Practice Area: Real Estate

Philadelphia’s Ten Year Tax Abatement Program has been in place for almost twenty years. It was instituted to spur new development and re-development, by exempting, for ten years, the value of any improvements to real estate.  Over the past few years, many new or recent home buyers in Philadelphia with ten year abatements, have opened their mail to find a very unpleasant surprise. Though they bought their property subject to a 10-year tax abatement, they hold in their hand a notice from the City indicating their tax bill has increased by 300% or more. But their total assessed value hasn’t gone up, so why do they owe so much more? Then they compare to their previous year’s notice, and find that a significant portion of their assessed value has been shifted from ‘Improvement’ Value to ‘Land’ Value.

Philadelphia’s 10 year tax abatement for new residential construction, exempts from taxation “that portion of the assessment valuation attributable to the cost of construction of the new eligible dwelling unit.” This means that for a 10 year period, qualifying properties will only be taxed on the land value of their property, and not on the value of any improvements.  There are similar abatements for new commercial construction, and renovations to residential and commercial properties.

The reasoning behind the Abatement Program is simple: if the City temporarily removes an additional cost for those who buy new homes (or business properties), demand will increase and developers will be motivated to build new construction or renovate dilapidated and outdated structures. This in turn spurs additional development in many neighborhoods and increases the city’s tax revenues in other ways.  And the Program works.  There are plenty of studies that show this setup has been a win-win-win for Philadelphia home buyers, the City’s tax revenues, and developers.

However, it’s becoming less of a win for the new homeowners who have received one of these notices showing a massive increase in their land value.  How is the land under their home now worth 3 to 12 times more per square foot than the sale price for the vacant lot next door? It doesn’t seem fair. They want to appeal, but are often unfamiliar or intimidated by the system.

And many of those who do file an appeal are then advised that they cannot appeal just the land value, or that the appeal may even result in an increase in their assessment. Most accept this to be true and decide that even though it doesn’t seem right, it’s not worth the time and effort to continue with the appeal.  Those that do pursue the appeals to a hearing, often feel  like they are being taken advantage of, that they are being discouraged from exercising their right to appeal,  and that the system is both wrong and unfair.

Now, the courts are starting to agree. In a recent Court of Common Pleas case where a property owner appealed the increase in the taxable land value of his property under the 10 Year Abatement Program, a Kensington homeowner received a favorable decision that lowered his assessed land value from $113,500 to $79,000.  This reduction will save the property owner hundreds of dollars a year on his property tax bill over the duration of the 10 year abatement.

We’re glad to see this progress being made.  Based on our long history helping many clients navigate the 10 Year Tax Abatement Program, we also believe that the land value increases are not appropriate.  We have a number of legal arguments and valuation strategies that we believe support the unfairness an inappropriateness of these land value increases

Property owners in Philadelphia have the right to appeal their tax assessments every year, and to appeal changes to their assessments when those changes are made.. So if you still have a number of years remaining under your abatement, you became aware of an increase in your land value and taxes, and you’ve previously considered appealing  a land value increase but forgot, decided not to, or been dissuaded by the city from doing so,  you’ll have another chance in 2018. If you’d like to review your case with us, please call or email and we’ll be glad to discuss your case.

If you have questions about real estate tax assessments or the 10 Year Tax Abatement Program, please contact William F. Kerr, Jr. at (610) 275-0700 or wkerr@highswartz.com.  High Swartz real estate attorneys continue a long tradition of providing a full range of real estate services. This work includes the protection of the interests of landowners, buyers and sellers of land, municipalities and developers.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

September 21, 2017

by Kevin Cornish

Many individuals in Pennsylvania live in planned communities such as townhouses or condominiums.  Association dues and assessments, as well as possible penalties and fines, are regularly due from homeowners to the association.  If a homeowner fails to make payment, it could lead to liability far in excess of the amount of the actual assessment itself.

