PRINTER'S NO. 24
No. 14 Session of 2003
INTRODUCED BY WALKO, THOMAS, BEBKO-JONES, BELFANTI, BROWNE, CAPPELLI, CASORIO, CIVERA, CRUZ, DALEY, DERMODY, D. EVANS, GEIST, HENNESSEY, HORSEY, JAMES, KELLER, MELIO, MICOZZIE, PRESTON, KOTIK, YOUNGBLOOD, YUDICHAK, CRAHALLA, LEACH, FREEMAN, HARHAI AND JOSEPHS, JANUARY 29, 2003
REFERRED TO COMMITTEE ON URBAN AFFAIRS, JANUARY 29, 2003
AN ACT 1 Providing for court-appointed receivers to bring residential 2 buildings into municipal code compliance when owners fail to 3 comply. 4 The General Assembly of the Commonwealth of Pennsylvania 5 hereby enacts as follows: 6 Section 1. Short title. 7 This act shall be known and may be cited as the Blighted 8 Property Receivership Act. 9 Section 2. Legislative declaration and findings. 10 The General Assembly finds and declares as follows: 11 (1) Many citizens of this Commonwealth are adversely 12 affected by blighted residential property, those residing in 13 dwelling units located in buildings that fail to meet 14 municipal building and housing codes for public safety and 15 sanitation and those who live in proximity to such occupied 16 substandard buildings as well as vacant residential 17 buildings.
1 (2) Substandard housing units are unsafe. In addition, 2 tenants often pay rents disproportionate to the value of the 3 housing accommodations and services received. Substandard, 4 deteriorating residential structures whether occupied or 5 vacant are a public safety threat and nuisance, and their 6 blighting effect diminishes property values in the 7 neighborhoods in which these properties are located. 8 (3) If these buildings are not rehabilitated and brought 9 into code compliance, they are likely to be abandoned, 10 resulting in increased costs to the Commonwealth, 11 municipality and taxpayers to secure and ultimately demolish 12 these buildings. 13 (4) If it becomes necessary to ultimately abandon a 14 building, existing tenants will be displaced, disrupting 15 lives and adding to the affordable housing problems of the 16 municipality and the Commonwealth. Many displaced tenants may 17 become homeless. 18 (5) As a result of the aforementioned, the General 19 Assembly declares that, if the owner of a residential 20 building that has been declared to be a public nuisance or is 21 in violation of municipal and housing code requirements fails 22 to correct such code violations, it is in the best interests 23 of the Commonwealth, the municipality, the neighborhood and 24 the tenants for the court, pursuant to the provisions of this 25 act, to appoint a receiver only to make the necessary 26 improvements to bring the building into code compliance 27 before the building deteriorates further and necessitates 28 abandonment and demolition, resulting in the displacement of 29 the existing tenants occupying the building and/or removal of 30 the building from the housing supply. 20030H0014B0024 - 2 -
1 Section 3. Definitions. 2 The following words and phrases when used in this act shall 3 have the meanings given to them in this section unless the 4 context clearly indicates otherwise: 5 "Code." Any building, housing, property maintenance, fire or 6 other public safety ordinance enacted by a municipality. 7 "Competent entity." Any person or entity with experience in 8 the operation and maintenance of residential buildings. 9 "Court." The appropriate court of common pleas. 10 "Municipality." Any city of the first, second, second class 11 A or third class, any incorporated town, any township of the 12 first or second class and any borough. 13 "Nonprofit corporation." Any nonprofit corporation organized 14 for the purpose of initiating community development activities, 15 including housing. 16 "Owner." The holder or holders of title to a residential 17 building. 18 "Parties in interest." Parties in interest shall be those 19 persons or entities who have a direct and immediate interest in 20 a residential building, including: 21 (1) The owner. 22 (2) Any individuals, associations and corporations who 23 have interests of record in the residential building or who 24 are in actual possession thereof or who collect or receive 25 rents payable for housing accommodations therein. 26 (3) Any tenants living in the building pursuant to a 27 lease. 28 (4) Any mortgage lienholders and other secured creditors 29 of the owner. 30 (5) A nonprofit corporation carrying out community 20030H0014B0024 - 3 -
