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Landlords Beware

A landlord cannot escape the reach of a municipal lien when a tenant fails to pay for a municipal service.  In City of Philadelphia v. Perfetti, 2171 C.D. 2014, (Pa. Cmwlth., filed June 8, 2015), Perfetti’s tenants were responsible to pay their gas bills, but failed to do so for a number of years.  The City finally caught up with them, and filed liens against the properties.  Perfetti found out about the liens three years after they were filed.  Perfetti cried foul because he did not know that the tenants had not paid the gas bill,  had no prior notice that there was a delinquency, or that liens had been filed.  Perfetti argued that the City was barred from filing the liens because it waited too long to file the liens, and that his due process rights were violated because it was too late for him to go after his tenants.   The Commonwealth Court noted that under the Municipal Claims and Tax Liens Act [MCTLA], the owner of the property is responsible to pay the municipal lien.   Further, a municipality is not required to provide any pre- or post-lien notice.   In addition, there is no statute of limitations as to when a lien can be filed.  The Commonwealth Court noted that the courts have consistently held that the lack of a pre-lien hearing does not violate due process.

In a case of first impression, the Commonwealth Court addressed Perfetti’s argument that due process requires a municipality to provide pre-lien notice to an owner who did not incur the municipal debt, and whether the inability to recover the debt from a tenant is a valid defense.  The Commonwealth Court rejected these arguments by applying the United States Supreme Court’s test for determining whether state action violates due process.  Under that test, a court must consider (1) the private interest that is affected by the government action; (2) the risk of erroneous deprivation through the procedure uses; and, (3) the government interest affected by any additional or substitute procedure.   In this case, the Commonwealth Court found that while the filing of a lien against the property is not as burdensome as a seizure or judicial sale of the property, it does encumber the property.  As for the second prong, the risk of erroneous deprivation is low.  Placing liens on property based on failure to pay a debt are ordinarily uncomplicated matters that lend themselves to documentary proof, i.e. either someone did or did not pay the bill.  While the existence of a tenant may complicate the matter, a landlord is in the best position to protect the landlord’s interests since a municipality has no control over a tenant.  The Commonwealth Court found that under the third prong, a municipality has a greater government interest in making its financial position as predictable as possible, and in securing debt owed for municipal services.  Making a municipality jump through more hoops before it can file a lien significantly increases a municipality’s burden.  Therefore, the filing of liens without notice or a hearing to an owner does not violate due process.  Finally, the MCTLA does not allow for equitable defenses such as laches or prejudice by delay.

The bottom line is that a landlord has the responsibility to make arrangements with his tenants to ensure payment for municipal services or to require proof of payment from the tenant.