The developers of the Wharf, an ongoing waterfront development at 1100 Maine Avenue SW in Washington, D.C., recently announced that they have secured $113 million of debt financing for the project. PN Hoffman and Madison Marquette, the project’s developers, will use the financing to pay for the construction of two new hotels, the 175-room Canopy by Hilton and the 237-key Hyatt House hotel, scheduled to open later next year. SunTrust Bank and M&T Bank will provide the financing.

The announcement is the latest step in an ambitious plan to transform approximately 25 acres along a mile of waterfront of the nation’s capital into a desirable, livable destination complete with hotels, condos, rental housing, retail, and restaurants.

Continue Reading $113M in Construction Financing Approved for One of Washington D.C.’s Most Ambitious Projects – the “Wharf”

After months, maybe years, of planning, raising capital, obtaining permits and waiting out construction, your gleaming new building is open and occupied. Soon, you’ll get a simple, one-page letter from your county’s Tax Assessment Office. What should you do if that letter indicates that your property is worth about a half-million dollars more than your appraisal reflects? Every Pennsylvania property owner is entitled to an annual appeal of their property assessment through the real estate tax assessment appeal process. Knowing the value of your property, your tax liability and whether you can reduce your tax burden through an appeal is as critical as managing any other area of your financial portfolio.

Calculating your Property Tax and Fair Market Value (FMV)

In Pennsylvania, real property typically incurs school, city/township and county taxes. Each of the three taxes is assigned a millage rate, which is used to calculate the property’s tax liability. To calculate the total real estate tax owed, the total millage of all of the taxing authorities is multiplied by the property’s assessed value. It is important to note that tax assessment appeals only challenge the assessed value of your property, NOT the imposed millage rate. Millage rates are published on each county’s website.

Continue Reading Real Estate 101: Knowing Your Property Value and Challenging Your Tax Assessment

On June 25, 2015, Justice Kennedy delivered the Supreme Court’s decision in Texas v. Inclusive Communities Project.  In the case, the Court determined that the Fair Housing Act of 1968 includes disparate impact claims.  Prior to Texas v. Inclusive Communities Project, nine of the twelve federal Courts of Appeals had ruled that the Act encompassed disparate impact claims. Nevertheless, there remained much dispute over the Act’s inclusion of such claims.

There are two forms of discrimination:  disparate treatment and disparate impact.  Disparate treatment is the intentional discrimination based on a person’s inclusion in a protected class (such as race, color, national origin, sex, religion, familial status, or disability).  Disparate impact, on the other hand, has little to do with intent.  Rather, disparate impact occurs when a policy that appears to be neutral on its face is discriminatory against a protected class when it is applied.  It has never been questioned that the Act prohibits disparate treatment.  Until June 25, however, there had been much debate over whether the Act prohibits disparate impact.  The debate is now settled!

The Court recognized, though, the potential dangers of disparate impact claims.  In his opinion, Justice Kennedy wrote:  “An important and appropriate means of ensuring that disparate-impact liability is properly limited is to give housing authorities and private developers leeway to state and explain the valid interest served by their policies.”  The Court concluded that policies adopted by government or private developers are not “contrary to the disparate impact requirement” unless they are “artificial, arbitrary, and unnecessary barriers.”

To address this problem, the Court decided to heighten the burden necessary to establish an initial case of disparate impact liability before considering evidence to rebut the claim.  In short, plaintiffs in discrimination cases will need to show that the implementation of the policy of which they complain creates the discriminatory impact.  By raising the bar of what is needed to assert a valid disparate impact claim, the Court has created some protection for housing providers to ensure that disparate impact claims will not cripple the industry.   The Court also recognized that housing providers  must be allowed to consider market factors when making housing decisions and take into consideration many factors in defending their policies.  If the challenged policy “is necessary to achieve a valid interest,” it will likely survive scrutiny under the disparate impact analysis.

While Texas v. Inclusive Communities Project involved the specific issue of tax credit distribution for housing projects, the Court’s decision makes clear that its holding applies to all housing matters covered by the Act.  Thus, all housing providers should carefully review their policies with counsel to limit the risks of having to defend disparate impact claims.

About the Authors: 

Steven M. Williams is the Managing Partner of the Harrisburg, Pennsylvania office of Cohen Seglias, Chair of the firm’s Commercial Litigation Group and a member of the Business Practices and Labor & Employment Groups. Steve has been representing landlords in virtually every aspect of their business for over 23 years and concentrates his practice in the areas of commercial and civil litigation, real estate, landlord and tenant law, employment law, business and corporate law and construction law.  He can be reached at 717.234.5530 or swilliams@cohenseglias.com.