1 development activities within the municipality where the 2 residential building is located. 3 (6) A municipality in which the residential building is 4 located. 5 "Party." The owner, all petitioners and any party in 6 interest that has intervened in the receivership proceeding. 7 "Public nuisance." A condition at or with respect to a 8 residential building that is dangerous to the health, safety or 9 welfare of the residents of the neighborhood in which the 10 residential building is located; or which unlawfully obstructs 11 or unreasonably interferes with the public rights; or which has 12 been declared to be a public nuisance under applicable local 13 ordinance. 14 "Residential building." Any building or structure and the 15 land appurtenant thereto containing one or more dwelling units. 16 Section 4. Petition for receiver. 17 (a) Petitioner.--A petition for the appointment of a 18 receiver to take possession and to assume the operation, 19 improvement and/or maintenance of a residential building may be 20 filed by a party in interest. 21 (b) Grounds.--If a petition is filed under subsection (a), 22 the court may grant appropriate relief if: 23 (1) The building is currently in violation of any 24 municipal building or housing code requirements and the 25 violation or violations have persisted, unabated, for at 26 least 90 days; the building has been declared a public 27 nuisance by the municipality; or the safety, health or 28 welfare of the tenants or adjoining property owners is in 29 immediate jeopardy. 30 (2) The code violations or nuisance or unsafe conditions 20030H0014B0024 - 4 -
1 are not likely to be abated in accordance with law unless a 2 receiver is appointed by the court. 3 (3) The appointment of a receiver is in the best 4 interest of the public. 5 (c) Contents.--The petition submitted to the court shall 6 include a concise statement of the grounds for relief and, to 7 the extent available, to the petitioner: 8 (1) A copy of any citation or citations charging the 9 owner with being in violation of municipal building code 10 requirements or declaring the residential building to be a 11 public nuisance. 12 (2) A recommendation of the receiver to be appointed. 13 (3) The proposed receiver's preliminary plan with 14 initial cost estimates for improvement of the residential 15 building and compliance with all municipal codes. 16 (d) Verification.--The petition shall be verified by a 17 petitioner. 18 (e) Notification of owner.--The petitioner shall notify the 19 current owner of the property by registered or certified mail to 20 the last known address of the owner immediately upon filing the 21 petition with the court and publish a notice in a newspaper of 22 general circulation within one week of filing the petition. With 23 regard to occupied properties, unless tenants have been provided 24 with written notice to the contrary, the most recent address to 25 which tenants were directed to send or deliver rent shall be 26 considered an adequate address for this notice. 27 (f) Mortgagees and lienholders.--Upon scheduling of a 28 hearing on the petition, the petitioner shall mail all 29 mortgagees and lienholders of record, as of the day that the 30 petition was filed, a copy of the petition, together with notice 20030H0014B0024 - 5 -
1 of the hearing. Within seven days after the scheduling of this 2 hearing, the petitioner shall file with the court a certificate 3 of service verifying compliance with this requirement. 4 Section 5. Appointment of receiver. 5 (a) Court action.--The court shall act upon any petition 6 submitted by holding a hearing within 30 days of receipt of the 7 petition and rendering a decision no later than 30 days after 8 completion of the hearing. 9 (b) Intervention.--Subject to the court's discretion, any 10 party in interest may intervene in the proceeding and be heard 11 with respect to the petition, the requested relief or any other 12 matter which may come before the court in connection with the 13 proceedings. 14 (c) Hearing.--At the hearing, any party in interest will be 15 permitted to present evidence to support or contest the 16 petition. 17 (d) Appointment.--If the court determines after hearing that 18 the grounds for relief set forth in section 4(b)(1) through (3) 19 have been established, the court may appoint a receiver and 20 grant such other relief as may be just and appropriate. If the 21 court appoints a receiver, the court may appoint a nonprofit 22 corporation or other competent entity. In appointing a receiver, 23 the court shall consider any recommendations contained in the 24 petition or otherwise presented by a party in interest. 25 (e) Conditional relief.--If the court finds after hearing 26 that the grounds for relief set forth in section 4(b)(1) through 27 (3) have been established, but the owner represents that the 28 violations or nuisance or emergency condition will be abated in 29 a reasonable period, the court may, but shall not be obligated 30 to, enter an order providing that in the event that the 20030H0014B0024 - 6 -