If a homeowner fails to make payment, the association is generally permitted to assess penalties and interest for nonpayment.  Should non-payment continue, the association may choose to proceed with lawsuit against the homeowner to collect the unpaid assessment.  In such a situation, the association will hire an attorney to represent it, at an initial cost to the association.

However, the Pennsylvania Uniform Condominium Act  and the Uniform Planned Community Act both authorize the association to receive legal costs and expenses incurred in collecting unpaid assessments.  Pennsylvania court have enforced these laws and permitted attorneys fee awards far in excess of the actual assessment.  In one case, the Commonwealth Court affirmed an award of over $46,000 in attorneys fees on a case involving a $1,200 assessment.  In a recent case, the Commonwealth Court also affirmed an award of over $26,000 in attorneys fees on a case involving an assessment of just over $600.

Homeowners living in a condo or planned community must be cautious when failing to pay assessments as the homeowner could end up being liable for far in excess of the assessment amount.  Associations should proceed with collection efforts against delinquent homeowners knowing that it will likely be awarded its attorneys fees incurred in collecting assessments.

If you have any questions about condo or HOA dues, please contact Kevin Cornish, at 610-275-0700 or via email at kcornish@highswartz.com.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

April 11, 2017

Unfortunately, it is that time of year again…tax season. However, I’m not talking about personal income tax, but real estate tax appeals.

The deadline for filing a real estate tax assessment appeal for property owners in Bucks, Chester, Delaware, and Montgomery Counties is August 1, 2017 and October 2, 2017 for property owners in Philadelphia. In addition, residents of the surrounding counties may have limitations on how early they can file their tax assessment appeals. More importantly, deadlines in  all counties is absolute, which means that missing the deadline can result in you losing your appeal rights until 2019. While this may seem like a minor issue, filing your assessment appeal too early in certain counties can be as detrimental as missing the deadline. For example, in Chester County, appeals may only be filed from May 1^st until the first business day in August (this year, August 1, 2017); while Delaware County residents are permitted to file their assessment appeals as early as March (this year, March 15, 2017). However, regardless of when your deadline is, now is the time to start considering whether you want to appeal your real estate tax assessment for 2018.

For property owners throughout Pennsylvania, your property’s assessed value is the value used  in calculating your real estate tax liability for your county, school district and municipality. Keep in mind that your property’s assessed value is typically some percentage of your property’s fair market value.  When reviewing your tax bill, the simplified method of determining your property’s total assessed value is by adding the value assigned to your land to the value of the improvements on the parcel you own. The total assessed can the be used in calculating your property’s fair market values and should be closely reviewed.

Philadelphia County is the most recent county to have assessment changes, as most other surrounding counties have not completed county-wide reassessments in over 10 years. For example, Delaware County has not had a county-wide reassessment since as far back as 2000, but due to a recent court order, the county is now required to complete a county-wide reassessment to become effective January 1, 2021. As a result of this recent court decision it is anticipated that other counties will follow Delaware County and complete a county-wide assessment. Therefore, property owner’s in counties that have not had county-wide reassessments in the last decade should not become complacent with their properties’ assessed value and should take notice of any changes in their tax assessments every year. Delaware County residents may also want to consider if they want to appeal their 2018 assessment or wait until the county-wide assessment becomes effective in 2021.

However, a county reassessment is not the only thing that may trigger the reassessment of your property. If you make any improvements to your home or a piece of undeveloped land that you own,  your property may be reassessed.

In general, it is a good idea for property owners to always check and compare your property’s assessment annually to make sure that your tax assessment appropriately reflects what your property is worth. Staying on top of your property’s assessment will ensure that if the property is overvalued, you will be able to take the necessary action to make sure you are paying the appropriate amount of real estate taxes.

to summarize, when considering whether to appeal your property’s assessment for 2018, you should take the following into consideration: (1) how your property’s  fair market value compares with its current value and recent property sales in your area; (2) if your recently purchased your property, whether your purchase price  is consistent with your most recent assessment; and (3) if your property was recently appraised, whether the appraised value is consistent with the fair market value as determined by your assessed value.

