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What Do the Revisions to Ohio's Foreclosure Procedures Mean for Creditors?

September 13, 2016      |      Larry R. Rothenberg, Esq.   

In an abrupt move to beat the summer recess, the Ohio legislature passed H.B. 390, which becomes effective September 28, 2016. Despite the bill's title, "Sales tax-exempt sale of natural gas by municipal gas company," the 212-page bill includes numerous provisions applicable to Ohio's foreclosure procedures, enhancing the options available for creditors. Among the significant new provisions are a procedure to expedite foreclosures on vacant and abandoned residences, and a standardized process to request the use of a private selling officer (in lieu of the Sheriff) to conduct the sale. While the details are too extensive to cover completely here, I have highlighted some of the main points. To discuss the new bill in greater detail, please contact me directly.

Vacant and abandoned residential properties (R.C. §2308.01 et seq)

The new procedure to request an expedited foreclosure on vacant and abandoned property applies to residential property only. The statute defines "residential property" as a structure containing four or fewer dwelling units, each of which is intended for occupancy by a separate household. “Residential property” includes a residential condominium unit notwithstanding the number of units in the structure, and includes a manufactured or mobile home that is taxed as real property.  

The plaintiff may file a motion, and the court may determine that a residential property is vacant and abandoned upon finding that all of the following exist:  

  1. The preponderance of the evidence shows that the loan is in monetary default; 
  2. The preponderance of the evidence shows that the plaintiff is the party entitled to enforce the instrument secured by the mortgage; 
  3. The property is shown by clear and convincing evidence through multiple indicia on a list specified by the statute, that the property is vacant and abandoned; 
  4. No defendant has filed an answer asserting a defense or objection, which if proven, would preclude the entry of a judgment for foreclosure; and
  5. No defendant has filed a written statement indicating that the property is not vacant and abandoned.

At least three of the indicia on the statutes' specified list must be shown to declare a property vacant and abandoned. The list includes: utilities disconnected; windows or entrances boarded up or broken; accumulation of trash, or hazardous or unhealthy materials on the property; furnishings, window treatments, or personal items absent; vandalism, loitering, criminal conduct, physical destruction or deterioration of the property; a written statement expressing the intention of all mortgagors to abandon the property; no owner or tenant appearing to reside in the property at the time of an inspection by governmental officials; a written statement by an official indicating that the structure is vacant and abandoned; or other reasonable indicia of abandonment.

If the motion is filed before the last answer date has expired, the statute directs the court to decide the motion within 21 days after expiration of the last answer date, or within the time consistent with local rules. If the motion is filed after the last answer date has expired, the court is to decide the motion within 21 days of its filing, or within the time consistent with local rules.

If the court finds that the property is vacant and abandoned and enters a final judgment for foreclosure, the property is to be offered for sale no later than 75 days after the Clerk of Courts issues order of the sale. This directive, however, does not supersede other procedures adopted by the court (including mediation) to resolve the residential mortgage loan foreclosure action.

A "private selling officer" may be appointed to conduct the sale, in lieu of the sheriff (§2329.152). 

Creditors in a foreclosure case may file a motion for an order authorizing a specified private selling officer to sell the real estate at a public auction. The officer must be an Ohio resident who is licensed by the state both as an auctioneer and as a real estate broker or real estate salesperson. The property must still be appraised by the sheriff, and the minimum bid must be two-thirds of the appraised value.

The private selling officer may market the real estate and conduct the public auction online or at any physical location in the county. If online, the auction is to be open for bidding for a minimum of seven days.  

The private selling officer is also authorized to hire a licensed title insurance agent or a title insurance company to assist in performing administrative services, including title, escrow, and closing services related to the sale; and the private selling officer is authorized to execute and record the deed to the purchaser.  Fees of the title agent or the title insurance company are to be taxed as costs, but fees exceeding $500 are to be paid only if authorized by a court order.

