Last month, in Liberties Lofts v. Zoning Board of Adjustment, 2018 Pa. Commw. LEXIS 106 (April 2), the Commonwealth Court addressed whether a variance granted by the city of Philadelphia's Zoning Board of Adjustment (ZBA) should be extinguished due to the alleged lack of standing of the corporate entity which sought the proposed property development.

In Liberties Lofts, RLDL Spruce LLC, a corporate entity owned and managed by a sole member, entered into a written agreement of sale with the property owners to purchase a one-story building situated at the neighborhood known as Northern Liberties in Philadelphia, the opinion said.

The agreement of sale allowed for an assignment of RLDL's rights and obligations under the terms and conditions of the agreement of sale, the opinion said.

Over the years, a number of single-family and multi-family uses had been built within the vicinity of the property, the opinion said.

In fact, the property immediately adjacent to the one in Liberties Lofts was developed into a 61-unit multi-family building that a residential apartment building based upon variances received, the opinion said.

That property was owned by Liberties Lofts.

In April 2016, Hightop Brown, a corporate entity owned and managed by the same individual who owned RLDL, applied for a zoning permit with the city of Philadelphia's Department of Licenses and Inspections (L&I) for the demolition of the pre-existing building structure situated on the property and for the construction of a five-story, 26-unit, multi-family residence with one commercial space, garage parking for 14 cars, and a roof deck and pilot house, the opinion said.

Because the proposed use of the property was prohibited in the ICMX zoning district in which the property lied pursuant to the Philadelphia Zoning Code, L&I issued a notice of refusal and Hightop appealed it to the ZBA, the opinion said.

At hearing before the ZBA, Hightop presented the current deed to the property as well as agreement of sale between the property owners and RLDL, the opinion said.

In addition, during the hearing, Hightop's corporative representative testified that Hightop was the equitable owner of the property by way of the agreement of sale. However, the corporate representative when testifying did not make any reference or offer any physical evidence at the hearing if and when RLDL's rights and obligations as prospective purchaser under the agreement of sale were assigned to Hightop, the opinion said.

The managing member of Liberties Lofts, also a practicing attorney, testified in opposition to the proposed property development, the opinion said.

At no time during the hearing did Liberties Lofts challenge the standing of Hightop to file the zoning permit application with L&I or initiate the appeal with the ZBA, the opinion said.

At the conclusion of the hearing, the ZBA voted to grant the requested zoning variance, the opinion said.

Liberties Lofts then filed an appeal of the ZBA's ruling to the Philadelphia County Court of Common Pleas.

Judge Daniel J. Anders presided over the appeal of the ZBA's ruling.

At oral argument before Anders, Liberties Lofts asserted that the zoning variance should be denied simply because Hightop lacked standing to obtain the requested administrative relief, since RLDL, not Hightop, had equitable title to the property by way of the agreement of sale entered into with the property owners.

According to the opinion, when the parties appeared at oral argument, and the issue of jurisdiction arose, Anders expressly asked Hightop's attorney: “is there any evidence in the record that would indicate that your client had the authority or had the assignment of the property?” and, in response thereto, Hightop's attorney stated that “my client is a member of both entities, RLDL and Hightop.”

During oral argument, a purported assignment was presented (not as part of the record) by Hightop to Anders, the opinion said.

Anders ultimately held that the issue of standing was waived because it was not raised at the hearing before the ZBA by Liberties Lofts.

Liberties Lofts then appealed Anders' ruling to the Commonwealth Court.

In a written opinion issued by Judge Robert Simpson, the Commonwealth Court, among other things, addressed Liberties Lofts' argument as to whether the ZBA lacked subject matter jurisdiction over Hightop's zoning variance request where Hightop lacked standing to file the zoning permit application with L&I.

In making this argument, Liberties Loft pointed out that “the ZBA had no jurisdiction to grant the variance here because Hightop had no authority to file the underlying zoning application, and the record lacks any evidence to the contrary.”

Liberties Lofts maintained that a variance under the Philadelphia Zoning Code may only be granted on a duly authorized zoning permit application and that Hightop had no authority to the file such a zoning permit application under Section 14-303(1) of the Philadelphia Zoning Code.

Under Section 14-303(1)(c), a zoning permit application “may only be filed by a department or agency of the city or the property owner, except as provided in Section 14-303(1)(c) (equitable owners, authorized agents and conservators)” and, “in turn, Section 14-303(1)(c)(1) states: 'Any person or entity with written documentation of equitable ownership of that real property' may file a zoning permit application.”

Furthermore, according to Liberties Lofts, under Section 5.2.3.1 of the ZBA's rules and regulations, “an applicant seeking zoning relief from the ZBA must submit: 'Proof of legal or equitable interest in the property in question, such as a fully signed deed, agreement of sale, lease or similar instrument.'”

