

ENGLANDER, J. In 2022, the defendant intervener, M & S

Bluebird, Inc. (M & S Bluebird, or owner), the owner of Bluebird Acres, a

manufactured housing park located in the city of Chicopee (park), sought and

obtained a substantial across-the-board increase in its rent charges from the

defendant City of Chicopee Mobile Home Rent Control Board (board). The basis for the rent increase was

additional expenses that the owner would incur because it was required to

connect the park's residents, its tenants, to the Chicopee public sewer

system.

The board's enabling legislation sets

forth a specific formula for determining rents, which formula establishes a

defined rate of return above a park's "reasonable operating

expenses." See St. 1977,

c. 596, § 3 (a) (c. 596).

The plaintiffs, two residents of the park, objected to the rent increase

and appealed the board's decision under G. L. c. 30A. The plaintiffs argued that the rent increase

violated regulations of the Attorney General that state that it is an unfair or

deceptive act or practice in violation of G. L. c. 93A for a manufactured

housing community operator "to seek to recover costs or expenses resulting

from any legal obligation of the operator to upgrade . . . sewer

. . . systems to meet minimum standards required by law." 940 Code Mass. Regs. § 10.03(2)(m)

(1996).[3] The plaintiffs accordingly

contended that the board was barred from using the sewer expenses at issue as a

basis for increasing rents.

A Housing Court judge rejected the

plaintiffs' challenge, concluding that the Attorney General's regulations

"d[id] not apply." We do not

agree that § 10.03(2)(m) "do[es] not apply" in the rent control

context. Rather, the question before us

requires us to construe the enabling legislation for the rent control board,

and the Attorney General regulations, and to determine if they are in conflict

and harmonize them if reasonable. Cf.

School Comm. of Newton v. Newton Sch. Custodians Ass'n, Local 454, SEIU, 438

Mass. 739, 751 (2003) ("In the absence of explicit legislative commands to

the contrary, we construe statutes to harmonize and not to undercut each

other").

As discussed below, we conclude that as to

one of the sewer expenses at issue -- the future and ongoing costs for using

the city's sewer system -- the board's enabling legislation and the Attorney

General's regulations are not in conflict, but rather can be harmonized such

that sewer usage costs can be a basis for rent increases through the

board. As to the second cost, however --

the betterment charge for the city's new pumping station -- the rent control

legislation and the Attorney General regulations appear to be in conflict. Accordingly, as to the betterment charge, we

remand the matter to the board for further evaluation of whether those charges

constitute "reasonable operating expenses" under the circumstances.

Background. The park, which consists of 170 lots, has

been in operation for around sixty years, operated for much of that time by the

Grochmal family and its company, M & S Bluebird. The Grochmals sold the park in 2013, and

repurchased it in 2016.

Beginning in the 1970s, the park used a

septic system to handle sewage. By the

time the owner repurchased the park in 2016, the septic system was

failing. The Massachusetts Department of

Environmental Protection (Mass DEP) advised the owner that even a fully

compliant upgrade to the septic system would be sufficient for only seventeen

lots under Title 5 of the State environmental code (310 Code Mass. Regs.

§§ 15.000 [2016]). Accordingly,

Mass DEP and the owner entered into a consent order, which evidently required

the owner to connect the park to the city sewer system.

By 2022, the owner had begun the

conversion to sewer, and anticipated finishing the work in 2023. The costs associated with the new sewerage

arrangement had three components. First,

a pumping station was required in order for sewage to flow out of the park,

which cost over $2 million. The city of

Chicopee installed and paid for the pumping station, and then assessed the

owner a "betterment fee" of $1.1 million to be paid over twenty years,

or $55,000 yearly (exclusive of interest).

Second, costs arose from connecting the park to the sewer system,

including installing sewer pipes, connecting pipes to individual lots, and

resurfacing the roads after installation, totaling approximately $875,000. Third, there were anticipated future charges

for the use of the sewer system; these charges were estimated to be $156,310

yearly.

In January of 2022, the park submitted a

request for a rent increase to the board.

The board was established pursuant to special legislation, enacted in

1977. See c. 596. Under § 3 (a) of that statute, the board

"may make

such individual or general adjustments . . . as may be necessary to

assure that rents for mobile home park accommodations in the city

. . . yield to owners a fair net operating income for such

units. Fair net operating income shall

be that income which will yield a return, after all reasonable operating

expenses, on the fair market value of the property equal to the debt service

rate generally available from institutional first mortgage lenders

. . ." (emphasis added).

