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A Helpful Change for Boroughs and Second Class Townships Who Are Selling Real Estate

On February 5, 2020, Governor Wolf signed Senate Bills 691 and 692 into law.  SB 691, now Act 3 of 2020, amends the Second Class Township Code by increasing the value of real estate that may be sold by a Second Class Township without bidding or a public auction.  The amount was increased from $1,500 to $6,000 before a public bid or auction is required.  Act 3 requires the Township to obtain an appraisal to “estimate” the value of the real estate to confirm it is less than $6,000 and also requires the Board of Supervisors to publicly announce its intention to sell the real estate at a regular or special meeting of the supervisors at least 30 days prior to the sale.  SB 692, now Act 4 of 2020, amends the Pennsylvania Borough Code and the Pennsylvania City Code in the same manner.  The requirement for an appraisal verifying the value was already contained in the Borough Code and City Code, so it was not included in Act 4.  The public announcement of the sale is required by Borough or City Council.  Both Act 3 and 4 of 2020 become effective on April 6, 2020.

At the present time, the threshold for the value of real estate to be sold by First Class Townships remains at $1,500.  However, a comprehensive amendment to the First Class Township Code is underway and a similar change will most likely be included in that legislation.

It appears that the legislature has finally recognized that the administrative costs of a public bid/auction have exceeded the potential sale proceeds of low-value real estate.  However, in some cases, a public bid or auction may still be the preferred method of sale to maximize the proceeds of the sale of real estate through a competitive sale method.  Further, the terms of many public auctions require the buyer to pay the commission on the sale and the transfer taxes associated with the sale, thereby minimizing administrative costs to the municipality.  If your municipality is considering the sale of real estate, the Stock and Leader Municipal Practice Group can provide valuable insight and guidance as to the appropriate sale process and to ensure compliance with the requirements of the applicable municipal code.

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