PRIOR PRINTER'S NO. 2518 PRINTER'S NO. 2559
No. 1996 Session of 1999
INTRODUCED BY REINARD, PETRONE, FICHTER, ARGALL, BROWNE,
CAPPABIANCA, COY, DEMPSEY, GODSHALL, HARHAI, HENNESSEY, LEH,
MAHER, MARSICO, ORIE, PIPPY, RAMOS, READSHAW, ROBINSON,
STABACK, E. Z. TAYLOR, THOMAS, WALKO, WOGAN AND WOJNAROSKI,
OCTOBER 25, 1999
AS REPORTED FROM COMMITTEE ON URBAN AFFAIRS, HOUSE OF
REPRESENTATIVES, AS AMENDED, OCTOBER 26, 1999
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
1 buildings.
2 (2) Substandard housing units are unsafe. In addition,
3 tenants often pay rents disproportionate to the value of the
4 housing accommodations and services received. Substandard,
5 deteriorating residential structures whether occupied or
6 vacant are a public safety threat and nuisance, and their
7 blighting effect diminishes property values in the
8 neighborhoods in which these properties are located.
9 (3) If these buildings are not rehabilitated and brought
10 into code compliance, they are likely to be abandoned,
11 resulting in increased costs to the Commonwealth,
12 municipality and taxpayers to secure and ultimately demolish
13 these buildings.
14 (4) If it becomes necessary to ultimately abandon a
15 building, existing tenants will be displaced, disrupting
16 lives and adding to the affordable housing problems of the
17 municipality and the Commonwealth. Many displaced tenants may
18 become homeless.
19 (5) As a result of the aforementioned, the General
20 Assembly declares that, if the owner of a residential
21 building that has been declared to be a public nuisance or is
22 in violation of municipal and housing code requirements fails
23 to correct such code violations, it is in the best interests
24 of the Commonwealth, the municipality, the neighborhood and
25 the tenants for the court, pursuant to the provisions of this
26 act, to appoint a receiver to make the necessary improvements
27 to bring the building into code compliance before the
28 building deteriorates further and necessitates abandonment
29 and demolition, resulting in the displacement of the existing
30 tenants occupying the building and/or removal of the building
19990H1996B2559 - 2 -
1 from the housing supply.
2 Section 3. Definitions.
3 The following words and phrases when used in this act shall
4 have the meanings given to them in this section unless the
5 context clearly indicates otherwise:
6 "Code." Any building, housing, property maintenance, fire or
7 other public safety ordinance enacted by a municipality.
8 "Competent entity." Any person or entity with experience in
9 the operation and maintenance of residential buildings.
10 "Court." The appropriate court of common pleas.
11 "Municipality." Any city of the first, second, second class
12 A or third class, any incorporated town, any township of the
13 first or second class and any borough.
14 "Nonprofit corporation." Any nonprofit corporation organized
15 for the purpose of initiating community development activities,
16 including housing.
17 "Owner." The holder or holders of title to a residential
18 building.
19 "Parties in interest." Parties in interest shall be those
20 persons or entities who have a direct and immediate interest in
21 a residential building, including:
22 (1) The owner.
23 (2) Any individuals, associations and corporations who
24 have interests of record in the residential building or who
25 are in actual possession thereof or who collect or receive
26 rents payable for housing accommodations therein.
27 (3) Any tenants living in the building pursuant to a
28 lease.
29 (4) Any mortgage lienholders and other secured creditors
30 of the owner.
19990H1996B2559 - 3 -
1 (5) A nonprofit corporation carrying out community
2 development activities within the municipality where the
3 residential building is located.
4 (6) A municipality in which the residential building is
5 located.
6 "Party." The owner, all petitioners and any party in
7 interest that has intervened in the receivership proceeding.
8 "Public nuisance." A condition at or with respect to a
9 residential building that is dangerous to the health, safety or
10 welfare of the residents of the neighborhood in which the
11 residential building is located; or which unlawfully obstructs
12 or unreasonably interferes with the public rights; or which has
13 been declared to be a public nuisance under applicable local
14 ordinance.
15 "Residential building." Any building or structure and the
16 land appurtenant thereto containing one or more dwelling units.
17 Section 4. Petition for receiver.
18 (a) Petitioner.--A petition for the appointment of a
19 receiver to take possession and to assume the operation,
20 improvement and/or maintenance of a residential building may be
21 filed by a party in interest.
22 (b) Grounds.--If a petition is filed under subsection (a),
23 the court may grant appropriate relief if:
24 (1) The building is currently in violation of any
25 municipal building or housing code requirements and the
26 violation or violations have persisted, unabated, for at
27 least 90 days; the building has been declared a public
28 nuisance by the municipality; or the safety, health or
29 welfare of the tenants or adjoining property owners is in
30 immediate jeopardy.
19990H1996B2559 - 4 -
1 (2) The code violations or nuisance or unsafe conditions
2 are not likely to be abated in accordance with law unless a
3 receiver is appointed by the court.
4 (3) The appointment of a receiver is in the best
5 interest of the public.
