PAR is strongly advocating for the passage of House Bill 1567 (Malagari, D-Montgomery), legislation that clarifies the Municipal Code and Ordinance Compliance Act to ensure property transfers are not arbitrarily stopped by municipalities or their components or result in the displacement of renters from properties that are changing ownership. It further clarifies that temporary use permits can still be issued for renter-occupied property transfers, ensuring existing renters are not displaced due to minor code violations. HB1567 is sponsored by Realtor® champion Steve Malagari from Montgomery County.
Currently, some interpretations of MCOCA are unclear, which may place an undue burden on sellers and prospective buyers and threaten displacement of long-term renters. The bill amends the definition of “temporary access certificate” to specify when a tenant-occupied property is subject to a point-of-sale inspection and a substantial violation has been found, the act does not necessarily require the tenant to be removed from the property. Code enforcement is given the discretion to determine whether the conditions are such that the tenants may remain in the property while the violation is addressed. If the tenants do remain, they may place rent payments in escrow until the violation has been corrected.
HB1567 is a commonsense approach to ensure that property transfers are not arbitrarily stopped by municipalities or result in the displacement of renters from properties that are changing ownership.
The Pennsylvania House of Representatives unanimously approved HB1567 on Nov. 14, 2023. The bill now heads to the Senate for consideration.
About the Municipal Code and Ordinance Compliance Act
The Municipal Code and Ordinance Compliance Act was first enacted as Act 99 of 2000 to establish rules for correcting violations discovered during local use and occupancy inspections. One provision of the original Act stated that a violation could not be used to deny a U&O certificate or to require presettlement repairs unless the violation made a property unfit for habitation, but that provision was often overlooked or misused.
MCOCA has been amended by Act 133 of 2016, effective Jan. 2, 2017, to address situations in which municipalities were inappropriately withholding or impeding certificates, leading to some real estate transactions being postponed or canceled due to minor property maintenance violations. These amendments clarify the rights and responsibilities of both municipalities and property owners so these issues don’t occur in the future.
Municipalities are not required by the act to inspect existing homes that are being sold. However, municipalities that do require such inspections must issue a certificate prior to the date of purchase, in the following manner:
USE AND OCCUPANCY PERMIT: If no property maintenance or other code violations are found, a Use and Occupancy Certificate must be issued allowing the property to be used or occupied as intended.
TEMPORARY USE AND OCCUPANCY PERMIT: If the municipal inspection reveals at least one violation, but no substantial violations (see definition below), the municipality shall issue a Temporary Use and Occupancy Certificate. The purpose of a temporary use and occupancy permit is to authorize the purchaser to fully utilize or reside in the property while correcting code violations.
TEMPORARY ACCESS CERTIFICATE: If the municipal inspection reveals a substantial code violation that renders a building “unfit for habitation,” a Temporary Access Certificate must be issued. The purpose of the certificate is to authorize the purchaser to access the property for the purpose of correcting substantial violations. No person may occupy a property during the term of a Temporary Access Certificate, but the owner shall be permitted to store equipment that is related to the proposed use or occupancy of the property or is needed to repair the substantial violations during the time of the temporary access certificate.
SUBSTANTIAL VIOLATION: A Substantial Violation is a condition that makes a building “unfit for habitation.” Unfit for habitation is defined as: “A condition which renders a building, structure, or any part thereof, dangerous or injurious to the health, safety or physical welfare of an occupant or the occupants of neighboring dwellings. The condition may include substantial violations of a property that show evidence of: a significant increase in the hazards of fire or accident; inadequate sanitary facilities; vermin infestation; or a condition of disrepair, dilapidation or structural defects such that the cost of rehabilitation and repair would exceed one-half of the agreed-upon purchase price of the property.”
ESCROWS AND BONDS PROHIBITED: A municipality may not require the escrowing of funds or posting of a bond, or impose any similar financial security as a condition of issuing a certificate. But before accessing the property, a property owner is still generally required to follow all the applicable rules for permits, fees, escrows, etc., under an existing building, property maintenance and fire codes or other health or safety codes.
COMPLIANCE PERIOD: A new owner will have 12 months from the date of purchase to either bring the property into code compliance or demolish the building. At the request of the property owner the municipality may negotiate a longer time period, but may not shorten it.
REINSPECTION OF PROPERTY: 1) At the expiration of the 12-month time period or before that time, if requested by the property owner, the municipality shall re-inspect the property to determine compliance with the cited violations. 2) If a temporary access permit has been issued and re-inspection indicates that the noted substantial violations have been corrected but other cited violations have not yet been corrected, the municipality shall issue a temporary use and occupancy permit to be valid for the time remaining on the original temporary access permit. 3) If the re-inspection indicates that all noted violations have been corrected, the municipality shall issue a use and occupancy certificate for the property.
