UNDERSTANDING RIGHTS OF FIRST REFUSAL AND OPTIONS TO PURCHASE

 

A right of first refusal or option to purchase is a contractual provision that some tenants may choose to bargain for in a lease.  Both are legally enforceable agreements that generally allow the tenant to purchase the rental property at a later date. The distinction is the event that triggers that right to purchase.

As discussed more fully below, the courts look to the express language of the contract to effectuate the intent of the parties. So, it is important to understand and include key language.

A RIGHT OF FIRST REFUSAL arises when and only when the landlord conveys or sells the subject property.  The tenant can not force the landlord to sell.  The tenant's rights only kick-in when the landlord made the independent decision to sell.   Also, the landlord can never force the tenant to buy.

The landlord must first obtain an offer to purchase. The landlord can decline offers from third parties and in doing so is not obligated to make any offer to the lessee. However, the landlord cannot accept an offer from a third party without first giving an option to purchase to the lessee. The terms of a lease that provide for a first right of refusal may provide for a purchase price based on a fixed amount, the then fair market value, or on the same terms as an acceptable offer from some third party.

AN OPTION TO PURCHASE typically is more of an absolute right, in that it is not conditional on the landlord's willingness to sell.  While the event that triggers the option can be anything the parties wish to express, the terms and the price must be set forth with sufficient definiteness and certainty for the option to be valid and enforceable.

In either case, for this right to be legally enforceable it must be in writing and you must pay or give something in exchange. It is best to include a statement in the express terms of contract to memorialize the consideration given for this right.

Why would you want to include an option to purchase or right of first refusal in your lease?  As a tenant, you may want to purchase a property:

·         and at the same time you are just not able to afford the cost to purchase it outright;

·         or you may be hesitant to purchase because the property has several problems that you may have to fix and you are unsure of the costs;

·         or you may be uncertain if you will remain in the area for an extended period of time;

·         or the landlord may not be certain if she wants to sell the property.

So, a possible solution is that you offer to lease the property from the landlord, and include such a clause. 

 

What do I need to know if I do bargain for an option to purchase or a right of first refusal? 

An option to purchase is straightforward. To avoid confusion or loss of the benefit of your bargain, be sure to use straightforward language in the option clause.

Problems typically arise with rights of first refusal. Occasionally, the tenant will bargain for this right and then the landlord will transfer ownership of the property, and the tenant will not be able to use their right to purchase as they thought they could.

This is because there are several ways that you can 'convey' ownership of property by law.  Typically, the right of first refusal comes into play when there is a 'sale' by the landlord. But what if the landlord gives the property away as a gift, or puts it into a trust?

The fact is that an unscrupulous landlord can take advantage of the unassuming lessee.

In the case of Lehn's Court Mgmt. LLC v. My Mouna Inc., the Pennsylvania Superior Court summarized the law in this area. 2003 PA Super 439, 837 A.2d 504, 507-08 (Pa. Super. Ct. 2003). A property lease is treated like any other contract in many respects.  The courts will look to the language in your lease.  If the lease says that you have the right to purchase when the landlord "sells" the property, then you have no right to purchase the property if the landlord gives it away as a gift.  It does not matter that you paid for that right to purchase.  On the other hand, if the lease says that you have the right to purchase if the landlord "sells or conveys", the court is more likely to enforce your right to purchase in either case. This is because the word 'convey' is a broader concept than a 'sale'.

Remember, if you want to put a right of first refusal in your lease, be sure to include broad language: the tenant has the right to purchase in the event that landlord "conveys, gifts, or sells the property." If you choose an option to purchase, use specific language to establish 1) when the option arises, and 2) the purchase price.

SUING A GENERAL CONTRACTOR IN PENNSYLVANIA MAY BE EASIER THAN YOU THINK

Without question, Pennsylvania is one of the most debtor-friendly states.

The biggest challenge that creditors face when collecting a debt in a court of law is minimizing legal fees in order to maximize recovery.  Many times debts are forgiven because the creditors realize that they will spend more time and money trying collect than is actually owed.

