On January 13, 2014, Philadelphia Mayor Michael Nutter signed into law Bill No. 130156-A, creating a municipal land bank for the city. With this law, Philadelphia became the largest U.S. city to adopt a land bank and joins more than 75 cities and towns nationwide that have established land bank programs to manage vacant properties.

Philadelphia's land bank legislation is authorized by Pennsylvania's Land Bank Act, P.L. 1239, No. 153, which allows local governments to establish public authorities to manage the purchase and sale of vacant municipally owned property. The goal of both the state and city laws is to decrease the number of vacant properties in order to reduce the detrimental social and economic impacts associated with vacant properties. Currently, around 40,000 parcels of land are vacant in Philadelphia, with the city owning close to 10,000 of those vacant properties.

The city's previous system of managing vacant properties was disjointed, creating burdens for prospective purchasers. Three separate city agencies owned and managed vacant city property, and each of these agencies had different rules for property sales.

The new law consolidates ownership and management of vacant properties into one authority—the land bank—and the same rules for sales will apply to all property. It is anticipated that the consolidation will streamline property sales, significantly lowering the burdens for prospective purchasers. Additionally, the land bank will be able to acquire tax-delinquent privately owned property more easily, which could increase the number of properties managed by the city. Currently, approximately 17,000 of the 30,000 privately owned vacant lots are tax delinquent.

Although management of vacant property will be consolidated under the new law, land sales will still involve a multi-step process. Before land can be sold, the land bank's Board of Directors must approve the sale; the City Council must approve a resolution; and the Vacant Property Review Committee, an interagency advisory panel, must also give its approval.

Mayor Nutter envisions the program to be fully operational by the end of this year. Before it goes into full effect, the land bank must be incorporated by the state, and the city must provide a budget appropriation for the land bank, appoint permanent members to the Board of Directors and transfer property to the land bank. The Board of Directors will have 11 members, and at least 4 of its members are required to be involved with nonprofit or advocacy organizations that deal with housing and community development issues.

The city anticipates that developers and other prospective purchasers will have a much easier time navigating the administrative process and acquiring city-owned property. Further, because the land bank will be able to acquire tax-delinquent property more easily, purchasers may have the opportunity to acquire larger blocks of land all at once without having to track down private owners or purchase at tax sales.

As for other benefits, the city also anticipates an increase in its tax revenue as formerly vacant land is developed, and city residents can look forward to enhanced safety as formerly vacant properties are developed.

If you have any questions about this Alert, please contact George J. Kroculick, David R. Augustin, any member of the Real Estate Practice Group or the attorney in the firm with whom you are regularly in contact.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. The Duane Morris Institute provides training workshops for HR professionals, in-house counsel, benefits administrators and senior managers.