Pennsylvania Law Monitor : Pennsylvania Lawyer & Attorney : Stark & Stark Law Firm : Yardley, Philadelphia, New York, New Jersey

The Pennsylvania Senate approved legislation on Tuesday, May 24, 2011 that would require contractors and subcontractors to verify legal employment status for all employees working on public building projects.

Senate Bill 637, which passed 47-7, makes use of the federal E-Verify system, operated by the Department of Homeland Security, mandatory to confirm that all employees are eligible to work in the U.S.

Employers would be required to submit employment verification statements to the Pennsylvania Department of Labor and Industry prior to beginning work on any public contract.  The Secretary of Labor and Industry will provide the form of the verification.  Additionally, Contractors will be required to provide to the public entity with the verification statement before it can commence work for the public entity.  Any subcontractor will be required to provide a verification statement to the Contractor prior to commencing work on a public building project and the Contractor will provide a verification statement to the public entity for all subcontractors it uses or intends to use on the public building project.  The verification statements will contain a certification signed by the Contractor or Subcontractor, as the case may be, that the information in the verification is true and correct and that submission of false or misleading information shall subjection the person signing the verification to sanctions.

The following constitutes a violation of this provision:

1. Employment of an employee on a public works project whose eligibility has not been verified through the federal E-Verify system.
2. Use by a Contractor of a Subcontractor on a public works project prior to the submission by the Subcontractor of a verification statement.
3. Commencement of work by a Subcontractor on a public works project prior to the submission by the subcontractor of the verification statement.
4. Making a false statement or misrepresentation in a verification statement.

Penalties for violation of this provision can be a fine, cancellation of the contract and possible debarment or suspension for one year. A Contractor will be immune from sanctions if it in good faith relies upon the federal E-Verify system and was provided with incorrect information.

We will follow this legislation and advise of any amendments and if the Governor signs this legislation into law.

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In Pennsylvania, “The Landlord and Tenant Act of 1951” (“The Act”) governs all residential leases entered in Pennsylvania. The Act provides certain terms in the relationship between a landlord and tenant that cannot be waived by the tenant, even where the written lease has provisions contrary to the Act. 

A common issue that arises between landlords and tenants in residential leases governed by the Act is the handling of the tenant’s security deposit at the conclusion of the lease. Residential landlords should be wary of the Act’s remedies for improperly withheld security deposit monies. The Act requires a landlord under a residential lease to provide the now former tenant with a written list of the damages to the premises that the landlord claims are the tenant’s responsibility within 30 days of the termination of the lease.

The list of damages must be accompanied by payment of the difference between the amount claimed for the damages and the amount of the security deposit with interest.  If a landlord fails to provide the written list of damages and repayment of security deposit amounts in excess the amount of damages claimed within the 30 day window, they will be deemed to forfeit the rights to withhold any portion of the security deposit or to sue the tenant for damages to the premises. If the landlord fails to pay the amount of the security deposit for which no claim is made within 30 days of the termination of the lease, the landlord can be held civilly liable for double the amount of the security deposit wrongfully withheld. A tenant’s claim for double the security deposit can be mitigated if the landlord can prove the amount of actual damages done to the premises to the satisfaction of the Court. This procedure may be employed by a tenant regardless of the terms of the written lease agreement or other writing between the landlord and the tenant.

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There are three principal types of tenancies related to the ownership of real estate. Perhaps the most popular, and most familiar, is the joint tenancy. If two persons own a property as joint tenants, upon one person’s death, the other person automatically owns all of the interest in the property. There is no limit on the number of persons that can hold property as joint tenants. If a husband and wife own a property together and add their child to the deed, each will own a one-third interest in the property. Upon one of their deaths, the two surviving persons will each own a one-half interest in the property.

In the event that a joint tenancy owner is sued, and a judgment is entered against that owner, the owner’s interest in the property is subject to attachment by the creditor. In addition, any co-owners can bring an action to divide the interest in the property, and attempt to force the other owners to sell their interest.