Pursuant to the above formula, the board

had previously set the rent at $296 monthly.

In 2022, the park sought a $120 increase in monthly rent, to be

implemented over time. This increase

derived in large part from two of the three costs identified above: (1) the anticipated sewerage usage charges,

and (2) the betterment charge. Notably,

the park did not seek an increase based on the cost of the connection

infrastructure.

Two residents of the park, plaintiffs Dant

and DeLonge, objected to the proposed increase before the board, arguing that

940 Code Mass. Regs. § 10.03(2)(m) prohibited the board from including the

costs resulting from the sewer upgrade.

The board ultimately included the costs, however, increasing the monthly

rent from $296 to $416.

The residents then filed a complaint in

the Housing Court seeking judicial review under G. L. c. 30A, and

requesting a declaratory judgment under G. L. c. 231A that the

increase was unlawful. The residents

renewed their argument that § 10.03(2)(m) forbade the board from including

the betterment and sewerage usage fees as "reasonable operating

expenses" of the owner. The Housing

Court judge entered judgment for the board and owner, holding that the Attorney

General's regulations "do not apply" to manufactured housing

communities subject to rent control.[4]

This appeal followed.

Discussion. The question is whether it was lawful for the

board to include the two sewerage costs at issue as "operating

expenses" in determining the park's rent -- or whether, as the plaintiffs

urge, the inclusion of these costs violated G. L. c. 93A. There are two provisions of law at issue --

the board's enabling statute, duly enacted as special legislation in 1977, and

the Attorney General regulations, duly promulgated in 1996.[5] See c. 596; 940 Code Mass. Regs.

§§ 10.00. No party questions the

validity of either provision. The key

language of the statute establishes the formula for determining rent, which is

designed to "yield to owners a fair net operating income" for mobile

home parks. See c. 596,

§ 3 (a). "Fair net

operating income," in turn, is defined as "that income which will

yield a return, after all reasonable operating expenses, on the fair market

value of the property equal to the debt service rate generally available from

institutional first mortgage lenders" (emphasis added). Id. As

for the Attorney General regulation, it addresses the "costs or

expenses" that manufactured housing park operators can charge residents;

it prohibits operators from seeking to "recover costs or expenses

resulting from any legal obligation . . . to upgrade . . .

sewer . . . systems." 940

Code Mass. Regs. § 10.03(2)(m).

As indicated, the plaintiffs argue that

the anticipated future charges for the use of the city's sewer system, as well

as the betterment charge, are each "costs or expenses resulting from"

a "legal obligation . . . to upgrade . . . sewer"

-- and thus that the board was precluded from including them as a basis for

increasing rent. The board and the

owner, on the other hand, argue that the regulation in essence does not matter

-- because the enabling statute granted the board the power to include each of

the costs as "reasonable operating expenses" under the statute's formula. The board's position is that if the Attorney

General regulations conflict with the board's enabling legislation, then the

enabling legislation wins out.

Perhaps. Certainly, in the case

of an irreconcilable conflict between a statute and a regulation, it is the

statute that must be followed. See

Veksler v. Board of Registration in Dentistry, 429 Mass. 650, 652 (1999),

quoting Pinecrest Village, Inc. v. MacMillan, 425 Mass. 70, 73 (1997)

("[T]o the extent that there is a conflict [between a statute and a

regulation], the statute must prevail over the administrative

regulation"). On the other hand, we

are mindful that where two statutes are said to conflict, our first task is to

determine whether the two can be harmonized, and that principle should apply as

well where the allegedly conflicting laws are a statute and a regulation. See School Comm. of Newton, 438 Mass. at 751

(rule is to construe statutes to harmonize in absence of contrary legislative

commands). See also DeCosmo v. Blue Tarp

Redev., LLC, 487 Mass. 690 , 697-698 (2021) (courts should attempt to harmonize

apparently conflicting administrative rules).

We consider the board's actions here with those basic principles in

mind. Our review is for whether the

board acted arbitrarily or capriciously, or committed other error of law. See Ten Local Citizen Group v. New England

Wind, LLC, 457 Mass. 222, 228 (2010) ("Under G. L. c. 30A,

§ 14 (7), we review an agency's decision to determine whether it was

not supported by substantial evidence, was arbitrary or capricious, or was

otherwise based on an error of law").

