Derelict Owners Beware: Municipalities Armed with New Prosecution Tools

April 14, 2011Newsletters In the Zone

On April 25, 2011, municipalities throughout Pennsylvania will be armed with new tools to prosecute property owners who neglect the real estate they own in Pennsylvania. The Neighborhood Blight Reclamation and Revitalization Act, approved on October 27, 2010, by then-Governor Ed Rendell, becomes effective this month. The Act grants municipalities two primary tools to prosecute derelict owners of real estate in Pennsylvania and force owners to correct serious code violations and public nuisances.

The first tool is the right to commence legal action against the owner. This right is in addition to all other rights municipalities currently have against owners. If a serious violation of any state law or building code exists and that violation poses an imminent threat to the health and safety of the dwelling occupant, occupants in the surrounding structures or a passerby, or the property is a public nuisance due to its physical condition or use, as determined under common law or as declared by an appropriate official within the municipality, then the municipality in which the property is located may commence an action against the owner for those violations. Before an action can be brought, the municipality must notify the owner of such violation or public nuisance. If the owner fails to take a substantial step to correct this violation within six months, the municipality may commence the action against the owner.

A significant aspect of this new right of action is that a judgment may be entered as a lien against all of the assets of the owner, not just the subject real estate. These other assets may include bank accounts, other real estate and other assets that otherwise cannot be reached by municipalities. This is a significant departure from prior law, under which owners could take comfort in the fact that the sole remedy of a municipality in a case such as this would be placing a lien on the property.

Additionally, municipalities are also empowered under the Act to recover all penalties and costs incurred by the municipality to correct the violation. Therefore, to the extent the municipality incurs any costs to remedy a violation (e.g., installing windows and doors, correcting faulty mechanical systems, etc.), the municipality will be entitled to obtain a judgment against the owner in the amount of such costs. This is also a significant departure from prior law. More importantly, in the event the municipality does take corrective measures, the owner will have no control over the cost and quality of the work performed. Owners may therefore be forced to pay premium prices for substandard work.

The second primary tool granted to municipalities under this Act is the power to reject applications for municipal permits, including building permits and zoning approvals, if the applicant owns property in any municipality, and with regard to any such property, if any of the following conditions exist: (1) there is a final and unappealable tax, water, sewer or refuse collection delinquency, or (2) there is a serious code violation for which the owner has failed to take a substantial step to remedy the problem within six months of notice of such violation.

Again, this also is a significant departure from prior law. It is important to note the language includes the word “any” municipality. Therefore, under a plain language interpretation of the Act, a building permit application filed in one municipality may be denied if a serious violation exists in any other Pennsylvania municipality. Practically, it may difficult for municipalities to track violations outside their borders. However, in the event municipalities are able to communicate effectively, they can essentially stop an owner from continuing to purchase and develop property anywhere in Pennsylvania.

There is some relief for property owners under this Act regarding denial of building permits and zoning approvals: the owners of inherited property must be given an opportunity to correct the deficiencies. However, there is no defined period during which the owners must correct the deficiencies, and it remains is unclear how this provision will be applied by local code enforcement officers and zoning officials.

In summary, under the newly enacted Neighborhood Blight and Reclamation and Revitalization Act, property owners who fail to comply with local zoning and building safety codes may face actions by municipalities and risk losing assets beyond real estate to satisfy judgments. Additionally, owners are responsible for costs incurred by municipalities to correct any existing violations. Finally, and perhaps most importantly, municipalities can deny permit applications, both building permits and zoning approvals, in the event a serious violation exists in any Pennsylvania municipality.

Nonetheless, there are some planning techniques potentially available to address these issues. For example, using multiple entities to hold real estate may insulate certain properties from other properties that constitute serious violations or public nuisances.

On its face, the Act itself seems simple enough, but its practical application will not be so simple. Nevertheless, municipalities throughout Pennsylvania will surely add the rights granted under the Act to their cache of methods to prosecute owners. In an article published in the Philadelphia Business Journal in early April 2011, Bridget Collins, Deputy Managing Director of the Philadelphia Department of Licenses and Inspections, was quoted as saying the city will be targeting vacant property owners in certain areas of Philadelphia, including the Port Richmond neighborhood, immediately following the Act’s effective date. Within the next several weeks, the city will send letters to owners of vacant properties informing them of the new law and requesting they take action. This will begin the six-month period in which the owners must take a substantial step to correct the problem. In an effort to make a significant impact quickly, Philadelphia’s Department of Licenses and Inspections has hired three temporary staff members to implement and apply this new Act. Additionally, Allentown, Reading and Erie are also planning to use this new Act to force owners to address abandoned and neglected properties.

For more information, please contact Andrew D. Santana at 610.397.7965 or [email protected].