Pennsylvania appellate courts have recently handed down several important decisions in the realm of real estate law that provide context for future cases.
- Exclusively appealing the real estate tax assessments of high-value commercial properties violates the Uniformity Clause of the Pennsylvania Constitution.
In Valley Forge Towers Apartments v. Upper Merion Area School District, 163 A.3d 962 (2017), the Upper Merion Area School District, entered into a contract with Keystone Realty, where Keystone was to identify under-assessed commercial properties within the district, and then decide which real estate tax assessments the district would then appeal. Pursuant to this arrangement, Keystone identified a series of properties that it concluded were under-assessed, and the district filed 2014 real estate tax assessment appeals against each of them with the Montgomery County Board of Assessment Appeals. The board denied each of the appeals, and the district appealed to the Montgomery County Court of Common Pleas.
While the district’s appeals were pending in the trial court, the owners of the affected apartment buildings commenced a civil action against the district and Keystone, seeking a declaratory judgment, injunctive relief and damages. In their complaint they alleged, inter alia, that the district’s practice of systematically selecting the real estate tax assessments of high-value commercial properties for appeal while not appealing any residential assessments, violated the Uniformity Clause set forth in Article 8, Section 1 of the Pennsylvania Constitution. In support of their allegations, the property owners asserted that, since Keystone was paid a commission of 25 percent of any increased revenues it obtained for the district, the contract between the District and Keystone was tantamount to a scheme aimed at increasing the district’s revenues to the detriment of commercial property owners within the district. The district and Keystone filed preliminary objections to the complaint which the trial court sustained, dismissing the action with prejudice.
On appeal, our Commonwealth Court affirmed. (2015 Pa. Commw. LEXIS 387 (2015)), In issuing its ruling the court noted that the Uniformity Clause requires that all taxes be “… uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax …” However, Section 8855 of the Consolidated County Assessment Law (53 Pa.C.S. Section 8855) provides that a taxing body shall have the same rights as a property owner to appeal a real estate tax assessment. Our Supreme Court granted allocator on the issue “of whether the Uniformity Clause of the Pennsylvania Constitution permits a taxing authority to selectively appeal only the assessments of commercial properties, such as apartment complexes, while choosing not to appeal the assessments of other types of property—most notably, single-family residential homes—many of which are under-assessed by a greater percentage.”
On appeal, our Supreme Court reversed. In issuing its ruling, the court reviewed previous Pennsylvania appellate court decisions on this issue and found that, for purposes of real estate tax assessment, all properties situated in a particular taxing district constitute a “single class” under the Uniformity Clause, and local taxing authorities are not permitted to treat different types of properties in divergent manners when determining which assessments to appeal.
Furthermore, these restrictions apply to all actions of a taxing body, whether intentional or unintentional, and whether systematic or unsystematic. As such, in reviewing the practices employed by the district, there is no question that their end result was to treat commercial properties and residential properties differently, thereby running afoul of the Uniformity Clause. Therefore, the practice was unconstitutional, and could not be permitted to continue.
- Parties that purchase real property at tax sale cannot void the sale by refusing to accept the sheriff’s deed.
In Commonwealth of Pennsylvania v. Investment Resource Holdings, 2017 Pa. Super. 251 (2017), Investment Resource Holdings, Inc. (IRH) purchased a parcel of real property at a Sept. 8, 2014, tax sale held by the Lebanon County Tax Claim Bureau. Upon registering as a potential bidder, IRH was provided with a copy of bureau’s “conditions of upset sale,” which provided that all sales were final. IRH submitted the prevailing bid, made the requisite down payment, and executed an agreement of sale for the property, which stated that all sales were final. The sale to IRH was subsequently approved and confirmed by the Lebanon County Court of Common Pleas. However, on Dec. 2, 2014, the property was destroyed by fire. On Dec. 3, 2014, the bureau delivered a deed to the property to IRH, which refused to accept it. The deed was then returned to the bureau by the U.S. Postal Service, and remained unclaimed.
Following the fire, IRH was issued citations for failure to maintain and secure the property. A summary trial was held in the Lebanon County Court of Common Pleas, during which IRH asserted that it had no duty to maintain the property as it had terminated the purchase by refusing to accept the bureau’s deed. The trial court—concluding that since IRH was the prevailing bidder at the tax sale its equitable interest in the property could not be divested by simply refusing the deed—found IRH guilty of the alleged summary offenses. On appeal, the Pennsylvania Superior Court affirmed.
The court noted that, under Pennsylvania law, a sheriff’s sale purchaser acquires a vested interest in the property “at the fall of the hammer.” Once the buyer has acquired this equitable interest in the property, it cannot void the purchase absent the consent of the seller. Since IRH was the prevailing bidder at the tax sale, equitable title and risk of loss passed to it, and its refusal to accept the deed tendered by the bureau did not relieve IRH of its duty to maintain the property.
Frank Kosir Jr. is an attorney at Pittsburgh-based law firm Meyer, Unkovic & Scott. He can be reached at FK@MUSLAW.com.