1 violations or nuisance or emergency condition is not abated by a 2 specific date or that other specified remedial activities have 3 not occurred by a specific date or dates, then an order granting 4 the relief set forth in the petition will be entered. The court 5 may also require the owner to post a bond in the amount of the 6 repair costs estimated in the petition, as a condition to 7 retaining possession of the residential building. 8 (f) Hearing on receiver's plan for abatement.--Within 30 to 9 60 days, the court shall set a date for hearing on the 10 receiver's plan for abatement. 11 (g) Bond or surety.--Upon appointment, the receiver shall 12 furnish the court a bond or such other surety or insurance as 13 the court deems sufficient in the circumstances of the case. 14 (h) Immediate possession.--The receiver shall take 15 possession of the residential building and other property 16 subject to the receivership promptly after posting of the 17 required bond or surety and shall immediately be authorized to 18 exercise all powers delegated by this act. 19 (i) Removal by court.--Any receiver appointed may be removed 20 by the court at any time upon the request of the receiver or 21 upon a showing by a party in interest that the receiver is not 22 carrying out its responsibilities under this act. 23 (j) Injunction.--Neither the filing of a petition under 24 section 4(a) nor the appointment of a receiver under subsection 25 (d) shall stay the filing or continuation of any action to 26 foreclose a mortgage or lien on the residential building or to 27 sell the property for delinquent taxes or unpaid municipal 28 claims, provided that nothing contained in this act shall 29 prevent the court in which the petition is filed, after notice 30 and hearing, from enjoining any such action if it determines 20030H0014B0024 - 7 -
1 that the interest of the mortgagee or lienholder in the 2 residential building is adequately protected during the period 3 the injunction is in effect. In the event that the residential 4 building is sold through a mortgage foreclosure or tax sale 5 while a receiver is in possession, the property shall remain 6 subject to the receivership, and the receiver shall remain in 7 possession unless and until discharged under section 9. 8 Section 6. Powers and duties of receiver. 9 (a) Full powers and duties.--The receiver shall have all the 10 powers granted to a receiver in connection with the foreclosure 11 of a mortgage on real property under the laws of this 12 Commonwealth, and all other powers and duties necessary or 13 desirable, from time to time, for the efficient operation, 14 management and the improvement of the residential building in 15 order to bring it into compliance with all municipal building 16 and housing code requirements and to fulfill the receiver's 17 responsibilities under this act. Such powers and duties shall 18 include the power to: 19 (1) Take possession and control of the residential 20 building, appurtenant land and any personal property of the 21 owner used with respect to the residential building, 22 including any bank or operating account for the residential 23 building. 24 (2) Collect rents and outstanding accounts receivable. 25 (3) Pursue all claims or causes of action of the owner 26 with respect to the residential building and all other 27 property subject to the receivership. 28 (4) Contract for the repair and maintenance of the 29 residential building, which contracts need not be subject to 30 any advertisement or bidding requirements, but which shall be 20030H0014B0024 - 8 -
1 filed with the court. If the court takes no action with 2 respect to the contract within 60 days the contract shall be 3 deemed approved. These contracts may include contracts or 4 agreements with tenants and/or members of the receiver 5 organization, provided that all such contracts or agreements 6 be appropriately documented and included in the receiver's 7 expenses and improvements under other provisions of this act. 8 (5) Borrow money and incur credit in accordance with 9 section 7. 10 (6) Contract and pay for the maintenance and/or 11 restoration of utilities to the residential building. 12 (7) Purchase materials, goods and supplies to accomplish 13 repairs and operate the residential building. 