Philadelphia Rental License -- Still Rent Without?

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Philadelphia Rental License -- Still Rent Without?

Brandon Cao
Real Estate Investor · Raleigh, NC · Member since 2012 · 59 posts · 17 votes

Hello Everyone,

I have a property in Northeast Philadelphia, I bought it around Mid-September last month. As soon as the deal closed, I submitted in my application for the Philadelphia Business Privilege License (which was received online pretty much immediately) and then applied for the Rental License (AKA Housing Inspection license) for my rental property (apparently takes 4-6 weeks). Fast-forward one month to today, I still have heard no word from Philadelphia L&I (even after calling/e-mailing) and I'm ready to start renting it out, but one problem:

"The Philadelphia Property Maintenance Code (Section PM-102.6.4) requires an owner offering residential property for rent to provide the following to the tenant at the inception of each tenancy:

A Certificate of Rental Suitability issued by the Department of Licenses and Inspections no more than sixty (60) days prior to the inception of the tenancy.
A copy of the “City of Philadelphia Partners for Good Housing” brochure issued by the Department of Licenses and Inspections....."

I have heard before technically, you need a Rental License to rent. Although practically, I have heard that you don't need it until you evict a tenant. The only problem is to get a Certificate of Rental Suitability, you need a Rental License for that property to get it. My question is, is there a way to get around this or are you at the mercy of the L&I department and waiting 4-6 weeks for license and then applying for the certificate?

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Steve Babiak
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
11y
Originally posted by @Cheryl Daniels:

Hi, Brandon Cao

... Question: Will I be fined for not obtaining a rental license before collecting rent from the tenants?

I doubt you will. But if you do have to evict, you could have trouble without the Housing Inspection License. There was also a case in Phila where a judge denied the landlord a judgment for the time period during which the license was not in place. I believe that is the worst fate you would face, but I could be wrong ...

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  • Scott W.
    Real Estate Investor · chicago, IL · Member since 2012 · 1k+ posts · 231 votes
    14y

    if the private sector operated this way, they'd be out of business really fast.

    I'd just rent it out; you did what you had to do. They may fine you $100 (doubt it since it's their fault for moving so slowly). The govt is like that gifaffe at the zoo. You know, always smiling & slowing chewing on those leaves.

    Today, I put in a call to a village rep. She worked for the code enforcement. They have a policy of inspecting every foreclosure.

    She asked me for the address, she pulls it up & says, "It's been in foreclosure for 2 years! We haven't inspected it yet. How did we miss this?" The house had a boarded up door & a broken window plus multiple stickers of pending foreclosure. T(this is not a big town).

    She told me, and I quote, "You gotta love our government. I know I work for the government but I mean the things they do makes no sense."

    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    14y

    Some reading on this topic:

    http://www.trustlibertyinsurance.com/legislative_news_39.aspx

    http://www.trustlibertyinsurance.com/legislative_news_48.aspx

    1Reply
  • Brandon Cao
    OP
    Real Estate Investor · Raleigh, NC · Member since 2012 · 59 posts · 17 votes
    14y

    Hmm, two interesting views. I like the try and rent it anyways, but I can't seem to get around the Certificate of Rental Suitability. Don't get me wrong, I rehabbed the place so that it is more than livable! The time it takes to get the license is just too long. Also, thanks Steve, I'm glad some people agree with this required license being too excessive. Also, here's an update:

    Spoke to a Property Management Co. based in Northeast Philadelphia:
    They said that you will have to wait the 4-6 weeks to get the license and then the Certificate, apparently it does take them that long.

    I also spoke to a Philadelphia 3-1-1 line Government representative:
    He said alternatively you can walk down to the Philadelphia Municipals building and directly request for Rental License, however, he warned that you need to bring a MONEY ORDER for the dues as well as it taking 4+ hours on a business day.

    Sigh, I don't want to take a vacation day just for this but if I don't get a response soon, I'm not sure if I can wait much longer. Any other thoughts out there?

    0Reply
  • Brandon Cao
    OP
    Real Estate Investor · Raleigh, NC · Member since 2012 · 59 posts · 17 votes
    14y

    Last Update: I made time to walk down to the municipal building. Took about 10 minutes to receive the rental license! If anyone is on a tight deadline, I would definite suggest going down in person. Make sure to bring either a personal check or a money order for the amount required.

