Act 75 Clears The Road to Settlement

On October 7^th 2021, Governor Wolf signed Act 75 of 2021 (formerly House Bill 523) into law amending the June 13, 1836 Act that regulates the maintenance and repair of private roadways. The Bill will take effect December 7, 2021, 60 days after approval.

Often, realtors and their respective parties meet at the settlement table, only to be blindsided by a logistical roadblock – no pun intended. That roadblock deals with properties that lie on a private roadway and the responsibilities of the homeowners along that road to maintain and to repair it. Absent a written maintenance agreement, lenders would not grant the borrower’s loan to protect the lender’s interest in the event that the road falls into disrepair and becomes impassable.

So, before Act 75, what recourse did buyers have without a signed maintenance agreement between all homeowners on their private road?

1. Buyers could accept responsibility themselves to maintain the road by way of an individual maintenance agreement, making them responsible for all maintenance and repairs for the road.
2. Buyers could also come to an agreement with all their neighbors on the private road to execute a shared private road maintenance agreement. This arrangement could prove difficult in very rural areas or on private roads with numerous landowners. All parties would have to agree and sign to the maintenance agreement in order for the bank to sign off on the loan.
3. Buyers could seek out a loan type that contains more lenient terms and may not require a private road maintenance agreement.

What has Act 75 changed with regards to the settlement process?

Thanks to Act 75, a private road maintenance agreement is no longer required to secure a loan. The Act now states that in the absence of a private road maintenance agreement, each property owner that shares the benefit of the private road must contribute in proportion to their benefit for the maintenance and improvement of the road. This requirement does not apply if there is already a written maintenance agreement in place between the property owners on the roadway. Residents can also bring a civil action against another property owner on the road if they fail to contribute their proportion of the benefit.

Now, there’s no reason to fear a settlement breakdown in the final hour, at least due to an oversight of a private road agreement. This Act provides a fallback provision upon which lenders, realtors and their respective parties can rely when a private road maintenance agreement is not already in effect.

Please contact our Real Estate Law Practice Group if you have any questions regarding any of your real estate needs.