A tenancy in common is where each owner of the property has an undivided interest in the whole of the property. However, upon the death of any owner, his or her share will pass to his or her decedents by will or by intestacy. Unlike a joint tenancy where each owner owns an equal portion of the property, tenancies in common do not require equal ownership. For example, in a tenancy in common, there could be three owners with one owing 50%, one owning 30% and one owning 20%.

A form of ownership allowed in many states is the tenancy by the entirety. In this type of ownership, only a husband and wife may own the property. The advantage of a tenancy by the entirety is that, in the event that either the husband or wife is sued (individually), a creditor may not take action against the property while it is held jointly by the husband and wife. In addition, neither the husband nor the wife may divide the ownership by deeding his or her interest to another person. Further, in order for a mortgage to be placed on the property, both the husband and wife must sign the loan documentation.

In some states, if there is no tenancy stated, there is a presumption that the owners are tenants in common, and if one person dies, then his or her interest in the property will need to be probated, even if the decedent desired for the property to pass to the surviving co-owner (including the spouse).

As you can see from the above, tenancy should not be taken lightly. We recommend a careful review of all property deeds on a regular basis to ensure that the properties are properly held in accordance with your desires.

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Contractors must take notice of the new requirements regarding Home Improvement Contracts taking effect on July 1, 2009, which will most likely require significant changes, if not wholesale re-drafting of most Contractors’ written form of Contract.  Because the Act not only declares existing common practices “Prohibited Acts” and others criminal “Home Improvement Fraud,” a Contractor’s existing form Contract may guide an unwary or uninformed Contractor into a transaction voidable by the Owner at will, or a transaction that can form the basis of civil Consumer Protection liability, and even a third degree felony. 

The Act requires that, in order to be valid and enforceable, a Home Improvement Contract must be in writing.  Although this was always a good practice, the Act’s requirement means that even relatively modest Home Improvement work should be documented with a written contract. 

The regulatory reach of the Act is so broad that it prescribes classes or materials, defines “special order materials” for all Contractors, and limits the amount of an allowable deposit based on the total sale price of each individual Contract.  Common provisions in form contracts, such as hold harmless provisions and provisions awarding attorney’s fees to the Contractor will now make the Contract voidable by the Owner at will.  Additionally, a Contractor’s refusal to return pre-paid sums as liquidated damages – even when agreed by the Owner - when the Owner abruptly cancels a Contract may constitute criminal “Home Improvement Fraud.

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As a Contractor, you may be aware that beginning on July 1, 2009, the Pennsylvania Home Improvement and Consumer Protection Act will become effective.  The Act gives the Bureau of Consumer Protection of the Office of the Attorney General broad regulatory powers over Home Improvement Contractors and ties a new class of acts titled “Home Improvement Fraud” and “Prohibited Acts” into the Pennsylvania Unfair Trade Practices and Consumer Protection Law.  The Home Improvement Act contains several traps for the unwary Contractor, and many common practices utilized by Contractors will soon become sufficient grounds for Owners to void a Home Improvement Contract, constitute “Prohibited Acts” leading to civil liability under the Consumer Protection Statute, or even constitute criminal “Home Improvement Fraud,” an offense punishable as a third degree felony.
 
The Act applies to contracts for “Home Improvement,” which is defined as any contracts exceeding $500 for such things as the repair, replacement, remodeling, demolition, removal, renovation, installation, alteration, conversion, construction (other than construction of a new home), and even certain kinds of landscaping of a building designed to be used as a private residence and/or land adjacent to a private residence. 
 
The Act requires all Contractors doing business in Pennsylvania to register with the Attorney General, and to provide personal information of the principals of the business and such other information as proof of the Contractor’s insurance.  Successful registration, accepted by the Attorney General will then become a “Home Improvement License,” and the Contractor is awarded a “Home Improvement Contractor Registration Number,” which must appear on all advertising and vehicles bearing advertising of the Contractor. 
 