See also c. 596, § 4 (provisions of c. 30A applicable to

board).

At the outset, the contention that the

Attorney General's manufactured housing regulations "do not apply" in

those communities that have mobile home rent control boards is incorrect. The regulations are duly promulgated and

apply across the Commonwealth. The

purpose of the regulations is to define certain acts as unfair and deceptive

when performed by an operator of "any manufactured housing community"

(emphasis added). 940 Code Mass. Regs.

§§ 10.01 and 10.02. The regulations

address many types of unfair and deceptive practices affecting manufactured

housing parks; they are not limited to the one regulation at issue here. There is no provision that states that the

regulations do not apply in rent control communities, nor are we aware of any

policy that would suggest such a limitation.

Indeed, there are regulations that specifically address certain unfair

and deceptive practices in rent controlled communities. See, e.g., 940 Code Mass. Regs.

§ 10.02(7) (operator in rent control jurisdiction may not increase rent

except as permitted by rent control law).

That the regulations apply, however, does

not at all resolve whether the charges at issue could properly be included in

the board's expense base for determining rents.

In addressing that issue, we think it useful to consider the two charges

separately. As to the $156,310 per year

charge for future sewer usage, that charge qualifies as a "reasonable

operating expense" under the board's enabling statute. Indeed, the cost of the park's future use of

the city's sewer system is a classic operating expense -- it is a necessary

expense of doing business, incurred regularly.

It is not different in kind than other utility costs such as electricity

or water. See Lindheimer v. Illinois

Bell Tel. Co., 292 U.S. 151, 167 (1934) (in context of determining reasonable

rate of return for public service, "operating expenses" are

"cost of producing the service").

The board accordingly was directed by

statute to include the reasonable sewerage cost in the operating expenses

considered when determining rent.

Moreover, as to this charge we perceive no conflict with the Attorney

General regulation. A future, recurring

cost for use of a sewer system is not an expense "resulting from" the

legal obligation to upgrade. As we read

the regulation, it prevents the pass through of certain capital costs -- such

as the expense of building a new system or overhauling an old one; it does not

prevent the recovery of charges from providing a necessary service. Such charges (provided they are reasonable)

do not "result from" the upgrade; they result from the necessity of

supplying sewer service to the residents, a necessity that preceded the upgrade

and exists independently of it.

Accordingly, as to the sewer usage charges we perceive no conflict

between the board's enabling statute and the regulation, and that charge was properly

included in the board's operating expense base.

The betterment charge presents a different

case. On the one hand, the board decided

to include the betterment charge as a "reasonable operating expense"

of the park. On the other hand, the

betterment charge is in fact a cost of the upgrade of the park's sewage

disposal system; it is not contested that the pumping station was required to

connect the park to the city's sewer system, and that the betterment charge was

a condition to the building of the pumping station. The pumping station is unlike the charge for

future sewer usage. It is in fact the

"upgrade" to the system, and including the charge for the pumping

station in the expense base appears to be inconsistent with the Attorney General's

regulation.[6]

Accordingly, as to the betterment charge

there may well be a conflict between the board's enabling statute and the

Attorney General's regulation. As noted

above, if there is such a conflict then the regulation must yield to the

statute, and the board's inclusion of the charge would be affirmed. See Veksler, 429 Mass. at 652 . On the present record, however, we are not

confident that the board's decision reflects consideration of the proper legal

framework. Under the enabling statute,

the board is directed to consider all "reasonable operating expenses"

of the park. See c. 596,

§ 3 (a). The board's decision

does not address what is an "operating expense" for these purposes, or

why the betterment charge qualifies. We

assume that one-time capital charges would not qualify as an "operating

expense," although we also expect that appropriately amortized capital

costs -- that is, a charge for the depreciation of capital assets over time --

would need to be included in the expense base.[7] See Lindheimer, 292 U.S. at 167 ("In

determining reasonable rates for supplying public service, it is proper to

include in the operating expenses . . . an allowance for consumption

of capital"). These are

considerations as to which the board has considerable discretion, see Marshal

House, Inc. v. Rent Control Bd. of Brookline, 358 Mass. 686, 706 (1971)

("fair net operating income" as used in rent control statute with

identical language is flexible definition, "consistent with the overriding

requirement of a reasonable return on investment"), but here the board did

not explain its reasoning in including the charges.[8] There is the possibility, as well, that the

board accepted the (incorrect) argument that the Attorney General regulations

did not apply, and thus applied incorrect law.