Alexander F. Barth is an Associate in the Business Transactions and Commercial Litigation Groups at Cohen Seglias. He focuses his practice on commercial litigation and represents businesses and individuals in complex commercial disputes.  Alex represents residential and commercial real estate developers in land use and zoning matters throughout Pennsylvania and New Jersey. He can be reached at 215.564.1700 or abarth@cohenseglias.com.

By: Marian Kornilowicz and Mark Leavy

Real Estate Tax.jpgIf you are a resident of Philadelphia, then you likely know about the ongoing turmoil surrounding Mayor Nutter’s pursuit of real estate tax reform. His plan is known as the Actual Value Initiative, or AVI, and will have the effect of increasing the real estate property taxes paid by homeowners in certain neighborhoods and lowering them in others.

Due to widespread concerns that there might be a dramatic increase in the taxes paid by homeowners, implementation of the AVI was postponed until the 2014 tax year. On October 18, 2012, the state Senate passed a bill necessary for the AVI to go into effect, and Governor Corbett is expected to sign the bill.

There is a critically important deadline coming up – November 15, 2012 – that no Philadelphia homeowner should miss. Even though it is more than a year before the new tax assessment and rates will go into effect in 2014, homeowners must submit a Homestead Exemption application by November 15, 2012 (if they have not already done so). As long as your Philadelphia residence is your primary residence, you can obtain a $30,000 reduction in the assessed value of your property for real estate tax purposes.

There is no reason not to take advantage of the potential tax savings – even though the actual dollar value of the “savings” you may realize is unknown. And, of course, calling it a “tax savings” may not really be accurate since the Homestead Exemption will probably only result in less of an increase in your taxes as a result of the AVI. This is shown in the following explanation and example.

The existing real estate tax law applies a tax rate to the “assessed value” of a property. The “assessed value” is currently set by the City at 32% of the “market value.” In 2012, the tax rate was 9.432%. So, for $100,000 of “market value,” 2012 real estate taxes were in the amount of $3,018.24 (9.432% x 32% x $100,000). In 2013, the tax rate is being increased to 9.771%. This results in taxes of $3,126.72 per $100,000. (9.771% x 32% x $100,000), or an increase of $108.48 per $100,000.

One of the big issues with the existing tax law was that the “market values” actually used are grossly inconsistent with reality. Typically, higher valued residential properties were grossly under-assessed and lower valued residential properties were over-assessed for tax purposes. This led to highly skewed real estate taxes for homeowners across the City. (Interestingly, commercial real estate was generally more accurately assessed.)

The AVI is intended to make the tax system more fair by using market values that reflect the current “actual value” of real estate. This is of great concern to homeowners because – instead of basing real estate taxes on 32% of the “market value” – taxes will now be based on 100% of the market value! For example and at the 2013 tax rate, real estate taxes on $100,000 of property value would be $9,771.00 – a more than $6,600 increase.

It is easy to see in this example how big of a difference the $30,000 Homestead Exemption could make. Using the same example of $100,000 of property value, the Homestead Exemption would apply real estate taxes based on $70,000 – which, at the 2013 tax rate, would produce taxes of $6,839.70. In this example, the Homestead Exemption would reduce taxes by in taxes of almost $3,000.

Now, real estate taxes will not become three times what they were “overnight” as shown in this example. It is expected that the AVI program will be implemented with a new, “lower” tax rate. The big question on everyone’s mind is what the new rate is going to be – and it remains unknown for every homeowner at what value their home will be assessed, and what their resulting real estate taxes will be.

So, no one knows for sure how much their 2014 taxes will be. About the only thing you can be sure about is that a $30,000 reduction in market value under the Homestead Exemption will blunt the impact of the tax increase coming in 2014.

This is the web link to apply for the Homestead Exemption online.

Marian A. Kornilowicz is the Chair of the Business Practice Group of Cohen Seglias Pallas Greenhall & Furman PC. His practice is concentrated in the representation of clients in varied business transactions and real estate matters.

Mark J. Leavy is an Associate with the Firm and specializes in employment litigation at the trial and appellate levels.

By: Steve Williams

Pennsylvania now has a law that prescribes how landlords must handle a tenant’s abandoned property in certain circumstances. Senate Bill 887 was signed into law by Governor Corbett on July 5, 2012 (as Act 129-2012), becomes effective on August 4, 2012, and amends the Landlord and Tenant Act.

In summary, Act 129 requires that tenants remove their personal property when they relinquish possession of an apartment. Relinquishment occurs when a tenant is evicted, or when he vacates, removes substantially all of his personal belongings and gives his landlord a forwarding address or written notice that he has abandoned. The Act provides for a period of time during which a landlord must hold the abandoned property for the tenant to retrieve, and it provides for payment to landlords for removal and storage costs in some cases. Finally, the Act requires that tenants be provided notice of landlords’ rights under the Act.

