One of the topics generating a great deal of attention in zoning relates to people leasing their residential homes via Airbnb.

This issue came up in Reihner v. City of Scranton Zoning Hearing Board No. 256 C.D. 2017 (PA Commw. Ct. Dec. 8, 2017). The owners of a single family residential dwelling rented the three bedrooms on the second floor of their house via the Airbnb website.

The City filed a notice of violation alleging that the use was a “Bed and Breakfast” which was not allowed in the property’s zoning district.

Scranton’s ordinance defined a “Bed and Breakfast use” as follows:

“The use of a single family residential dwelling and/or accessory structure which includes the rental of overnight sleeping accommodations and bathroom access…and which does not provide any cooking facilities or provision of meals for guests other than breakfast…”

Continue Reading Zoning Concerns from Listing Your Property on Airbnb

A recent Commonwealth Court case involving a pair of residential properties has aptly demonstrated that not every residential property in Philadelphia can be automatically utilized for student housing. This case in question is Schwartz v. Philadelphia Zoning Board of Adjustment, 2015 Pa Commw. Lexis 413 (2015).

In Schwartz, two properties were zoned for single family and two family residential use, and located near Drexel University’s campus in Powelton Village. The properties were unequivocally zoned and used for residential purposes, and they were currently being leased to Drexel students, with each property rooming at least 4 students. For the record, the Philadelphia Zoning Code defines a family as “a person living independently or group of persons living as a single household unit using housekeeping facilities in common, but not to include more than three persons unrelated by blood, marriage or adoption.”

Continue Reading Commonwealth Court Upholds Philadelphia’s Definition of a Family for Zoning Purposes

At times, when a lender gives a loan secured by a mortgage on real estate, something happens in the loan origination or closing processes (whether through mistake, inadvertence, or even fraud), which results in the mortgage being defective, and therefore not a lien on the real estate. Items such as missing signatories to the mortgage and incorrect legal descriptions of the mortgaged property are typical.

The means of resolving such issues is usually the filing of a mortgage reformation action, asking the court to judicially “reform” the mortgage to make right what went wrong. Reformation actions are usually uncontested, and defenses, when proffered, tend to be limited.

However, in a recent reformation case I litigated, US Bank as Trustee v. Finkel, et al. (Court of Common Pleas, Northampton County, #C-48-CV-2011-5023), the defendants raised rarely-seen defenses, specifically, defenses under the federal Fair Debt Collection Practices Act, the Pennsylvania Unfair Trade Practices and Consumer Protection Law, the Pennsylvania Fair Credit Extension Uniformity Act, and the federal Equal Credit Opportunity Act. All of these defenses, in one way or another, alleged that the plaintiff was engaging in debt collection through the reformation action and/or had caused the defendants harm thereby. Although I have litigated numerous reformation cases in Pennsylvania, this was the first and only one I know of to raise these defenses.

The Court granted summary judgment against the defendants, holding, in what seems to be a case of first impression in Pennsylvania, that the subject reformation action (as well as an alternative count requesting an equitable lien on the property at issue), did not involve debt collection, nor caused the harm complained of by the defendants.

Lenders faced with the task of reforming mortgages in Pennsylvania can therefore count on Stark & Stark to effectively analyze and respond to uncommon challenges to such reformation efforts.

Metro Bank v. Board of Commissioners of Manheim Township (Pa. Commonwealth Court 2015) dealt with the appropriate calculation for a transportation impact fee. Metro Bank was approved to build a bank in Manheim Township, and was required to pay an estimated transportation impact fee prior to the start of construction. This dispute is due to the amount of the transportation impact fee to be paid.

Metro Bank’s consultant determined that the new bank’s location would generate 110 peak hour trips with a pass-by rate of 57%. Thus, it was expected that 63 of the 110 peak hour trips would be generated from vehicles that were already driving and passing by the new development. A transportation impact fee is intended to offset the strain on a municipality’s roads when the development is installed in an area.

Manheim Township disagreed with Metro Bank’s estimation, and determined that the impact fee should be based on all of the 110 peak hour trips. The bank countered that the impact fee should only be based on the 47 additional trips into the development not resulting from vehicles that were already on the road.

