Recent Developments Pertaining to Ohio Tax Foreclosures

There have been several recent developments in Ohio concerning Tax Foreclosures. First, on September 2, 2014, the Ohio Supreme Court issued a decision clarifying a lien holder's standing to redeem properties from tax foreclosure, by paying the taxes prior to the confirmation of the sale.  Second, Ohio Governor John Kasich signed SB 172 into law, effective September 4, 2014, amending the existing statutes relative to Ohio Tax Foreclosures on abandoned properties; granting broader powers to the County Land Banks and County Boards of Revision.  The amendments do not apply to mortgage foreclosures but will affect lienholders when a tax foreclosure on abandoned property is filed.

In April 2013, we issued an advisory concerning an Ohio Court of Appeals decision titled, In re Foreclosure of Liens for Delinquent Taxes v. Parcels of Land Encumbered with Delinquent Tax Liens, 2013-Ohio-1400. The decision was alarming to lien holders because the court of appeals determined that a lien holder was not intended under the pertinent redemption statute as a person entitled to redeem the real estate. The court found that "the intent of the statute is to provide the owner with an opportunity to redeem the property if they so desire.  The Court limited the rights of the lien holder to redeem and insisted that the lien holder must protect its rights only by bidding at the sale.

The case was taken up on appeal by the Ohio Supreme Court.  This Supreme Court's decision affects those tax foreclosures which have been filed in the Court of Common Pleas, not those filed in the Board of Revisions pursuant to the abandoned property statutes discussed below.

The Supreme Court reversed this alarming decision and found that the redemption statute protects the lien holder and the owner's competing interests in the property.   The court held that any lien holder with an interest in the property is permitted to redeem the land by paying the taxes prior to the confirmation of the sale.  Following this Ohio Supreme Court decision, lien holders can determine at any time prior to the confirmation of the sale whether they desire to redeem the property by paying the taxes, penalties and fees associated with the tax foreclosure. 

In Ohio, the treasurer or tax lien holder may commence a tax foreclosure on abandoned land in the County Board or Revisions.  The Board of Revisions is not a court, and therefore the proceedings are only quasi-judicial.  The authority is granted to the Board of Revisions for the purpose of fast tracking the transfer of abandoned lands without the need to go through the lengthy and costly process of a tax foreclosure in the Court of Common Pleas.  

The Amendments to Statutes governing these tax foreclosures on abandoned property will affect lien holders as follows:

• A lienholder served with a tax foreclosure on abandoned property must, within 28 days from the date of receipt of the Summons, either redeem the property through payment to the County Treasurer of the taxes, penalties and assessments; or file an answer to the complaint and permit the foreclosure to proceed to sale.  Failure to redeem or answer within 28 days will cause the lienholder to be in default, and no further notices concerning the sale of the property will be required to be served upon them.
• Lienholders who previously came into title and hold property in REO, must also be aware of the risk of allowing taxes to become delinquent on any vacant land. Pursuant to the amendments, abandoned property is now defined as properties where the home is, upon visible inspection, insecure, vacant or vandalized.  Vacant properties could be deemed to be abandoned even if they are secured.  It would therefore be prudent for lenders owning vacant homes, to ensure that the taxes remain current, in order to avoid any tax foreclosure proceedings. 
• The statutory notice of the tax delinquency period has been reduced from one year to 60 days. The treasurer is no longer required to wait until the issuance of publication of the delinquent tax list prior to commencement of the tax foreclosure.  Once notice of the tax delinquency is issued by the Treasurer, the taxes must be paid within 60 days, or the property will be immediately subject to tax foreclosure proceedings.
• Abandoned land will no longer be offered for sale a second time when the property fails to sell as a result of no bidders at the first sale.  The property will only be offered for sale once and will be forfeited to the municipality if the property remains unsold.  Therefore, lienholders can no longer take a wait and see approach at the first sale.  A decision whether to bid on the property must be made prior to the first and only sale.
• The right of redemption has been reduced from 45 to 28 days after the tax foreclosure decree is filed.  This includes the lien holder's right of redemption.
• Lienholders no longer have standing to contest the determination, and may not request that the tax foreclosures be removed from the Board of Revisions to the Common Pleas Court. Only property owners now have standing to contest the determination by the Treasurer of the abandoned property, and only the homeowner has standing to make a request to have the property removed from the list of abandoned properties. If the property is removed from the list of abandoned properties, the Treasurer will be required to take the property through the more lengthy tax foreclosure process in the Court of Common Pleas.   
• Lienholders that purchase properties at these tax sales must be sure to pay the balance of the sale price in a timely manner in accordance with the amended Statute. The sheriff will issue notice to the successful bidder at the tax sale to pay the balance of the purchase price within 30 days. Failure to do so will cause the sale deposit to be forfeited to the County without any further proceedings.  Additional contempt proceedings may also be instituted against the bidder for any deficiency arising from the cost of the subsequent sale.  

Lienholders who are served with a tax foreclosure complaint filed against abandoned property in the Board of Revisions need to be cognizant of these amendments. The amended statute requires quick and decisive action. The summons should be provided to counsel as soon as received to ensure that the lien interest can be properly protected throughout the foreclosure proceedings. Failure to act in the proper manner can leave a lien holder exposed to the forfeiture of its lien interest.