FAILURE TO COMPLY BY OWNER: If the property owner fails to correct the code violations cited by the municipality, the following actions may occur: 1) Revocation of the temporary certificate; 2) The purchaser will be subject to any existing municipal ordinances or codes relating to the occupation of a property without a use and occupancy certificate; 3) The purchaser will be personally liable for the costs of maintenance, repairs or demolition sufficient to correct the cited violations, and a fine of not less than $1,000 and not more than $10,000.
PRE-EXISTING VIOLATIONS: This act generally applies to violations that are found as a part of the municipal inspections done for property resale. But these rules do not apply to violations of a local code or ordinance that are already the subject of a fine or some other judicial action against the current owner, or to properties that are subject to certain other statutory provisions. In those instances, the violations must be addressed under the other applicable rules, whatever they may be.
State Law Amends Municipal Code
Act 133 of 2016, which took effect January 2, 2017, amended the Municipal Code and Ordinance Compliance Act (MCOCA), originally enacted as Act 99 of 2000. This act prohibits municipalities from denying use and occupancy certificates based on the results of a point-of-sale inspection.
Some municipalities were inappropriately withholding or impeding U&O certificates, leading to some real estate transactions being postponed or canceled due to minor property maintenance violations. Act 133 is a tremendous legislative victory for PAR. Members sent more than 13,000 emails to state legislators, urging them to vote to amend the Municipal Code and Ordinance Compliance Act.
More detailed information is available below. If you experience what you believe is a violation of Act 133, please contact your local government affairs director or field representative.
Frequently Asked Questions
Are municipalities required to perform U&O inspections?
No. Nothing in MCOCA or anywhere else in state law/regulation requires a municipality to inspect a property and issue a certificate prior to resale, and many choose not to. MCOCA is simply designed to establish some rules for when a municipality does choose to do those inspections as part of the process of a property resale.
Does this process affect inspections for new construction or renovations?
No. The inspection process for new construction and renovations is covered by the PA Uniform Construction Code (and related codes as adopted by the municipality), which is different. MCOCA applies only to inspections and certificates in the context of a property resale.
Does MCOCA establish rules for how municipalities must perform inspections?
No. The inspection process is up to the individual municipality, based on their local ordinances. For example, some might require the inspection to be ordered by the seller and others by the buyer, or there may be differing timelines for ordering the inspections. Since municipalities are all different, Realtors® should fully familiarize themselves with the processes in their geographic areas of practice to ensure they are properly advising clients on how to proceed.
What sorts of things is the municipality looking for in this inspection?
Inspections are based on the locally-adopted combination of building, housing, property maintenance and fire codes, as well as any maintenance, health or safety nuisance ordinances that are in place. The codes/ordinances and related rules will vary greatly, so it is important to understand just what’s being looked at in each jurisdiction. Municipalities generally use some sort of checklist. It can be helpful to obtain a copy to share with both the seller and buyer so they understand what will be looked at.
What happens if there are problems discovered during the inspection?
A “municipal report” will be issued after the inspection. If the inspector finds conditions that don’t comply with the relevant codes/ordinances, each of the conditions will be noted as either a “violation” or a “substantial violation” in the municipal report.
What are the different kinds of violations, and what do they mean?
A municipal report can show either a “violation” or a “substantial violation,” or some combination thereof. A “violation” is any basic violation of a local code or ordinance related to the property. A “substantial violation” is any violation that is so significant it makes the property “unfit for human habitation.” The type(s) of violation(s) will determine the type of certificate to be issued (see below).
What does it mean to be “unfit for human habitation”?
The definition includes conditions that make a property likely to be dangerous to the health and safety of occupants or neighbors, including things like fire risks, lack of sanitary facilities, vermin, or overall disrepair that would cost half or more of the sales price of the property to fix. This will always be somewhat subjective, but is generally limited to the worst types of violations.
What are the different certificates and how are they issued?
If the municipal report shows no violations at all, the municipality must issue a full U&O certificate for the property. But if there are any violations, one of two possible temporary certificates would be issued: If the report shows one or more basic violations (and no substantial violations), then the municipality must issue a temporary U&O certificate. This certificate allows the buyer to fully use and live in the property during the time they are making any necessary repairs. If the report shows one or more substantial violations, then the municipality must issue a temporary access certificate for the property. This allows the buyer to use the property only for the purpose of making repairs. For example, a buyer can access the property to do the work, can store tools and materials on-site, and can even store personal belongings there in preparation of moving in – but can’t sleep there or use it to store items for some other purpose.
Can a municipality require that any of these violations be repaired before issuing a permit?