6 (c) Contents.--The petition submitted to the court shall
7 include a concise statement of the grounds for relief and, to
8 the extent available to the petitioner:
9 (1) A copy of any citation or citations charging the
10 owner with being in violation of municipal building code
11 requirements or declaring the residential building to be a
12 public nuisance.
13 (2) A recommendation of the receiver to be appointed.
14 (3) The proposed receiver's preliminary plan with
15 initial cost estimates for improvement of the residential
16 building and compliance with all municipal codes.
17 (d) Verification.--The petition shall be verified by a
18 petitioner.
19 (e) Notification of owner.--The petitioner shall notify the
20 current owner of the property by registered or certified mail to
21 the last known address of the owner immediately upon filing the
22 petition with the court. With regard to occupied properties,
23 unless tenants have been provided with written notice to the
24 contrary, the most recent address to which tenants were directed
25 to send or deliver rent shall be considered an adequate address
26 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
19990H1996B2559 - 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), (2)
27 and (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
19990H1996B2559 - 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
19990H1996B2559 - 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. These contracts
19990H1996B2559 - 8 -
1 may include contracts or agreements with tenants and/or
2 members of the receiver organization, provided that all such
3 contracts or agreements shall be appropriately documented and
4 included in the receiver's expenses and improvements under
5 other provisions of this legislation.
6 (5) Borrow money and incur credit in accordance with
7 section 7.
8 (6) Contract and pay for the maintenance and/or
9 restoration of utilities to the residential building.
10 (7) Purchase materials, goods and supplies to accomplish
11 repairs and operate the residential building.
12 (8) Renew existing rental contracts and leases for a
13 period not to exceed one year.
14 (9) Enter into new rental contracts and leases for a
15 period not to exceed one year.
16 (10) Affirm, renew or enter contracts providing for
17 insurance coverage on the residential building.
18 (11) Engage and, subject to court approval, pay legal,
19 accounting, appraisal and other professionals to aid the
20 receiver in the conduct of the receivership.
21 (12) Eject or commence eviction proceedings against
22 tenants where necessary and prudent, even if the owner was
23 delinquent in taxes or municipal claims, or the dwelling was
24 unfit for human habitation, at the time of the receivership.
25 (13) Sell the residential building in accordance with
26 section 8.
27 (14) Exercise all authority that an owner of the
28 residential building would have to operate, manage, improve
29 and otherwise deal with the residential building.
30 (b) Affirmative duty.--While in possession of the
19990H1996B2559 - 9 -
1 residential building, the receiver shall have the affirmative
2 duty to:
3 (1) Maintain, safeguard and insure the residential
4 building.
5 (2) Apply all revenue generated from the residential
6 building consistent with the provisions of this act.
7 (3) Develop the plan for the abatement of the conditions
8 which caused the petition to be granted referred to in
9 section 5(f) or, if no such feasible plan can be developed,
10 to develop alternatives, including the closing, sealing or
11 demolition of all or part of the residential building.
12 (4) Implement the plan referred to in section 6(b)(3)
13 upon approval by the court.
14 (5) Submit a status report to the court and parties in
15 interest every six months. This report shall include:
16 (i) A copy of any contract entered into by the
17 receiver regarding the improvement of the residential
18 building.
19 (ii) A description of any action taken with regard
20 to any tenant or lease.
21 (iii) An account of the disposition of all revenue
22 generated from the residential building.
23 (iv) An account of all expenses and improvements.
24 (v) The status of developing and/or implementing a
25 plan pursuant to paragraph (3).
26 (vi) A description of any proposed actions to be
27 taken in the next six months to improve the residential
28 building.
29 (c) Submission of plan.--The plan referred to in subsection
30 (b)(3) shall be submitted to the court and all parties in
19990H1996B2559 - 10 -
1 interest. After notice and an opportunity for a hearing, the
2 court may amend the plan.
3 (d) Accounting.--Upon the implementation of the plan
4 approved by the court, the receiver shall file with the court a
5 full accounting of all income and expenditures during the period
6 of time it took to implement the plan.
7 Section 7. Incurring indebtedness.
8 (a) Borrowing.--From time to time the receiver may borrow
9 money or incur indebtedness in order to preserve, insure, manage
10 or operate the residential building or to otherwise fulfill the
11 receiver's obligations under this act.
12 (b) Liens.--With the approval of the court, after notice and
13 hearing, the receiver may secure the payment of any borrowing or
14 incurrence of indebtedness under subsection (a) by a lien or
15 security interest in the residential building or the other
16 assets of the receivership. If the borrowing or incurrence of
17 indebtedness is for the safeguarding, insurance, repair or
18 improvement of the residential building, WITH THE EXCEPTION OF <--
19 THE FIRST LIEN POSITION HELD BY THE MORTGAGOR, SUBJECT TO THE
20 PROVISIONS OF SUBSECTION (C), the court may authorize the
21 receiver to grant a lien or security interest with priority over
22 all other liens or mortgages, including, if approved by the
23 municipality, municipal liens and claims. No such lien shall be
24 effective unless recorded in the recorder of deeds office for
25 the county in which the residential building is located.