14 (8) Renew existing rental contracts and leases for a 15 period not to exceed one year. 16 (9) Enter into new rental contracts and leases for a 17 period not to exceed one year. 18 (10) Affirm, renew or enter contracts providing for 19 insurance coverage on the residential building. 20 (11) Engage and, subject to court approval, pay legal, 21 accounting, appraisal and other professionals to aid the 22 receiver in the conduct of the receivership. 23 (12) Eject or commence eviction proceedings against 24 tenants where necessary and prudent, even if the owner was 25 delinquent in taxes or municipal claims, or the dwelling was 26 unfit for human habitation, at the time of the receivership. 27 (13) Sell the residential building in accordance with 28 section 8. 29 (14) Exercise all authority that an owner of the 30 residential building would have to operate, manage, improve 20030H0014B0024 - 9 -
1 and otherwise deal with the residential building. 2 (b) Affirmative duty.--While in possession of the 3 residential building, the receiver shall have the affirmative 4 duty to: 5 (1) Maintain, safeguard and insure the residential 6 building. 7 (2) Apply all revenue generated from the residential 8 building consistent with the provisions of this act. 9 (3) Develop the plan for the abatement of the conditions 10 which caused the petition to be granted referred to in 11 section 5(f) or, if no such feasible plan can be developed, 12 to develop alternatives, including the closing, sealing or 13 demolition of all or part of the residential building. 14 (4) Implement the plan referred to in paragraph (3) upon 15 approval by the court. 16 (5) Submit a status report to the court and parties in 17 interest every three months. This report shall include: 18 (i) A copy of any contract entered into by the 19 receiver regarding the improvement of the residential 20 building. 21 (ii) A description of any action taken with regard 22 to any tenant or lease. 23 (iii) An account of the disposition of all revenue 24 generated from the residential building. 25 (iv) An account of all expenses and improvements. 26 (v) The status of developing and/or implementing a 27 plan pursuant to paragraph (3). 28 (vi) A description of any proposed actions to be 29 taken in the next six months to improve the residential 30 building. 20030H0014B0024 - 10 -
1 (c) Submission of plan.--The plan referred to in subsection 2 (b)(3) shall be submitted to the court and all parties in 3 interest. After notice and an opportunity for a hearing, the 4 court may amend the plan. 5 (d) Accounting.--Upon the implementation of the plan 6 approved by the court, the receiver shall file with the court a 7 full accounting of all income and expenditures during the period 8 of time it took to implement the plan. 9 Section 7. Incurring indebtedness. 10 (a) Borrowing.--From time to time the receiver may borrow 11 money or incur indebtedness in order to preserve, insure, manage 12 or operate the residential building or to otherwise fulfill the 13 receiver's obligations under this act. 14 (b) Liens.--With the approval of the court, after notice and 15 hearing, the receiver may secure the payment of any borrowing or 16 incurrence of indebtedness under subsection (a) by a lien or 17 security interest in the residential building or the other 18 assets of the receivership. If the borrowing or incurrence of 19 indebtedness is for the safeguarding, insurance, repair or 20 improvement of the residential building to bring the building 21 into code compliance, with the exception of the first lien 22 position held by the mortgagor, subject to the provisions of 23 subsection (c), the court may authorize the receiver to grant a 24 lien or security interest with priority over all other liens or 25 mortgages, including, if approved by the municipality, municipal 26 liens and claims. No such lien shall be effective unless 27 recorded in the recorder of deeds office for the county in which 28 the residential building is located. 29 (c) Reduction in the amount of first lien; mortgagor.--The 30 court may approve a reduction in the amount of the first lien 20030H0014B0024 - 11 -
