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.

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.

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.

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. 

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).

National Law Journal - Verdicts & Settlements

Review fees are typically paid at the discretion of the municipality, at the commencement of the land development plan application, or over time. Whether the municipality requires the review fees to be paid at the commencement of the land development plan application or over time, the municipality must inform the developer of each payment it makes for professional services, so that the developer can object to a particular invoice that it believes is unreasonable. Section 10503(1)(i) of the MPC requires the municipality to submit to the developer, an itemized bill showing the work performed, identifying the person performing the services, and the time and date spent for each task.

Dispute Procedure:

In the event the developer disputes the amount of review fees charged by the municipality, the developer is required, no later than 45 days after the transmittal of the bill by the municipality to the developer, to notify the municipality and the municipality’s professional service provider that such fees are disputed and the developer must explain the basis of the objection to the fees charged. Failure of a developer to dispute a bill within 45 days waives the developer’s right to arbitration of that bill as set forth in Section 10510(g)(2) of the MPC. However, if the objection is timely filed and an agreement cannot be reached with the municipality’s professional service provider regarding the review fees charges, the developer may request that the dispute be arbitrated.

Arbitration Proceeding:

Section 10510(g)(2) of the MPC requires that the arbitrator chosen to arbitrate the dispute between the developer and the municipality’s professional service provider must be of the same profession or discipline as the professional service provider whose fees are disputed. In the event that the municipality’s professional service provider and the developer cannot agree upon the arbitrator within 20 days of request for appointment of an arbitrator, then, the President Judge of the Court of Common Pleas of the judicial district in which the municipality is located shall appoint such arbitrator. Section 10510(g)(2) of the MPC also requires that the arbitrator move swiftly in attempting to resolve the matter. The arbitrator is required to hear such evidence and review such documentation as the arbitrator in his or her sole opinion deems necessary and must render a decision no later than 50 days after the date of appointment. Based upon the decision of the arbitrator, the developer or the professional service provider whose fees were challenged is required to pay any amounts necessary to implement the decision within 60 days. The developer must pay the fee of the arbitrator if the arbitrator sustains the review fee charged; or, otherwise it shall be divided equally between the parties.

Procedural Considerations:

It is imperative that a developer challenging a professional service provider’s fees follows the statutory guidelines of the MPC set forth above. Failure to do so may have grave consequences on the challenge. In a case recently decided, Tobin v. Centre Township, the developers notified Centre Township (the “Township”) that they were disputing certain fees charged by the Township’s professional service provider and that they wanted to negotiate a reasonable fee. The Township refused to negotiate, and the developers filed a court action seeking to have the court determine the reasonableness of the fees charged. The Commonwealth Court of Pennsylvania ruled that the Township was required to negotiate reasonable review fees and remanded the matter to the trial court for further proceedings. After remand, the parties attempted to negotiate a fee that was acceptable to both parties, but failed to resolve the dispute. At no point prior to filing a subsequent court action did the developers invoke their statutory right to an arbitration proceeding pursuant to Section 10510(g) of the MPC, and therefore the Commonwealth Court ruled that the developers could not challenge the reasonableness of the fees charged by the municipality’s professional service provider.
 

The video can be played directly on this site by clicking on the video icon on the top right-hand side of the blog, or you can visit the Stark & Stark page on Vimeo. 

Development Projects And The Use Of Bonds from Stark and Stark on Vimeo.

What is a TIF District?
Local governing bodies have the power to create Authorities, which in turn have the power to declare an area a TIF District. A TIF District is an urban community that has become “blighted because of the unsafe, unsanitary, inadequate or over-crowded condition of the dwelling therein, or because of inadequate planning of the area, or excessive land coverage by the buildings thereon, or the lack of proper light and air and open space, or because of the defective design and arrangement of the buildings thereon, or faulty street or lot layout, or economically or socially undesirable land uses.” Additionally, a finding is required that the problems that exist are beyond remedy and will not be cured without the assistance of TIF.

How Does TIF Work?
The first step in using TIF to redevelop a certain urban area is to create a local Authority that has the power to declare an area as “blighted.” An area that is deemed blighted is called a TIF District. The local municipality is then allowed to issue bonds, allowing the municipality to use the borrowed money to finance the development in the TIF District. The money can be used to finance the redevelopment of industrial, commercial or residential areas.

When a TIF District is declared, the district’s property tax revenue is frozen at the value established at the base year. The year that the TIF District is established is considered the base year. The taxing authority will only receive tax revenues at that frozen level in subsequent years. However, as redevelopment occurs, property values will increase, thus increasing the tax levels. Any tax revenue generated above the frozen level will be used to pay off the municipal bonds that were issued. This creates a scheme of private financing initiated by local government.

The legislature has found that these conditions create numerous problems, including nuisance, fire and health hazards, criminal operations, depreciated property values, and a shortage of decent, safe or sanitary housing accommodations. TIF was enacted to remedy these problems in order to promote the public health, safety, convenience and welfare of these areas.

You can download a copy of this podcast here.

