Pending Legislation Impacts Condos in Business Improvement Districts

Jun 28, 2011

Legislation affecting condominium associations within business improvements districts throughout the Commonwealth of Pennsylvania could have a far reaching administrative impact on condos without changes sought by CAI’s Pennsylvania Legislative Action Committee.

House Bill 1582 was introduced by Representative John Taylor (R-177) of Philadelphia on May 24, 2011. As written, the Bill provides Business Improvement Districts the option of adopting an alternate method of billing residential units within a condominium association.

Under current law, Business Improvement Districts (BID) assess a fee on every property within their jurisdiction based upon the assessed value of the property for real estate tax purposes. In the case of condos, each individual unit owner receives a bill for their property assessment and pays their bill directly to the BID.

Under this Bill, the billing of BID assessments to condo associations would change if elected by the BID. The value of assessments for all units within the condo association would be aggregated and one bill would be sent to the condo association. This change would mean the BID assessment would now become a common expense apportioned to each unit owner based upon percentage of ownership in the condominium. The association would be responsible for including the BID assessment in each unit owners’ monthly condo assessment, delineating the portion of the assessment that constitutes the BID fee and for collecting the BID fee along with the monthly condo assessments. In the event of a delinquent unit owner, the condo association would still have to pay the BID bill in full, meaning all owners in the building would have the added burden of paying the fee for a delinquent owner. However the legislation does allow the BID to authorize payment of this “building” assessment in equal, annual or more frequent installments over a fixed period of time at 6% interest or less. The legislation also allows the BID the option of discounting, by 50%, all residential assessments within its jurisdiction.

Practical Impact

Condo owners, like all other single family residential property owners within a BID, would receive a 50% discount on the BID assessment. However, this discount appears to be neither mandatory, nor permanent. Each condo association would now be responsible for the  billing and collections for the BID assessment. Because the BID assessment would now become a common expense allocated by percentage of ownership, all owners would have the added burden of covering the fee for a delinquent owner.

CAI’s Objections

CAI’s Pennsylvania Legislative Action Committee (PA LAC) objected to various provisions of the legislation. By aggregating assessments and billing the association, the BID assessment would have to be treated as a common expense, which could potentially alter the assessment on each individual unit within the association since it would be based on percentage of ownership as opposed to the actual assessed value of the unit. Furthermore, the association would now be responsible for collecting the BID assessment, pursuing delinquent unit owners through the collections process, and would subject the unit owners association to a claim enforceable as a judgement for money against the unit owners association. Such a claim would appear as a lien against every unit within the condo with the potential to affect resales and securing of a mortgage.

Amendments

On June 17, the following amendments were submitted to the legislature by CAI’s PA LAC.

  1. The 50% residential discount be made mandatory and permanent.
  2. Language be added that allows the condo association to treat the BID assessment based on the actual assessment of each individual unit and not as a common expense allocated by a percentage of ownership.
  3. Language be added that clearly designates that the condo association is merely serving as the collection agent for the BID and that unit owners shall not be liable for delinquent owners who fail to pay their BID assessment. The BID would be responsible for directly pursuing any owners who do not pay.

The above amendments were agreed to in principle by the parties involved with negotiations on the Bill, including CAI and Philadelphia’s Center City District, and sent to the Legislative Reference Bureau. CAI will monitor progress of the Bill and keep members updated as the Bill works its way through the legislative process.


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