Hi, How Can We Help You?

Author Archives: Jennings D. Kleeman

Jennings Kleeman

Lateral Support: The right not to have your land slide

Author By Jennings D. KleemanPosted on

Do you own land on one of the seven hills of Cincinnati? Has your downhill neighbor started digging on their land? Has such digging threatened to cause or caused your land to slide? If you answered yes to the preceding questions, then you might be entitled to an injunction or damages due to your neighbor removing the “lateral support” to your land.

This blog post will address a (i) background on lateral support; (ii) neighbor’s liability for removing lateral support from a landowner’s land when such land is in its natural or improved state; and (iii) landowner’s recourse when their land is going to start or starts to slide due to their neighbor’s digging.

Background:

The right to lateral support is a landowner’s right to have their land supported laterally by their neighbor’s land. The right varies based on whether the damaged land is natural or improved. Land in its natural state is always entitled to lateral support. However, improved land is not so entitled unless provided by statute or a neighbor negligently removes lateral support. Ohio provides such a statute.

Natural Land:

If a neighbor’s digging causes damage (e.g., sliding) to a landowner’s natural land, then the neighbor is liable for the damages that flow from such digging. There is no need for the landowner to show fault; it is a strict liability standard. To prove strict liability, the landowner must show (i) that their land was injured by the removal of its lateral support, (ii) that the injury resulted from the neighbor’s digging, and (iii) ascertainable damages.

Improved Land:

The Ohio Revised Code, under Sections 723.49 – 723.50, allows a neighbor to excavate down to (i) nine feet below the curb or street grade and (ii) the full depth of the foundation wall of any building on the landowner’s land, without liability. That said, if a neighbor digs to a depth greater than nine feet below the curb of the street, and such digging causes damage to any of a landowner’s buildings, then the neighbor is liable regardless of whether the neighbor is negligent. However, the neighbor’s digging must be the proximate cause of the damage.

Under a negligence standard, a neighbor might also be liable when the neighbor’s digging causes damage to a landowner’s building. The landowner must demonstrate that the neighbor was negligent by showing that the neighbor’s digging (i) removed the lateral support to the landowner’s building, (ii) caused injury thereto, and (iii) caused ascertainable damages.

Note: Concerning negligence, a neighbor has a duty to perform work, even if on their land, in such a manner as not to damage an uphill landowner’s land.

Landowner’s Recourse:

When dealing with the possible removal or the removal of lateral support, a landowner may seek an injunction or sue for damages. A landowner may seek an injunction to ask the court to prevent a neighbor from taking actions that will remove the lateral support to the landowner’s land. Alternatively, a landowner may seek monetary damages after a neighbor damages the landowner’s land. Such damages are based on “the time required to repair and a comparison of the cost to repair to the diminution in the fair market value of the [landowner’s land] before and after the damage.”[1]

Note: If a landowner lives uphill from a neighbor, and the neighbor removes soil downhill from the landowner’s land resulting in damage to the landowner’s land, then the neighbor must make the repairs.

Conclusion:

If (i) you own land on one of the seven hills of Cincinnati; (ii) your downhill neighbor started digging on their land; and (iii) such digging threatened to cause or caused your land to slide, then call the Finney Law Firm today, where an experienced professional can provide insight as to whether you have a claim for an injunction or damages.

[1] 1 Ohio Real Property Law and Practice § 8.07 (2021).

Important Changes in Ohio Limited Liability Company Law

Author By Jennings D. KleemanPosted on

10,000 Foot View of What You Need to Know

On February 11, 2022, Ohio’s law governing limited liability companies will change from its current form under Ohio Revised Code Chapter (“ORC”) 1705 (the “Old Law”) to its new form under ORC Chapter 1706 (the “New Law”). This means some significant changes for Ohio limited liability companies, which also apply to those organized under the Old Law. To make these changes less painful and reduce confusion, the New Law will use many of the same terms used in the Old Law. This blog is meant to provide an overview of some, but certainly not all, of those changes.

Changes Relevant to Operating Agreements

An operating agreement is a document governing the relations among the members of a limited liability company and the limited liability company. Many of the provisions of the New Law are default provisions, which a limited liability company can alter through its operating agreement. Due to the default nature of the provisions of the New Law, operating agreements existing under the Old Law should not be affected by the New Law.

Provisions That May Not Be Altered

Similar to the Old Law, a limited liability company may not alter certain provisions. For example, a limited liability company may not (i) eliminate the implied covenant of good faith and fair dealing, as discussed below; (ii) enforce promises to make capital contributions, which are not in writing; or (iii) create a situation where a limited liability company is not a separate legal entity. This is not an exhaustive list.

