Pittsburgh Legal Back Talk

Legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus.

1297 Posts and Counting

Fake News, Fake Facts and What We Think We Know.

Posted by Cliff Tuttle| January 14, 2017 | © 2017

No. 1,297

In this age of electronic spying and Wikileaks, how are we supposed to know who made up what?  And even if something isn’t a total fabrication, a misinterpretation can be just as deadly. During the Presidential Campaign, fact checkers reported that an extremely high percentage of alleged facts we were being told by both sides was totally or partially false or stated in such a way as to be misleading. So what are we supposed to do?

The answer is and perhaps always was, doubt everything.  Do not permit your brain to be an open dumpster.  Demand proof, real proof.

Believe it or not, there is a way to do this.  Apply the rules of evidence which have been developed by the legal system over thousands of years.  First, separate fact from opinion.  I’ll form my own opinion when I have enough facts, thank you very much.  I don’t need celebrities — or anyone — to help me with this.

Facts must come first hand from a credible source.  A news organization reporting what somebody else says or writes is not a first hand source.  Thus, it is always necessary to look past the news copy to the actual first party testimony from a qualified and knowledgeable source.  This is a difficult task, especially when the medium has edited and even censored a news clip.  This means that the truth is only partially available to the general public. So we must be patient and refuse to accept allegations made by partisans or by those without first hand knowledge and adequate expertise.  That means that just about everything we are told must be taken with that proverbial grain of salt.

Yes, the task of getting to the truth can be overwhelming, even impossible.  The rapid acceleration of technology and events makes today’s truth obsolete. We are severely limited in what we can observe, analyze and understand.  In a world exploding with change, we cannot know or understand more than a tiny percentage of available information and despite our best efforts, much of what we think we know will ultimately turn out to be flat wrong.

CLT

 

Commonwealth Court Explains How to Avoid Realty Transfer Tax When Drafting a Renewal Clause in a Long-term Commercial Lease.

Posted by Cliff Tuttle| January 2, 2017 | © 2017

No. 1,296

SATURDAY FAMILY LP v. COMMONWEALTH; TECHSPEC INC. v COMMONWEALTH, Nos. 781 F.R. 2013, 782 F.R. 2013

SUMMARY:  To avoid real estate transfer tax on a long-term lease, it is necessary to make the initial term less than 30 years and to price any renewals at fair market value at the time of the renewal.

Image: expert beacon.com

Image: expert beacon.com

On December 28, 2011, Landlord and Tenant entered into a ground lease for a period of 29 years and 11 months.  The tenant was granted an option to renew for a period of up to 6 periods of 5 years each for a fair market value rent to be established on the renewal date to be established by agreement of the parties taking into account the values of similar properties in Westmoreland County.  If the parties cannot agree, a procedure was established for a determination through an appraisal.

The Department of Revenue issued a Realty Transfer Tax Notice of Determination, assessing $12,455.23 in state and local transfer tax, stating that the “Lease exceeds 30 years with a formula in place” to determine the rent for each extension.  A lease for a period exceeding 30 years is declared to be the equivalent of a sale under the Tax Code and thus subject to Pennsylvania Real Estate Transfer Tax. The Commonwealth Court summarized the applicable Tax Code provisions as follows:

” Section 1103-C.1 of the Tax Code provides that “[i]n determining the term of a lease, it shall be presumed that a right or option to renew or extend a lease will be exercised if the rental charge to the lessee is fixed or if a method for calculating the rental charge is established.”

The Department’s regulation pertaining to exclusions from realty transfer tax similarly provides that a real estate lease is excluded from the realty transfer tax unless the lease is for a term of 30 or more years. 61 Pa. Code § 91.193(b)(24)(i). It also provides:

In determining the term of a lease under this paragraph, it shall be presumed that a right or option to renew or extend a lease will be exercised if the lessor and lessee cannot renegotiate the rental charges for the renewal or extension period unconditionally. A lessor and lessee cannot renegotiate a rental charge unconditionally if it is fixed at a set amount for the period or a method for establishing the rental charges is established. Renewals or extensions at the option of the lessee at fair rental value at the time of the renewal or extension are not included in determining the term of a lease.

61 Pa. Code § 91.193(b)(24)(v) (emphasis added). The parties in this matter disagree as to whether the regulation, particularly the last sentence, should be interpreted to exclude the renewal period from the term of the Ground Lease for purposes of determining whether the term of the Ground Lease is 30 or more years, because the rental charge for a renewal period would be based on the fair market value.