However, a recent development in Pennsylvania law offers a large benefit construction contractors.  An experienced attorney can collect a bad debt without it costing your business a dime!

WHAT DO CONTRACTORS NEED TO KNOW ABOUT ATTORNEY FEES?

As a general rule the parties typically bear their own costs of litigation, including attorney's fees.  Pennsylvania is no different--a party cannot recover counsel fees from the defendant unless there is express statutory authorization, a clear agreement of the parties, or some other established exception.” Trizechahn Gateway LLC v. Titus, et al., 601 Pa. 637, 976 A.2d 474, 482 (Pa.2009).

For any business contractor, the first solution is obvious: put a provision in the contract that requires the breaching party to pay costs of collections and reasonable attorney fees. There are very few exceptions that allow a creditor to collect attorney fees from a debtor, so be sure to put it in the contract every time.

Even then a contractor is only partially protected, because the law only allows debtors to collect the legal fees they paid up and until they win the case and get a judgment.

In a perfect world, all debtors would immediately pay once there is a judgment against them.  In reality, the hard work has only just begun after you get a judgment.  A judgment creditor must engage in the "execution process", which is the use of legal process to seize and/or sell a judgment debtor's assets, in order to satisfy the judgment amount. 

This is usually costly, and in nearly every case the judgment creditor cannot recover post-judgment attorney fees. A judgment creditor can act out of spite by hiding assets and delay the execution process to drive down your bottom line.

But, there may be a silver lining for Pennsylvania construction contractors.

PENNSYLVANIA LAW HAS AN EXCEPTION THAT BENEFITS CONSTRUCTION CONTRACTORS

It is well known that lawsuits between general and subcontractors are often heated and bitter entanglements. Often, a general contractor will withhold or delay payment, and try to drive up the cost of a lawsuit out of spite for a subcontractor.  They do this before and after a lawsuit.

These types of problems became so prevalent that the Pennsylvania legislature took notice and enacted the Contractor and Subcontract Payment Act (hereinafter “CASPA”).  The purpose of the CASPA is “to encourage fair dealing among parties to a construction contract” and to protect the parties involved.  Ruthrauff, Inc. v. Ravin, Inc., 914 A.2d 880, 890 (Pa. Super. 2006).

The CASPA entitles a subcontractor to payment if the subcontractor has performed in accordance with the contract. 73 Pa.C.S.A. § 507(a). Payment to a subcontractor should be made fourteen days after receipt of the subcontractor's invoice. 73 Pa.C.S.A. § 507(c).

WHAT HAPPENS WHEN A GENERAL CONTRACTOR REFUSES TO PAY?

First, the subcontractor needs to sue for breach of contract and also raise the CASPA. It is essential that the subcontractor did substantially perform its contract in order to take advantage of the Act.

The Penalty Fee. If the court finds that the general contractor unreasonably or “wrongfully withheld” payment, the court will award all money that is due under the contract, consequential damages, and “a penalty equal to 1 % per month of the amount that was wrongfully withheld.” § 512(a).

Attorney Fees. Next, a subcontractor may recover its attorney fees if the court finds that it is the “substantially prevailing party.” § 512(b). To qualify as a substantially prevailing party, the subcontractor must win the case, and also prove that the contractor withheld payment without a good reason. Zimmerman v. Harrisburg Fudd I, L.P., 984 A.2d 497, 504-05 (Pa.Super.2009).  This decision is left to the trial court’s discretion.

Here is the best news yet, the Superior Court has held that under the CASPA a contractor can recover post-judgment interest and penalties, as well as attorney's fees and expenses incurred to collect the money owed. Zimmerman, 984 A.2d 497, 504-05 (Pa.Super.2009).   As discussed above, recovery of attorney fees and costs of collection after a judgment has been reached is all but unheard of.

So, unlike most judgment creditors, under the CASPA a contractor does not have to take a hit to their bottom line by paying thousands in attorneys fees when trying to collect a judgment from a slow moving or fraudulent judgment debtor.

