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The Real Deal - Spring 2023

Pittsburgh’s Rental Registration Program: Remedial or Repressive? 

By: ViVi R. Bestemen
 

Introduction

For nearly two decades, Pittsburgh officials have worked to establish a program which would create a registry of rental properties in the City and routine inspection requirements for those properties (the “Program”). The City states that the goal of the Program is “to ensure that rental properties meet the minimum standards for safe living conditions,” a special concern in a majority renter city like Pittsburgh. Advocates also argue that the Program protects renters from absentee landlords who have been unresponsive to declining property conditions over the years.

The City has had difficulty implementing the Program due to persistent pushback from local landlord groups. The first version of the Program was signed by former Mayor Luke Ravenstahl in 2008, and was followed shortly after by a lawsuit from the Apartment Association of Metropolitan Pittsburgh (“AAMP”) in 2009. A similar lawsuit was filed by AAMP and the Landlord Service Bureau (the “Bureau”) when the latest version of the Program was passed by the City Council in 2015, arguing that the requirements of the Program are unconstitutional.

Most recently, on March 17, 2023, the Program was reviewed by a Pennsylvania appellate court, which found that state law does not “expressly” empower the City to launch “wide-ranging regulation of the residential landlord business.” As such, the City “was without authority to enact the rental ordinance in its present configuration.” Local officials indicate that they will continue to pursue the Program, including by appealing this decision to the Pennsylvania Supreme Court.
 

Program Details

The most recent version of the Program was introduced in 2015 and was set to become effective on May 29, 2022. The stated purpose of the Program was to “ensure rental units meet all applicable building, existing structures, fire, health, safety, and zoning codes, and to provide an efficient system for compelling both absentee and local landlords to correct violations and maintain, in proper condition, rental property within the City.” Pittsburgh Code § 781.00.

To achieve this, the Program requires registration of rental units in the City, so that an inventory of rental properties and verification of compliance with requirements can be made. Under the most recent Program, rental unit owners (an owner of any structure containing sleeping units which is leased for a term exceeding fifteen consecutive days in a thirty-day period) would have a little over six months (until December 31, 2022) to register any relevant properties.

In addition to registering, the Program requires owners to obtain a permit from the City and to designate a “responsible local agent” before renting. Pittsburgh Code § 781.02. To obtain a permit, owners must provide property information for rental unit(s), contact information for relevant parties such as the local agent, and a copy of a valid occupancy permit. Id. § 781.03(a).

Owners residing outside of Allegheny County must hire a licensed real estate management firm in the County to oversee operation of and access to rental units, and to accept legal notice and service of process related to the units. Pittsburgh Code § 781.03(e). The local agent requirement is particularly relevant for neighborhoods such as South Side, Oakland, and Allentown, where properties are mostly owned by limited liability companies.

Regular inspections are a key goal of the Program, which authorizes the Department of Permits, Licenses, and Inspections (the “Department”) to inspect each registered rental unit at least once every three years. Pittsburgh Code § 781.04. Structures built prior to 1978 are subject to an additional inspection for lead-based hazards. Id. § 782.01.

The Program requires registered rental unit information to be recorded into a public database that is maintained by the Department. The Department is further required to issue regulations and to create “a manual of good landlord practice,” “a performance-based regulatory system,” “a landlord academy,” “incentives to encourage ‘good landlords,’” and “other best practices in the field of rental licensing.” Pittsburgh Code § 781.06(a)-(b).

Violations of the Program are considered summary offenses and owners in violation have thirty days to either resolve the issue or face a fine. Failure to register each rental unit, for example, can be sanctioned by a fine of $500 per unit per month. Hotels, motels, bed and breakfasts, public housing units, dormitories, certified rehabilitation facilities, long-term medical care facilities, and owner-occupied rental units are exempt from the Program.
 

Litigation

The Program has been challenged on two fronts: (1) fees and (2) substantive requirements.
 

