Friday, December 31, 2010

Harrisburg Ordinances 13 and 14 tabled by City Council

Click here for previous descriptions and discussions of Harrisburg's proposed Ordinances 13 and 14. [These Ordinances would impose vicarious liability on landlords for the actions of their tenants, impose a residency requirement on property management and ownership and modify the inspection program.]

Last evening, the Harrisburg City Council voted 4-3 to table both proposed Ordinances after a fair amount of discussion.

Numerous investors (and others) spoke out against the proposed ordinances at the beginning of the meeting. Investor and Realtor organizations such as CARPOA, GHAR and AACP participated in the public comment section of the meeting. We listed pending litigation in Allegheny County and Columbia County relating to similar legislation as bases for the Council to withold action at this time, especially since City officials have previously stated that these measures would constitute a source of revenue for the city (which is illegal under state law).

Council members stated that they wanted to explore the issues further and rework the Ordinances. Council invited investors and others to participate in committee meetings during the new year.

It is my hope that in these committee meetings we can address some of the more basic issues keeping city properties from being improved - such as the large volume of properties that suffer from title defects due to having been sold at tax sale at some point in the past.

Wednesday, December 29, 2010

Real estate market decline to continue in 2011

Real estate sales are expected to continue to decline in 2011 throughout the United States:
Home prices are dropping in the nation's largest cities and are expected to keep falling next year, as fewer people purchase homes and millions of foreclosures come on to the market.

The AP article attributes part of the downward pressure to foreclosures:
Millions of foreclosures are forcing home prices down. Many people are holding off on making purchases because they fear the market hasn't bottomed out, analysts say.

Foreclosures likely will remain high for the next two years, said Mark Zandi, chief economist at Moody's Analytics.

Despite the downward trend, mortgage rates are on the rise:
And more people might be less inclined to buy now that mortgage rates are rising again. In the last month, rates on fixed mortgages have surged more than a half-point to near 5 percent.

Monday, December 27, 2010

Penbrook Borough litigation, citations, tax and sewer rate increases

In August, I commented on Penbrook Borough's requirement that rental property owners file copies of their own federal tax returns with the Borough office. As I stated in August:
Penbrook's employees have begun to embroil the Borough in an ever widening controversy, the outcome of which depends only on the willingness of investors and residents to appeal to the Court of Common Pleas or otherwise challenge the Borough in Court.

Since that time, one investor filed suit against the Borough as a result of this requirement and other Borough initiated litigation.

The Harrisburg Patriot-News reported yesterday on this lawsuit and some of the issues behind it. That Patriot quoted Plaintiff Michael Coleman's research showing that the Borough filed 562 citations in 2009, despite having only about 3,000 residents. As a guest on the Bob Durgin radio show this afternoon (on WHP 580) Coleman cited public records showing that all but about 80 of those citations were unsuccessful.

Coleman further stated that Penbrook's campaign of citations is motivated by the Borough's need for revenue, a claim that is supported in part by Penbrook's increase in real estate taxes and sewer rates a year ago.

Thursday, December 23, 2010

Harrisburg Ordinances 13 and 14 scheduled for December 30 vote.

I have written previously about Harrisburg Ordinances 13 and 14. These ordinances would impose vicarious liability upon landlords for the actions of tenants, would impose a residency requirement for Harrisburg real estate investment or management and would attempt to raise revenue for the City by enforcing the inspection program that has existed for fifteen years.

These ordinances were on the agenda on September 28th, but were tabled. They are scheduled for a vote on December 30th at the next City Council meeting.

Sunday, December 12, 2010

Tax assessment appeal litigation exploding throughout the United States

I predicted in January that tax assessment appeals would become more common as market values declined, especially if municipalities raised taxes or other fees.

Bloomberg now reports on a "fiscal flood that threatens to swamp local government budgets across the U.S. . . . " Bloomberg's article focuses on Michigan, but also includes data from Illinois, Nevada and New Jersey.

This trend indicates future revenue shortfalls for municipalities:
Municipal budgets “tend to lag economic conditions” by 18 months to several years, according to a National League of Cities report in October that Pagano [Unniversity of Illinois professor] co-wrote.

“The full weight of the decline in housing values has yet to hit the budgets of many cities and property tax revenues will likely decline further in 2011 and 2012,” the report said.

When the effect of today's appeals finally hits municipalities, we can expect more revenue raising measures that will create further declines in the value of real estate.

Friday, December 10, 2010

Carlisle Borough proposed rental inspection ordinance; Joint task force; SOSO

Click here for the previous post on a proposed rental inspection ordinance in Carlisle.