This is among the most favorable laws to creditors in Pennsylvania. It gives subcontractors a large advantage. It is crucial to have an experienced attorney on your side who knows how to capitalize on the CASPA and other laws.

Understanding Loss of Consortium Claims in Pennsylvania

WHAT IS A LOSS OF CONSORTIUM CLAIM?

In Pennsylvania,  when one spouse is injured, the uninjured spouse may bring a claim for monetary compensation for the loss of all the services and companionship of the injured spouse. 

There are a few things that you should know about settling loss or consortium claims, and when to take them to trial.

SETTLING LOSS OF CONSORTIOM CLAIMS

Although a loss of consortium claim is a distinct cause of action, it is what is known as a "derivative" claim.  Darr Const. Co. v. W.C.A.B. (Walker), 552 Pa. 400, 408, 715 A.2d 1075, 1079-80 (1998). This is a common law concept that exists because the consortium claim "emerges from the impast of one spouse's physical injuries upon the other spouse's marital privileges and amenities." It is derivative because the consortium claim cannot exist without the original injury upon that spouse, and as a legal fiction the marital unit is recognized as one legal entity. Id.  Hence, the consortium claim is derived from the uninjured spouse's personal injury claim.

Because the claim is 'derivative', the law treats that claim differently for insurance and settlement purposes.

In the landmark case of Koenig v. Progressive Insurance Co., the Pennsylvania Supreme Court held that because the claim is derivative, the value of the uninjured spouse's claim is to be included under the injured spouse's policy limits.

Let me explain.  Most auto insurance policies are set up so that if the insured person is a fault and injures one or more people, the insurance company will have certain 'policy limits' that apply to the injured individuals, and the incident as a whole.  For instance, the at fault party might have policy limits of $300,000 per incident, and $150,000 per person.  The policy limit is the maximum amount of coverage that the insurance company has to pay. If a judgment exceeds the policy limits, the at fault party will be personally responsible for payment.

In cases where liability is clear, and the injuries have an estimated value at or around the policy limits, the plaintiff(s) will offer to settle the case if the insurance company pays the policy limits.

Now, if husband and wife are injured by an at fault driver, and only the wife is seriously injured, the wife has a personal injury claim, and the husband has a loss of consortium claim.  Assume that her injuries are estimated at $500,000.  She may want to offer settling the claim for the policy limits of $300,000 to avoid the risks, time and resources involved in taking the case to trial.

Then, the insurance company is required to protect the interests of the at fault driver, and it will try to settle the husband's loss of consortium claim along with the wife's claim.  Under the law, once the insurance company tenders the policy limits for the wife's claim, it has no obligation to cover the loss of consortium claim.  This is because of the Pennsylvania Supreme Court's decision in Koenig v. Progressive Insurance Co., based on the history of loss of consortium claims, and the interpretation of the 'per person' language in the insurance contract. 

If the injured spouse does settle, be sure that the settlement agreement reflects whether or not the uninjured spouse intends to settle the loss of consortium claim.

The husband can still bring his claim to trial if he is unwilling to settle. It does not matter that his wife previously settled her claim.


THIS ARTICLE IS FOR ENTERTAINMENT PURPOSES ONLY. IT WAS WRITTEN BY A NON-ATTORNEY. THIS CONTENT IS NOT LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.

How Long is a Money Judgment 'Good' For in Pennsylvania?

If you ask most any attorney in Pennsylvania, "How long does a judgment stay on the record?", or "How long is a judgment 'good' for?" you will probably get answers like "five years", or "twenty years", or "forever, as long as you continue to revive the judgment".

 Actually, none of these answers are entirely correct.  The confusion is largely due to the fact that the vast majority of attorneys do not engage in the collection or 'execution' process of judgments, and the fact that there are different time periods associated with the revival of judgments, the preservation of the lien on real property,  execution, and the duty to satisfy judgments.

To understand your rights as a judgment creditor, there are some basics that you should know.