As a result of the Act, landlords may want to consider amending their leases, or preparing a lease addendum, to provide the required notice. In addition, landlords may want to create a form notice letter to be sent to tenants who leave property behind.

There is more to the Act, and a careful reading of it is recommended. For more information, contact Steve Williams at (717) 234-5530 or swilliams@cohenseglias.com.

Steve Williams is Managing Partner in the Firm’s Harrisburg office, and a member of the Firm’s Commercial Litigation and Employment Law Groups.

Smart contractors now more than ever must be vigilant about preserving their rights to mechanics’ liens. Lien rights provide another avenue of protection if and when payment is not made for work performed. Contractors should beware however, when performing work or supplying materials on Pennsylvania projects that cover multiple plots of land.

Mall.jpgRecently, a contractor in Philadelphia County performed concrete and masonry work on a strip mall that covered multiple plots of land, with multiple owners. In court, this contractor’s attempt to lien the project was unsuccessful because the contractor filed two liens for the same work against both plots and did not apportion the liens based upon the improvements made to each plot.

The practical message here is that Pennsylvania contractors who work on projects that span multiple land plots and involve more than one owner should be mindful of exactly where they are performing their work, and where the materials they supply are ultimately installed and/or deposited. The statutory expectation under the Pennsylvania lien law in this multiple-plot circumstance is that work performed on each plot is specifically apportioned. This means that the contractor must account for and divide the work and associated costs according to each plot of land where the work occurred.

Pennsylvania contractors would be well-advised in this multiple plot situation to maintain specific daily reports that delineate which work is being performed on which plot of land. Additionally, maintenance of delivery tickets and shipment receipts that specifically note where particular materials are installed is helpful.

Steven M. Williams contributed this post.

In December 2009, Pennsylvania became the first state in the country to require that fire sprinklers be installed in all new residential construction. The law took effect on January 1, 2010 for townhouses and is scheduled to become effective for one- and two-family hsprinkler.jpgomes on January 1, 2011.

Controversy Over Pennsylvania Sprinkler Mandate

This new requirement has been met with some controversy. Home builders and builders associations have strenuously fought the requirement, complaining that mandatory sprinklers would add significant costs to the construction of new homes. They argue that such additional costs should not be imposed on home buyers in an already sluggish economy.

Firefighters and sprinkler installation contractors have applauded the new requirement as a long-awaited step in the fight to save lives from home fires. They dismiss the cost factor argued by contractors, and maintain that the lives saved by sprinklers would far outweigh the costs involved. According to Gary Keith, vice president of the National Fire Protection Association:

The reality is if you have a smoke alarm in your house compared to nothing your chances of survival are improved by about 50 percent. If you have both smoke alarms and sprinklers, your chances are about 80 percent . . . We think that level of protection is completely warranted when you add in that extra benefit to keeping those fires small to minimize injuries and minimizing property damages.

HB 1196-Possible Delayed Implementation of Residential Sprinkler Mandate

The fight over sprinklers in one- and two-family homes is not over. In April 2009, House Bill 1196 (HB 1196) was introduced in the Pennsylvania House of Representatives to address the implementation of the residential fire sprinkler mandate. HB 1196 floundered in the Pennsylvania General Assembly until mid-October 2010, when the Pennsylvania Senate, generally in favor of delaying the sprinkler requirement, inserted into HB 1196 a provision that would do just that. In its amended form, HB 1196 would delay the implementation of the sprinkler requirement for one year – until January 1, 2012 – in all new one- and two-family homes.

On October 14, 2010, the Pennsylvania Senate passed the amended version of HB 1196, and sent it back to the Pennsylvania House of Representatives for a concurrence vote. However, the House recessed before it could take up the matter, announcing that it would not be back in session until after the election. After this announcement, it was reported that the House would not come back into session this year to consider any legislation. Subsequently, official reports indicated that the House would take up HB 1196 when it reconvenes after the election. More recently, however, the Democratic majority in the House notified House members that all remaining session days for 2010 were being cancelled and that no bills would be considered. A small group of Democratic members have asked the leadership to reconsider so that the House can vote on outstanding legislation. Whether this will actually happen is not certain.

If the House does not approve the Senate’s amendment to HB 1196, it is almost certain that the sprinkler requirement will become effective on January 1, 2011. However, if the House does approve the Senate’s changes, the bill will go to Governor Rendell for consideration. While nothing official has come out of the Governor’s office, it is well known that Rendell generally favors delaying the sprinkler requirement and supports the Senate’s amendment to HB 1196. It remains to be seen, however, whether Rendell will, in fact, sign HB 1196 in the lame duck session.

Cohen Seglias will continue to monitor the progress of this pending legislation and update you on any developments.