PENNSYLVANIA LEGAL UPDATE
Summer 2002 ISSUE

Home buyers often make the most expensive and significant investment of their lifetime when they purchase a home. Because the average agreement of sale is lengthy and complicated, many buyers sign without reading the entire agreement.

How can new home buyers protect their interests? First, and most important, home buyers should read and be sure they understand the entire agreement of sale. Special attention should be paid to the mortgage contingency clause-a clause that excuses the buyer from the obligation to buy the property unless the buyer can secure mortgage financing. The mortgage contingency clause can include a specific interest rate or other mortgage terms protecting the buyer from having to close the deal unless he or she secures truly favorable financing. Also deserving of special attention are the agreement's terms making the sale contingent on the buyer's sale of his or her current home. Finally, tightly drafted contingency clauses on the property's passing various inspections and tests always should be included.

A wise buyer secures professional surveys either from the seller or by hiring a surveyor if no current survey map exists. Title insurance is required by mortgage lenders. However, even without a mortgage, all buyers should be sure to buy title insurance. Title insurance is issued after a title search. Such searches can reveal liens, easements, judgments, and restrictive covenants that can significantly affect a property's value or permitted use. Wise buyers also conduct a final walk?through on the day of closing to insure that all requested repairs are complete and that the property is in the expected condition and ready for occupancy.

At closing, sellers deliver their deed and buyers sign mortgage documents and authorize the disbursement of funds to finalize the sale. The mortgage agent and the closing agent are responsible for preparing all of the necessary documents. It is reasonable for buyers to request the opportunity to review the documents, or to have their attorney review them, prior to closing. It is also wise to review the final closing costs with the closing agent several days in advance. Finalized interim mortgage interest and property taxes may be different from the mortgage company's initial projections. To avoid surprises at closing, buyers should work with their attorney or closing agent to determine all of the final costs in advance.

Most closing agents and mortgage agents require that buyers bring photo identification to the closing. At closing, buyers must also produce documentation that their homeowner's insurance is in place.

After closing, buyers should be sure to review their settlement statement. In most cases, loan origination fees and points are tax deductible, as are property taxes and legal fees associated with the home purchase.

A Pennsylvania worker assaulted by another worker during the workday suffered a dislocated shoulder. The injured worker sued his employer, claiming that the worker who committed the assault had a history of violent conduct and therefore made the workplace unsafe.

Most workplace injuries are covered under the Workers' Compensation Act: a collection of laws that limit the economic awards workers can receive in exchange for making employers absolutely liable for work?related injuries. While the Act generally prohibits employees from suing their employers for workplace injuries, an injured worker can sue his employer for injuries caused by another worker in an attack motivated by a history of personal animosity toward the injured worker.

Where an employer knows that a worker is directing verbal abuse or threatening actions toward another employee out of personal animosity, the employer can be liable to the victimized worker if the conflict escalates into physical violence. However, if the motive for the attack is work related and does not arise from personal conflict between the involved workers, the injuries are compensable only under the limited remedies available from the Workers' Compensation Act.

Employers who are aware of animosity between workers are responsible for taking steps to make the workplace safe. Especially where the conflict arises from personal issues not connected to workplace conflicts, employers should take action. Employees struggling with unresolved conflicts at work should be sure to document the conduct of aggressive co?workers.

In a surprising and far?reaching decision, the United States Supreme Court recently decided that the IRS is entitled to place liens against real estate owned by married couples for the delinquent tax obligations of one spouse. The Supreme Court found that a husband's ownership interest in the couple's marital home was property to which a federal tax lien may attach even though the delinquent taxes were only his obligation and his wife was not in any way responsible for nonpayment of the taxes.

Many state laws, including the laws of Pennsylvania, provide that real estate owned by married people is held by them as tenants "by the entireties." A tenancy by the entireties is a unique form of ownership that can only exist between married persons. Entireties property constitutes an unbreakable unit that neither spouse can sell or transfer without the consent of the other. In many states, entireties property cannot be attached by creditors except for joint debts of both spouses. The concept of entireties property presumes that the husband and the wife each own an indivisible interest in the entire property.

Departing from this presumption, the Supreme Court has held that a federal tax lien recorded against a husband is a binding lien on marital real estate. A dissenting Justice expressed serious concerns that the protection of entireties property is a particular benefit to the stay?at?home spouse or mother. Characterizing mothers as "overwhelmingly unlikely" to be the spouse with delinquent tax problems, the dissenting Justice found it "regrettable that the Court has eliminated a large part of this traditional protection retained by many States."

Anyone working to resolve federal tax obligations must now presume that all of his or her property, including the marital home, can be subject to a federal tax lien. Anyone purchasing property subject to a federal tax lien against a married owner can no longer assume that the lien does not attach to the property. Instead, the lien must be satisfied or removed at the time of the sale.

Married people are entitled to borrow money separately. The federal Equal Credit Opportunity Act (ECOA) prohibits creditors from treating borrowers differently based on their gender or their marital status. Creditors may not require the signature of an applicant's spouse on any loan or credit instrument if the applicant spouse alone qualifies under the creditor's standards of creditworthiness for the credit.