    Thanks everyone!

    3Reply
  • Brandon Eleazer
    Real Estate Agent · Philadelphia, PA · Member since 2010 · 166 posts · 23 votes
    13y

    Brandon(same name),

    If you sent in the $50 fee to apply and paid another $50 in person then the city will apply the extra payment to the following year (2013-2014). As you may be aware they do not issue a refund.

    How is your duplex working out? Was it already in move in condition when you bought it?

    A friend of mine owns a duplex in Mayfair that he lived in the first floor and rented out the second floor.

    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    13y

    Crazy as this sounds especially for Philadelphia: They have renamed the "Business Privilege License" to the name "commercial Activity License" - same basic thing, just new name. But they are phasing out the fees to renew that license, and I believe that in 2014 there is no fee for this! At least it says so at this next link:

    https://business.phila.gov/Pages/BusinessPrivilegeLicense.aspx?stage=Start&type=Construction§ion=City%20Registration&BSPContentListItem=Obtain%20a%20Business%20Privilege%20License

    0Reply
  • Brandon Eleazer
    Real Estate Agent · Philadelphia, PA · Member since 2010 · 166 posts · 23 votes
    13y

    Hi Steve,

    For some reason the link wouldn't open. Are you saying there will be no fee to renew the housing inspection (rental) license? I'm sure you weren't referring to the BPL as that is a one-time fee....

    The city will find another way to make its money

    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    13y

    Brandon Eleazer - the link works fine for me - just tried it from a different computer even.

    The BPL has two payment options; here is a verbatim statement from the page in the link:
    "The lifetime license fee is $300, made payable to the City of Philadelphia. Some businesses may elect to pay a $50 annual fee. Starting in 2014, the fee for the Annual and Lifetime Commercial Activity License will be eliminated for all businesses."

    So if you elected to pay $50 per year for the BPL (made sense to do so in the past couple of years) - then in 2014 that will go away. If you had the lifetime license for at least 6 years, then it paid to have a lifetime license I guess, rather than the $50 per year.

    The housing inspection license AKA rental license is another matter - I can't imagine that one going away. In fact, I see lots of the outlying suburban towns adopting their own rental license fees, so the city is certainly going to continue theirs.

    0Reply
  • Brandon Cao
    OP
    Real Estate Investor · Raleigh, NC · Member since 2012 · 59 posts · 17 votes
    13y

    Thanks guys for responding. A little update on my property, I did purchase that property back in September, but it turned out to be Single Family residence out in Frankford. I received the rental license by walking down to Center City. Turns out a lot has happened since then and I purchased another property in February 2013, a Triplex out in Germantown, which I currently owner occupy. I'm sure you guys already know, for a triplex you do have to put in $150 check for a Triplex, instead of the owner occupied Duplex. This time I dropped off the application with my Deed and received my rental license 4 weeks later!

    Steve Babiak
    Unfortunately, I wasn't about the $50 a year until after September so I ended up paying for the $300.

    Brandon Eleazer
    Looks like they found their new way of making money. Lead inspections every 2 years required for families with children 6 and under. I'll probably start a new thread to discuss this issue...

    As for the Single Family house in Frankford, it was owned by a woman who lived there for 30 years. It definitely took a toll, but most of the structure was good bones, I ripped out the carpet and refinished the hardwood floors. Replaced some 2"x2" missing tiles with those small 1"x1" glass tiles from HD. Fixed many plaster crack issues with Alex Plus DAP caulk as well as Spackle and Drywall plaster Washers. Ripped out the wallpaper and repainted the entire house and replaced the stove. All in all a lot of elbow grease a few subcontractors, but eventually got it rented out in 3 days on the market!

    Looking forward to future investing!

    0Reply
  • Brandon Eleazer
    Real Estate Agent · Philadelphia, PA · Member since 2010 · 166 posts · 23 votes
    13y

    Brandon,

    Nice work....looks like you're well on your way as an investor. Question: Did you refinish the floors yourself?

    I looked at a multiunit in Germantown last week. If you live in one of the units it would be nice to only pay for the other two units you're actually renting instead of $150 for all three.

