Real Estate, Zoning & Land Use

Last week, a new law was passed that allows municipalities to prohibit Video Gaming Terminals (VGT) in truck stops. If a municipality wants to opt out of allowing VGTs, it must pass a Resolution that prohibits VGTs before September 1, 2019. This new law reverses the 2017 gaming law that forced many municipalities to permit VGTs, provided certain conditions were met. This bill was sponsored by two Pennsylvania Senators from Lancaster County, Scott Martin and Ryan Aument.

In 2017, Pennsylvania amended its gaming laws to permit “mini casinos” and VGT arcades. The law gave different rights to counties depending on whether a casino was located in the county. If the county had a casino, the municipalities in that county could prohibit VGTs. If the county did not have a casino already, the municipalities could opt out of mini casinos, but were not allowed to prohibit VGT arcades in “truck stops.” A truck stop was given a very broad definition in this new gaming law. Practically, many convenience stores could be built or converted to meet this definition.
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Up until April 26, 2019, short-term vacation rentals (like Airbnb, VRBO, HomeAway, etc.) were probably allowed in zoning districts where single family homes are permitted. In April, the Pennsylvania Supreme Court decided that a short-term vacation rentals are not permitted as a single family use.

What do municipalities do now?

First, we should review how the Courts got to this point. It is an interesting development. The first case (Marchenko) dealt with a homeowner who rented her home for less than 25% of the year. The second case (Shvekh) had homeowners who rented their home for about half the year. The third case (Slice of Life) has an owner who bought the property solely as an investment, and never lived there at all. The Commonwealth Court said the first was OK, and then the next two cases built on that decision. 
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I recently presented a national webinar explaining interest rate swaps, caps and floors.  I had the pleasure of presenting with Chrys A. Carey, counsel with Morrison and Foerster in Washington D.C. I have written before on the growing interest in these hedge agreements.  Chrys and I and a number of the “attendees” of the webinar agreed that hedge agreements such as interest rate swaps and forward swaps are becoming more a part of commercial real estate transactions.

Chrys and I brought different perspectives to our presentation.  While I am involved with the borrower or lender, Chrys has much more knowledge with the regulatory side of hedge providers  and traders under the Commodity Exchange Act and the Dodd-Frank Act Regulations.  Despite these different perspectives, our  overlap in experience brought up some interesting discussions.  Some of those are:

  • What happens after LIBOR? Most hedge agreements use LIBOR as the standard for interest rates.  Luckily, most of the variable interest rate loans that are involved in these transactions also use LIBOR as the standard interest rate.  As you may know, LIBOR is set to be discontinued sometime in the next few years.  Chrys believes the hedge providers and exchanges will settle on one single benchmark interest rate (such as the Wall Street Journal Prime Rate).


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Property Law is one of the areas where the legal jargon can be so confusing that a property owner may not even understand what they own. This is especially true where there are multiple owners of the same piece of property. To clear up some of the confusion, I put together this primer on a portion of Property Law that I call “Concurrent Interests 101.”  I still remember the first time that I understood the difference between tenancy in common and joint tenancy. Professor Kane, you were right, I would need to know this someday!

There are three types of concurrent interests in property: tenancy in common, joint tenancy and tenancy by entirety. 
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Associations and Unit Owners frequently disagree over who is responsible to pay for repairs to certain items.  Sometimes it is easy to figure out.  The Association needs to pay for repairs to the community swimming pool, and the Unit Owner needs to fix the stove.  Whenever the item to be repaired gets close to the boundary of the Unit, however, the answer to this question becomes more difficult.  I came across an interesting case, Winchester Condominium Association v. Auria, where the question was who is responsible to pay for re-wiring a wall outlet: the Unit Owner or the Association?

