Real Estate Development

Effective July 1, 2017, the City of Philadelphia established a single Department of Planning and Development.  The Department will have three divisions.  The Division of Planning and Zoning will include the Art Commission, the Historical Commission, the City Planning Commission, and the staff for the Zoning Board of Adjustment.  The Division of Development Services will include the development services group which had previously been a part of the Commerce Department.  Lastly, the City’s office of Housing and Community Development, the Philadelphia Housing Development Corporation and the Philadelphia Land Bank will be organized within the Division of Housing and Community Development.

Philadelphia Skyline
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The idea for the reorganization has been promoted by City Council President Darrell Clarke since 2015 and was approved by the voters as a charter change in November of that year.  In connection with the establishment of the new Department, the Land Bank and the Historical Commission, along with the Development Services section will increase staff.  The remaining sub-groups will not enjoy staff increases.

Within the new Department, particular attention will be paid to the Land Bank which has enjoyed only limited success since its creation in 2013.  While the Land Bank faces challenges associated with assuming duties previously held by a range of departments and agencies, its most acute challenge is likely securing approval for transactions from City Council, particularly in light of the Council’s historic informal policy (known as councilmanic prerogative) of requiring approval from the District City Councilperson in connection with the sale of city property.

The different city offices and agencies which are being coordinated within this single Department will not immediately relocate, so the Department’s offices will continue to be spread among different floors of 1515 Arch Street and 1234 Market Street.  This unorthodox approach will present management challenges to the Director of the Department, Anne Fadullon.

When the Philadelphia Zoning Code was amended in August, 2012, a Transit–Oriented Development (“TOD”) Overlay District was included.  Such districts have become increasingly favored by urban planners as a way to encourage development adjacent to transit hubs, with associated increase in the use of public transit and a decrease in reliance upon private transportation.  However, the provision included in the 2012 Zoning Code proved cumbersome, and during the intervening 4+ years, no parcel in Philadelphia has been so designated.  In response, Councilwoman Blondell Reynolds Brown and Councilman Bill Greenlee jointly introduced on February 23, 2017, a new ordinance amending the TOD overlay (ordinance # 170162).

Public transit
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The main objective of the proposed new Overlay District is to both simplify the application of the TOD and increase bonuses, which would be available to landowners and developers who utilize it. To achieve the simplification, the Overlay District would apply to any parcel located within 500 feet of a designated transit station.  It is anticipated that stations will be so designated only by action of City Council, and presumably only after approval of the District City Council person in whose district the TOD will be designated.

There will be a development bonus of 30% of the otherwise permitted FAR for parcels located in the TOD.  Furthermore, bonus FAR is available for green buildings, next income housing, provision of public space, provision of underground parking, and certain transit connections.  Where bonuses of 150% are available, generally, in the Philadelphia Zoning Code for provision of such items, in the TOD, bonuses can be accumulated allowing for an increase of FAR of 200%.

One interesting provision of the proposed new ordinance is that for the first time, Philadelphia would impose a maximum amount of parking which can be made available in connection with a project.  This change will be welcome by planning professionals, who hope similar provisions will be applied in Center City.

It is certainly unclear whether or not City Council will pass the ordinance in the form introduced, but if passed, the City’s planning professionals will seek to convince members of City Council to designate a small number of pilot TOD districts, which will be tested to see whether increased development can be triggered by this approach.

As of this blog post, City Council’s Rules Committee has not scheduled the ordinance for a public hearing.  It appears that usual, short-term concern about parking availability may delay the implementation of this forward-looking approach.

Newspaper featuring local news
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After receiving a favorable zoning or land use decision, such as a passed ordinance amendment or a granted variance from the zoning hearing board, you should take steps to protect yourself from any validity appeals by publishing notice of the decision.  Section 108 of the Municipalities Planning Code (“MPC”) provides that notice of municipal action to adopt an ordinance or enter a decision may be provided through publication, at any time, “once each week for two successive weeks in a newspaper of general circulation in the municipality.”  This notice can be published by the governing body of the municipality, by any resident or landowner in the municipality (in the case of an ordinance), or by the applicant requesting the decision, the landowner or successor in interest of the property subject to or affected by the decision (in the case of a decision).  The notice must contain certain elements and statements, as provided in Section 108 of the MPC.