    Yes, that new lead certification law is going to be chaos. I went and got certified to complete the lead tests; something you may want to consider, though I'm not sure if you can submit samples on your own properties; seems that would create a conflict of interest.

    0Reply
  • Brandon Cao
    OP
    Real Estate Investor · Raleigh, NC · Member since 2012 · 59 posts · 17 votes
    13y

    Thanks Brandon,

    Yes after removing all of the staples and tackstrips, I did attempt to refinish the hardwood floors myself, unfortunately as a rookie, I did not heed the advice of getting the drum sander. I couldn't dig deep enough with a 2-hand orbital floor sander (not the U-sander one). Next time I'll either hire it out or rent the drum sander. But once I ripped off the carpet, I knew that the floors were in great shape.

    Yeah not excited about the lead law

    0Reply
  • Prashant P.
    Real Estate Investor · Philadelphia, PA · Member since 2010 · 283 posts · 81 votes
    13y

    Hey Brandon,

    I bought a house in Germantown a month or so ago. The previous owner had painted the hardwood floor and put stick on vinyl tiles on as well. Anyways I had them refinished and they look alot better.

    I was going to do the work myself but instead hired someone. I met with three companies and the guy I hired did a great job, fast and had communication.

    Let me know if you want his contact information.

    0Reply
  • Brandon Cao
    OP
    Real Estate Investor · Raleigh, NC · Member since 2012 · 59 posts · 17 votes
    13y

    Thanks Prashant, their contact information would be great!

    0Reply
  • Shree Pathak
    Philadelphia, PA · Member since 2013 · 2 posts · 0 votes
    13y

    Hello everyone,

    I just came across this thread while researching about the housing rental license and thought of asking for some advice since this thread was quite informative. From my question you would all guess I am a newbie at this.....here's my question, does the city actually sends somebody to inspect the property after receiving the license application or just issue the license if I go and apply for the same at the center city office.

    The property is being refurbished and plan to put it on the market for rent around Nov 1st.

    I appreciate your earliest reply. Thank you in advance and definitely look forward to more guidance from you experts.

    0Reply
  • Brandon Cao
    OP
    Real Estate Investor · Raleigh, NC · Member since 2012 · 59 posts · 17 votes
    13y

    Hi Shree,

    Make sure you have a business privilege license and get a tax account number before you apply for the rental license. But no, the City does not send out an inspector to your house to make sure its up to code. You will later print out and sign a Certificate of Rental Suitability that is essentially an affadavit stating that your property is suitable for occupancy. The City of Philadelphia barely has enough resources to give you are rental license, let alone send out an inspector to check your property. But do make sure your property is up to code!

    Also, I would highly suggest that you go in person with your application to the Municipal Building in Center City, it will take over 5 weeks if you mail it through snail mail. They take care of it that day if you go in person, assuming your house in question is zoned correctly... Unlikely the property I purchased in June that apparently had "2 units and a Sandwich shop" when it in actuality was a duplex.

    Good Luck and ask more questions if you want!

    1Reply
  • Shree Pathak
    Philadelphia, PA · Member since 2013 · 2 posts · 0 votes
    13y

    Thank you Brandon, this is really helpful. Yes I have already applied and received the tax account number and the commercial activity license (BPL). Also the housing rental application is filled out and ready. After reading some earlier messages, I had already planned o go in person to the Municipal building to get this and am glad you also suggested the same. Will wait for all the completion of all the work that is happening before I go with my application. Yes the house is zoned correctly and all the work being done is as per the codes.

    Once again appreciate your quick reply. Thank you!!

    Will send more updates on this little later.

    0Reply
  • Phil C.
    Queens, NY · Member since 2013 · 82 posts · 10 votes
    12y

    Brandon - How did you deal with the duplex that had a sandwich shop in it?  Did you have to close down and reconvert?

    0Reply
  • Brandon Cao
    OP
    Real Estate Investor · Raleigh, NC · Member since 2012 · 59 posts · 17 votes
    12y

    @Phil C. I didn't realize there was a zoning issue with it until after I bought it.  So when I went down to get my Housing Inspection License from the Municipal Building in Philadelphia, they told me that my zoning was for a Sandwich shop and 2 residential units (most likely was a variance since my duplex was a rowhome).  They actually forwarded me to the zoning department, which is in the next room over.  Just note, come with a lot of free time and a check book because each time Philadelphia transfers you from one department to the next, you have to restart your wait time and crack another check, if you catch my drift.