First, a money judgment is what the average person thinks of as a judgment. It is simply a debt created by an award or order of court for a specific amount of money, and recorded in whatever county the judgment was entered. If the plaintiff wins, she becomes a 'judgment creditor' and the defendant becomes a 'judgment debtor.'

If the judgment debtor does not pay the judgment off willingly, the creditor will have to hire an attorney to engage in the 'execution process', which is how you enforce a money judgment.

Generally, there are two types of property that the judgment creditor can go after: real property, and personal property.

 In Pennsylvania the entry and docketing of a money judgment will automatically act as a lien upon all of the judgment debtor's real estate in the county. 42 Pa. Cons. Stat. Ann. § 4303. (Judgments can be transferred from county to county after they are entered).  A judgment creditor may force a sheriff sale on the judgment debtor's real property.

Also, the judgment creditor can direct the county sheriff to execute on and sell the personal assets or seize bank accounts.  

Once the judgment has been paid in full, the judgment creditor has a legal duty to mark the judgment as 'satisfied' by filing a document with the court.  42 Pa. Cons. Stat. Ann. § 8104.

So, how long does a money judgment last for?

There are three statutes of limitations associated with money judgments. The "five year period", "ten year period" and the "twenty year period".

The five year period is only applicable to the lien on the judgment debtor’s real estate in that county.   If the judgment creditor does not file a document with the court called a 'writ of revival'  every five years, the lien on the real estate lapses. A judgment may be revived every five years, indefinitely, and the lien will forever maintain its position ahead of other lienholders. However, if the judgment is revived more than five years after the docketing of the original judgment, or the judgement creditor forgets after one of the five-year periods runs, the judgment  will still act as a lien upon the real estate but it will lose its position in accordance with the requirements of 42 Pa. Cons. Stat. Ann. § 8141; See Home Consumer Discount Co. of Wilkes-Barre v. Hashagen, 35 D. & C. 3^rd 668 (1985; Cusano v. Rubolino, 351 Pa. 41, 39 A.2d 906 (1945). At that point, the lien has lost its priority against liens filed before the latest revival. Popatek v. Evans, 26 Pa. D. & C. 4^th 244 (1995). A late revival is not effective against a terre-tenant, or a person that subsequently bought the home. Ricci v. Cuisine Management Services, Inc., 621 A.2d 163 (Pa.Super.1993). If the judgment is not revived with in ten years of docketing, or the last writ of revival, the lien is lost forever. U.S. v. Shadle, 16 Pa. D. & C 4^th 297 (1992).

The twenty year period is applicable to money judgments for purposes of determining the statute of limitations for execution against personal property.  Under PA Statute, “[a]n execution against personal property must be issued within 20 years after the entry of the judgment upon which the execution is to be issued.” 42 Pa. Cons. Stat. Ann. § 5529.  In other words, the 20-year statutory period for execution against personal property prevents judgment creditor from executing against personal property of debtor more than 20 years after judgment was entered. Shearer v. Naftzinger, 747 A.2d 859, 560 Pa. 634, Sup.2000.  The 20 year period has no bearing on the judgment creditor’s lien on real property. Id. (“the twenty-year statute of limitations in § 5529 regarding execution against personal property does not constitute a defense to a writ of revival”).

In short, judgment creditors must file a writ of revival every five years to preserve their lien on real property. See, 42 Pa. Cons. Stat. Ann. § 4303, 8141. They may do that indefinitely. Shearer, 747 A.2d 859.  But they only have 20 years to execute on real property, until that right is lost forever. 42 Pa. Cons. Stat. Ann. § 5529.

After the twenty year period, there is a rebuttable presumption that a judgment has been paid. Rosenbaum v. Newhoff, 152 A.2d (Pa. 1959).   However, the presumption vanishes at the introduction of any evidence sufficient to support a finding to the contrary (including an acknowledgement of the debt).  

