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The Pennsylvania Commonwealth Court recently issued a ruling in Landlord Service Bureau v. City of Pittsburgh, 2023 Pa. Commw. LEXIS 24 (March 17, 2023), striking the city of Pittsburgh’s residential housing rental permit program (the program) under the “business exclusion” of Pennsylvania’s Home Rule Law.

In 2015, Pittsburgh enacted the program through an ordinance with the purpose of ensuring rental units meet “all applicable building, existing structures, fire, health, safety, and zoning codes, and to provide an efficient system for compelling both absentee and local landlords to correct violations and maintain, in proper condition, rental property within the city of Pittsburgh,” the opinion said.

The ordinance required rental units to be registered within the city of Pittsburgh “so that an inventory of rental properties and a verification of compliance can be made by city officials.”

Furthermore, the ordinance required rental property owners in Pittsburgh to obtain a permit designating them a “responsible local agent,” and to submit personal identifying information for themselves and any agent responsible for the property or authorized to collect rent, the opinion said.

Under the ordinance, rental property owners in the city of Pittsburgh are charged an annual permit fee, and all identifying information is entered into a publicly available database.

The ordinance authorizes the city of Pittsburgh’s Department of Permits, Licenses, and Inspections (the department) to inspect each registered rental unit at least once every three years, requires the department to issue regulations and issue a “manual of good landlord practice,” and allows the department to levy fines for violations of the ordinance, the opinion said.

After the ordinance was enacted, the Landlord Service Bureau (the bureau), a membership organization for landlords doing business in the city of Pittsburgh, initiated a lawsuit in the Allegheny County Common Pleas Court against the city of Pittsburgh and others, arguing that the ordinance was unconstitutional and seeking a permanent injunction to end the program’s enforcement.

In the lawsuit, the bureau, among other things, argued that the requirements set forth in the ordinance “constitute a regulation of its business, which a home rule municipality lacks power to do under the Home Rule Law.”

The trial court in Landlord Service Bureau held that the ordinance was a valid exercise of police powers, enacted to protect the health and safety of rental housing residents.

The bureau thereafter appealed the trial court’s ruling to the Commonwealth Court.

From the outset, the Commonwealth Court in Landlord Service Bureau reiterated that the right of home rule is constitutionally protected.

Citing to City of Pittsburgh v. Fraternal Order of Police, Fort Pitt Lodge No. 1, 161 A.3d 160 (Pa. 2017), the Commonwealth Court in Landlord Service Bureau noted that home rule allows municipalities broad authority with respect to how their government functions, so long as the locally enacted law falls within the confines of the United States and Pennsylvania Constitutions, the home rule charter, and an act of the General Assembly.

Relying upon Adams v. City of New Kensington, 55 A.2d 392 (Pa. 1947), the Commonwealth Court in Landlord Service Bureau stated that the police power authorizes “broad and varied municipal activity to protect the health, morals, peace and good order of the community.”

However, according to the Commonwealth Court in Landlord Service Bureau, Section 2962(f) of the Home Rule Law prohibits a home rule municipality from regulating the conduct of a business enterprise unless expressly authorized by a state statute.

In Landlord Service Bureau, the Commonwealth Court then discussed several rulings handed down by appellate courts in Pennsylvania which have addressed the application of the Home Rule Law to municipal ordinances.

In Smaller Manufacturers Council v. Council of City of Pittsburgh, 485 A.2d 73 (Pa. Cmwlth. 1984), the Commonwealth Court analyzed an ordinance that addressed the economic disruption caused by plant closings. In Smaller Manufacturers Council, the ordinance required the employer to notify the city of Pittsburgh when a plant closed, relocated, or reduced operations. The Commonwealth Court in Smaller Manufacturers Council ultimately found that this ordinance was in violation of the Home Rule Law because it regulated the duties, responsibilities, or requirements of businesses without being empowered by the state government to do so.

In Building Owners and Managers Association of Pittsburgh v. City of Pittsburgh, 985 A.2d 711 (Pa. 2009), the Pennsylvania Supreme Court considered an ordinance that imposed requirements upon city contractors providing janitorial and security services to commercial buildings. Under the ordinance in Building Owners and Managers Association of Pittsburgh, city contractors awarded a new contract were required under that ordinance to retain the employees of the prior city contractor for 180 days after commencement of the new contract. The Supreme Court in Building Owners and Managers Association of Pittsburgh struck down the ordinance because it placed affirmative duties upon city contractors similarly in violation of the Home Rule Law.

In Apartment Association of Metropolitan Pittsburgh v. City of Pittsburgh, 61. A.3d 1036 (Pa. 2021), the Supreme Court of Pennsylvania reviewed an ordinance that prohibited property owners from refusing to rent to person receiving housing assistance. In Apartment Association of Metropolitan Pittsburgh, the apartment association argued, and the Supreme Court agreed, that the ordinance placed an affirmative duty on property owners by making them participate in an otherwise voluntary federal housing subsidy program, which involved numerous and burdensome governmental requirements, which were not authorized by the city of Pittsburgh’s general police powers or a state statute.

Here, in Landlord Service Bureau, the city of Pittsburgh argued that the ordinance is authorized by its police power to protect the health and safety of rental housing residents.

The city of Pittsburgh pointed to Berwick Area Landlord Association v. Borough of Berwick, 48 A.3d 524 (Pa. Cmwlth. 2011), which held that rental registration and inspection ordinances are a valid exercise of the police power.

The Commonwealth Court in Landlord Service Bureau countered that the registration and inspection ordinances in Berwick and other similar cases were not as extensive in scope as compared to the one at issue in Landlord Service Bureau, in that those ordinances required a permit but limited the inspections to periods of vacancies or required a warrant.

In comparison, the Commonwealth Court in Landlord Service Bureau pointed out that the burdens outlined in the ordinance include inspections of rentals units, the employment of a licensed real estate management firm, and participation in a newly created “landlord academy” and directs the city of Pittsburgh to create a database on rental units, their inspections, and landlords, including their personal identifying information, and make this information available to the public.

The Commonwealth Court in Landlord Service Bureau concluded that, in light of express limitation of the Home Rule Law, the city of Pittsburgh was without the authority to enact the ordinance.

The ruling in Landlord Service Bureau may have an affect on other municipalities whose authority derives from the Home Rule Law, including the city of Philadelphia. It will be interesting to see if Philadelphia’s rental inspection and licensing ordinances may now be challenged as a result.

Alan Nochumson is the sole shareholder of Nochumson P.C., a legal services firm with a focus on real estate, land use & zoning, litigation, and business counseling for the people of Pennsylvania and New Jersey. Nochumson is a frequent author and lecturer on issues commonly confronting businesses, individuals and professionals. You can reach him at 215-399-1346 or alan.nochumson@nochumson.com.

Alex Goldberg is an associate attorney at the firm. You can reach him at 215-399-1346 or alex.goldberg@nochumson.com.

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