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September 22, 2006

New Mechanic's Lien Law

In June, the Governor Rendell signed a new law that becomes in effect on January 1st.  The new law empowers sub-contractors and suppliers with the right to place a lien against a property if the owner or general contractor does not pay the sub-subcontractor for his/her work.  The old law limited this right to the prime contractor and the sub-contractor.


Why did we need a new mechanic’s lien law?
 

The purpose of the law is to protect sub-subcontractors, title insurance companies, and mortgage lenders who finance development projects.  Owners are now motivated to pay a lien regardless of whether they dispute the claim because liens cloud the property title and interfere with the owner’s ability to sell the property after the lien is attached.

Who can this law harm?

While sub-subcontractors celebrate the new law, owner-developers are not so happy.  The law now broadens the class of people who can file a mechanics lien.  In addition the law limits a developer’s ability to protect her property from a mechanic’s lien.  In the past, a developer and a sub-contractor could sign a waiver relieving the parties of their right to file a mechanic’s lien.  The new law enforces a waiver only if the developer purchases a bond equal to 1% of the project.     

 

How will this law work?

 

An owner-developer purchases a residential lot.  The developer sub-contracts with Company Builder to builder the homes.  Company Builder in turn contracts with Dry Wall Company to put up the walls for the new homes.  Dry Wall Company orders 300,000 nails from Nail Supplier in China.  After the nails arrive, Dry Wall Company refuses to pay Nail Supplier because the Company Builder did not pay Dry Wall Company for its work.  Who can file a mechanic’s lien against the property?  The Nail Supplier and Dry Wall Company can file.  The owner-developer will be forced to pay Nail Supplier and Dry Wall Company directly to protect the property’s title, even though the developer only has a contract with Company Builder. 

 

How can I protect my property from a mechanic’s lien?

 

To prevent this from occurring, a developer will have to purchase a bond worth at least 1% of the project and get signed waivers from all the sub-subcontractors and suppliers working on the project. 

 

If you need help determining whether this law applies to your company, please call or email me.

 

Sharmil McKee
Attorney
blogs@mckeeoffice.com

 

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New Law for Philadelphia Landlords

What is the Certificate of Rental Suitability?


In February 2006, the City of Philadelphia issued a new law that requires a landlord to certify that the rental unit is suitable for living.  It is also a way for the City to ensure that a landlord has purchased his/her Business Privilege License and Rental License. 


The law requires that a landlord give the tenant the following documents:
 

1. Certificate of Rental Suitability (cannot be issued more than 60 days prior to move-in)
2. Owner’s attestation that the unit is suitable for dwelling (attestation is a written, signed, and notarized statement)
3. “City of Philadelphia Partners for Good Housing” Handbook

What does “suitability” mean?


1. The landlord has obtained all necessary licenses for the unit (Rental License, Business Privilege License, and any required Zoning permits)
2. The unit does not have outstanding License & Inspection (L & I) violations
3. The unit has working fire extinguishers and smoke detectors
4. The unit is free from health defects (ie. lead paint)
5. The owner will maintain these requirements while the unit is occupied
 

What is on the Certificate?
1. The property’s Rental License number
2. The date of the last inspection conducted by L & I. (The Department has not stated whether inspections will be required for all Certificate applications)
3. The applicable zoning designation (C2, R2, etc.)
4. An explanation about how a tenant may request that L & I further inspect the property for violations
 

What are the penalties for not obtaining the Certificate?
1. L &I may issue a fine (the amount has not been determined) if the landlord fails to comply within 30 days after the notice
2. The landlord cannot collect rent while he/she is noncompliant
3. The landlord cannot evict tenant while he/she is noncompliant
4. The tenant can sue landlord to compel him/her to comply with this law
 

Effective: Now but applications will not be available until September 18th. 
 

Cost: $25 per rental unit
 

Please call or email me anytime.  I am happy to answer your questions.
 

Sharmil McKee
Attorney
215-242-5260 or sm@mckeeoffice.com

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September 15, 2006

Why does my landlord want a copy of my gas bill every month?


The reason your landlord wants to see your gas bill is because a new law allows PGW to place a lien on the property if a tenant does not pay the gas bill.  The law allows the lien even if the gas bill in the tenant’s name.  A lien places a cloud (or mark) on the title of the property which diminishes the value of the property.  So your landlord wants to make sure that the bill is paid in full and on time each month.  Otherwise PGW could force the landlord to pay the bill on your behalf. 
 

I will give you an example of how this works. 
 

