by Ron Kaplan

After winning round one against the city in Common Pleas Court, Philadelphia's condo owners are looking forward to round two. This fight will be played out soon in Federal Court where a class action suit has been filed against the city about the way it collects license fees and treats its condo and multi-unit residential apartment building's owners and residents.

Round one was a lawsuit filed years ago by Allan Domb, individually and on behalf of all others similarly situated. According to Carolyn C. Lindheim, of Levy, Angstreich, Finney, Baldante, Rubinstein & Coren, P. C., way the city was collecting what it called condo license fees. Although the city denies the plaintiffs' allegations, denies liability and denies that the plaintiff or any class member is entitled to any damages, they have decided to settle the suit and have already changed the way these fees are collected. The settlement is expected to be approved at a hearing tomorrow, January 19th, 2001. According to Lindheim, it's a done deal with no surprises expected.

In this case the basic issue was the individual condo license fee. The city charges $25 per unit in all condominium buildings with more than four units. Generally the city bills the condo association, who then assesses each individual owner. However in the case where the resident of the unit was someone other than the actual owner, the owner was also being billed by the city thereby being forced to pay the same fee twice.

Allan Domb, the acknowledged "condo king" of Philadelphia got involved because he thought the city was taking unfair advantage. He said, "The whole basis of this suit is it was an unfair tax masquerading as a license fee and non-resident condo owners were being taxed twice. It's totally unfair!"

With the settlement of the suit, which covers a period from July 1992 to June 1999, without the actual issue of whether it's a tax or a license fee ever really being decided still leaves the question up in the air. The city denies any wrongdoing, but has changed the way they collect these fees so non-resident owners now only have to pay once. The result is a nice $3,000,000 settlement, with 35% going to the lawyers, $7,500 to Mr. Domb and the balance to the overcharged owners.

According to the city solicitor handling the case, Michael Eichert, "The city denies that the fee is an unfair tax." However the way it was being collected did leave the impression that something was not quite right and the appearance of double billing was what led to the settlement of the case.

Now for round two…

The Philadelphia Owners Association, 2401 Pennsylvania Ave. and the Welsh Walnut Associates, L.P. at 248 S. 13th St., both of Philadelphia, have filed, on behalf of themselves and all others similarly situated, a Civil Action against the City of Philadelphia, in the United States District Court for the Eastern District of Pennsylvania.

This Class Action Lawsuit filed by Robert Greenbaum, Esq. and Gary Krimstock, Esq. of Fineman and Bach, again challenges the $25 license fee and brings in another issue, waste removal, arguing both federal and state constitutional issues.

The way Bob Guzzardi of Welsh Walnut Associates explains it, "The license fee isn't a fee at all but an unfair tax that brings about $4,000,000 annually to the city. A tax is supposed to raise revenue, a license fee is supposed to cover its own costs." He went on to use as an example the drivers license fee charged by the state. He said, "The charge for your drivers license is supposed to cover the physical cost of producing the actual license and the records that go with it. But if I have a building whether it contains twelve or two hundred units, I get one certificate with the number of units stamped on it. Where does the extra money go? That makes it a tax not a license fee."

The other argument is that multi-family dwellings with more than six units are required by the city to be responsible for their own trash removal. Since real estate taxes are based on land and property value assessments that are based on the same principals no matter what the value and the city removes trash from small buildings but not from larger buildings, that represents unfair treatment and unequal taxation.
According to the complaint both these arguments are covered by the Equal Protection Clause of the Fourteenth Amendment of the US Constitution. And the Uniformity Clause, Article 8 of the Pennsylvania Constitution, which provides "all taxes shall be uniform, upon the same class of subjects."

Mike Eichert, the city solicitor who handled the Domb case is also handling this one for the city. His motions for dismissals have been denied and the case is scheduled for court sometime this spring or summer. Not wishing to comment on pending litigation he would only say, "I feel that the city's policy's are both responsible and rational." He went on to say that he felt, "I'm sure Judge Schiller will give this a good and honest look."