Since Hightop did not provide written proof that it maintained a legal or equitable ownership interest in the property, Liberties Lofts contended that Hightop lacked the authority under the Philadelphia Zoning Code and the ZBA's rules and regulations to file the zoning permit application and the subsequent appeal to the ZBA and, thus, the zoning variance so granted was void ab initio.

Citing to an unreported decision previously handed down by the Commonwealth Court in Fircak v. North Strabane Township, 59 A.3d 691 (Pa. Commw. Ct. 2012), Liberties Lofts argued that, because the ZBA had no subject matter jurisdiction, the trial court and the Commonwealth Court had no such jurisdiction as well.

Moreover, Liberties Lofts argued that, even if the Commonwealth Court determined that the ZBA as well as the trial court and the Commonwealth Court possessed the subject matter jurisdiction to adjudicate this zoning variance request, Hilltop still lacked standing because it is not an aggrieved party under Pennsylvania law and because it has no ownership interest in the property.

Agreeing with Anders, the Commonwealth Court concluded that Liberties Lofts waived the issue of standing by not raising the issue before the ZBA.

Rejecting Liberties Lofts' attempt to recast its standing argument as implicating subject matter jurisdiction, the Commonwealth Court emphasized that “the law is well-established that 'the question of standing is not an issue of subject matter jurisdiction and, therefore, may not be raised sua sponte.'”

Relying upon a multitude of published decision issued by the Supreme Court of Pennsylvania in In re Condemnation by Urban Redevelopment Authority of Pittsburgh, 913 A.2d 178 (Pa. 2006), and its progeny, the Commonwealth Court noted that “the courts of this commonwealth view the issue of standing as nonjurisdictional and waivable.”

By failing to raise the issue of Hilltop's standing to file the zoning permit application or seek the request variance before the ZBA, the Commonwealth Court bluntly stated that this issue was waived by Liberties Lofts.

The Commonwealth Court was also not persuaded upon by Liberties Lofts' reliance upon the decision rendered by the Supreme Court of Pennsylvania in Scott v. Zoning Board of Adjustment, 126 A.3d 938 (Pa. 2015).

In Scott, the applicant sought and obtained variances before the ZBA. On appeal, an objector appealed the grant of the variances and the applicant challenged the objector's standing to appeal the ZBA's ruling to the trial court. The trial court agreed with the applicant that the objector lacked standing to appeal and, in doing so, it quashed the objector's appeal.

On further appeal, in Scott, the Commonwealth Court held the applicant waived its challenge to the objector's standing by failing to raise it before the ZBA.

Ultimately, the Supreme Court in Scott disagreed with the Commonwealth Court's ruling by differentiating between the standing requirements, or lack thereof, of an objector before the ZBA and to appeal the ZBA's ruling to the trial court.

As explained by the Supreme Court in Scott, the Philadelphia Zoning Code does not provide any definition of who is a party before the ZBA and does not limit who may appear and participate in a zoning hearing. In other words, the Supreme Court in Scott “emphasized that anyone is free to attend and address the ZBA at its hearings.”

However, the Supreme Court in Scott cautioned that Section 17.1 of the Home Rule Act provides standing in appeals from zoning matters in the city of Philadelphia to the Philadelphia County Court of Common Pleas only to an 'aggrieved person' and, accordingly, an objector must establish “an interest that is substantial, direct, and immediate,” citing to Spahn v. Zoning Board of Adjustment, 977 A.2d 1132 (Pa. 2009).

The Supreme Court in Scott concluded “it would be futile, and contrary to the law, to require a landowner to challenge the standing of everyone who participates before the ZBA, when there is no requirement that participation before the ZBA requires standing at that stage” especially “because the ability to appear and participate before the ZBA is distinct from standing to appeal the ZBA's decision to the trial court.”

Since “the first time the applicant could challenge the objector's standing to appeal in this case was when the objector took the appeal to the trial court,” the Supreme Court in Scott held that “the applicant's challenge to the objector's standing was, therefore, timely.”

In contrast, the Commonwealth Court in Liberties Lofts noted that, if Liberties Lofts had concerns regarding Hilltop's ownership interest in the property, and, therefore, its authority to file the zoning permit application with L&I and its ability to seek zoning relief before the ZBA, there is no reason why it could not have raised those concerns at the hearing before the ZBA.

In a footnote, the Commonwealth Court stated that, even if this issue of standing had not been waived, Liberties Lofts' argument still failed because the ZBA found that Hilltop was the equitable owner of the property by way of the testimony of Hilltop's corporate representative and, citing its previous ruling in Scott, “while Section 14-303(1) of the Philadelphia Zoning Code permits equitable owners with written documentation thereof to file zoning applications, there is no requirement contained therein that such written documentation be submitted into evidence at the ZBA hearing.”

Alan Nochumson is the sole shareholder of Nochumson P.C., where his law firm's primary practice areas consist of real estate, litigation, land use and zoning, business formation and general counseling and appellate advocacy. He is also president of Bear Abstract Services, where his title insurance company offers comprehensive title insurance, title examination and closing services. He can be reached at 215-399-1346 or [email protected].