Massachusetts SJC Upholds Independent 3rd Party Appraisals
In September GBREB filed an Amicus Curiam , or “Friends the Court” brief in the case of Buffalo-Water, LLC V. Fidelity Real Estate Company LLC.
In this case the two parties reached a contractual agreement on the
purchase/sale of commercial property, with the price being established
by a 3rd party appraiser. In this case, Buffalo Water did not like the
number that the appraiser arrived at for the sale price and sought to
extricate themselves from the transaction.
Under Massachusetts law, judicial review of an
independent third party appraisal in a transaction like this was limited
to cases of fraud, corruption, dishonesty or bad faith. This case is an
attempt to create additional categories to discredit the third party
appraisal and thwart a transaction.
The issue on appeal in this case is whether we should
modify this common-law rule and allow a judge to invalidate an appraisal
intended by the parties to provide a final, binding valuation of a
property where there is the appearance of bias, not on the part of the
individual who conducted the appraisal, but on the part of the entity
that employed the individual appraiser.
On November 26th, the SJC concluded
that the common-law rule established in Eliot v. Coulter, 322 Mass. 86,
91 (1947), properly balances the need for fair valuations
with the need for finality in the appraisal process, and that an
appearance of bias alone is insufficient to invalidate an appraisal.
Because the allegations in the complaint, if proved, do not warrant a
finding of any violation of the agreements setting forth the terms of
the appraisal, or a finding of fraud, corruption, dishonesty, or bad
faith by the individual appraiser, or a finding of breach of the implied
covenant of good faith and fair dealing by the defendant, the SJC
affirmed the Superior Court judge's order allowing the defendant's
motion to dismiss.
The Amicus Brief filed on behalf of the Greater Boston Real Estate
Board states that the current law should be upheld and that no new
categories or exceptions should be created judicially as that is best
left to the Massachusetts Legislature. The Massachusetts Supreme Judicial Court decision upheld GBREB's position.