Limitation, Expansion, and Elimination of Fiduciary Duties

A limited liability company may alter certain duties and liabilities through an operating agreement. An example under the New Law is that a limited liability company may limit, expand, or eliminate fiduciary duties (defined by Black’s Law Dictionary as “a duty to act for someone else’s benefit, while subordinating one’s personal interests to that of the other person”) owed by members, managers, and others. However, this ability for a limited liability company to alter fiduciary duties is not absolute, as a limited liability company may not use an operating agreement to do away with what is referred to as the implied covenant of good faith and fair dealing. The Old Law did not allow for the elimination of fiduciary duties but did allow for the limitation, expansion, and elimination of the duties of loyalty and care. 

            Penalties For Failure to Comply with an Operating Agreement

Under the New Law, a limited liability company may, also through its operating agreement, impose any penalty or consequence upon a member for failing to comply with its operating agreement. A couple of specific examples enumerated in the New Law include (i) forcing the sale of a member’s membership interest in a limited liability company and (ii) reducing a member’s proportionate interest in a limited liability company. The Old Law did not allow for such penalties.

            Third Parties’ Ability to Approve Amendments

Another wrinkle from the New Law dealing with operating agreements is that a limited liability company may vest the authority to approve amendments to its operating agreement in third parties (parties not involved in the limited liability company). The Old Law did not allow for this.

Separate Asset Series

One of the more critical changes in the New Law, which was not allowed under the Old Law, is the allowance for separate asset series in limited liability companies. Through its operating agreement, a limited liability company may establish separate series with separate (i) rights, powers, or duties regarding specified property or obligations of the limited liability company or its profits and losses; or (ii) purposes or investment objectives. Either of the foregoing is possible if each series has at least one member associated with it.

Where there is a separate asset series, the debts, liabilities, obligations, and expenses for that series are only applicable to that series, not any other series or the limited liability company in general, and vice versa.

To benefit from this treatment, a limited liability company must (i) maintain the assets of each series separately from any other series, and the limited liability company in general; and (ii) provide a statement in its operating agreement and its articles of organization (document filed with the Ohio Secretary of State to establish the limited liability company) similar to what is outlined in the preceding paragraph.

Membership Without Membership Interest or Contribution

Under the New Law, a party may become a member of a limited liability company without acquiring a membership interest or contributing to a limited liability company.

The Old Law required that a party be admitted (i) at the time a limited liability company was formed, (ii) by acquiring an interest directly from a limited liability company, or (iii) by acquiring an interest from a member of a limited liability company.

Statement of Authority

The New Law allows a limited liability company to file a statement of authority with the Ohio Secretary of State to state the authority of a specific party in a certain position to conduct business on behalf of a limited liability company. As such, where there is a statement of authority, it is no longer necessary to look to an operating agreement to determine who can conduct business on behalf of a limited liability company. Having a statement of authority will also limit the ability of third parties to enforce members’ and managers’ unauthorized decisions.

The Old Law did not provide for statements of authority but generally required parties transacting with a limited liability company to look to its operating agreement to determine who could conduct business on its behalf.

End of the Member-Managed and Manager-Managed Distinction

The New Law implicitly does away with the distinction between member-managed and manager-managed limited liability companies. A limited liability company no longer needs to make this distinction in its operating agreement, which was necessary under the Old Law.

Under the New Law, a manager is any party authorized to manage the activities of a limited liability company. Such a party does not need to be defined as a manager but can be called a director, officer, or anything else. This may allow for more flexible management structures, which the Old Law did not contemplate.

Mechanism for Barring Certain Claims after Dissolution

Known Creditors

Under the New Law, when dealing with known creditors, a dissolved limited liability company may give notice of its dissolution to known creditors, setting a deadline for them to bring their claims. Such a deadline may not be less than 90 days from the date of the notice. If the known creditors fail to bring their claims within that period, then their claims are effectively barred, protecting the dissolved limited liability company from those claims.

Unknown Creditors

Under the New Law, when dealing with unknown creditors, a dissolved limited liability company may now (i) publish a notice of its dissolution on its then maintained website, if any, and (ii) provide a copy of such notice to the Ohio Secretary of State for it to publish on its own website. If the dissolved limited liability company does so and requests that unknown creditors present their claims in accordance with the notice within two years from the date of publication (or if the statute of limitations runs during the two years), then those claims are effectively barred, protecting the dissolved limited liability company from those claims.

Under the Old Law, the dissolution of a limited liability company did not prevent the commencement of a proceeding against it.

Conclusion

The foregoing changes are only some of those seen under the New Law. If you need help navigating the New Law, it would be prudent to reach out to the Finney Law Firm. We can provide further guidance and a more in-depth explanation of the foregoing changes.  Contact Jennings Kleeman (513.797.2858) for assistance with your LLC or corporate affairs.