    The zoning department reviewed my change on an application I just filled out at the Municipal building and they changed the zoning right then and there.  Just make sure your building can be zoned for a multi-unit if you have a multi-unit.  Subsequently, I was pushed to the back of the line for my original intent, the Housing Inspection License.  All in all I was able to get the license the same day and eventually had it rented out.

    Now that I think about it... Perhaps I just missed out on the perfect opportunity to start my enterprise in making Gyros and Chicken over Rice.  

    1Reply
  • Wen Wang
    New York City, NY · Member since 2014 · 1 post · 0 votes
    12y

    Thanks everyone for sharing their experiences and information, definitely great help.  As I am looking for the first rental property in Philly, this gave me better idea of the process and time frame.  Thanks again! 

    0Reply
  • Cheryl Daniels
    Homeowner · Philadelphia, PA · Member since 2015 · 70 posts · 24 votes
    11y

    Hi, Brandon Cao

    I recently purchased a triplex in Philadelphia. I inherited the current tenants from the previous owner. Settlement was the 20th of the month. And found out about the rental license in Philadelphia some time later. So that gave me 10 days to get a license. One tenant moved out the other remained and signed a month to month lease beginning the first of the month.  I have not used the rental income and will not until I obtain the license. Question: Will I be fined for not obtaining a rental license before collecting rent from the tenants?

    0Reply
  • Irfan Raza
    Accountant · NJ · Member since 2015 · 210 posts · 167 votes
    11y

    It may take some time before you are fined, but it will eventually happen.  I think the best bet is to obtain the rental license as well as the commercial activity license that is necessary to apply for the rental.  Using the income from rental will not affect the fact that you are renting units.  Please also keep in mind that you will need to file NPT and BRT returns as well.  

    1Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    11y
    Originally posted by @Cheryl Daniels:

    Hi, Brandon Cao

    ... Question: Will I be fined for not obtaining a rental license before collecting rent from the tenants?

    I doubt you will. But if you do have to evict, you could have trouble without the Housing Inspection License. There was also a case in Phila where a judge denied the landlord a judgment for the time period during which the license was not in place. I believe that is the worst fate you would face, but I could be wrong ...

    2Reply
  • Paulette Midgette
    Investor · Philadelphia, PA · Member since 2014 · 344 posts · 276 votes
    11y

    @Brandon Cao, @Shree Pathak, and @Cheryl Daniels it takes the city some time to get around to inspecting all rental properties on their list.  As Brandon said, they don't have enough staff to expect every property each year, so the inspections are on a cyclic schedule.  Please know that eventually they will come knocking at your rental.  My previous rental seemed to be on a 2 year cycle and was inspected about every couple of years to the date. 

    You are not allowed to collect rent without the proper licenses.  Now, this usually does not come into play until you have a landlord tenant issue and you need to take your tenant to court.  However, if it were determined that you collected rent at any time during a period of time you were not licensed the judge could order you to give the tenant the money back or fine you. 

    Also, a savvy tenant who understands what is needed to rent and what you need to provide to them before collection of rent could call L&I and report you if you have not done everything by the letter.  Bottom line,  make sure your house in order before you start collecting rent. 

    1Reply
  • Cheryl Daniels
    Homeowner · Philadelphia, PA · Member since 2015 · 70 posts · 24 votes
    11y

    Thank you, Irfan Raza, Steve Babiak and Paulette Midgette. I'm  on it! I'll have my house in order before renting the other unit. Thanks again.

    0Reply
  • Clifford Yun
    Real Estate Investor · Philadelphia, PA · Member since 2016 · 4 posts · 1 vote
    10y

    This thread is great. 

    Hi everyone. My fiance and are in the contract phase of an investment in North Philly. We're planning on having a room in the basement for us and using the 4 bedrooms we have as a rental space. 

    Looks like we need: The business privilege license and the tax account number prior to getting the rental license.

    Anything else? 

    Do you think we should get a real estate lawyer to draw up tenant leases and help us with this process? Does anyone have a lawyer they currently work with?

    0Reply
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