Real estate developers who acquire deteriorated properties in Philadelphia are at risk of code enforcement lawsuits. Developers perform the important work of transforming underperforming buildings into productive assets. These properties are often over a hundred years old making it difficult to comply with city code requirements.
I have represented investors who were hit with enforcement actions despite significant efforts to correct violations. In my experience, violation of city codes is not usually wilful. Non-compliance is often due to cash flow, logistical problems, or the practicality of correcting a defect.
In the City of Philadelphia, the municipal code imposes a penalty of $300 per violation for every 30-day period from the date of the violation order to the date of correction. Each violation is a separate offense with a separate fine that accrues until the property owner resolves the violations.
Penalties can be assessed for many types of violations. Some violations are a simple matter of failing to obtain a particular license. But in the case of a property with severe structural problems, a court could order the property demolished with the cost of the demolition imposed against the owner.
Here are four tips to avoid the risks of municipal enforcement actions to your investment property:
Clients often ask me if a court will force a prospective seller who signed a real estate agreement of sale to transfer the property when the seller refuses to close. A party who breaches an ordinary contract may be responsible for money damages. But in the case of real estate, a buyer may ask the court to force the seller to complete the sale. The kind of lawsuit is called specific performance.
I recently represented a seller who signed an agreement of sale but refused to complete the transaction. In this particular case, the seller was diagnosed with a severe mental health condition. A person who lacks mental capacity cannot legally sell a property. Courts will declare agreements void when one party lacked capacity. However, sellers sometimes simply have cold feet. Will a court force a sale when the seller does not have an adequate excuse?
Commercial lease disputes can be disruptive to the businesses of both landlords and tenants. A landlord may be frustrated with the loss of rental income or the tenant’s breach of lease conditions. The tenant’s business can be harmed when a landlord does not fulfill requirements of the lease that are critical to the tenant’s operations. Unlike residential leases where non-payment of rent is often the main issue, many commercial disputes are related to a breach of some condition of the lease.
Courts interpret commercial leases very differently than residential leases. Tenants in residential leases receive protections of local ordinances and consumer protection laws. There is often an assumption in commercial leases that both parties are on equal footing or have a certain level of sophistication in negotiating lease terms. Commercial leases are therefore interpreted more strictly.
Here are four common disputes that often arise in commercial leases: