Appeals court probes whether AG regulation bars passing sewer upgrade costs to Chicopee mobile-home tenants

BOSTON — The Massachusetts Appeals Court on Monday heard argument in Dan v. City of Chicopee over whether state attorney general regulations and Chapter 93A bar a mobile-home park owner or the Chicopee Mobile Home Rent Control Board from including sewer upgrade and related betterment costs in a rent increase for residents of Bluebird Acres Mobile Home Park.

At oral argument, the three-justice panel — Justice Greg Massing, Justice Englander and Justice DeAngelo — pressed attorneys on how to reconcile a statute that requires rent-control boards to allow “all reasonable operating expenses” with attorney general regulations, 940 CMR 10.032(m), that describe seeking to recover some sewer upgrade or repair costs as an unfair and deceptive practice. The court identified the key issues as whether the attorney general regulation conflicts with the special act governing mobile-home rent control and whether the challenged charges are operating or capital expenses.

Dan Ordarica, attorney for plaintiffs Catherine Dent and Cindy DeLong, told the court the case is “about a bait and switch.” Ordarica argued the park owner “knew for over 12 years” that the park’s septic system was out of compliance with Department of Environmental Protection requirements and continued to rent lots without informing buyers they could face large rent increases when the owner later sought to pass on the costs. Ordarica cited 940 CMR 10.032(m) and Chapter 93A as forbidding that practice and said the tenants’ complaint is not about the arithmetic used to set the increase but about the propriety of including certain costs in the calculation.

Timothy Ryan, representing the City of Chicopee Mobile Home Control Board, urged the court that the rent-control statute provides a “model of simplicity” and instructs municipal boards to determine fair net operating income by examining “all reasonable operating expenses.” Ryan told the panel that, in his view, the attorney general regulation does not “control here” and that the local board’s statutory role requires it to consider operating expenses under the statute’s framework.

John Moran, counsel for the owner/operator (identified in argument as M & S Bluebird/Bluebird Acres), told the court that much of the work was not a routine upgrade but a full replacement and a set of capital projects. Moran said the park itself spent roughly $850,000 to repave roads and install new sewer lines, and the city built a pumping station that cost about $2,200,000; Moran said the city assessed roughly half that cost (about $1,100,000) back to the park owner as a betterment spread over property tax assessments. Moran told the court the pumping station is city-owned and that the park would likely be unable to operate without access to the city sewer system, because the existing septic system could only serve about 17 lots of the park’s roughly 170 lots.

The justices repeatedly asked whether the attorney general regulation’s broadly worded prohibition against recovering “costs or expenses resulting from any legal obligation to upgrade or repair” sewer systems should be read to include continuing annual operating costs the park expects to incur (the parties discussed a recurring expense of about $150,000 per year) and whether that regulation can be harmonized with the statute authorizing rent-control boards to include reasonable operating expenses in rent calculations. The court also explored whether some charges — including the betterment for the city pumping station and the park’s one-time hookup costs — are capital expenses that fall outside the statute’s operating-expense concept.

Counsel for the tenants urged the court to adopt a reading that would prevent owners from passing on to buyers costs that the attorney general has classified as unfair and deceptive, particularly where, as the tenants allege, the owner knew of the need for compliance years earlier and did not disclose it. Defense counsel emphasized the municipal board’s statutory role and argued the regulation was intended to supplement, not supplant, legislative acts governing rent control; he urged the court to interpret the regulatory scheme in light of the statutory framework that gives rent-control boards authority to determine what operating expenses are reasonable.

The justices signaled uncertainty about how to resolve overlapping authorities and asked for further briefing on specific questions, including whether the ongoing sewer expense should be treated as an operating expense, whether the pumping-station betterment is capital or operating, and how to harmonize agency regulation with the statutory formula. The court said it might order additional briefing and left the case submitted for decision after argument.

The parties and issues in this argument include: plaintiffs Catherine Dent and Cindy DeLong alleging that the park owner improperly sought to pass sewer-related costs to renters in violation of 940 CMR 10.032(m) and Chapter 93A; the City of Chicopee rent-control board defending the board’s application of the statutory formula for calculating fair net operating income; and the park owner asserting that the disputed items are capital expenses or otherwise properly considered under the statute. The court did not issue a ruling at the hearing and indicated it may request additional memoranda.

The case number discussed at argument is 24-P-857.