No. The buyer and seller can certainly negotiate pre-settlement repairs if they choose, but they cannot be required by the municipality. Regardless of the number or type of violations found in a municipal report, the municipality must issue one of three kinds of certificates whether or not any of the violations are fixed prior to closing.
Can a municipality require that estimated repair funds be escrowed before issuing a certificate?
No. The law forbids a municipality from requiring escrowed funds, bonds, or other sorts of financial arrangements as a condition of issuing the certificate.
How long does a buyer have to do repairs?
All repairs must be completed within 12 months from the day of purchase. The municipality and owner can negotiate a longer time period if they desire, but the time frame cannot be shortened.
How does a temporary certificate get converted to a full U&O certificate?
At the end of the 12-month period – or before if the owner requests – the municipality will reinspect the property. If there were both violations and substantial violations, once the substantial violations have been corrected (and verified through re-inspection), even if there are outstanding basic violations the municipality should upgrade from a temporary access certificate to a temporary U&O certificate. This would then allow the owner to move into the property and continue the work. Once a re-inspection shows that all violations have been fixed, the temporary certificate will be replaced with a permanent one.
What if the repairs aren’t completed in time, or the re-inspection shows repairs weren’t up to code?
If repairs have not been completed and verified through re-inspection at the end of 12 months, the temporary certificate can be withdrawn. If that happens, the owner will not have a valid certificate to use or occupy the property. This will make the owner subject to any existing codes/ordinances/etc. that apply to someone who uses a property without proper certificates. Penalties might include an order to move out, and/or various citations and fines. The owner can also be forced to pay the relevant maintenance and/or repair costs to fix the violations – or the costs to demolish the property – and be subject to an additional fine of $1,000 – $5,000.
Can the buyer and seller negotiate over repairs even though the municipality can’t require them?
Generally, yes. Unless there’s something in the purchase agreement between the parties that says this is not a negotiable issue, the parties are free to negotiate any combination of pre-settlement repairs, post-settlement repairs, escrowed funds, price reductions, seller assists or any other accommodations. Remember that these negotiations are subject to the same criteria as any other repair negotiations; however, parties and their brokers should be extremely careful to understand how any of these negotiations might affect the overall transaction. Specifically, be sure that you understand how any negotiated resolution might affect mortgage financing. The PAR Agreement of Sale (Form ASR) contains a provision about U&O repairs that will be reviewed for possible amendments in light of these statutory changes.
Are there municipal fees or costs that apply to this process?
Probably. Most – probably all – municipalities charge some sort of fee for the initial inspection. If violations are found and a re-inspection is necessary, most will charge a re-inspection fee as well – and that might be paid multiple times if you require multiple re-inspections. In addition, while municipalities shouldn’t impose any special repair-related fees just for this type of inspection, any generally applicable fees or costs would still apply. For example, if a building permit (with a fee) is always required to install sidewalks, then that same permit must be obtained at that same cost whether the homeowner is doing the repair for U&O purposes or for some other reason. On the other hand, if no permit is required for that work in other circumstances, it would not be appropriate to require a permit (and fee) only for sidewalks replaced after this sort of inspection.
How do these rules apply to code/ordinance violations that were cited through some other process?
This law is directed only at violations that are only found when a municipality decides to inspect a property at resale; it does not apply to violations discovered through other regular inspections. For violations already on the books that have advanced to some sort of judicial enforcement, the generally applicable municipal rules would still apply and a new owner wouldn’t be guaranteed a certificate. In addition, if the property has previously been cited under the Neighborhood Blight Reclamation and Revitalization Act, those rules would apply instead.
My municipality issues a “move-in permit” instead of a “use and occupancy certificate.” Is this covered by the law?
A “use and occupancy certificate” is defined as “a certificate issued by a municipality stipulating that the property meets all ordinances and codes and may be used or occupied as intended.” Regardless of the actual name used by a municipality, if the piece of paper is used for this purpose, it should be covered by the statute.
My municipality has point-of-sale requirements that aren’t tied to a comprehensive inspection, but that can still hold up issuance of a certificate. Is this process covered by the law?
It’s tough to say without looking at the specific ordinance. Please contact your local association’s government affairs director or field staff representative for more clarification.
What do I do if a client is denied a certificate, or I think a municipality is violating the statute some other way?
If a Realtor® believes a municipality may be violating these provisions, please contact your local association’s government affairs director or field staff representative. Staff will have resources to discuss this topic with the local municipality, and can access additional help through PAR if necessary. Even if you are able to handle issues in a specific transaction yourself, please contact local staff, so PAR can better monitor compliance across the state and not rely on transaction-by-transaction negotiations at the local level