1 where same is held by a mortgagor under the following terms and 2 conditions: 3 (1) The receiver shall have an independent appraisal 4 made of the property's market value, by a certified real 5 estate appraiser of that type property, who has been 6 certified pursuant to the act of July 10, 1990 (P.L.404, 7 No.98), known as the Real Estate Appraisers Certification 8 Act, subject to the approval of the certified real estate 9 appraiser by the court. 10 (2) If the appraised value is less than the amount of 11 the first lien held by the mortgagor, the amount of the first 12 lien shall be reduced to reflect the property value as 13 determined by the appraisal. 14 (d) Owner obligations.--Nothing in this section shall be 15 deemed to relieve the owner of the residential building of any 16 civil or criminal liability or any duty imposed by reason of 17 acts or omissions of the owner nor shall the appointment of a 18 receiver suspend any obligation the owner or any other person 19 may have for payment of taxes, any operating or maintenance 20 expense, mortgages or liens or repair of the premises. 21 Section 8. Sale of residential building. 22 (a) Sale.--Upon application of the receiver, the court may 23 order the sale of the residential building if the court finds 24 that: 25 (1) notice was given to each record owner of the 26 residential building and each lienholder of record; 27 (2) the receiver has been in control of the residential 28 building for more than one year and the owner has not 29 successfully petitioned to terminate the receivership under 30 section 9; and 20030H0014B0024 - 12 -
1 (3) the sale would be in the best interests of the 2 parties. 3 (b) Sale free and clear.--In connection with the sale, the 4 court may authorize the receiver to sell the residential 5 building free and clear of liens, claims and encumbrances, in 6 which event, all such liens, claims and encumbrances shall be 7 transferred to the proceeds of sale with the same priority as 8 existed prior to resale in accordance with subsection (c). 9 (c) Distribution.--The court shall confirm the sale and 10 shall order a distribution of the proceeds of the sale, after 11 paying court costs, in accordance with the following priorities 12 to: 13 (1) The costs and expenses of sale. 14 (2) (i) Repay principal and interest on any borrowing 15 or incurrence of indebtedness granted priority over 16 existing liens and security interest under section 7(b); 17 and 18 (ii) any fees and expenses of the receiver in 19 connection with the sale or the safeguarding, insurance, 20 repair or improvement of the residential building. 21 (3) Valid liens and security interests in accordance 22 with their priority. 23 (4) Any costs and expenses of the receiver not covered 24 in paragraphs (1), (2) and (3). 25 (5) Reimburse expenses and improvements, planning costs, 26 attorney fees, expert witness costs and inspection fees and 27 costs incurred by the tenants, affected property owners or 28 nonprofit organizations in petitioning the court to place the 29 property in receivership. 30 (6) Any unpaid obligations of the receivership. 20030H0014B0024 - 13 -
1 (7) The owner. 2 Section 9. Termination of receivership. 3 Upon request of a party in interest or the receiver, the 4 court may order the termination of the receivership if it 5 determines: 6 (1) the conditions that were the grounds for the 7 petition and all other code violations have been abated or 8 corrected, the obligations, expenses and improvements of the 9 receivership, including all fees and expenses of the 10 receiver, have been fully paid or provided for and the 11 purposes of the receivership have been fulfilled; 12 (2) the owner, mortgagee or lienholder has requested the 13 receivership be terminated and has provided adequate 14 assurances to the court that the conditions that constituted 15 grounds for the petition will be promptly abated, all 16 obligations, expenses and improvements of the receivership, 17 including all fees and expenses of the receiver, have been 18 fully paid or provided for and the purposes of the 19 receivership have been fulfilled; 20 (3) the residential building has been sold and the 21 proceeds distributed in accordance with section 8(c); or 22 (4) the receiver has been unable after diligent effort 23 to present a plan that could be approved under section 24 6(b)(3) or implement a previously approved plan or, for any 25 reason, the purposes of the receivership cannot be fulfilled. 26 Section 10. Sequestration. 27 A municipality may seek the appointment of a sequestrator in 28 the event that an owner has outstanding and unpaid municipal 29 claims, including, without limitation, claims arising from code 30 violations, unpaid water, sewer or gas bills or demolition 20030H0014B0024 - 14 -
1 liens, in the same manner and with the same effect as if the 2 owner were delinquent in the payment of taxes. The remedy 3 provided in this section shall be in addition to any other 4 remedies or powers provided by law. 5 Section 11. Effective date. 6 This act shall take effect in 90 days. A2L68MEP/20030H0014B0024 - 15 -