The ordinance adds Chapter 9-5700, entitled “Leasing of Commercial Property,” to Title 9 of The Philadelphia Code, concerning the “Regulation of Businesses, Trades and Professions.” It becomes effective on March 26, 2022.
Bear in mind that commercial leasing disclosures are not required for every transaction. Landlords must provide the disclosures in commercial leases whenever a new tenant is not represented by an attorney or a licensed Pennsylvania real estate agent. However, the disclosure is still required if the attorney or real estate agent is also representing the landlord, or subject to the control or influence of the landlord. For example, “control or influence” could mean a pre-existing business relationship between the landlord and the tenant’s attorney or real estate agent.
To comply with this new ordinance, landlords have two obligations. First, they must provide tenants with a Commercial Leasing Notice that explains how to determine the zoning and approved uses of the commercial property that is available for lease. The Philadelphia Office of the Managing Director has made the Commercial Leasing Notice available online. Second, landlords must provide an acknowledgment form signed by the parties indicating that the tenant was provided the notice and informed of their right to perform due diligence on the zoning and approved uses for no less than seven days prior to becoming obligated under the contract to lease. Both landlord and tenant must be provided signed copies of the acknowledgment form. Landlords should retain a copy of the commercial leasing disclosures with their lease agreement documents for each new tenant going forward.
Landlords working with attorneys and, especially, landlords that perform leasing in-house should be cognizant of these disclosure requirements as oversight will leave them liable to penalties. The ordinance gives tenants a private right of action against any landlord who fails to comply with these new requirements. Tenants may recover actual damages and punitive damages not to exceed $2,000 per violation, reasonable attorneys’ fees and court costs to the extent allowed by law and other relief, including injunctive relief, as the court may deem appropriate. Furthermore, the private right of action permitted by subsection 9-5702(3) does not limit the rights of tenants to pursue any legal rights and claims that they may possess under a written agreement or any other applicable law.
Please do not hesitate to contact our real estate attorneys for advice on how to modify lease forms to satisfy the new commercial leasing disclosure requirements and keep record of compliance.
Author Melanie Lacey is an associate in the Real Estate and Finance Department at Klehr Harrison.