Jennings Kleeman

Ohio’s statute of conveyances: Its application to real estate leases and its exceptions

Author By Jennings D. KleemanPosted on

For most contracts, an agreement is an agreement: If the parties agreed, orally, on paper, or even just electronically, in an email, text message, or through social media, generally, the agreement can be legally binding.

However, agreements relating to the purchase, sale and leasing of real estate can have special requirements for their enforceability. Here, we explore the Ohio Statute of Frauds (O.R.C § 1335.05), which requires certain agreements (i) be in writing and (ii) signed by “the party to be charged therewith,” i.e., the buyer, seller, landlord or tenant. And for real estate instruments, the Ohio Statute of Frauds has those requirements for contracts for the purchase and sale of real estate and for leases (residential or commercial) extending beyond one year. Many people are familiar with the requirement of the Ohio Statute of Frauds as it relates to real estate.

Less familiar to laymen and even real estate professionals is Ohio’s Statute of Conveyances, which requires deeds, mortgages, land installment contracts and leases with a term in excess of three years to be “acknowledged” before a notary public (i.e., “notarized”).  This derives from O.R.C. § 5301.01, which requires these instruments to be notarized and O.R.C. § 5301.08, which then excepts from that requirement leases for less than three years.

 But what does the Statute of Conveyances mean? Is it that, if you have a signed lease, residential or commercial, that is not notarized, and (i) a tenant has moved in, (ii) a landlord or tenant has made expensive improvements to a premises, or (iii) a tenant has made a long-term commitment to having its operations at a specific location, the other party can simply terminate the lease due to it not being notarized?  Despite this seeming like a harsh outcome, the answer is yes, to a degree.

To bypass such harsh outcome, the Courts have carved out equitable exceptions to the Statute of Conveyances. This blog entry explores the enforceability of non-notarized leases in excess of three years in Ohio under the Statute of Conveyances on the one hand and those common law exceptions on the other.

Enforceability of non-notarized leases in excess of three years in Ohio

Where parties execute a lease without notarizing it, the lease is considered defectively executed. A defectively executed lease is invalid and does not create the exact lease sought to be created. That said, the terms of the defectively executed lease are controlling once the tenant moves in and starts paying rent under said lease, except for duration. The duration is determined by the provision for the payment of rent. For example, a lease with monthly rent payments results in a month-to-month lease, while a lease with annual rent payments results in a year-to-year lease.

Where parties do sign and notarize a lease as required by the Statute of Conveyances, and such lease contains an option to renew, the act of accepting an option to renew does not require a second formal execution.  However, where there is not an option to renew, a grant of an additional term is an independent and separate transaction requiring its own compliance with the Statute of Conveyances.

Common law exceptions

The applicable law in a defectively executed lease case depends on the type of the relief pursued. If the party suing seeks to recover damages for breach of the lease, then the applicable route is that of the equitable doctrine of Partial Performance. If the party suing seeks to have the defective lease treated as a contract to make a lease, then the applicable route is that of the equitable doctrine of Specific Performance.

(A) Partial Performance:

A defectively executed lease can be validated through Partial Performance. Partial Performance is based in fairness and is utilized where it would be unfair to permit the Statute of Conveyances to invalidate the defectively executed lease. Partial Performance validates a defectively executed lease where the following four factors are present: (i) unequivocal acts by the party relying on the agreement; (ii) the acts are exclusively referable to the agreement; (iii) the acts change the party’s position to his detriment; and (iv) the acts make it impossible to place the parties in “statu quo”. The party wishing to benefit from Partial Performance must show that the facts of their particular matter meeting the aforementioned four factors are, more likely than not, true.

Generally, the facts of the cases, where the courts allow Partial Performance to validate defectively executed leases from the Statute of Conveyances, include: (i) expending sums of money, (ii) extending credit, (iii) making improvements, and (iv) following what the parties called for in the defectively executed lease. That said, it is important to note that moving in and paying rent is not sufficient to relieve the parties from the Statue of Conveyances.

(B) Specific Performance

Courts may allow for Specific Performance of defectively executed leases where no adequate remedies at law exist. Whether courts will allow for Specific Performance of defectively executed leases is within each respective court’s discretion. As such, Specific Performance is not guaranteed.

Where parties seek to enforce defectively executed leases through, and courts allow for, Specific Performance, the Statute of Conveyances does not impede such enforcing parties’ right to recovery. This is because defectively executed leases are enforceable, as a matter of fairness, as contracts to make a lease between the parties who intended to be bound by them. Courts may order Specific Performance of such contracts.