Section 1101-C of the Tax Code (emphasis added). Finally, Section 1103-C.1 of the Tax Code[6] provides that “[i]n determining the term of a lease, it shall be presumed that a right or option to renew or extend a lease will be exercised if the rental charge to the lessee is fixed or if a method for calculating the rental charge is established.”

The Department’s regulation pertaining to exclusions from realty transfer tax similarly provides that a real estate lease is excluded from the realty transfer tax unless the lease is for a term of 30 or more years. 61 Pa. Code § 91.193(b)(24)(i). It also provides:

In determining the term of a lease under this paragraph, it shall be presumed that a right or option to renew or extend a lease will be exercised if the lessor and lessee cannot renegotiate the rental charges for the renewal or extension period unconditionally. A lessor and lessee cannot renegotiate a rental charge unconditionally if it is fixed at a set amount for the period or a method for establishing the rental charges is established. Renewals or extensions at the option of the lessee at fair rental value at the time of the renewal or extension are not included in determining the term of a lease.

61 Pa. Code § 91.193(b)(24)(v) (emphasis added). The parties in this matter disagree as to whether the regulation, particularly the last sentence, should be interpreted to exclude the renewal period from the term of the Ground Lease for purposes of determining whether the term of the Ground Lease is 30 or more years, because the rental charge for a renewal period would be based on the fair market value.

“Section 1103-C.1 of the Tax Code provides that “[i]n determining the term of a lease, it shall be presumed that a right or option to renew or extend a lease will be exercised if the rental charge to the lessee is fixed or if a method for calculating the rental charge is established.”

The Department’s regulation pertaining to exclusions from realty transfer tax similarly provides that a real estate lease is excluded from the realty transfer tax unless the lease is for a term of 30 or more years. 61 Pa. Code § 91.193(b)(24)(i). It also provides:

In determining the term of a lease under this paragraph, it shall be presumed that a right or option to renew or extend a lease will be exercised if the lessor and lessee cannot renegotiate the rental charges for the renewal or extension period unconditionally. A lessor and lessee cannot renegotiate a rental charge unconditionally if it is fixed at a set amount for the period or a method for establishing the rental charges is established. Renewals or extensions at the option of the lessee at fair rental value at the time of the renewal or extension are not included in determining the term of a lease.

61 Pa. Code § 91.193(b)(24)(v) (emphasis added). The parties in this matter disagree as to whether the regulation, particularly the last sentence, should be interpreted to exclude the renewal period from the term of the Ground Lease for purposes of determining whether the term of the Ground Lease is 30 or more years, because the rental charge for a renewal period would be based on the fair market value.”

After recounting detailed arguments on both sides, the Court states that the language in the regulation set forth at 61 Pa. Code § 91.193(b)(24)(v), which governs the outcome, is clear. In the first sentence, it sets forth the presumption that a right or option to renew will be exercised if the parties “cannot renegotiate the rental charges . . . unconditionally.”

The second sentence goes on to state that the parties cannot renegotiate the rental charges unconditionally “if it is fixed at a set amount for a period or a method for establishing the rental charges is established.”

“The critical third sentence explains in clear language that if the rental charge is based upon the ‘fair rental value at the time of the renewal or extension,’ the extension period is not included in the total lease term. Id. These provisions operate concurrently and are not internally inconsistent, because the first two sentences essentially provide that if the parties set forth a method for establishing the rental charge for the renewal period, then they cannot renegotiate the rental charge unconditionally at the time of the renewal and the renewal period is included in determining the total lease term. The third sentence clarifies how a renewal term in a lease is to be treated if the lease provides that the rental charge for the renewal period shall be based upon the fair market value rent at the time of the renewal.”

In other words, if the rental charge is repriced at the time of renewal based upon fair market value, then the extension period is not counted as part of the initial lease term.  On the other hand, if a renewal option can be exercised  at a rental charge fixed in the lease, the renewal must be considered part of the lease term.

To illustrate, if a lease contains an initial term of 29 years and 11 months at $10.00 per square foot, followed by an option to renew at $12.00 for five years, the lease term exceeds 30 years and transfer tax applies.  But if the extension is based upon fair market value, which is determined under the language of the lease, then the extension is not part of the initial term and the transaction is not subject to realty transfer tax.

Determining the rent of renewals at fair market value might seem to be a problem, but in practice it is often easy.  In shopping centers and office buildings, the going rate at any given time is usually indicated by the rents negotiated with new tenants as the units turn over.  If a property is unique, the appraisal alternative is practical one.  Appraisals cost money, but so does the realty transfer tax.

In drafting a lease provision, it is advisable to follow the language of the regulation exactly. as the parties did in this case.