The cost of the appraisal and the advertisement required by R.C. §2329.26 are to be taxed as costs in the case.  The private selling officer's fee and other costs are to be taxed as costs in the case up to an amount equal to one and one-half percent of the sale price.  Any excess is not to be included in the amount necessary to redeem the property under R.C. §2329.33 or in the calculation of any deficiency judgment under R.C. §2329.08, but is to be paid by the judgment creditor or from the judgment creditor’s portion of the proceeds of the sale.  

The judgment creditor may instruct the private selling officer to postpone the sale one or more times, for up to 180 days after the initial sale date, or to cancel the sale entirely.

A second sale is to be scheduled to take place if there are no bidders at the first sale (§2329.52).

When a sale is initially scheduled, a second sale will also be scheduled to take place 7-30 days after the first sale date. If there are no bidders at the first sale, the second sale will proceed – with no minimum bid requirement. If there are no bidders at the second sale, additional sales with no minimum bid requirement may follow. If there is a bidder at the second or a subsequent sale, the judgment creditor and the first lienholder (if different) will each have the right to redeem the property within 14 days of the sale, by paying the purchase price and thereby become the purchaser.

Deposits by bidders at the time of sale (§2329.211). 

For foreclosure sales of residential property, the judgment creditor will no longer be required to pay a deposit at the time of sale. Other successful bidders must pay a standardized deposit amount, as follows: 

  • For residential property appraised at less than or equal to $10,000, the deposit is to be $2,000.
  • For residential property appraised at an amount from $10,001 to $200,000, the deposit is to be $5,000. 
  • For residential property appraised at greater than $200,000, the deposit is to be $10,000.
  • For commercial property, any requirement for a deposit is to be established for the sale, presumably by court order or local rule.

The county prosecutor may cause a sale to be scheduled in an inactive post-judgment mortgage foreclosure (R.C. §2329.071). 

If a post-judgment foreclosure of residential real property does not have a sale completed or underway within 12 months after the entry is filed, the prosecuting attorney may file a motion for authority to sell the property, in the same manner as if they were the attorney for the party in whose favor the decree of foreclosure and order of sale was entered. The court is to decide the motion no sooner than 30 days after it is filed. If granted, the prosecuting attorney may be ordered to issue a praecipe directing the property to be sold at the next available public auction, with no set minimum bid. If such a sale occurs, the judgment creditor will have the right to redeem the property within 14 days after the sale, by paying the purchase price to the clerk of the court.

If the deed is not prepared and recorded within 14 days after confirmation and payment, the purchaser has a remedy (R.C. §2329.31). 

If the deed is not prepared and recorded within 14 days after confirmation of the sale and payment of the balance due, the purchaser may file a motion for a court order, which may be used to complete the conveyance without the need for a deed.

A statewide website is to be established allowing foreclosure sale bids to be entered online (2329.153).

The state department of administrative services is to arrange for an official public sheriff sale website and integrated auction management system, providing a standardized method for posting sales, receiving bids, and postponing or canceling sales. For residential property, the website will initially be optional for sheriffs, but will become mandatory five years after the system becomes operational. The sheriff may use the website for commercial properties, but unlike residential property, there is no provision for it to become mandatory.

Criminal mischief (R.C. 2308.04 and 2309.07)

New R.C. 2308.04 essentially duplicates R.C. §2909.07, in stating that a person is guilty of criminal mischief if the person knowingly and with purpose to diminish the value or enjoyment of the residential real property moves, defaces, damages, destroys, or otherwise improperly tampers with the person's own residential real property that is subject to a mortgage, after having been served with a summons and complaint for foreclosure, and at any time until confirmation of the sale. While R.C. §2308.04 applies to a person's own residential real property, R.C. §2909.07 also pertains to the property (not limited to residential real property) of another.

 

For more information, please contact Larry R. Rothenberg, Esq. Mr. Rothenberg is an attorney with more than 35 years of legal experience who has been recognized by Martindale-Hubbell as a leader in his field, and has been selected in multiple editions of Ohio Super Lawyers. He is a shareholder in WWR’s Real Estate Default Group in Cleveland, Ohio, and can be reached at 216.685.1135 and lrothenberg@weltman.com