City Exemption from Mechanic's Lien If It Leases Land to a Tenant for Building and Managing a Spotrs Arena
Is a City Exempted from Mechanic's Lien if it Leases Land to a Tenant for Building and Managing a Spotrs Arena Which is a Proprietary Function Not a Public One ?
In American Seating Company v. City of Philadelphia, 434 Pa. 370, 256 A.2d 599 (1969), the Pennsylvania Supreme Court considered whether a sports arena owned by the City of Philadelphia was exempt from a mechanics' lien.
In that case, the prospective tenant of the arena and the City had entered into a contract whereby the tenant agreed to construct the arena, paying the entire cost of construction.
In return, the tenant was to remain in possession for a term of fifty years with an option to renew the lease for an additional term of fifty years and was entrusted with the management and control of the arena.
Title to the land on which the arena was to be built and the building itself remained with the City.
In deciding the issue, the court stated as follows:
It seems to us that a meaningful ground for distinction rests in the use to which the municipality puts the property.
Where, as here, the municipality acts as an absent landlord, entrusting the management and control of its premises to its tenant; and where the building was constructed and paid for by the tenant; and further, where the municipality in owning the building, discharges a function not governmental in nature, but rather proprietary and quasi-private; -- then an exception to the general rule that municipal property is exempt from mechanics' liens seems proper. 434 Pa. at 375, 256 A.2d at 601.
The court concluded that the City, in its capacity as the owner of the arena, served a proprietary function rather than a public function.
The court opined, "Since an execution upon the lien would not disrupt an essential public service or function, no reason appears for striking the lien down." Id.
Thus, the court held that the City was not exempt from the mechanics' lien.