 

Rule Proposed to Permit Citation of Non-precedential Superior Court Opinions

Posted by Cliff Tuttle| December 31, 2016 | © 2017

No. 1,295

The Legal Intelligencer reports that a proposed rule is about to be published permitting citation of non-precedential Superior Court Opinions for their persuasive value, but not as authority.  The reason for the rule permitting non-precedential opinions is the heavy workload of the Court.

Although these opinions do not appear in the official reports, they can be found in Google Scholar.  This ban is frequently ignored by brief writers and, alas, by bloggers.

Magistrate Filing Costs and Fines for 2017

Posted by Cliff Tuttle| December 30, 2016 | © 2017

No. 1,294

The following costs and fines have been established by the Pennsylvania Supreme Court for Magisterial District Judges beginning January 1, 2017.

  • 29.402. 42 Pa.C.S. § 1725.1. Costs.

 

(a) Civil cases. — In calendar year 2017, the costs to be charged by magisterial district judges in every civil case, except as otherwise provided in this section, shall be as follows:

 

(1) Actions involving $500 or less                        $51.50

 

(2) Actions involving more than $500

but not more than $2,000                              $69.00

 

(3) Actions involving more than $2,000

but not more than $4,000                              $86.00

 

(4) Actions involving between $4,001

and $12,000                                          $129.00

 

(5) Landlordtenant actions involving $2,000 or less      $77.50

 

(6) Landlordtenant actions involving more than $2,000

but not more than $4,000                              $94.50

 

(7) Landlordtenant actions involving more than $4,000

but not more than $12,000                            $129.00

 

(8) Order of execution                                    $39.00

 

(9) Objection to levy                                     $17.50

 

 

(10)   Reinstatement of complaint                           $9.00

 

(11)   Entering Transcript on Appeal or Certiorari          $4.50

 

Said costs shall not include, however, the cost of postage and registered mail which shall be borne by the plaintiff.

(a.1) Custody cases. — In calendar year 2017, the cost (in addition to the cost provided by general rule) to be charged by the court of common pleas shall be as follows:

 

(1) Custody cases, except as provided in section 1725(c)(2)(v)   $8.00

 

(b) Criminal cases. — In calendar year 2017, the costs to be charged by the minor judiciary or by the court of common pleas where appropriate in every criminal case, except as otherwise provided in this section, shall be as follows:

 

(1) Summary conviction, except motor vehicle cases   $49.00

 

(2) Summary conviction, motor vehicle cases, other

than paragraph (3)                               $39.00

 

(3) Summary conviction, motor vehicle cases,

hearing demanded                                 $47.00

 

(4) Misdemeanor                                      $56.00

 

(5) Felony                                           $64.50

 

Such costs shall not include, however, the cost of postage and registered mail which shall be paid by the defendant upon conviction.

(c) Unclassified costs or charges. — In calendar year 2017, the costs to be charged by the minor judiciary in the following instances not readily classifiable shall be as follows:

 

(1) Entering transcript of judgment from another member

of the minor judiciary                                     $9.00

 

(2) Marrying each couple, making record thereof, and

certificate to the parties                                $43.00

 

(3) Granting emergency relief pursuant to 23 Pa.C.S. Ch. 61

(relating to protection from abuse)                       $17.50

 

(4) Issuing a search warrant (except as provided in

subsection (d))                                           $17.50

 

 

(5) Any other issuance not otherwise provided in this

subsection                                                $17.50

 

 

  • 29.403 42 Pa.C.S. § 3571.

 

In calendar year 2017, Commonwealth portion of fines, etc.

* * *

(c) Costs in magisterial district judge proceedings.

(2) Amounts payable to the Commonwealth:

 

(i) Summary conviction, except motor vehicle cases       $17.10

 

(ii) Summary conviction, motor vehicle cases other than

subparagraph (iii)                                   $17.10

 

(iii) Summary conviction, motor vehicle cases,

hearing demanded                                     $17.10

 

(iv) Misdemeanor                                          $22.40

 

(v) Felony                                               $34.40

 

(vi) Assumpsit or trespass involving:

 

(A) $500 or less                                     $21.50

 

(B) More than $500 but not more than $2,000          $34.50

 

(C) More than $2,000 but not more than $4,000        $51.60

 

(D) Between $4,001 and $12,000                       $86.00

 

(vii) Landlordtenant proceeding involving:

 

(A) $2,000 or less                                   $34.50

 

(B) More than $2,000 but not more than $4,000        $42.95

 

(C) More than $4,000 but not more than $12,000       $60.20

 

(viii) Objection to levy                                     $8.75

 

(ix) Order of execution                                   $26.00

 

(x) Issuing a search warrant (except as provided in

section 1725.1(d)(relating to costs))                $12.25

 

(xi) Order of possession                                  $15.00

 

 

(xii) Custody cases (except as provided in

section 1725(c)(2)(v))                                $6.40

 

Landlord-Tenant: Domestic Violence Exception to 10-day Appeal Limit in Eviction Cases.

