New PA Law Affects Municipal Invoice Disputes, Escrow Requirements

December 2012Articles In the Zone

On October 24, 2012, Governor Tom Corbett signed into law legislation that amends Pennsylvania’s Municipalities Planning Code (MPC) by increasing the amount of time a property owner has to dispute invoices from third-party municipal consultants; by providing penalties for excessive and unreasonable billings; and, by clarifying escrow requirements for land development projects. House Bill 1718 now becomes Act 154 of 2012.

The MPC provides an applicant with a set period of time to evaluate and dispute invoices received from a third-party municipal consultant. If the invoice is for review fees associated with a land development project, the applicant previously had 45 days to identify the invoice as unreasonable or excessive. Act 154 increases that window to 100 days. Likewise, an applicant had 30 days to dispute bills for inspections of infrastructure installations; and, the new law similarly extends that deadline to 100 days. The new provision also further clarifies that the governing body must submit the invoice indicated as the “final bill” to the applicant.

While the primary focus of concern over “unreasonable” invoices has been third-party municipal engineers, the MPC defines professional consultants to additionally include “[p]ersons who provide expert or professional advice, including, but not limited to, architects, attorneys, certified public accountants, engineers, geologists, land surveyors, landscape architects or planners.”

In the event a set of disputed invoices ultimately reaches the arbitration phase, the MPC has been expanded to impose various responsibilities on the losing party. Namely, the applicant pays the arbitrator fees if the disputed fees are upheld; the charging party pays the arbitrator fees if $2,500 or more in fees are deemed unreasonable; and finally, the arbitrator fees are split equally if under $2,500. If the arbitrator holds that the charging party has billed the applicant more than $10,000 in unreasonable or excessive fees, then not only does the charging party pay the arbitrator fees but also an additional 4 percent surcharge on whatever amount was deemed unreasonable or excessive.

The final area of the MPC that Act 154 amends addresses the financial security an applicant posts with the municipality for the installation of land development improvements. When calculating the total escrow amount, the value of the improvements plus a 10 percent contingency fee – for a total of 110 percent of value – is normally required by the municipality. As improvements are completed over the course of the project, the municipality releases a portion of the escrow fairly representing the value of that completed improvement. Act 154 makes clear that a municipality must release funds equal to that valuation. While the municipality may be able to retain the original 10 percent contingency fee, it cannot additionally withhold another 10 percent of the completed improvement in question. Put another way, the full value of the incrementally completed improvements must be released, not merely 90 percent of value.

Lastly, when the governing body accepts dedication of the project’s improvements, it may require posting of financial security for a period of time on the integrity and functioning of the installed improvements. Act 154 confines the governing body’s ability to require such financial security to those improvements that have been specifically dedicated to the municipality.

As House Bill 1718 (Act 154) amends the MPC, similarly does House Bill 1719 amend the Municipal Authorities Act. Both take effect on or around December 24, 2012.