We accordingly vacate the judgment as it applies to the betterment

charge, so that the board may reconsider and explain its decision in light of

this opinion.[9],[10] In all other

respects, the judgment is affirmed and the order denying the plaintiffs' motion

for reconsideration is affirmed.[11]

So ordered.

footnotes

[1] Cindy

DeLonge.

[2] M & S

Bluebird, Inc., intervener.

[3]

Section 10.03(2)(m) states in pertinent part:

"It shall be

an unfair or deceptive act or practice in violation of [G. L.] c. 93A, §

2, for an operator:

". . .

"(m) to seek

to recover costs or expenses resulting from any legal obligation of the

operator to upgrade or repair sewer, water, gas, or electrical systems to meet

minimum standards required by law, unless such standards first become effective

after a tenant has initially assumed residency in a manufactured housing

community and unless such costs are recovered as capital improvements in

accordance with 940 [Code Mass. Regs. §] 10.03(2)(l) . . . ."

[4] The parties

filed cross motions for reconsideration.

Aside from an adjustment to the timing of the rental increases, the

judge denied the motions. Although the

plaintiffs' notice of appeal included both the judgment and the denial of their

motion for reconsideration, the plaintiffs make no separate argument on appeal

as to their motion for reconsideration and we, therefore, consider it

waived. See

Mass. R. A. P. 16 (a) (9) (A), as appearing in

481 Mass. 1628 (2019).

[5] The Attorney

General is authorized by G. L. c. 140, § 32S, to promulgate

rules and regulations " necessary for the interpretation, implementation,

administration and enforcement of [the Manufactured Housing Act]." The Attorney General's authority to

promulgate such regulations is "in addition to, and not in derogation of,

the attorney general's authority to promulgate rules and regulations under

[G. L. c. 93A, § 2,] with respect to manufactured housing

communities." Id.

[6] It does not

matter for purposes of our analysis that the pumping station is owned by the

city rather than the park. Under the

circumstances, the betterment charge that the city assessed "resulted

from" the park's legal obligation to connect to the sewer system, and

accordingly would fall within the language of the Attorney General's

regulation.

[7] Relatedly,

the Attorney General regulations forbid operators from passing on the costs of

capital improvements to their tenants as lump-sum charges, but allow operators

to recover the amortized costs of such improvements if certain conditions are

met. See 940 Code Mass. Regs.

§ 10.03(2)(l). We note that the

Attorney General has published a "guide" to the Manufactured Housing

Community Law, which indicates that the Attorney General regulations

"generally allow a community owner/operator to recover the cost of

improvements over time through rent increases." See The Attorney General's Guide to

Manufactured Housing Community Law 27 (Nov. 2017).

[8] The

plaintiffs argue that a charge that violates the Attorney General regulations

must be considered "unreasonable" for purposes of the rent control

statute essentially as a matter of law.

The contention proves too much, as it would have the regulation, in

essence, redefine the language of the preexisting statute. Cf. Veksler, 429 Mass. at 652 .

We

note as well that while the plaintiffs' argument assumes that the Mass DEP

sewage disposal requirements at issue were effective and applicable before the

plaintiffs came to the park, the board made no findings on this issue, which

would be critical to the application of the regulation.

[9] At oral

argument, the plaintiffs presented their c. 93A argument as premised upon

a "bait and switch" -- that is, the gist of their position at

argument was that the plaintiffs had moved to the park under false pretenses,

because the operator knew that the septic system would have to be upgraded and

that rents would therefore increase. We

note that this is not the unfair and deceptive practice theory that was

presented to the board, it is not the theory in the administrative record for

the c. 30A appeal, and it was not pleaded in the complaint. The theory is not properly before us. See Doe, Sex Offender Registry Bd. No. 10800

v. Sex Offender Registry Bd., 459 Mass. 603, 630 (2011) (in appeal from agency

decision, judicial review confined to administrative record).

[10] Our opinion

herein is not intended to suggest any particular outcome on remand.

[11] The owner's

request for attorney's fees is denied.