Real Estate, Zoning & Land Use

… 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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In the summer of 2017, property tax assessments and assessment appeals were a big topic of discussion.  That is because 2017 marked the countywide reassessment for all properties.  The County Tax Assessment Appeal Board heard tens of thousands of assessment appeals.  Some of the appeals resulted in substantial savings for the property owners.

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Very often, a real estate developer is only active in a project until the subdivision plan is approved.  At that point, the developer often sells some or all of the development rights to the builders who actually construct and sell the homes. The developer may not realize that it usually retains liability for the completion of the community, even though the developer and builder planned to pass that responsibility onto the builder.  Why?  Like most legal surprises, the reason is not taking care of the details of the transaction.

In Hillside Villas Condominium Association, Inc. v. Bottaro Development Company, a neighborhood was created using this typical model.  The developer created a community in nine separate phases. The builder constructed the homes, and paid the developer every time a home was sold. This looks like a typical residential condominium project. Whenever a phase of the community was added, the developer assigned special declarant rights to the builder. This allowed the builder to construct and to legally declare the units. The developer retained all of the declarant rights that were not specifically transferred or assigned to the builder.  So long as the builder sold at least four units per year, this relationship would continue until the community was sold out.

In all of these relationships, the problem comes when the builder fails to complete something.  Here, the storm water management basins were not completed, and the roads required repairs totaling $900,000.00.  The Association sued both the builder and the developer. 
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* House Bill 595 was signed by Governor Tom Wolf on Monday, May 7, 2018.  The Bill becomes effective on Wednesday, July 6.

The Pennsylvania General Assembly passed House Bill 595, which is expected to be signed by Governor Wolf.  This Bill gives a process for deciding disputes in Condominium and Homeowners’ Associations.  There are a few things that every Association should know about this new requirement.  They are:

  • Most Associations need to adopt bylaws or rules and regulations that establish Alternate Dispute Resolution (ADR) procedures. This includes procedures for disputes between two or more unit owners and/or between a unit owner and the Association.
  • A “unit owner in good standing” can file a Complaint with the Attorney General’s Bureau of Consumer Protection for a violation of the Act relating to meetings, quorums, voting, proxies, and Association records. Previously, this option was available only to disputes over Association financial records.
  • A “unit owner in good standing” is someone who has no past due assessments. So a unit owner that is behind on their assessments cannot file a Complaint with the Bureau of Consumer Protection.  Except that if the unpaid assessments are related to a Complaint filed with the Bureau of Consumer Protection, then the unit owner is in good standing regardless of unpaid assessments.
  • A unit owner cannot file a Complaint with the Bureau of Consumer Protection until he or she has exhausted the ADR procedure or at least 100 days after the unit owner started the Alternative Dispute Resolution procedure. If there is no ADR procedure, the unit owner can go straight to the Bureau.
  • Finally, if a unit owner has a dispute with the Association and wins, he or she may be entitled to an award of costs and reasonable attorney’s fees.

These additions to the Uniform Condominium Act and the Uniform Planned Communities Act are intended to help owners and Associations settle their differences without going to court.  In order to do this, Associations will need to take some steps to prepare themselves:
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Whenever a farmer needs zoning approval for an agricultural project, they cannot leave any detail to chance.  If anyone opposes the project – be it the Zoning Hearing Board, the Board of Supervisors or a group of neighbors – anytime the farmer misses even the smallest detail, it could be grounds for getting the project denied.

In Berner v. Montour Township Zoning Hearing Board, the Zoning Hearing Board (twice) and the County Court of Common Pleas (twice) approved the farmer’s zoning application for a swine nursery barn. The Zoning Hearing Board in particular put a lot of faith in the work of Todd Rush from my friends at TeamAg.  Unfortunately, there was an organized group of neighbors that opposed the application.  The Commonwealth Court eventually ruled that the Zoning Hearing Board was wrong, and that the farmer should not have received the approval for the swine barn.

Most of the Commonwealth Court’s denial dealt with very small differences between the language of the Zoning Ordinance and the Nutrient Management Act.  The Zoning Ordinance required the applicant to “submit facility designs and legally binding assurances with performance guaranties” to ensure that the operations will be “conducted without adverse impact upon adjacent properties.”  Since this sentence appears to deal with the design of manure storage facilities and manure and wastewater management, the Zoning Hearing Board decided that these requirements were preempted by the Nutrient Management Act. After all, the NMA does not allow a municipality to regulate practices related to storage or application of manure or the construction or operation of manure storage facilities.
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Whenever a farmer needs zoning approval for an agricultural project, they cannot leave any detail to chance.  If anyone opposes the project – be it the Zoning Hearing Board, the Board of Supervisors or a group of neighbors – anytime the farmer misses even the smallest detail, it could be grounds for getting the project denied.

In Berner v. Montour Township Zoning Hearing Board, the Zoning Hearing Board (twice) and the County Court of Common Pleas (twice) approved the farmer’s zoning application for a swine nursery barn.  The Zoning Hearing Board in particular put a lot of faith in the work of Todd Rush from my friends at TeamAg. Unfortunately, there was an organized group of neighbors that opposed the application.  The Commonwealth Court eventually ruled that the Zoning Hearing Board was wrong, and that the farmer should not have received the approval for the swine barn.

Most of the Commonwealth Court’s denial dealt with very small differences between the language of the Zoning Ordinance and the Nutrient Management Act.  The Zoning Ordinance required the applicant to “submit facility designs and legally binding assurances with performance guaranties” to ensure that the operations will be “conducted without adverse impact upon adjacent properties.”  Since this sentence appears to deal with the design of manure storage facilities and manure and waste water management, the Zoning Hearing Board decided that these requirements were preempted by the Nutrient Management Act. After all, the NMA does not allow a municipality to regulate practices related to storage or application of manure or the construction or operation of manure storage facilities.

On a closer look, however, the Court decided that the preemption only applies to operations where a Nutrient Management Plan is required.  A NMP is only required for a concentrated animal operation or a concentrated animal feeding operation – a CAO or a CAFO. In this case, the use was neither a CAO nor a CAFO, so the farm only needed a Manure Management Plan, and not a NMP.  Because a NMP was not required, the preemption in the Nutrient Management Act did  not apply, and the Zoning Ordinance could require anything that it wanted.
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Yes, this is a tongue twister and I’ll be impressed if you can say it five times fast, but parking is one of the biggest problems that community associations face.  No matter how the developer sets up the community, sooner or later there are either too few parking spaces, people parking where they don’t belong or parking vehicles that nobody wants to see out their front windows.  Too often developers don’t think about these issues or, if they do think about them, do not have a way to come up with a perfect solution.  The same is true of association boards.  Either they do not want to consider a plan to get a handle on parking problems or, if they do, their parking regulations don’t help the problem.

The lead article in the CAI Common Ground for September/October 2017 is titled “Park That Thought.”  It discusses some of the problems that associations have with parking.  Unfortunately, the article doesn’t give many answers on how to solve the problems.  While there might not be a perfect solution to parking, some advance planning by both the developer and the association can help reduce parking problems.
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