Multiple Real Property Tax Bills Go Right Up to the Finish Line

Ohio’s House Bill 75 – the proposed Bill that would have improved the tax appeal process passed the Senate but failed to obtain concurrence in the House and the Governor’s signature before the end of 2020.  Below are some of the main objectives of that legislation:

  • Required a school board or the legislative authority of a county, municipal corporation, or township, before filing a property tax complaint or counter-complaint, to pass a resolution approving the complaint or counter-complaint at a public meeting.
  • Modified the circumstances under which a county auditor must notify the property owner or a school board that a property tax complaint has been filed against a property.

Click here to review the latest version of House Bill 75.

There was also a concerted effort to enact legislation to provide the opportunity for property owners to seek a reduction in property value due to COVID-19 circumstances.  That effort came extremely close to passing but fell just short of the finish line.  Both efforts will resume this year – with the COVID-relief language having a chance at passing on an expedited basis.

Correctly Describing the Property in your Transaction

Ohio’s Sixth District Court of Appeals recently affirmed an Order issued by the Ottawa County Court of Common Pleas granting summary judgment in favor of a lender.  See Nationstar Mtge., LLC v. Cody, 6th Dist. Ottawa Case No. OT-18-041, 2020-Ohio-5553.

In Cody, the borrower received $938,250 in exchange for a mortgage granted on two adjacent parcels located on Put-in-Bay Island.  One parcel contained a residential structure.  The other parcel was mostly vacant, but a portion of a detached garage was located on that “vacant” parcel, along with a private boat dock.   The heirs argued that the legal description contained in the Mortgage listed only the street address of the residential parcel.

The Trial Court granted summary judgment, finding that the Mortgage was unambiguous and should be enforced as to both parcels described in the legal description.  On appeal, the heirs claimed error based on the Trial Court’s refusal to consider the heirs’ testimony about their father’s claimed statements that the Mortgage wasn’t supposed to encumber the vacant lot.  The Appellate Court further found that the legal description included in the Mortgage clearly and unambiguously described both the residential parcel and the vacant parcel, and therefore affirmed the grant of summary judgment in favor of the lender.

The Cody decision nicely illustrates the importance of using a complete and accurate legal description in your transaction and diffusing any ambiguity as to what property is supposed to be transferred and/or encumbered when you prepare any documents for your real estate transactions (ideally starting with the purchase agreement).

To review the Cody Decision, click here.

Ohio’s Contract Statute of Limitations Likely to Change Again

House Bill 251 (the Bill regarding Contract Action Statutes of Limitations) has been favorably reported out of the Senate Judiciary Committee (receiving only only one dissent).  If that Bill becomes law, it would further reduce Ohio’s statute of limitations for a breach of contract action from 8 years to 6 years.

To review HB 251, click here.

Buying Property Out of Foreclosure or Receivership

Throughout Ohio, there has been an uptick in commercial foreclosure and receivership cases, and that trend is likely to continue well into next year.  For many years, buyers of distressed real estate have faced a procedural quandary that has forced many of those transactions to be dragged-out, while waiting to obtain a definitive final appealable order.

In BankUnited NA v. Lowe, 2020-Ohio-3742, the Plaintiff lender foreclosed on its mortgage in default, and  the lender’s Complaint identified a recorded second mortgage as encumbering the property.  The borrower defaulted, but the junior lender filed an Answer asserting a mortgage lien arising from its recorded mortgage.  The trial court granted judgment in the foreclosing lender’s favor, ordered that the property be sold, and that the  junior lender would have a claim against “the proceeds derived from the sale of said premises” after satisfaction of court costs, property taxes, and Plaintiff’s first mortgage.  The borrower appealed from that foreclosure order, arguing that the second mortgage was invalid.

Ohio’s Second District Court of Appeals applied the following standard for determining whether an order in a foreclosure case is final and appealable: “if it determines the extent of each lienholder’s interest, sets out the priority of the liens, determines the other rights and responsibilities of each party, and orders the property to be sold by sheriff’s sale.”  Id. at ¶ 11.  Where the validity or priority of a mortgage or other encumbrance is denied by the property owner, or otherwise in doubt, the foreclosure order must resolve that challenge in order to be final.  Id. at ¶ 12.  But in this case, where the property owner defaulted and no other party challenged the validity of the second mortgage, the Court of Appeals concluded that the foreclosure order was sufficiently final, by making clear that the second mortgage was valid and junior in priority to the first.

The Lowe case adds to the growing legal authority addressing what constitutes a final appealable order on the validity and/or priority of liens in a case that will result in the sale of real estate, but that law still is not uniform throughout Ohio.   Working with our title team at Omni Title can empower you to overcome certain issues and will enable you to not just obtain a title policy, but to minimize post-transaction risk.

To review the Lowe Decision, click here.

Equitable Mortgage Decision Highlights Importance of Obtaining & Maintaining Records from Your Deals

An Ohio Court of Appeals recently decided an equitable mortgage case that stresses the importance of obtaining and maintaining records from your deals.  In Wilmington Savs. Fund Soc. v. Woods, 2nd Dist. Montgomery No. 28730, 2020-Ohio-4599, the Plaintiff-lender Wilmington Savings Fund Society, FSB (“Wilmington”) sought to foreclose on property that had been owned by Joanna Woods (“Woods”), who died in 2014.  Wilmington asserted that Woods had also executed a Mortgage securing the Note.  However, that Mortgage was never recorded “as a result of an error made at the closing of the loan,” and “despite diligent efforts,” Wilmington could not locate even a copy of that Mortgage.  As such, Wilmington asked the trial court to find that Wilmington was entitled to an equitable mortgage encumbering the property.

Woods’ heirs argued that an equitable mortgage may only be enforced between the mortgagor and mortgagee, and not against third parties such as the heirs.  The trial court agreed with the heirs and granted their motion for summary judgment, reasoning that a mortgage is only effective against third parties once it has been recorded, and therefore, an unrecorded equitable mortgage cannot be enforced against a non-party to the underlying conveyance.

Ohio’s Second District Court of Appeals reversed the trial court’s decision.  The Court reasoned that because the heirs to an estate essentially “stand in the shoes” of the decedent, those heirs cannot inherit a greater interest than the decedent possessed before death.  Thus, the Court of Appeals held that, even though the Mortgage had not been recorded, the lack of recording did not affect the validity of the Mortgage as against the mortgagor or the mortgagor’s heirs or devisees.

The Wilmington case illustrates how important it is to retain copies of all instruments concerning a transaction.  If Wilmington had a copy of the Mortgage executed by Woods, Wilmington would be virtually assured of its ability to prove the existence of an enforceable mortgage.  But without even copy of that Mortgage, Wilmington still faces a steep hill to climb to achieve a total victory.