When husbands and wives apply jointly for loans or credit, lenders certainly can require that both spouses sign the loan documents, and if joint marital assets are the collateral or security for the loan, lenders are entitled to require that both spouses sign. But lenders violate the ECOA if they have a practice and policy of requiring both spousal signatures for all loans or credit extended to married individuals, regardless of the creditworthiness of the individual applicant.

Any married person who seeks individual credit and is individually creditworthy is entitled under the ECOA to borrow money without his or her spouse's signature. A creditor who has violated the ECOA in a particular loan or credit transaction is not entitled to pursue collection from the nonapplicant spouse who was required to sign, guarantee, or co?sign the loan.

If you are borrowing money or securing credit, be sure to explore all of your options in structuring the loan or credit. Borrowers who are married can limit their liability by not securing business loans on marital assets and by avoiding joint borrowing. Unless the pledging of marital assets and a spousal guarantee are necessary to qualify for a loan or line of credit, married borrowers should consider building their credit individually.

"AdultBasic," a new program paid for by tobacco settlement funds, provides health?care coverage for Pennsylvania citizens age 19 through 64 who need it but cannot afford it. Call 1?800?GO?BASIC for more information.

Many real estate deeds contain "restrictive covenants." These are clauses that prohibit property owners from using or developing the property in particular ways. Restrictive covenants can prohibit all commercial activity or may specify that the owners cannot conduct certain business pursuits. Restrictive covenants may ban owners from maintaining livestock, from placing mobile homes on the land, or from building certain kinds of structures. Restrictive covenants can be set out in deeds or, in cases where property owner associations or planned unit developments are involved, they may be recorded as a separate, sometimes lengthy, document.

The Pennsylvania Superior Court recently upheld a set of restrictive covenants that applied to homes in a vacation community. All of the lots in the community were sold subject to a set of recorded restrictive covenants that forbade owners from keeping livestock or poultry. One owner who kept up to 20 chickens on his property at a time claimed that the chickens were exempt from the restrictive covenants because they were not "poultry" but instead were family pets.To house the flock, the owner built a permanent metal structure that extended beyond the outside wall of his house by four feet. Neighbors complained about the odor and the noise, and the property association brought suit seeking the permanent removal of all of the chickens.

The court found that while all restrictive real estate covenants must be read strictly, permitting homeowners as much free use of their property as is reasonably possible, they must also be read fairly to protect neighboring homeowners in their expectations of peaceful enjoyment of their property. Rejecting the owner's claim that the chickens were pets, the court found that no matter how a homeowner regards or treats his chickens, chickens are poultry. Since the restrictive covenant at issue forbade homeowners in the community from maintaining "poultry," the court ordered that the owner could not continue to keep any chickens on the property.

preserve open space, many Pennsylvania municipalities are struggling under the ever?growing burden of a constant flow of new development plans. Some townships and boroughs have sought refuge in building moratoriums, passing ordinances that declare a moratorium on all new development pending an overall review of the local zoning and development ordinances. The Pennsylvania Supreme Court has recently restated its ban on such moratoriums. Pennsylvania municipalities may not enact temporary moratoriums on subdivision and land development.

The court held that while townships, boroughs, and cities in Pennsylvania have the power to enact zoning and subdivision ordinances, they do not have the power to suspend their valid ordinances to the prejudice of a landowner. The court recognized that property owners can sometimes defeat a local governing body's efforts to establish a new comprehensive zoning or development plan by racing to get their projects approved before the effective enactment of new ordinances. However, the court insisted that unless and until the Pennsylvania legislature clearly legalizes municipal government building moratoriums, they will remain illegal.

The Pennsylvania legislature recently passed a law requiring that drivers convicted for a second time of driving under the influence must equip their cars with ignition interlock systems before their driver's licenses are restored. Courts have the option to require the devices of first offenders as well.

An ignition interlock system is a security system that prevents a driver from starting the secured vehicle unless the driver first provides a breath sample with an alcohol level of less than .025%. Offenders who comply with the law and install interlock devices on all of their cars receive driver's licenses that are clearly marked to restrict the person to operating only motor vehicles equipped with approved interlock ignition systems.

A driver who is limited to using cars with interlock devices can be fined $1,000 and imprisoned for 30 days for driving a car not properly equipped with an interlock device. Anyone who helps a driver thwart the operation of an interlock system can be fined up to $100. Drivers who violate the interlock law and anyone who assists in tampering with an interlock device lose their driving privileges for one year if convicted of the violation or tampering.

As of January 2002, it is unlawful to carry a loaded paintball gun in any part of a vehicle in Pennsylvania. Anyone traveling with a paintball gun must disassemble it so that the propellant canister is separated from the gun and the gun does not contain any paintballs. As an alternative to disassembling the gun, owners may drive with a completely unloaded paintball gun whose canister is completely empty of any gas or air propellant.

The new law permits commercial paintball businesses to transport participants to and from designated player areas. Penalties for violating the law include up to 90 days in jail and fines up to $300.