These rather stringent requirements of the Act do have one significant upside, however, because a License is now effective for the entire Commonwealth, and preempts all local contractor licensing requirements.

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This blog is part of an ongoing series discussing the Pennsylvania Mechanics’ Lien Law. For more information on Mechanics' Liens in Pennsylvania, click here.

If you’re in the Contracting business, you know well that performing professional work and keeping your customer happy is only half of what is required to maintain a financially healthy business.  The other half of the Contracting business is the challenge of getting paid for good work already performed, after you have paid suppliers and met payroll, and when your attention has turned to new jobs needed to keep you in business.  For Subcontractors, unscrupulous General Contractors compound the problem of getting paid for good work already completed when they withhold funds allocated to your work long after the work has been accepted and paid for by the owner.  Too often, an unscrupulous General Contractor will take advantage of its ability to “squeeze” a Subcontractor, knowing that the Subcontractor may accept reduced payment in order to meet its operating expenses. 

Most Contractors and Subcontractors are familiar with Mechanics’ Liens to ensure payment by an owner of General Contractor, however, Mechanics’ Liens are not always an effective and efficient means to force payment.  Often, the property will be sold or a General Contractor paid in full by an Owner before a Contractor or Subcontractor files a Lien limiting the effectiveness of the Lien.  In addition, Mechanics Liens, though a valuable tool, limit the Claimant’s recovery to the value of the work performed, and do not allow an aggrieved party to seek an amount which reflects the costs of grossly delayed payments by an Owner or General Contractor.   

In a perfect world, owners would pay Contractors on time, and Contractors would pay Subcontractors on time and in full.  Although Pennsylvania isn’t a perfect world, in 1994 the Pennsylvania Legislature made life for Contractors and Subcontractors a bit easier by enacting the Pennsylvania Contractor/Subcontractor Payment Act. (“the Act”)  The Act provides for adherence to payment deadlines to encourage fair dealing among parties to all commercial Construction Contracts, as well as residential Construction Contracts with six (6) or more units simultaneously under construction in the Commonwealth.  In addition, the Legislature provided a “Hammer” for Contractors and Subcontractors in the form of statutory authorization for a Court or Arbitrator to award interest and penalties on payment amounts which are withheld by Owners or Contractors which do not reasonably relate to deficiencies in the work performed.  The interest and penalties under the Act are each calculated at the rate of 1% of the wrongfully withheld payment per month.  For example, if an owner wrongfully withholds payment for the period of one (1) year, a Contractor is entitled to interest in the amount of 12% of what is withheld, as well as penalties in the amount of 12%, for a total of 24% of the amount wrongfully withheld by the Owner or General Contractor. 

Additionally, if a claim is brought pursuant to the Act and a Contractor or Subcontractor is a “substantially prevailing party,” the Act entitles the Contractor or Subcontractor to an award of attorneys’ fees.  Beware, however, that a “substantially prevailing party” under the Act can be either the Plaintiff or Defendant – if a Contractor or Subcontractor brings a claim under the Act for payment which a Court later determines is reasonably related to deficiencies in the work, the Court can then award attorneys’ fees to an Owner or General Contractor who rightfully refused to pay in full.  

In short, the Contractor/Subcontractor Payment Act provides a valuable tool to ensure prompt payment in full for Contractors and Subcontractors which perform good work for Owners and General Contractors in the Commonwealth.  Waiving the “Hammer” of interest, penalties, and attorneys’ fees under the Act can motivate a slow paying Owner or unscrupulous General Contractor to reconsider the decision to withhold payment in full without good cause.

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In Pennsylvania, there are generally three (3) forms of real estate taxation: (1) County; (2) Municipality (i.e., Township, Borough or City); and (3) School District.  Each of these taxing authorities sets their own taxing rate, referred to a millage.  A mill is equal to $1.00 for every $1,000.00 of assessed property values.  The total real estate tax that someone pays is equal to the total millage of all the taxing authorities times the assessed value of the real estate.