            Fees

The most recent version of the Program proposes a $16 per application registration fee, in addition to a $5.50 per parcel fee and a per unit fee of $14. The City suggests that fee revenue covers the costs of inspections and travel. Rental properties that are not subjected to an inspection in a given year are only responsible for the annual registration fee.

The Program’s fee structure has been improved over its various iterations (for example, the per unit fee has already been reduced from $65 to $35.50, and now to $14), but landlord groups continue to argue that fees are unreasonable. Fee challenges are proceeding in litigation separate from the challenges to Program requirements, and are not the subject of the March 17, 2023 appellate court decision or this article.
 

            Requirements

After the Program’s latest iteration was introduced in 2015, AAMP and the Bureau (the “landlord parties”) pursued a lawsuit against the City seeking a declaration that the Program was unconstitutional and a permanent injunction preventing its enforcement. 

In support of relief, the landlord parties argued that the affirmative requirements of the Program violate the Home Rule Law, 53 Pa. C.S. §§ 2901-3171. Under the Home Rule Law, a municipality cannot regulate the conduct of a business enterprise unless a statute that applies to the entire state authorizes that regulation.

Additionally, the landlord parties seek relief under the United States and Pennsylvania Constitutions. Specifically, the landlord parties argue that new registration requirements unlawfully impair existing leases, and that required appointment of a local agent discriminates against out of state owners. See Pa. Const. art. I, § 17; Pa. Const. art. I, §§ 1, 26. Moreover, the parties contend that inspection requirements allow officials to enter leased rental units without the permission of the relevant owner or renter, and that the Program deprives owners of the right to enjoy their properties in violation of substantive and procedural due process. See U.S. Const. amend. IV; U.S. Const. amend. XIV; Pa. Const. art. I, § 8; Pa. Const. art. I, § 9.

In July 2017, the trial court ruled in the City’s favor, finding that the Program was a “valid exercise of police powers, enacted to protect the health and safety of rental housing residents.” AAMP and the Bureau appealed.

On March 17, 2023, the Pennsylvania Commonwealth Court held that the Home Rule Law prevents “regulations that burden commercial interest absent express authorization” and found that the numerous affirmative requirements of the Program fall within this classification. Landlord Serv. Bureau, Inc. v. City of Pittsburgh, No. 1026 C.D. 2021, 2023 WL 2543477, at *11 (Pa. Commw. Ct. Mar. 17, 2023). The Court ultimately sided with the landlord parties:
              Id. at *12 (emphasis added).

Though the City cited rulings upholding similar programs in other localities, the Court noted that none of these imposed as many requirements as the Pittsburgh Program. See id. at **10-11. For example, the City cited McSwain v. Com., 520 A.2d 527 (Pa. Commw. Ct. 1987), which involved an ordinance imposing routine inspections like those under the Program. Id. at *11. Unlike Program inspections, however, those in McSwain are only conducted when properties are vacant, eliminating associated constitutional concerns that persist under the Program. Id.
 

Takeaways

Though not yet successful in implementing the Program, the City has shown commitment to heightened rental registration and oversight through both the various iterations of the Program and the desire to appeal the March 17, 2023 decision to the Pennsylvania Supreme Court.

Landlords should take note of the City’s commitment to the Program and be prepared to come into compliance with the requirements discussed in this article if they do not already meet them. While it is unclear how long it will be before the Program is officially implemented and what the exact terms of that Program iteration will look like, staying up to date with discussions surrounding the Program and related litigation will allow landlords to develop a plan for meeting Program requirements, and will ease the burden of doing so when the time comes.

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Claim of Right Not Sunk by Prior Permission: Argument That Prior Permission Transfers With Title Blown Out of the Water!

By:  Ross C. Allen and Michael H. Brady with Dale G. Mullen, Michelle E. Hoffer; and Zanas D. Talley.
 