A NID can be created by a municipality itself or a municipality can be petitioned to create a one by businesses, residents, or a combination thereof within the municipality. Prior the creation of a NID, a public hearing must be conducted on the matter. Any property owner that objects to the proposed NID must do so in writing and in order to veto the plan, 40% of the benefited properties within the proposed NID must object.

On June 24, 1990, Landowners and Tobin Contractors filed sketch plans with the Township, for the development of 369 homes, consisting of townhouses, duplexes and single-family residences. When the sketch plans were filed, the Township’s fee schedule for the review of land development plans (1989 schedule) was as follows:  $500.00 for review of a residential subdivision sketch plan; $500.00 plus $100.00 per dwelling unit for review of a residential preliminary plan; and $500.00 for a review of a final plan.  This fee schedule imposed a total fee upon Landowners in the amount of $38,400.00.  

On October 10, 1990, the Township revised its fees for reviewing land development plans (1990 schedule). Under the 1990 schedule, the Township charged developers $500.00 plus $250.00 per dwelling unit for review of a residential subdivision sketch plan, 500.00 plus $250.00 per dwelling unit for review of a residential preliminary plan; and $500.00 plus $100.00 for a review of a final plan. The fee imposed upon Landowners for review of their preliminary plan and their final plan totaled $130,150.00.  

On October 31, 1991, Landowners submitted a preliminary plan to the Township without including the fees chargeable under the 1990 schedule, and instead proffered the fees owed under the 1989 schedule, along with a letter disputing the 1990 schedule and offering to negotiate a reasonable fee. At a meeting on November 19, 1991, the Joint Planning Commission (“Commission”) (the Commission’s services are utilized by both the Township and Centerport Borough) voted not to accept the Landowner’s preliminary plan because it had not been accompanied by the proper fee. On December 23, 1991 Landowners filed an action requesting the court to order the Commission to review their preliminary plan while the parties negotiated a reasonable fee. After a series of rulings by the court, the Prothonotary terminated the Landowner’s action on April 1, 2002. 

On May 11, 1998, the Township again revised its fee schedule (1998 schedule), this time to reduce its fees. The 1998 schedule imposed a fee upon Landowners of $41,900.00 for review of their preliminary plan. On October 29, 1998, Tobin Contractors filed an action against the Township, alleging a de facto (actual) taking by the Township and requesting a determination of just compensation. After the parties engaged in extensive discovery on the issue, the trial court found that the 1990 fee schedule imposed oppressive and unreasonable fees upon Landowner and, further, the Township should have reviewed the Landowner’s preliminary plan when filed in 1991. Accordingly, the trial court found that a regulatory taking had taken place. The Township appealed the ruling, raising four arguments, one of which was that a landowner’s action was defective because a taking does not occur merely because regulation deprives the landowner of the most profitable use of the property.  

The Commonwealth Court explained that a de facto taking occurs when “the entity clothed with the power of eminent domain substantially deprives the owner of the beneficial use and enjoyment of his property.”  The Court went on to further explain that the burden for proving a regulatory taking of land is particularly stringent: “Property owners bear a heavy burden of proof and must show that exceptional circumstances exist which substantially deprive them of the use of their property, and further, that such deprivation is the direct and necessary consequence of the actions of the entity having the power of eminent domain.”   

The Court went on to explain the two types of regulatory takings as set forth by the United States Supreme Court. One test, referred to as the Lucas test, was developed in Lucas v. South Carolina Coastal Council. In Lucas, the United States Supreme Court explained that a regulatory taking is a regulation that deprives an owner of “all economically beneficial or productive use of land” and requires just compensation to be paid to the landowner. The second type of regulatory taking, commonly known as the Penn Central taking (from its origination in Penn Central Transportation v. New York City), is more traditional in nature. A Penn Central taking occurs where a regulation places limitations on land that fall short of eliminating all economically beneficial use, but a taking nonetheless may have occurred because of the regulation’s economic factors on the landowner, the regulation interferes with reasonable investment-backed expectations, and the character of the government action.  

The Commonwealth Court, in ruling in favor of the Township, held that losing one of several uses of land does not constitute a taking, relying upon an explanation from the Pennsylvania Supreme Court that “a taking does not result merely because a regulation...deprives the owner of the most profitable use of his property. Otherwise all zoning regulations could be categorized as “takings” in the sense that the owner is not completely free to use his property as he chooses.” 

In further justifying its ruling in Tobin, the Court stated that the Landowners’ loss of the “residential development interest” in their land is the loss of only one of several uses. The Landowners had been using the land in question for farming since the pendency of this action in 1990. Additionally, the Court held that there were other development opportunities available to Landowners that would have been less costly to review under the 1990 fee schedule. Finally, the Court held, in reference to the 1990 fee schedule that, at most, the 1990 fee schedule deprived the Landowners of their ability to put their land to its most profitable use, but that it was not a taking.  

The moral of the story: as a land developer, just because you own the land, does not mean you are completely free to develop it as you choose. So long as a municipality provides for other uses of the land, a “takings” claim will be unsuccessful, in most instances, if brought against the municipality.  

This podcast will discuss the Court's decision and what it means for developers whose projects require obtaining outside agency approvals.  You can download this podcast here.