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DEVELOPMENT LAW

    Despite the impact of the recession on construction, development and real estate sales, state law continues to evolve to address what many call “the New Normal” in the real estate market.

Act 46 -- Extend Those Valuable Approvals and Permits

    Pennsylvania enacted Act 46 in 2010 (the “Permit Extension Act”), providing an automatic extension for most state and municipal development permits, authorizations, and agreements until July 2, 2013.  This extension period applies to a permit, authorization, approval or agreement that was granted on or after the date of December 31, 2008, that would have expired prior to July 2, 2013.  Since its enactment, two critical interpretations of the Permit Extension Act have occurred. 
 

    First, the Pennsylvania Department of Environmental Protection issued guidance stating that NPDES Stormwater Construction permits are not extended under the Permit Extension Act because such permits are administered pursuant to a federal law, the Clean Water Act, over which the General Assembly cannot implement amendments.  In 2011, the development community hoped to see a reversal of this interpretation, but to no avail.  Therefore, the NPDES approval must remain at the forefront of a developer’s continued monitoring of the validity of its approvals.
 

    Second, in an interpretation favorable to developers, property owners and builders, the Court of Common Pleas of Lancaster County reviewed whether Act 46 provides an extension of the permit life through July 1, 2013, or a “suspension,” with the relevant permit’s approval life to be tacked on after July 1, 2013.  In Re: Appeal of Keystone Custom Homes, Inc., the Court held that the use of the phrase “suspended during the Extension Period” within the Act effectuates a tolling of the running of the expiration dates, rather than merely postponing all expiration dates until July 1, 2013.  While this decision is binding only on the Lancaster County courts, it is a favorable interpretation, consistent with the statutory language, and can be raised for guidance in municipalities to attempt to counter a strict interpretation of the Permit Extension Act.

EMINENT DOMAIN

    Protection of private property rights for landowners, businesses and homeowners is a focus of Fitzpatrick Lentz & Bubba (FL&B)'s real estate and land use practice. 

    Eminent Domain is the legal process by which government can seize private property for public purposes – usually for highways, utility facilities, public buildings and similar purposes.  Sometimes, government or utilities will take actions which limit or physically hamper the use or value of private property, without taking formal legal action.  This area of the law, also known as “condemnation,” is one in which FL&B continues to assist private property owners when government intrudes on land rights.  Under appropriate circumstances, an affected property owner is entitled to financial damages, known as “just compensation.”  Our real estate group has extensive experience in eminent domain work and can help the private property owner in minimizing harm to the property, while optimizing financial compensation for the restrictions or taking of land or buildings.  In specific instances, we have worked with governmental agencies and utility companies in providing advice regarding the condemnation process, as well as the duties and obligations of government and utilities to the landowner. 

    As counsel to the AHL Phantoms hockey team, FL&B, has been directly involved in the downtown Allentown arena project. This urban redevelopment initiative demonstrates how large scale condemnations can impact private property rights while benefitting a valuable public purpose.

TAX ASSESSMENT

Is Your County Reassessing Your Property?

    In Pennsylvania, counties are charged with assessing values of homes, land and business properties. The assessment value is the basis for your property tax bill.  For example, Lehigh County’s last County-wide reassessment was in 1991. An assessment is a percentage of the appraised value of your property as of a specific date, called the "base year," which for Lehigh County is 1991.  In a county-wide reassessment, new assessments typically are based on drive-by and aerial photos of all properties across the county - residential, commercial or otherwise.  Factors such as number of rooms, location, school district and condition of the property are considered in the analysis.


    RECENT NEWS:   There has been activity in the last couple of years in our region which merits any property owner’s attention. Lehigh County planned a county-wide assessment to go into effect in 2013.

    The change in assessment is being publicized by the County as revenue-neutral. This means that although assessments will increase to reflect 2012 values, Pennsylvania law requires that the County rescale its millage rate to avoid an overall tax increase. Typically, a reassessment will result in increased taxes for 40% of properties, decreased taxes for 40% of properties and no change for 20% of properties. However, the County has reported that its data reflects an increase for 42% and a decrease for 58% of properties. Tax bills for only five residential properties will remain the same.

    Taxpayers will be notified of their new assessments in February or March. Each property owner will be eligible to informally appeal the new assessment during a short period of time following issuance of the Reassessment Notices. If a property owner opts not to appeal the reassessment during the informal appeal period, an appeal may still be filed by August 1, 2012, under the regular appeal process. 

    As of the writing of this article, it is likely that the reassessment will occur in 2012. Last month, the County Executive’s office requested postponement of the reassessment due to market volatility. Regardless, the County Commissioners supported implementation of the reassessment and argued that the County administration failed to provide evidence supporting the reassessment delay. The Commissioners reapproved the reassessment at their January 25 meeting. County Executive Don Cunningham has stated that he will veto the bill. If the reassessment is delayed, the data can be utilized to implement a reassessment within the next five (5) years.

    FL&B's real estate group has experience in handling tax assessment appeals and is ready to assist anyone who would like to challenge a reassessment.