In Horn v. Webb, 301 Va. __, 882 S.E.2d 894 (Va. 2023), the Supreme Court of Virginia brought long-absent clarity to the ancient law of prescriptive easements. To claim an easement by prescription, rather than agreement, the property owner must satisfy, by clear and convincing evidence, six (6) elements.  These are often stated as use of the property that (1) was adverse, (2) under a claim of right, (3) exclusive, (4) continuous, (5) uninterrupted, and (6) with the knowledge and acquiescence of the landowner and for a period of twenty years or more. Amstutz v. Everett Jones Lumber Corp., 268 Va. 51, 559 (2004) (citation omitted). The unanimous opinion from Justice McCullough explained the elements of “exclusivity” and that the use be “under claim of right,” as well as the latter element’s relationship to “permission” and “acquiescence,” a relationship that has long been murky and misunderstood.
 
The Horns stored small watercraft at a boat dock on the Webbs' land. The Webb’s brought a complaint alleging trespass and nuisance and seeking a declaratory judgment. The Horns counterclaimed that they had a prescriptive easement to both dock the boat and to store the watercraft. The circuit court ruled in favor of the Webbs and awarded them compensatory and punitive damages. The Supreme Court reversed in part, ruling that the Horns established the existence of a prescriptive easement to dock a boat at the Webb's real property and that nothing in the record established malice on the part of the Horns.
 
Despite the “clear and convincing” standard applicable to claims for prescriptive easement and the favorable findings for the Webbs at the bench trial below, the Supreme Court reversed the lower court’s decision and held the “Horns established their right to a prescriptive easement to dock a boat on the Webbs’ lot.”  Horn, 882 S.E.2d at 900.  Note that this decision was reached notwithstanding the principle of appellate review that the Court “will not disturb [a] judgment unless it is plainly wrong or without evidence to support it,” perhaps the least favorable standard known to the law.  See Hafner v. Hansen, 279 Va. 558, 562, 564–65 (2010) (citing Virginia Code § 8.01–680, and reversing a judgment recognizing a prescriptive easement).
 
The Webbs sought affirmance of the judgment on appeal by arguing two (2) elements: first, that the use was not “exclusive” and, second, that it was not under a “claim of right” or “hostile.” On the first element, the Webbs argued that the easement was not exclusive to the Horns because other adjacent landowners, both concurrently and previously, had also claimed a similar prescriptive easement as did the Horns. The Supreme Court dispensed with this objection as foreclosed by Nelson v. Davis, 262 Va. 230, 236 (2001), which held that two or more individuals can each assert an independent, concurrent prescriptive right to use and enjoy a single piece of property.  Horn, 882 S.E.2d at 899.
 
On the second “claim of right” element, the Supreme Court began its analysis with the established fact that the use of the Webbs’ property for docking a boat was “open, visible, continuous and unmolested since 1966.”  The Court explained that the requirement that the use be under a “claim of right” meant simply that the “prescriptive easement claimant treated the property as an owner would.”  Horn, 882 S.E.2d at 899.  Thus, the “hostile intention” need not be “express,” but may be inferred from conduct.  Id.  Decisively here, the “claim of right” will be presumed when the use is shown to be “open, visible and continuous throughout the required prescriptive period.”  Id.
 
Although permission by the owner to a party claiming a prescriptive easement defeats a “claim of right” and “negates hostility,” id., the Court re-affirmed that once the open, visible and continuous use is established, the party opposing the prescriptive easement must “rebut” the presumption and show that the “‘use was permissive, and not under a claim of right.’”  Id. (quoting Johnson v. DeBusk, 272 Va. 726, 730 (2006)).  Without addressing how this presumption interacts with the “clear and convincing” evidentiary burden borne by the prescriptive easement claimant, the Horn Court concluded that the “Webbs bore the burden of proving permission,” id. at 900, had failed “to show that the use was permissive,” and, therefore, held that the “claim of right” was established.  Id. at 899–900.
 