Under Pennsylvania law, a judgment may not be “collectible” via execution upon personal or real property by operation of the statute of limitations, but that does not mean that the judgment creditor has a duty to satisfy the judgment. The judgment creditor does not have a duty to satisfy the judgment until the judgment debtor has paid in full the appropriate amount of the judgment. 42 Pa. Cons. Stat. Ann. § 8104; see also, Hanover Plumbing Supply, Inc. v. Russell, 680 A.2d 1181, (Pa.Super.1996). 2  The result is that a judgment, although not collectible, may remain unsatisfied, and on the books; unless the judgment creditor volunteers to satisfy it.

 

THIS ARTICLE IS FOR ENTERTAINMENT PURPOSES ONLY. IT WAS WRITTEN BY A NON-ATTORNEY. THIS CONTENT IS NOT LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.

Understanding Full Tort vs. Limited Tort Options

As a law clerk for a personal injury attorney, http://pghfirm.com/pittsburgh-personal-injury-lawyers/ , I tell all of my friends, family, and clients, with absolute confidence that one of the best investments that you can make is as simple as electing full tort coverage on your auto-insurance policy. Unfortunately, many Pennsylvanians choose the limited tort coverage option because they are trying to save a buck on insurance premiums, and they think they can beat the odds by avoiding a motor vehicle accident.  Do not want gamble with your family's welfare. Know the facts before you sign away your family's rights.  

What is a tort? Tort is another word for a 'civil wrong'. In the insurance context, "tort" means a lawsuit for personal injuries caused by the negligence of others, where the plaintiff seeks monetary compensation.

What is the difference between Full Tort and Limited Tort?  The Commonwealth of Pennsylvania has passed laws designed to reduce claims for pain and suffering, and reduce insurance policy premiums. One of those laws requires all drivers to carry auto insurance and choose between full and limited tort on their policy. Those who select limited tort will necessarily pay about fifteen-percent less in premiums (which generally amounts to less than a dollar, or even fifty cents a day). However, a person who elects limited tort gives up important rights that they and their family would otherwise have if they had elected the full tort option. 

Under full tort, a person may recover all damages that can be proven in court.

Under limited tort, parties cannot sue for "non-economic loss" unless they suffer a "serious injury" or fit within one or more narrow legal exceptions. To help explain this concept I will define the legal terms and provide a factual example of how limited tort coverage might affect you.

What is non-economic loss? Basically, there are two categories of harm for which you can seek monetary compensation in a court of law. Economic loss refers too those actual out of pocket losses: lost wages, medical bills, and property damage. Non-economic loss refers to physical injuries and even mental and physical discomfort, pain, and suffering. 

What is a serious injury? Serious injury is defined as a personal injury resulting in death, serious impairment of body function or permanent serious disfigurement. This includes broken bones, severe scarring, etc.  The question in any legal proceeding is whether the injury is a serious one.

Let's put it all together. Suppose John chose limited tort coverage.  John is driving his SUV along with his wife and two children. Their car was rear-ended by a careless driver of another family vehicle. The other driver admits fault under the laws of Pennsylvania.  

John's injuries include a bruised chest-wall and whip-lash to the neck and back.  All of his injuries are to the soft-tissues of the body.  As a result John missed 3 weeks of work, and has $1,000 in medical bills.  Before the accident John had an extremely active life, which included sports, playing with his children, and physical labor. He now suffers stiffness, aches and pains when engaging in life's activities. Doctors tell him that he will likely develop severe aurthritis in his neck and back as he ages.

John sues the at-fault driver. He can only ask the courts to award compensation for his medical bills and lost wages, because the courts will not consider his injuries to be 'serious'. Had John chose the full tort option, he could have potentially received upwards of $100,000 for his claim alone.  Unfortunatly, the same rules also apply to any potential claims that his family members may have.

For most personal injury victims the most significant source of recovery is the money received as compensation for physical injuries and the pain and suffering associated with those injuries. Now that you know the facts, make the right choice for your family and elect the full tort option on your next renewal of your auto-insurance policy.

THIS ARTICLE IS PROVIDED FOR ENTERTAINMENT PURPOSES ONLY. THE CONTENT IS NOT LEGAL ADVICE AND SHOULD NOT BE RELIED UPON.