COMMUNITY ASSOCIATIONS

    As more homeowners choose to live in condominium and other planned communities in 2012, it is important to keep an eye on recent developments affecting ownership and lifestyle considerations.   With the ever-changing legislation related to the financing and governing of common interest communities, in 2011 several issues presented themselves to developers and property owners.

Reserves

    Given the state of the economy and declining housing values, it is critically important that each association have an up-to-date reserve study performed by a qualified firm to ensure adequate reserve funds for maintenance of common areas to fund a large-scale capital improvement project, like repaving a road or replacing a roof.  Owners will be issued a special assessment to pay for the project in addition to the normal assessment, if the reserve funds are inadequate.  Lenders may be less inclined to finance potential buyers, if the reserve funds are deemed inadequate.  Freddie Mac, Fannie Mae and the Federal Housing Administration have stringent reserve requirements for condominium lending, and the annual budget must include at least 10% allocated to replacement reserves.  Any amount less than 10% must be supported by a reserve study less than one year old.

Budget

    Now is the time to make sure that your association’s budget is properly done.  In addition to the issues spelled out in the reserve study, pay careful attention to the association’s outstanding debts and liabilities, as well as the percentage of homeowners that are not paying their assessments.  If a large percentage of homeowners are not paying, which is fairly common in many communities given the current state of the economy, this may have a negative impact on a potential buyer’s ability to obtain a mortgage to purchase a home in a condominium association.  Freddie Mac, Fannie Mae and the Federal Housing Administration, which purchase and/or insure a majority of mortgages, place a 15% cap on assessment delinquency rates in order to approve lending for homes in the community. 

Number of Investment Properties

    Associations should keep track of the percentage of homes that are actually owner-occupied versus leased to tenants.  A high level of rental properties in a community can have a negative impact on a potential buyer’s ability to obtain a mortgage to purchase a home in a condominium association.  Freddie Mac, Fannie Mae and the Federal Housing Administration currently require a 51% owner occupancy rate in order to approve lending for homes in a community.  Associations can amend their community documents to take investment properties into account.

2011 SELECTED REPORTED CASES

Environmental  Hearing Board

    In 2011, FL&B prevailed in a groundbreaking land use decision which is the ongoing subject of litigation. 

    In Blue Mountain Preservation Association v. Alpine Rose Resorts and the Pennsylvania Department of Environmental Protection, FL&B represents the developer of a road course and sports car resort in Eldred Township, Monroe County. The project received all required municipal approvals and continued to be reviewed by the Pennsylvania Department of Environmental Protection regarding the NPDES permit stormwater management measures at the property.

    The central issue in the appeal filed by the Blue Mountain Preservation Association (BMPA), an organization comprising individuals objecting to the project, is the application of DEP's antidegradation regulations, which apply to stormwater discharges to water courses such as streams and rivers which have been designated as protected waters by DEP.  After a two-day trial at the Pennsylvania Environmental Hearing Board, Judge Labuskes ruled that Alpine complied with all applicable requirements of DEP's regulations regarding antidegradation of protected waters and dismissed the appeal.  BMPA filed an appeal with the Commonwealth Court of Pennsylvania, which is now pending. 

    The antidegradation regulations are part of recent revisions to DEP regulations that impose stricter stormwater management rules on developers.  The Alpine Rose matter represents one of the first cases to review the application of these rules and will be part of the framework for how the regulations are interpreted.

Commonwealth Court

    In a reported decision that ended three years of litigation, the Commonwealth Court of Pennsylvania decided in favor of FL&B’s client, affirming conditional use approval granted for a planned commercial development in North Whitehall Township.  

    A significant issue in the complicated appeal centered on the retail center being permitted under the applicable zoning ordinance as a planned commercial development, which is a designation for certain lands not located in the commercial zoning district but permitted by conditional use to be used for commercial purposes.  The zoning ordinance required an applicant for a planned commercial development to present whatever information it had available on the types of tenants or uses intended or expected in the planned commercial development.  The client’s application listed general retail and commercial use along with its 180,000 SF retail store.   

    The Court rejected an argument by objectors to the project that the applicant needed to present evidence of compliance with the specific standards for each underlying use that may be conducted in the planned commercial development.  The Court found that the zoning ordinance specifically provided for a planned commercial development to be subject to a multi-tiered procedural review in which the underlying uses are subject individually to zoning and land development review at the time the use is proposed. 

    In this instance, the proposed retail store would be subject to separate land development review, which at the time of the appeal was underway.  If a later use proposed on another lot in the planned commercial development required special exception approval, that review would be conducted at that later time as well as its land development plan review.  The Court also upheld the Board of Supervisors’ acceptance of the testimony of the project engineer that the use would not result in or substantially add to a significant traffic hazard or significant traffic congestion.   The Court rejected objectors’ argument that a traffic study is the only means by which an applicant can meet the traffic criteria.  (This decision follows an unreported 2010 decision in which the Commonwealth Court upheld a Board of Supervisors' decision to grant subdivision approval for the property proposed for the retail store and four outparcels.)