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Pennsylvania using land banks to improve towns

| Sep 27, 2013 | Commercial Real Estate |

A new state law in Pennsylvania, the Land Bank Act, is empowering municipalities to purchase real estate, including abandoned buildings and turn them around for development use. The law went into effect last year in October, and municipalities can use it to purchase abandoned eyesores that are a blight on their communities. The cities can work with developers to turn them around and use them for productive purposes.

The troubled economy and real estate market in recent years has resulted in commercial buildings being abandoned as small and even medium- sized businesses shut down. Many residential units are going into a state of disrepair, as well. The land bank law does not use the traditional municipal power of eminent domain to gain control over properties for municipalities, but rather acquires them through foreclosures, transfers, gifts and outright purchases.

In many instances, the properties being acquired may owe bank taxes to municipalities and other local taxing units, and foreclosing on those taxes is one way some of those properties are being acquired. Placing them in the land bank and planning to return them to productive use can serve twin purposes: Putting them back on the taxpaying rolls and revitalizing a neighborhood with a renovated commercial building or mixed commercial and residential project.

Funding for the land banks is a major concern, as the law, while providing a mechanism intended to revitalize communities, does not have its own funding mechanism. This means that a city, town or county must think through how to do it. Some have suggested seeking startup funding from private foundations. Once such projects start rolling out, however, it is hoped that they would soon be self-generating. This is based on how much the sales of properties to developers and the new and increased taxes that such redeveloped properties would bring in to municipalities.

Developers and other private entities interested in exploring such plans would find it helpful to seek guidance from real estate attorneys knowledgeable about the ins and outs of the new law. There are also various regulatory hurdles that may arise in the course of trying to take abandoned properties and turn them around for productive use.

Source: 
TribLive, “Municipalities slowly move toward using land banks to eliminate blight” Sam Spatter, Sep. 14, 2013

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