The Court looked at the Administration of Impact Fee provision contained in Section 505-A of the Municipalities Planning Code and determined that nothing in that section required the municipality to exclude pass-by trips. Moreover, the Court determined that Metro Bank’s interpretation would lead to an inappropriate result because, by excluding pass-by traffic, the revenues generated by the impact fee would fall significantly short of the Township’s total costs.

Additionally, under Metro Bank’s calculation, the initial developer would pay for an unfairly high percentage of the increase in vehicular traffic to an area. Thus, the Court held that the impact fee should be determined by multiplying the per-cost trip multiplier by peak hour trips attributed to the new development, with no exclusion for pass-by traffic.

The unreported case of Jenkins v. City of Philadelphia (1470 C.D 2014) should serve as a reminder to all land use attorneys that they must always adequately satisfy all of the applicable proofs when presenting a zoning case. In this instance, the Applicant needed use and dimensional variances in order to utilize a building for commercial and residential purposes. In this instance, the property only permitted industrial uses.

The Philadelphia Zoning Board of Adjustment granted the requested variances. However, after this request a neighbor filed an appeal. The Philadelphia Court of Common Pleas affirmed the approval, at which time the neighbor appealed to the Commonwealth Court.

After reviewing the case, the Commonwealth Court reversed the trial court and observed that the Applicant failed to satisfy its burdens. The Court also noted that the Applicant presented extremely limited testimony to the Zoning Board. Initially, there was no evidence that the property was incapable of being used for any permitted purpose, and the Applicant testified that the property had been vacant for a decade.

That being said, the Applicant never tried to explain why the property was vacant or what marketing efforts were employed to sell/lease the property or use it for any permitted purpose. There was also no presented evidence that showed it was cost prohibitive to utilize the property for any permitted use. Instead, there was simply a statement that the property had been vacant and the permitted uses were not viable, without any adequate data or supporting information.

For this reason, land use cases should always present the requisite proofs in a zoning case, even if it appears that the board is inclined to grant a zoning application. A zoning board’s decision is entitled to great weight, but testimony is still required to support a board’s approval. This is particularly true for a use variance.

In the aftermath of the 2008 financial crisis, one of the pieces of legislation that was intended to be considered “Main Street”-friendly, which is another way of referring to legislation that is supportive of locally owned small businesses and residences, was the Protecting Tenants at Foreclosure Act (“PTFA”).  In short, this statute provided protection for tenants who occupied residential real estate that was subject to mortgage foreclosure.

The PTFA permitted any occupant who was a non-relative of a foreclosure defendant who occupied real estate under an arms-length, bona fide lease for fair rental value, to remain in the property for the balance of the lease term. If the lease did not have a fixed remaining term, occupants were allowed to remain in the property for 90 days before a foreclosing mortgagee could commence ejectment proceedings.

Despite its good intentions, unfortunately the PTFA wound up creating more problems than it solved before it was eventually retired at the end of 2014, because it effectively turned foreclosing lenders into reluctant landlords.  Even worse, there was very little case law, be it federal or state, that arose to properly interpret the PTFA, as its originally written provisions were less than clear, and any case law that did exist often varied from jurisdiction to jurisdiction.  In Pennsylvania, virtually no case law existed that interpreted the PTFA.

This changed in August of 2015, with the entry of the trial court’s decision in Bosco Credit VI Trust Series 2012-1 v. Hofer, et al. (Blair County Court of Common Pleas, August 5, 2015), which was an ejectment case that called into question the applicability of the PTFA.  I represented the plaintiff in this case.

The Court eventually held that, considering the purported lease was not for fair rental value under HUD guidelines for the area, the protections of the PTFA did not apply, and therefore the ejectment of the tenant could proceed.

Although the Bosco Credit case has been appealed to the Superior Court of Pennsylvania, its existence represents what is very likely Pennsylvania’s first foray into the murkiness created by the PTFA.

Click here to read part one.

A lot of press has already been devoted to potential opportunities for the owners of residential properties in the Philadelphia area as a result of to the Pope’s visit in late September 2015. Considering the projected amount of available hotel/motel accommodations–approximately 30,000 units–pales in comparison to the expected 2 million-plus visitors, homeowners have been encouraged to become “short term landlords” and rent all or part of their properties to individuals visiting Philadelphia to see the Pontiff.