Once the second publication of the notice is published, any appeal or action contesting the validity of an ordinance based on procedural defect in the process of enactment, or contesting the validity of a decision based on procedural or substantive defect shall be dismissed, with prejudice, as untimely filed if not filed within the 30th day following the second publication of the notice.  Only an appeal establishing an “unconstitutional deprivation of due process” will be permitted after this 30-day period following the second notice publication.

Therefore, no appeal or action can be taken to contest the validity of an ordinance or decision after the 30th day following the second publication of the notice. This extra step of publishing the Section 108 notice ensures that you can proceed with the purchase and/or development of a property pursuant to the ordinance or decision without any uncertainty as to its validity after the 30-day period.

April, 2017

Are the real property taxes assessed against your property by the county board of assessment for county, municipality and school district taxes out of proportion to the actual value of your property or the value attributable to your property by capitalizing the income you receive from the property?

What Should You Do If You Think Your Real Estate Taxes Are too High?

First, you need to determine whether to file an appeal to the county board of assessment for your property. To do so, you need an experienced real estate assessment attorney and a qualified appraiser.

On commercial and industrial properties, as well as rental residential properties, two calculations often make the determination as to whether or not to appeal. Capitalization of income and comparable sales gives us the ability to make a preliminary determination as to whether a particular tax assessment is out of line.

The capitalization of income approach is the easiest and quickest test to determine the value of your property. The comparable sales approach requires information from an appraiser. Up to date information on rents, expenses, square footage, occupancy, necessary to complete the capitalization approach. As to comparable sales, it is important to determine whether the sale is an arm’s length sale or was the result of a mortgage foreclosure or workout agreement. For residential properties, the most reliable determination is of course comparable sales of similar homes within a reasonable distance from the subject property.

With the above in mind, now is the time of year to review your real estate tax assessment on any and all property owned. If the market value utilized by the board of assessment is inconsistent with the market value of your property, or if you have experienced rental income problems over the last few years, then an appeal to your assessment this year may be in order. We can help you make that determination in short order. In Pennsylvania, appeals in Bucks, Chester, Delaware and Montgomery Counties need to be filed on or before August 1, 2017. The deadline for filing an appeal in Philadelphia County is October 2, 2017

If you would like more information, please contact Rob Gundlach at 215-918-3636 or rgundlach@foxrothschild.com.

Copyright: ymgerman / 123RF Stock Photo
Copyright: ymgerman / 123RF Stock Photo

Before you rush to file a land development application with a municipality, make sure that the proposed work actually constitutes land development requiring municipal approval. In certain circumstances, municipal land development approval is not required.

For example, Pennsylvania courts have held that the construction of a roof over a previously-approved structure, such as a patio, does not constitute land development under the Municipalities Planning Code (“MPC”).  Per the Pennsylvania Commonwealth Court, land development typically involves a large tract of land being divided into smaller parcels for construction of residential or commercial buildings, which is the kind of large-scale development of land, “with an inevitable and concomitant effect on the public generally,” that is contemplated by the MPC.  The Commonwealth Court determined that a patio was only one component of a building, and construction of the roof over the patio is certainly not the type of “large-scale development of land” contemplated by the MPC. The construction of the roof would not increase parking, storm sewer needs, or sewer and water use at the building, nor would it change the amount of impervious surface, result in any increase of water runoff or sewage, increase parking areas, traffic or stormwater, or increase the square footage of the patio itself.  Mere construction of a roof over a previously-approved patio does not transform the patio, which would not otherwise require the submission and approval of land development plans, into a patio requiring such approval.

Similarly, the Pennsylvania Supreme Court has also determined that the construction of a billboard does not constitute land development within the meaning of the MPC.  The MPC, when viewed as a whole, clearly is intended “to apply to the allocation of land in such a way that issues related to public use, water management, sewers, streets and the like must be addressed.” The construction of a billboard, like raising the roof of an existing building or constructing a roof above a previously-approved structure, does not give rise to concerns relating to sanitary sewer, water, storm water management, parking, driveways, roadways, curbs and sidewalks, and does not increase the footprint, square footage, necessary parking, curbing, sidewalks, sewer, water, or stormwater relating to any existing buildings or structures. Because of these factors, this type of work should not constitute land development.

Therefore, the construction of a roof over an already-paved surface, or other similar work with no effect on issues such as public use, stormwater management, sewers, streets, parking or expansion of building size, may not require municipal land development approval.