Posted by Cliff Tuttle| December 30, 2016 | © 2017

Image: Shutterstock

Image: Shutterstock

No. 1,293

STEPHANO BROS. REAL ESTATE INVESTMENT ASSOCIATES v. DEBORAH WILLIAMS, NOS. 2571 EDA 2015, 2629 EDA 2015. Superior Court, filed November 2, 2016

In this non-precedential decision, the Superior Court construes a little-known provision in the Landlord and Tenant Act regarding appeal of a landlord-tenant case involving recovery of possession of the leased premises when the tenant is a victim of domestic violence. The statute, found at 68 P.S.§250.513(b) states:

“Within ten days after the rendition of judgment by a lower court arising out of residential lease or within thirty days after a judgment by a lower court arising out of a nonresidential lease or a residential lease involving a victim of domestic violence, either party may appeal to the court of common pleas[.]”

The applicable Rule is Pa.R.Civ.P.D.J. 1002, which does not mention the statutory exception for victims of domestic violence.

On May 15, 2015 the Magisterial District Judge entered an order for rent and possession in a landlord-tenant case. On June 15, the tenant appealed to the Court of Common Pleas.

The Court held that the appeal was not timely because the appellant did not qualify under the Landlord and Tenant Act as a victim of domestic violence. The Court notes:

“The Landlord Tenant Act defines a victim of domestic violence as “a person who has obtained a protection from abuse order against another individual or can provide suitable evidence as the court shall direct.” 68 P.S. § 250.513.”

In the hearing below, no Protection from Abuse Order was produced and the trial court stated that it was not convinced by the Tenant’s testimony. The Superior Court accepted that finding.  Thus, the Tenant was not qualified to appeal within 30 days.

A footnote:  yes, there are 31 days in May.  June 15 is in fact 31 days, not 30 days after May 15.  The thirtieth day, June 14, is Flag Day, a court holiday.  So, June 15 is the last day to file a 30-day appeal.

CLT

 

 

 

Shot Across the Border kills someone in Mexico — is there civil liability in US Courts?

Posted by Cliff Tuttle| December 29, 2016 | © 2017

No. 1,292

Is there civil liability for death caused by a shot fired across the Rio Grande?  Some think that the US Supreme Court will probably take the case.

Christmas Card for Tenants

Posted by Cliff Tuttle| December 20, 2016 | © 2017

No. 1291

notice

 

Trump’s secret was hiding all along in plain view.

Posted by Cliff Tuttle| November 10, 2016 | © 2017

No. 1,290

Image: gapundit.com

Image: gapundit.com

In the past two days, I have read a ton of articles and watched an army of talking heads expound upon various theories to explain the Trump triumph at the polls.  Undoubtedly, many stars had to come into alignment to create this remarkable constellation. But one beacon outshines them all.

Trump had the extraordinary ability to make interesting speeches — so interesting that he filled large arenas wherever he went.  This phenomenon became evident early in the primaries. And during the frantic final weeks, it served him well as he raced from one battleground rally to the next, filled to the overflow.

As Hillary was luring voters to her rallies with entertainers, Beyonce, JZ and the like, Trump didn’t need a concert to pack the house.  He was the celebrity in chief. And he didn’t need a media consultant to teach him how to attract television coverage. The news channels couldn’t get enough, because their viewers couldn’t get enough. And all he did was stand up and talk.

Now, that doesn’t mean that everybody loved him.  Those who swarmed to his campaign events obviously did, but according the polls, most TV viewers didn’t. Yet, they still watched his campaign speeches, perhaps because they wanted to be the first to know what blasphemy he might utter next. Yes, he was and still is the master of the art of being unpredictable.

Its a great gift, for certain — but not entirely rare. Many of the best trial lawyers have it, each in his/her own way. Lincoln was one.  He could disarm an opponent by telling a well-timed funny story. I’ve seen the dark mood in a criminal trial evaporate when defense counsel tells a well-timed joke at the expense of his client.  And I’ve also heard a courtroom become deadly quiet when trial counsel drops an unexpected idea at an unexpected moment.

Is the best yet to come? Stay tuned.