26 (C) REDUCTION IN THE AMOUNT OF FIRST LIEN; MORTGAGOR.--THE <--
27 COURT MAY APPROVE A REDUCTION IN THE AMOUNT OF THE FIRST LIEN
28 WHERE SAME IS HELD BY A MORTGAGOR UNDER THE FOLLOWING TERMS AND
29 CONDITIONS:
30 (1) THE RECEIVER SHALL HAVE AN INDEPENDENT APPRAISAL
19990H1996B2559 - 11 -
1 MADE OF THE PROPERTY'S MARKET VALUE, BY A QUALIFIED APPRAISER
2 OF THAT TYPE PROPERTY, SUBJECT TO THE APPROVAL OF THE
3 APPRAISER BY THE COURT.
4 (2) IF THE APPRAISED VALUE IS LESS THAN THE AMOUNT OF
5 THE FIRST LIEN HELD BY THE MORTGAGOR, THE AMOUNT OF THE FIRST
6 LIEN SHALL BE REDUCED TO REFLECT THE PROPERTY VALUE AS
7 DETERMINED BY THE APPRAISAL.
8 (c)(D) Owner obligations.--Nothing in this section shall be <--
9 deemed to relieve the owner of the residential building of any
10 civil or criminal liability or any duty imposed by reason of
11 acts or omissions of the owner nor shall the appointment of a
12 receiver suspend any obligation the owner or any other person
13 may have for payment of taxes, any operating or maintenance
14 expense, mortgages or liens or repair of the premises.
15 Section 8. Sale of residential building.
16 (a) Sale.--Upon application of the receiver, the court may
17 order the sale of the residential building if the court finds
18 that:
19 (1) notice was given to each record owner of the
20 residential building and each lienholder of record;
21 (2) the receiver has been in control of the residential
22 building for more than one year and the owner has not
23 successfully petitioned to terminate the receivership under
24 section 9; and
25 (3) the sale would be in the best interests of the
26 parties.
27 (b) Sale free and clear.--In connection with the sale, the
28 court may authorize the receiver to sell the residential
29 building free and clear of liens, claims and encumbrances, in
30 which event, all such liens, claims and encumbrances shall be
19990H1996B2559 - 12 -
1 transferred to the proceeds of sale with the same priority as
2 existed prior to resale in accordance with subsection (c).
3 (c) Distribution.--The court shall confirm the sale and
4 shall order a distribution of the proceeds of the sale, after
5 paying court costs, in accordance with the following priorities
6 to:
7 (1) The costs and expenses of sale.
8 (2) (i) Repay principal and interest on any borrowing
9 or incurrence of indebtedness granted priority over
10 existing liens and security interest under section 7(b);
11 and
12 (ii) any fees and expenses of the receiver in
13 connection with the sale or the safeguarding, insurance,
14 repair or improvement of the residential building.
15 (3) Valid liens and security interests in accordance
16 with their priority.
17 (4) Any costs and expenses of the receiver not covered
18 in paragraphs (1), (2) and (3).
19 (5) Reimburse expenses and improvements, planning costs,
20 attorney fees, expert witness costs and inspection fees and
21 costs incurred by the tenants, affected property owners or
22 nonprofit organizations in petitioning the court to place the
23 property in receivership.
24 (6) Any unpaid obligations of the receivership.
25 (7) The owner.
26 Section 9. Termination of receivership.
27 Upon request of a party in interest or the receiver, the
28 court may order the termination of the receivership if it
29 determines:
30 (1) the conditions that were the grounds for the
19990H1996B2559 - 13 -
1 petition and all other code violations have been abated or
2 corrected, the obligations, expenses and improvements of the
3 receivership, including all fees and expenses of the
4 receiver, have been fully paid or provided for and the
5 purposes of the receivership have been fulfilled;
6 (2) the owner, mortgagee or lienholder has requested the
7 receivership be terminated and has provided adequate
8 assurances to the court that the conditions that constituted
9 grounds for the petition will be promptly abated, all
10 obligations, expenses and improvements of the receivership,
11 including all fees and expenses of the receiver, have been
12 fully paid or provided for and the purposes of the
13 receivership have been fulfilled;
14 (3) the residential building has been sold and the
15 proceeds distributed in accordance with section 8(c); or
16 (4) the receiver has been unable after diligent effort
17 to present a plan that could be approved under section
18 6(b)(3) or implement a previously approved plan or, for any
19 reason, the purposes of the receivership cannot be fulfilled.
20 Section 10. Sequestration.
21 A municipality may seek the appointment of a sequestrator in
22 the event that an owner shall have outstanding and unpaid
23 municipal claims, including, without limitation, claims arising
24 from code violations, unpaid water, sewer or gas bills or
25 demolition liens, in the same manner and with the same effect as
26 if the owner were delinquent in the payment of taxes. The remedy
27 provided in this section shall be in addition to any other
28 remedies or powers provided by law.
29 Section 11. Effective date.
30 This act shall take effect in 90 days.
I8L68JLW/19990H1996B2559 - 14 -