In this case, the Association required all of the Unit Owners to replace aluminum wiring in the outlets of their Units.  The Unit Owners were informed that the replacement was required for safety reasons and for the Association to maintain property insurance. [Note:  I have done this a few times for dryer vents, pans under hot water heaters and fireplace insulation.]  Every Unit Owner made arrangements to have the wiring in their outlets replaced.  Every Unit Owner, that is, except for one. 
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Soon community associations will have to deal with snow and ice, and the problems that come with it. In this article I want to discuss salt and other deicers.  Many unit owners are certain that one type of salt will ruin their sidewalks.  Other units owners believe that any kind of ice melt will harm concrete.  Associations get complaints about ice in the winter, and then about spalling sidewalks in the spring.  Which deicers are best, and which are asking for problems?  Although most of my posts contain mostly legal advice, for this article I got to use my background as a chemical engineer too.

There are four main kinds of ice melt that are used.  They are sodium chloride (rock salt), calcium chloride, magnesium chloride and calcium magnesium acetate (CMA). The truth is that all ice melt works in basically the same way. Magnesium chloride, calcium chloride and CMA all absorb water.  In doing so, they produce a chemical reaction with the water that produces heat.  The heat produced melts the ice.  The melting ice dissolves the deicer, and then carries it onto the rest of the surface. Sodium chloride is a little different in that it actually lowers the temperature in which water freezes. So instead of freezing at 32 degrees, water with salt dissolved in it doesn’t freeze until it is 25 degrees.  Try it at home – science is fun!
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… no matter how much they want to. Many planned community and condominium declarations have a confession of judgment paragraph.  These are usually towards the back and written in all caps (just like my father-in-law sending an email).  They seem to permit associations to bypass all of the demand letters and District Justice courtrooms, and just enter a judgment against the Unit Owner.  But what looks good on paper doesn’t always work in practice.  Pennsylvania Courts just re-affirmed the long-time rule that Associations cannot confess judgment against Unit Owners.

Residential condominium or homeowner association assessments are a “consumer credit transaction.”  This means that the assessments are used to pay for goods or services that are primarily for personal family or household use.  Pennsylvania law says that a person cannot enter a confessed judgment against another for a debt that comes from a consumer credit transaction.  In the case that I read, the Association and the Unit Owner entered into a payment plan.  When the Unit Owner stopped making payments, the Association entered a confessed judgment against him. The Court struck the confessed judgment on its own – it did not even wait for the Unit Owner to make a request. 
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If you’re thinking about starting a business in Pennsylvania, an important part of the financial side of your business plan is to evaluate the impact of taxes on your new business. Your lawyer and your accountant are key members of your business team that can help you evaluate what type of entity to form, how that entity should be taxed, and the taxes applicable to your business.

Part three of this series discusses taxes associated with ownership of real estate and employment taxes. Part one discussed sales and use taxes and others that may apply based on the nature of the goods you sell or the services you provide. Part two discussed taxes that may apply depending on the way your business is organized.

This post is not intended to be a substitute for legal or tax advice from your lawyer or accountant – you should talk to them in order to obtain advice to address your specific situation. Need a lawyer or an accountant? We might be able to help you with that!
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One of the most important pieces of advice I give builders and developers is to “get it in writing.”  It turns out that when you get it in writing is also critical.  A big national builder found itself in Court with a home buyer because the builder did not put its arbitration clause in the Agreement of Sale. The builder used a form purchase agreement which referenced the builder’s limited warranty. Months later, at the settlement table, the builder finally gave the buyers the limited warranty. The limited warranty contained a requirement to arbitrate all disputes.  When the buyers later had problems with their home, they went directly to Court instead of to arbitration. The Pennsylvania Superior Court said the arbitration clause was not enforceable because it was not provided at the time of the Agreement of Sale.  The only mention of arbitration was provided months later, after the Agreement of Sale was signed.
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Lots of Association board members worry whether the Association is required to enact rules to control dangerous dogs.  In McMahon v. Pleasant Valley West Association, the Commonwealth Court ruled that an Association does not have a duty to force a unit owner to maintain, control or confine their dogs on the dog owner’s property.  The Association also does not have a duty to prevent dogs from harming other unit owners.  Because they have no duty to control the dog, or to protect unit owners from harm caused by the dog, the Association was not responsible for injuries to the unit owner.  The Court noted that there was no “special relationship” between the Association and the dog owner or the victim of the dog attack.  The Court noted that the Association did not act to “provide any additional protections against an attack by the … dogs over and above the protections provided in the dog law….”
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