Imagine you own a car and you let your friend borrow it to run some errands.  While your friend was in the grocery store, he got a parking ticket.  Imagine that your friend didn’t pay the ticket and late fines/penalties were added to the original ticket.  Now imagine you are running late for work but your car has a big orange boot on it because of this unpaid parking ticket.  Because you desperately need your car to get to work, you pay the ticket plus the fines and penalties just to get the boot off your car.  You and I know that you did not get that parking ticket, your friend did it.  But the city does not care. 
 

In this case, the city is like PGW.  PGW does not care who actually resides in the property or whose name is on the gas bill.  PGW just wants its bill paid in full and on time.  So like the city placed a boot on your car to force you to pay an unpaid ticket, PGW will place a lien on the property to force the property owner to pay an unpaid gas bill. 
 

Don’t misunderstand me, though.  This law does not let you (tenant) off the hook for paying your gas bill.  If you don’t pay the bill, your landlord could sue you to reimburse him/her for the gas payment or the landlord could evict you.
 

Sharmil McKee
Attorney
http://www.mckeeoffice.com

 

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September 14, 2006

Business and Payroll Tax

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During a meeting, a business client mentioned that she was trying to develop a budget for the next 12-months but she did not know what her tax rates or requirements were.  So, in addition to setting up a meeting with my small business CPA, I provided her with the following list.  These are the 2006 tax rates for the Federal, Pennsylvania, and Philadelphia government.

  • Federal Net Income tax is graduated from 10% to 25% depending on your income level
  • Pennsylvania Net Income tax is 3.07%
  • Philadelphia Net Income tax (also called the Business Privilege Tax) is 6.5%
  • Philadelphia Gross Receipts tax is 0.023%

Payroll tax usually refers to the money that an employer must withhold from the employee’s paycheck: federal income tax, plus one-half of the Social Security tax, and one-half of the Medicare tax.  In addition, the employer must match the money that is withhold from the employee’s check for federal taxes.  Together, the employer's and employee's shares of the Social Security and Medicare taxes are known as the FICA tax.  These are the tax rates:

  • Federal Social Security Tax 6.5%
  • Federal Medicare Tax is 1.4%
  • Federal Unemployment Tax is 6.2%
  • Pennsylvania Personal Income Tax is 3.07%
  • Philadelphia Wage Tax for Residents is 4.331%
  • Philadelphia Wage Tax for Non-Residents is 3.8197%

 If you need more information, please call my office or email me anytime.

Sharmil McKee

215-242-5260

sm@mckeeoffice.com

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September 02, 2006

Redemption Rights for Property Owners

If you own a residential property and it was sold at a Sheriff’s Sale to satisfy a tax or municipal claim, then Pennsylvania law allows you to reclaim (re-purchase) your property. You have up to nine (9) months after the Sheriff’s Sale to exercise this right.

To reclaim your property, you must meet the following requirements:

  1. The property should have been occupied by the same individual or basic family unit 
  2. The property should have been occupied for at least ninety (90) days prior to the date of the sale.
  3. You must reimburse the subsequent buyer for the following costs:
    1. the amount of the tax or municipal claim
    2. the cost of recording the deed
    3. the insurance on the property
    4. charges and necessary expenses for maintaining or improving the property
    5. plus 10 percent interest.

 

A new law decided recently by the Pennsylvania Superior Court suggests that if you own a mixed-use property, where the bottom level was used for a commercial purpose (like a bar), and the upper level was used for residential purposes (like an apartment), then you may also have the right to redeem the property after a Sheriff’s Sale, providing you meet all the other legal requirements.

This case, however, emphasizes an overlooked legal requirement—someone must have been living in the property for at least ninety (90) days prior to the Sheriff’s Sale. If your property was vacant for ninety (90) days before the sale, then you do not have the right to redeem (re-purchase) it, even if the property was residential.

See Lamm v. Fisher, 2006 Pa. Super 185 (July 19, 2006).

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Welcome

Welcome to the Small Business Law Blog by McKee Law Office.

I blog about new legal or market developments that may impact your small but growing business.  The ultimate goal is help you protect your business from future legal problems and law suits.

While I hope you find this blog informative, please use it only as a guideline prior to consulting your attorney.  This blog is too generic to substitute for an attorney's advice.

Feel free to contact me anytime.

Sharmil McKee, Attorney

Email: blog@mckeeoffice.com

Office: 215-242-5260

Fax: 215-701-7533

Address:  7715 Crittenden Street #314, Philadelphia, PA 19119

Website: http://www.mckeeoffice.com 

 

 

 

 

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