• Update: The Consequences of Modifying Pennsylvania’s Powers of Attorney Statute Potential Impacts on Commercial Loans & Leases
  • April 28, 2015 | Author: Christopher D. Hill
  • Law Firm: Obermayer Rebmann Maxwell & Hippel LLP - Philadelphia Office
  • On April 14, 2015, pending legislation was passed by the Pennsylvania House Judiciary Committee to resolve the current state of flux of confession of judgment provisions and the bill was sent to the Pennsylvania House of Representatives for further approval; presently, there is no indication when this issue will be fully resolved.

    As previously reported by Obermayer, recent amendments to Pennsylvania statutes governing powers of attorney (20 Pa.C.S.A Chapter 56) have caused unintended consequences to the laws affecting commercial documents containing powers of attorney, including confession of judgment provisions. The amendments inadvertently modified the manner in which certain commercial documents should be drafted. Since January 1, in order to comply with the amended statute and preserve the confession of judgment remedy, all commercial loan documents and commercial leases containing a confession of judgment now must include an acknowledgement of the signatory before a notary public plus a waiver of the agent’s duties imposed by 20 Pa.C.S.A. § 5601.3 as well as a clarification as to the commercial nature of the relationship of the parties.

    To resolve this, on March 2, 2015, Rep. Mark Keller introduced Bill 665 to rectify the statute to retroactively eliminate the additional drafting requirements for documents containing confession of judgment provisions. After the recent approval by the House Judiciary Committee, the bill now awaits the vote of the entire House of Representatives. If passed by the House, the proposed bill will then require the approval of both the Pennsylvania State Senate and Governor. As of this date, no corresponding bill has been introduced by the Senate relating to this issue.

    As previously recommended, until the proposed bill is signed into law, commercial loan documents and commercial leases which contain confession of judgment provisions should continue to include the necessary additions as outlined above. If we can be of assistance in drafting such language, or confirming that your documentation is in order, please let us know. And of course, Obermayer will continue to monitor the results of the progress of the bill through the legislature and provide you with relevant updates.