Commonwealth Adopts New Statutory Requirements For Powers Of Attorney

At the end of 1999, the state legislature of the Commonwealth of Pennsylvania made certain changes in the laws governing powers of attorney. These changes, which became effective on April 12, 2000, affect both the form and substance of powers of attorney.

The documentation required in connection with a power of attorney now includes, in addition to the power itself, a notice to the principal and an acknowledgment by the "agent," as the attorney-in-fact is called under the new legislation. The form and content of both the notice to the principal and the agent's acknowledgment are prescribed by the statute. The notice to the principal explains, in summary fashion, the powers and duties of the agent. It must be set forth in solid capital letters at the beginning of the power, and must be signed by the principal. If the notice is not included in the power of attorney, the agent has the burden of demonstrating that his exercise of authority was proper, in the event such exercise is challenged.

In the agent's acknowledgment, the agent covenants to exercise the powers for the benefit of the principal, to keep the assets of the principal separate from the agent's assets, to exercise reasonable caution and prudence, and to keep accurate records. The statute provides that an agent has no authority to act under the power unless the agent has first executed and affixed the acknowledgment to the power.

This could mean that documents executed pursuant to a power which does not include the acknow-ledgment are void and unenforceable against the principal. Thus, if one is a party to a transaction in which documents are being executed pursuant to a power of attorney, it is essential that the power be reviewed for compliance with the new law.

The new requirements for notice to the principal and acknowledgment by the agent apply to powers of attorney executed on or after April 12, 2000.

The 1999 amendments made a number of other changes in the statute, which are not included in the above discussion. Clients may wish to contact counsel to review the new provisions in detail.

NEW RECORDING STANDARDS ADOPTED BY PHILADELPHIA DEPARTMENT OF RECORDS

The Department of Records of the City of Philadelphia recently adopted new requirements and standards for documents presented for recording. The most significant of these is the requirement that all instruments be accompanied by a Recording Information Summary ("RIS").

The RIS, and instructions for completing it, can be found on the Internet at www.phila.gov/summary/records/ris.pdf. The use of the RIS retrieved from the website is acceptable, but it must be consistent in all respects with the official form.

Any instrument presented for recording without a completed RIS will be rejected. The RIS must be attached to the front of each instrument to be recorded, even if multiple documents are being recorded with respect to the same parcel. The Department will rely upon the information contained in the RIS for examination and indexing purposes. If there is a conflict between the RIS and the attached document, the RIS will prevail for examination and indexing purposes.

The Department of Records has also adopted the following new standards with respect to documents presented for recording:

(a) instruments must be legible and suitable for imaging;

(b) each page of an instrument must be 8.5" by 11" unfolded;

(c) pages must be printed on one side only, with a 1.5" margin at the top and 1.0" margins at the bottom and sides;

(d) all pages, including attachments, must be numbered sequentially;

(e) all information required for recording purposes must be at least 10-point font in size and printed in black ink. Handwritten information is not acceptable; and

(f) paper stock must be 20-pound opaque stock in white or off-white.

Please contact us, if you have any questions regarding the new recording requirements.

CITY RELAXES POSITION ON EFFECTIVE DATE OF TRANSFER TAX ORDINANCE

In our March, 2000 Update, we discussed a new ordinance passed by the City of Philadelphia amending the City's realty transfer tax to close the loophole for "89/11" transactions. In a typical 89/11 transaction, the partners of a real estate partnership sell 89% of the interests in the partnership and agree that the remaining 11% interest will be sold after three years have passed. Under the new ordinance, a 90% change in ownership will be deemed to have occurred (thus triggering the City's 3% realty transfer tax) if, within three years of a prior transfer, the owners of the real estate partnership enter into a "legally binding commitment" to sell the remaining interest in the company (or a sufficient interest to cross the 90% change in control threshold). This new provision is effective for transactions entered into after July 1, 2000. It should be noted that there is no comparable provision in the Commonwealth's transfer tax statute.

At the time of our earlier Update, the City was taking the position that the new ordinance merely clarified existing law, so that the 89/11 provision was already in effect. We felt that this was not a valid interpretation of the ordinance and discussed this issue with officials in the City's Law Department and Revenue Department. At a recent seminar, the City announced that it had again changed its interpretation of the effective date, and gave Saul Ewing credit for this change in position. The City's new position is that the new 89/11 provision will not apply in a case where the 89% interest was transferred prior to July 1, 2000, even if the 11% interest is transferred after that date. The City was not willing to state whether the ordinance would apply if the parties had entered into an agreement to do an 89/11 transaction prior to July 1, 2000, but had not yet transferred any interests. The City also confirmed our view that in the cases covered by the new ordinance, tax is only imposed when the 11% interest is actually transferred, not when the parties enter into an agreement to transfer the remaining interest.

Although the 89/11 ordinance is now effective, there are still techniques for avoiding or reducing transfer taxes in appropriate circumstances. We also urge that careful consideration be given to how real estate is held. With sufficient advance planning it is often possible to avoid or minimize transfer tax on future transfers.

EAST WHITELAND MORATORIUM INVALIDATED ON APPEAL BY SAUL EWING

On July 13, 2000, the Zoning Hearing Board of East Whiteland invalidated the moratorium on subdivision and land development in the Township. In two appeals brought by Saul Ewing, the Zoning Hearing Board determined that the moratorium ordinance had been improperly enacted. Landowners in the Township now have a limited window of opportunity to submit subdivision and land development applications before a new moratorium ordinance can be enacted. Please contact us if you need assistance with any such applications.

NEW AMENDMENTS TO THE MPC: THE CURE FOR SPRAWL?

On June 22, 2000, Governor Ridge signed into law new amendments to the Municipalities Planning Code ("MPC"), the statute governing land use in all municipalities in Pennsylvania other than Philadelphia and Pittsburgh. With the exception of some relatively minor changes to Article V of the MPC (governing land development and subdivision), the new amendments will not immediately change land use practice in Pennsylvania.

The amendments focus on two issues: the need for mixed use development in individual municipalities and the need for greater regional cooperation in land use planning. The amendments create a new Article within the MPC, Article VII-A "Traditional Neighborhood Development." Article VII-A encourage municipalities to enact zoning ordinance amendments allowing traditional mixed use neighborhood development and codifies some standards and conditions for such developments. The majority of the remaining amendments to the MPC focus on the restructuring of Article XI, which formerly provided for joint municipal planning commissions and now focuses on intergovernmental cooperative agreements. Through such agreements, municipalities can enter into multimunicipal comprehensive plans and then enact zoning and land development ordinances consistent with those plans.

Any changes in local mixed use zoning and in regional cooperation require enactment of revised or new zoning and land development ordinances by municipalities. These changes will not come quickly. We will continue to monitor any developments in these areas for our clients.

We have more detailed materials addressing the amendments to the MPC which we would be happy to share with you. Please contact any of the attorneys in our land use practice for further information.

The statements contained in this Update are intended for general information and do not constitute legal advice.