If you need help deciding if an appeal is worthwhile or with the process in general, consulting a knowledgeable real estate attorney can make all the difference in the successful lowering of your property tax liability.  For more information on the assessment changes that have impacted Philadelphia property owners‘ taxes for 2017, please see our blog about Philadelphia Tax Assessment Appeals.

If you have any questions about tax assessment appeals, please contact us at 610-275-0700 or via email at main@highswartz.com.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

March 22, 2017

By Arnold Heller

Purchasing a unit in a condominium is not the same as purchasing a single family, detached house. When purchasing a newly constructed or to be constructed condominium unit in Pennsylvania, there are certain matters that purchasers should be aware of. A few of those are listed below.

New Unit Purchases

Unless you are buying the most expensive and largest unit in the community, the ability to negotiate the actual terms of the community documents (i.e., the Declaration, Bylaws, or Rules and Regulations) is slim indeed. However, within those documents, things to look out for include:

• How are the percentages of liability for payment of common expense assessments determined? Do they vary from unit to unit? Are they based on size (square footage), or on some arbitrary basis that has no relationship to the value of a particular unit?
• Has the declarant/developer reserved the right to add or withdraw real estate? If real estate can be added, are there assurances that it will be developed in a manner that is compatible with the existing development? If real estate can be withdrawn, what effect might this have on the liability of existing units for expenses related to amenities (such as pools) that were intended for a larger community?
• How many phases of development are there? Are you looking at the first phase? Last phase?
• Are units restricted to residential use?
• Are there adequate and fair leasing restrictions? Many purchasers who are buying their primary residence prefer to have some restrictions on leasing.

Developer/declarants are required to provide public offering statements (POS) to prospective purchasers that contain detailed information about the condominium. A purchaser can cancel an agreement of sale within 15 days after receiving the POS or any amendment to the POS which would have a material and adverse effect on the rights or obligations of the buyer.  Purchasers should pay particular attention to the budget portion of the POS. Although these may be difficult to interpret, a high percentage of management fees to the remainder of the budget or a lack of provision for reserves may be warning signs. While comparisons may be difficult, an experienced broker may be able to provide insight.

Resales of Units

A buyer is entitled to what is termed (for condos) a "3407 certificate" which contains much the same information as is set forth in the initial public offering statement, updated to show the current status of the unit and the association in general. An agreement of sale is voidable for five days after the certificate is provided or until conveyance, whichever first occurs. The information must be complete; if it is not, the five day period would run from the time that complete information is provided.

With respect to the governing documents, many of the same considerations as those listed above apply.

Among the most important items within the 3407 certificate are the current budget, the most recent balance sheet for the association, any capital expenditures proposed by the association, the amount of common expense assessments against the unit in question, and a statement of any unpaid common expense assessments with respect to such unit.

Check to determine whether the project is professionally managed.

Check to determine whether the condominium association has a right of first refusal with respect to the unit (not a common requirement in condos of more recent vintage).

It is not a bad idea to ask other unit owners about their experiences. One common problem seems to be leakage of water into condo units, which inevitably leads to disagreement between the association and the affected unit owner as to what needs to be repaired and who is responsible to pay for it.

Closings

Make certain that the unit is correctly described in the deed. Ask the title company for help if you have doubts.

Get a "3315(g)" certificate from the association showing no unpaid assessments against the unit (overlaps somewhat with the 3407 certificate mentioned above, but a buyer is entitled to it and it is recordable).

Get a condo endorsement from the title insurer (#810 for a condo).

Summary

There are many factors to consider when purchasing a condominium unit. A professional real estate agent or an attorney can help you to navigate through those issues.

If you have any questions about real estate transactions, please contact Arnold Heller at 610-275-0700 or via email at aheller@highswartz.com.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.