CLT

 

 

 

Confession of Judgment and Political Advertising

Posted by Cliff Tuttle| November 7, 2016 | © 2017

No. 1,289

The TV advertising on both sides of the Pennsylvania Senatorial race has been an abomination of untruth, half truth and true but irrelevant statements.  So perhaps one more wrong allegation doesn’t matter very much. In fact, some of the claims are so outrageous, that even a child could see through them. Nevertheless,  the allegations regarding use of confession of judgment clauses are not obvious to non-lawyers and therefore is worthy of discussion.

Katy McGinty’s campaign criticizes Senator Toomey for authorizing the practice of confession of judgment in commercial lending by a bank in which he owns a stake and had once served as chairman of the board.  This ignores the fact that, in Pennsylvania, a  commercial (business) mortgage and the accompanying commercial promissory note almost always contain such a clause. They are also commonplace in commercial leases for offices, store rooms and other business property.

A “confession” means that the borrower agrees in advance to entry of judgment without a trial.  In Pennsylvania, as in many other states, this powerful legal tool cannot be used in a consumer transaction, one where the proceeds are used to fund the purchase of consumer goods or services, including a personal residence.  Most of the time, a confession of judgment is not entered on the public record until after there is a default.  But the agreement could provide for entry of judgment at any time the lender feels insecure about repayment of the debt. Sometimes the agreement provides for advanced notice and an opportunity to cure (usually pay)in order to avoid entry of judgment.  Sometimes not.

While most commercial borrowers cannot persuade the lender to waive a confession of judgment clause entirely, they may be able to negotiate the terms — perhaps to require advanced notice. An experienced business transaction lawyer may be able to get other concessions, depending upon circumstances.

A lender may also secure a commercial loan with a mortgage on the residence of the borrower. However, in this case, there is a certain amount of protection under Pennsylvania law.  The lender must go through the foreclose process, as it would under a residential mortgage.

Yes, a judgment does create lien the personal residence of the commercial borrower.  And yes, the commercial borrower could lose that residence through a sheriff sale. But the opportunity to present a defense is available.

Confession of judgment is not a practice that is unique to the bank where Senator Toomey owned a small interest.  Every bank that makes commercial loans in Pennsylvania could demand a confession of judgment in its loan documents.  Far from it being a predatory practice, as alleged in the commercials, it is a standard practice and is  authorized by federal and state bank regulators for commercial lending.  As a matter of fact, the failure to utilize this legal weapon in certain types of commercial lending might be viewed by regulators as an unsound practice — exposing the bank to an unnecessary risk of loan loss.

Perhaps there should be a policy discussion regarding this lending practice.  But the anti-Toomey advertising campaign is not the place to do it.

CLT

 

Vote Yes on the Judicial Retirement Constitutional Amendment

Posted by Cliff Tuttle| October 17, 2016 | © 2017

No. 1,288

Two newspapers on the other side of the State have editorialized against the ballot initiative to amend the Pennsylvania Constitution to raise the mandatory retirement age for judges from 70 to 75.  The principal reason why they are against this measure is that the ballot doesn’t state that the current retirement age is 70. Then, a few fluffy reasons are added to oppose the merit of the proposition.

But the truth is, there are plenty of excellent reasons to increase the retirement age for judges. The most important is that the Supreme Court regularly appoints senior judges to serve past age 70.  These judges serve on a per diem basis as needed.  The truth is is that they are usually needed.  And it is equally true that it takes longer these days to develop the expertise needed in specialized areas of the law.

Moreover, any lawyer who regularly appears in court will tell you that senior judges perform very well, primarily because they are the most experienced and frequently most knowledgeable members of the bench.  Increasing the tenure of judges would simply acknowledge the success of the senior judge program.

But the broader truth is that people in their seventies are healthier and live longer today than prior generations.  Mandatory retirement ages that were established in the past are  harder to defend.  We only deprive ourselves of the service of many of the most experienced individuals in the work force. This, of course, does not prevent voluntary retirement at any age.  But the choice should be made by the individual, not by an across-the-board rule.

CLT

keep looking »

Welcome

CLIFF TUTTLE has been a Pennsylvania lawyer for over 40 years and (inter alia) is a real estate litigator and legal writer. The posts in this blog are intended to provide general information about legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus. However, this information does not constitute legal advice and there is no lawyer-client relationship created when you read this blog. You are encouraged to leave comments but be aware that posted comments can be read by others. If you wish to contact me in privacy, please use the Contact Form located immediately below this message. I will reply promptly and in strict confidence.

  •  

    Click Here to Contact Cliff
  • Subscribe to our feed

    Search

    Admin