With that said, there has been little coverage of the potential effect that all of these visitors will have on commercial/retail property owners…in particular, those with large public parking areas, such as shopping centers that lie right outside the city center. Just recently, Mayor Nutter’s office announced a “traffic box” with boundaries from 38th Street to the west, South Street to the south, the Delaware River to the east and Girard to Ridge to Spring Garden to the north.

Further, regardless of whether the visitors are getting around Philly by foot, car or mass transit, they will need somewhere to stay, as well as eat and shop. This means that hotel accommodations, restaurant reservations and general retail traffic will surely increase. Given these opportunities to service the 2 million-plus coming to see the Pontiff, owners of any commercial/retail properties and parking lots should keep the following in mind to effectively manage the masses:

Continue Reading Pontiff’s Visit to Philadelphia (Part II) – How Commercial/Retail Owners Can Best Manage the 2 Million-Plus

Prior to 2008, when the Great Recession and its aftereffects brought about a sea of changes in the mortgage lending arena, it was not an uncommon scenario, post-closing on a sale or refinance of real estate, to see a mortgage signed by only one of multiple owners of the real estate. In most of these instances, it was one spouse signing the mortgage and the real estate titled in both spouses’ names, but the spousal scenario was not the only one. Unmarried co-owners and other family members might be on title, but missing from the mortgage encumbering such title. Continue Reading Mortgage Reformation in Pennsylvania

Suppose you have sold real estate to someone else and take a mortgage back from the buyer to secure payment of the sale price. Suppose, again, that you find out that there’s something wrong regarding that mortgage. Maybe the buyer claims he didn’t sign it. Maybe it describes the real estate incorrectly. Maybe it gets lost on the way to being recorded. Maybe…well, you get the point. If there’s something wrong with your mortgage, how can you be sure it’s a lien on the real estate to protect your “financial assistance” to the buyer with the sale price?

The answer (assuming you don’t have title insurance) may be filing an action to request an equitable lien on the real estate. An equitable lien is a lien imposed by a court when someone lends money or furnishes services to someone else, and intends real estate to secure the loan or services rendered, but (for whatever reason) doesn’t have an existing lien on the real estate. The ultimate rationale behind an equitable lien is to prevent a windfall/lucky break to the person whom money was lent to or services performed for, and who expected a mortgage on his real estate, but doesn’t have one. Three conditions must exist under Pennsylvania law for the imposition of an equitable lien—an obligation from one to another, a piece of real estate which is related to the obligation, and an intent between the obligor and the obligee that the real estate secure the obligation.

Practically, if an equitable lien is imposed by a court, it should reflect as many of the terms of the intended mortgage as possible, but at a minimum the original face amount of the mortgage. The court should also indicate that the equitable lien’s priority relates back to the date the intended mortgage was originally entered into or dated.

At Stark & Stark, we possess the expertise to file and prosecute actions for equitable liens in all Pennsylvania counties. If you feel you may benefit from the imposition of an equitable lien, do not hesitate to contact us.

The case of Linde Corporation v. Black Bear Property L.P. et al was decided by the Court of Common Pleas of Lycoming County and dealt with the issue of who is an owner for purposes of a mechanic’s lien claim. Specifically, is the owner of subsurface rights an owner under the Mechanic’s Lien Law? As noted by the Court, the owner of only subsurface rights can be an owner, but was not one in this instance.

The Plaintiff, Linde Corporation (“Linde”), filed a mechanic’s lien for labor and materials used to provide work on the subject property. Linde had entered into a contract with the owner of the property, Black Bear, LLC for the work to the surface of the property. Due to non-payment, Linde filed a Mechanic’s Lien Claim and a Complaint to Obtain Judgment and Enforce Mechanic’s Lien Claim. One of the other Defendants named in the Complaint was Penn Central Corporation, the owner of the subsurface rights in the subject property.

Linde argued that because it installed underground pipes, it had provided a benefit to Penn Central. Initially, the Court held that someone merely holding subsurface rights in a property can be an owner. However, in this instance, Linde did not enter into a contract with Penn Central. Because there is neither an actual nor an implied contract, the Court held that Penn Central is entitled to have the lien stricken against Penn Central. The Court held that in this instance, the Mechanic’s Lien Law should be construed to mean that only the property owner who actually contracts with the contractor can be subject to a mechanic’s lien.