Yesterday evening, an organization known as "SOSO" presented its proposal for rental inspections, licensing and related costs. As I wrote earlier this week:
The measure would require municipal inspections of every unit every time a new tenant moves in or out. The proposal would create a licensing system for landlords.

The proposal would also create a point system by which private complainants could, by virtue of filing complaints with the Borough, cause landlords to accumulate enough "points" that the Borough would revoke their license. These complaints would not have to be adjudicated in order for points to accumulate. This proposal would violate due process.

The "SOSO" advocates presented a list of municipalities in Pennsylvania that have adopted similar ordinances. The list included municipalities that have lost lawsuits related to their ordinances and were forced to provide refunds to landlords. SOSO did not mention this litigation, despite including these municipalities on their list.

More importantly, the list presented to Borough Council excluded certain municipalities where litigation remains pending currently. SOSO's list made no reference to Berwick Borough, Penbrook Borough and Pittsburgh. All of these municipalities are embroiled to one degree or another in litigation. Berwick and Pittsburgh have been expensive for all parties, while Penbrook has involved numerous smaller actions over individual instances of enforcement (the expense of which is just beginning to be felt). I and others brought some of this litigation to Council's attention during the public speak-out session.

If you are a municipal official, be careful about proposals for landlord regulation. These ordinances have often resulted in litigation, with varying results and costs. Without getting into the details of every legal challenge over the years, my own opinion of the legality of these ordinances is that an ordinance can survive a legal challenge, but only if it is watered down to the point where the municipality will not receive the desired benefit (revenue). Even then, actual enforcement of the ordinance will result in a greater than anticipated burden to the municipality, to the point where enforcement will eventually (or sooner) be abandoned (or will be inconsistent), thus creating a new basis for legal challenge.

Borough Council took no action, but announced the creation of a new joint task force to examine this issue and report to the Council. The composition of the task force has yet to be determined. Proponents of the ordinance immediately attempted to exclude from the task force (under the guise of limiting the task force to Carlisle residents) those of us that had pointed out litigation in other municipalities.

There will undoubtedly be more news to follow in the coming months.

Wednesday, December 8, 2010

Carlisle Borough rental inspection ordinance proposal.

Carlisle Borough in Cumberland County may shortly consider a rental inspection ordinance containing many controversial features. A community group plans to propose such a measure tomorrow evening at the Borough Council meeting.

The measure would require municipal inspections of every unit every time a new tenant moves in or out. The proposal would create a licensing system for landlords.

The proposal would also create a point system by which private complainants could, by virtue of filing complaints with the Borough, cause landlords to accumulate enough "points" that the Borough would revoke their license. These complaints would not have to be adjudicated in order for points to accumulate. This proposal would violate due process.

The meeting takes place tomorrow at 7:00 P.M. at the Carlisle Borough offices at 53 West South Street, Carlisle, PA. The public will be afforded the opportunity to speak against this proposal.

Berwick Borough rental inspection ordinance; Berwick Area Landlord Association

The Columbia County Court of Common Pleas will shortly hear oral arguments in the case of Berwick Area Landlord Associaton v. Borough of Berwick. Berwick landlords are challenging Berwick Borough's rental inspection ordinance largely on the basis that the ordinance would impose liability on the landlords for the actions of their tenants.

Recent court cases in Pennsylvania and elsewhere have struck down local ordinances that are inconsistent with existing state law (on a variety of issues). This principle can now be applied to landlord-tenant law to prevent municipalities from changing existing state law as it relates to landlords and their tenants. (I am briefly summarizing arguments that have been made by the Berwick Landlord Association in court.)

The oral arguments will provide the last input before the Court decides a "Motion for Summary Judgment" filed by the landlords. Whoever loses in this Motion will file an appeal to the Commonwealth Court. The Commonwealth Court's decision (expected later in 2011 or 2012) will profoundly affect rental ordinances throughout Pennsylvania.

This case is docketed at 2008 - CV - 1873 in Columbia County.

A victory in this case would not invalidate all of the rental inspection ordinances across Pennsylvania, but it would limit many of those ordinances. Many municipalities now consider similar ordinances without knowing that these ordinances (such as Berwick's) are often tied up in court. A victory in this case would cause other municipalities to consider future legislation more thoroughly rather than simply copy the ordinances from Berwick (and others) verbatim.

Thursday, December 2, 2010

Philadelphia City Council must recognize Sunshine Law; HAPCO

Two weeks ago, Pennsylvania's Supreme Court struck down Philadelphia City Council's ban on public comments at council meetings. The ruling results from a 2007 lawsuit filed by PROA affiliate HAPCO. The ruling is based on and enforces Pennsylvania's Sunshine Law.