While the Webbs were able to offer some evidence suggesting that a predecessor in title gave permission to the Horns to dock their boat at the Webbs’ property, id. at 899–900 & n.2, the Court noted that this permission does not continue through the chain of title, as does the prescriptive use, but is “personal to the grantor.”  Id. at 900. Thus, the Horn Court found error in the trial court’s holding that “once permission is granted, it is presumed to continue indefinitely,” and held, instead, that “[p]ermission does not extend beyond the ownership of the person who granted permission.”  In that respect, permission operates like a license.  Horn, 882 S.E.2d at 890 (quoting Clark v. Reynolds, 125 Va. 626, 630–31 for the proposition that “‘[t]here is no just foundation in the evidence for any contention that the use . . . was in a legal sense by permission or under a license.’”).
 
As a result, an open, visible and continuous use will not be defeated by an opponent’s predecessors in title having given permission, which requires the affirmative act of “granting permission,” and is the opposite of a mere “[f]ailure to object” or “acquiescence.”  Rather than establishing permission, and thus defeating the “claim of right,” the Horn Court noted that evidence of acquiescence is necessary to prove the prescriptive easement.  See Horn, 882 S.E.2d at 898 (citing Amstutz); id. at 900 (quoting the “observation” in Davis v. Wilkinson, 140 Va. 672, 679 (1924) that “‘[f]ailure to object to the use of the way is very often stated by witnesses as consent to its use, yet such consent is mere acquiescence, and acquiescence is one of the elements upon which the ripening of the use into a legal right rests.’”).  Thus, “[a]ssuming without deciding” that permission had been granted for some period of the use, the Horn Court held that that permission did not defeat the “claim of right” or the prescriptive easement.  Id. at 900.
 
Prior to Horn, Virginia courts often misconstrued evidence of acquiescence, a fact in favor of the easement, as evidence of permission, a fact against it, or improperly shifted the burden to disprove permission to the claimant, dealing fatal blows to an otherwise well-founded prescriptive easement claim.  In Horn, the Supreme Court removed any ambiguity: permission to use property (1) does not transfer with title, (2) requires an affirmative grant to be shown and not the mere failure to object, and (3) is the opponent’s burden to establish once an open, visible and continuous use has been shown.
 
 

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INTRODUCING NEW ATTORNEYS AT WHITEFORD

We are pleased to introduce several new attorneys to our Real Estate Practice Group.


George Mongell
Counsel 
Pittsburgh Office

Mr. Mongell's substantial real estate experience encompasses over $2 Billion in real estate work, with a particular focus on creating sustainable building landscapes. He has global real estate experience, including with REITs, developers, sports teams and others on matters related to mergers, acquisitions, dispositions, finance, leasing, and development contracts. He is well versed in real estate matters related to office, commercial, retail, industrial, multi-family, hospitality and sports arena properties.
 

Ross Allen
Counsel 
Richmond Office

Mr. Allen concentrates his practice in real estate and corporate law. He is experienced with all types of commercial transactions and commercial purchase agreements, as well as commercial leases, titles, mechanic’s liens and zoning-related matters. In addition, he has significant experience in real property, construction and bankruptcy litigation, with a practice that extends throughout Virginia in Circuit Court, General District Court and Federal Bankruptcy Courts.
 

Kurt R. Magette
Senior Counsel 
Richmond Office

Mr. Magette has 40 years of experience as a business, commercial real estate and tax attorney.  A registered CPA, he focuses his practice on business and commercial real estate transactions requiring significant expertise in federal and Virginia taxation. He is a frequent author and lecturer, including time as an adjunct professor at Virginia Commonwealth University School of Business and William and Mary’s Marshall-Wythe School of Law.
 

Zanas Talley
Associate
Richmond Office

Mr. Talley focuses his practice on real estate and is experienced in the representation of developers and landowners in matters relating to land use and zoning, development, financing, acquisition and leasing. His prior experience includes serving as an advisor to the Richmond City Commonwealth’s Attorney and serving as the Legislative Director for Virginia State Senator J. Chapman Petersen.

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Our Pittsburgh and Richmond offices continue to grow

Our full-service law firm continues to serve clients throughout the mid-Atlantic, with an ever growing presence in Pittsburgh and the Commonwealth of Virginia.  We offer comprehensive Corporate and Litigation capabilities.
 

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The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.