The calculation of the assessed value is not a simple matter.  The assessed value is equal to the ratio between fair market value and assessed values within a county referred to as the common level ratio.  The counties use a base year when all properties were last assessed to arrive at their assessed values.  In Bucks County the last countywide reassessment was done in 1972.  The common level ratio is a statistical calculation performed on a yearly basis by the State Tax Equalization Board based on data of sales in the prior year. 

A taxpayer has the right to challenge the assessment of his/her real property on an annual basis.  If you are successful in reducing the assessment of your real property you will have effectively reduced all of your real estate taxes.  Each county has a cut off date to file a challenge for the taxing authorities next fiscal year.  In many counties the deadline is August 1st, however it is important to know the cut off for the county in which your property is located.   The appeal it initially heard before the county’s Tax Assessment Appeals Board.  At the hearing before the board, the taxpayer has the burden of proving that the property is over assessed.  Normally, a taxpayer must prove that the property is over assessed in comparison to comparable properties within its taxing area (If you recently purchased your property you may be able to introduce your HUD-1 Settlement sheet as evidence that the property is over assessed). A taxpayer may also be able to challenge the assessment based on other theories (e.g. illegal spot assessments or constitutionality of the county’s base year), but are beyond the scope of this posting.  A taxpayer also has a right to appeal a reassessment done to the property due to a substantial change within forty (40) days of receipt of the notice of reassessment from the county.  The taxpayer or any taxing authority has the right to appeal the Tax Assessment Appeals Board’s decision to the Court of Common Pleas of that county, within a certain period usually thirty (30) days.  The Court of Common Pleas does not consider the board’s decision so long as independent credible evidence is introduced at the hearing before the court.  During the pendency of the appeal the taxpayer is still required to pay all taxes when they are levied. 

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In early October Governor Rendell signed into law the following piece of legislation which may affect the extent to which the Commonwealth of Pennsylvania adopts future triennial versions of the International Codes.

The legislation, House Bill 1096 (P.N. 4527), amends the Pennsylvania Construction Code to establish the Uniform Construction Code Review and Advisory Council. The council of 19 members, appointed by the Governor, will represent various trades and professions and it will be charged with gathering information from various municipal officers, code officials and other professionals concerning issues with, and possible changes to, the International codes.

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The current policies used in determining the standard for proving a regulatory taking of land are particularly strict. More often than not, the property owner is responsible for proving that exceptional circumstances exist which substantially deprives them of the use of their property. Additionally, the property owner is responsible for proving that the loss they suffered was a direct result of the taking through eminent domain.

As explained by the Pennsylvania Supreme Court in Machipongo Land & Coal Co. v. Department of Environmental Protection, 569 Pa. 3, 27, 799 A.2d 751, 765 (2002) , there are two types of regulatory takings: the Lucas taking and the Penn Central taking.

In a Lucas taking the landowner is deprived of all economically beneficial or productive use of their property. The only exception is when the proposed use of the land constitutes a public nuisance, and the landowner should have expected that the government would prohibit the use. While this form of regulatory taking is very rare, the consequences are significant and in some cases devastating to the property owner. Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992).

The Penn Central type of taking forces individuals to bear public burdens, which should be shared by the public as a whole. A Penn Central taking occurs when a regulation places limitations on land that does not eliminate all economically beneficial use of the land, but nonetheless, a taking may have occurred. This scenario depends upon several complex factors including the regulation's economic impact on the landowner, the extent to which the regulation interferes with reasonable financial expectations, and the intention of the government entity. Penn Central takings are more common than Lucas and though the provisions fall just short of those in a Lucas taking, they as well go too far. Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978).

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The US Department of Justice forced new industry policies recently which will allow Internet-based real estate agents to access home listings on more than 800 Multiple Listing Services (MLS). The settlement, which is awaiting court approval, could save homebuyers thousands of dollars on commission fees if online real estate agents are granted access to online databases previously limited to traditional residential property agents at the request of the National Association of Realtors.

National Law Journal - Verdicts & Settlements

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