Conclusion

So, if you are a party to a defectively executed lease, and you are concerned with its enforceability, it is prudent to take some time to call the Finney Law Firm. We can help determine whether your lease is compliant with the Statute of Conveyances, and what you might be able to do if it is not.

Cincinnati Community Reinvestment Area tax abatements for renovations of existing residential structures

Author By Jennings D. KleemanPosted on

Cincinnati homeowners may obtain a Community Reinvestment Area (“CRA”) tax abatement by renovating existing residential structures. This practice is common and reduces tax liability for homeowners who make such renovations. That said, recently, various homeowners with existing CRA Tax Abatements suffered a reduction in their existing CRA Tax Abatement. This issue was as new to us as it may be to you.

To preemptively clear up the foregoing issue for others, this blog post will discuss a background of the CRA Tax Abatement Program for existing residential structures, the importance of submitting the application in a timely manner, and how the Hamilton County Auditor’s Office, which has a duty to make appraisals, and can make such appraisals based on its own preferred method, calculates Tax Abatements.

Background

The CRA Tax Abatement Program is meant to stimulate revitalization, retain residents, and attract new homeowners, in the Cincinnati area. To encourage the foregoing types of behavior, the City of Cincinnati Department of Economic Development provides CRA Tax Abatements to certain homeowners who renovate existing residential structures (e.g., residential homes and residential condos, up to three units). To qualify for a CRA Tax Abatement, the cost of renovations must total at least $2,500.00, or $5,000.00, depending on the number of units in the residential structure. Some renovations, which might increase the marketability of a residential structure, are not contemplated in the cost of renovations (e.g., roofing, windows, gutters, vinyl siding, etc.) Likewise, unrelated improvements and tax on the land itself are not contemplated in the cost of renovations.

To apply for the CRA Tax Abatement Program, applicants will need to submit an application to the City of Cincinnati Department of Economic Development. Applicants who are renovating existing residential structures must pay an application fee of $250.00, which may be paid by check, to the “City of Cincinnati.” Also, applicants will need to submit evidence showing that all permits related to the renovations are closed. Applicants may obtain such evidence here. Finally, applicants will need to submit a document evidencing the costs of the renovations. Such evidence should be in the form of a notarized list indicating (i) the general categories of the work completed; (ii) the date such work was completed; and (iii) the expenses, including costs of labor, associated with each category of work completed.

Timing of the Application

Under the CRA Tax Abatement Program, the Hamilton County Auditor’s Office can set a CRA Tax Abatement Period for, at most, ten years, unless homeowners comply with LEED, LBC, or HERS standards, which are not discussed herein. That said, under the CRA Tax Abatement Program, the applicant cannot apply for the abatement until renovations are complete, and the CRA Tax Abatement is not applied to the residential structure until the application has been submitted.  Despite those rules, the abatement period begins when the renovations are commenced. Furthermore, it might take the City of Cincinnati eight weeks to respond to the application. As such, an applicant should complete their renovations and apply as quickly as possible to avoid missing out on their CRA Tax Abatement period.

Calculation of the Abatement

The Hamilton County Auditor’s Office recently started calculating CRA Tax Abatements under the “Percentage Method.” Under the Percentage Method, the Hamilton County Auditor’s Office determines a homeowner’s CRA Tax Abatement amount by dividing the contributed value of all the improvements, at the time construction began, by the value of the home without improvements. The purpose of the Percentage Method is to provide homeowners with a percentage that remains consistent, despite changes in home values.

Before the Percentage Method, the Hamilton County Auditor’s Office calculated CRA Tax Abatements under the “Beginning Value Method.” Under the Beginning Value Method, the Hamilton County Auditor’s Office determined a homeowner’s CRA Tax Abatement amount by subtracting the value of the home without improvements from the contributed value of all the improvements, at the time construction began. The Beginning Value Method created an issue where homeowners were unable to truly appreciate the value of their CRA Tax Abatement, because, when their property value increased, the value of their abatements did not, leaving them with little tax liability savings.

Due to the foregoing issue, the Hamilton County Auditor’s Office reacted by creating the Percentage Method. Despite its best intentions, the Hamilton County Auditor’s Office did not provide for grandfather clause for the various homeowners, with CRA Tax Abatements, who were content with their CRA Tax Abatement Valuation. This gave rise to the issue first described in this blog post, which the Finney Law Firm resolved for similarly situated homeowners. So, if you are a similarly situated homeowner and need professional guidance on how to remedy such issue, call the Finney Law Firm, today!

Ohio property owner alert: Legislature gives a special (COVID) second bite at the apple on property tax valuation reduction in 2021

Author By Jennings D. KleemanPosted on

There is a significant new development in Ohio property tax challenges directly and narrowly resulting from valuation reduction arising from the COVID-19 pandemic allowing such challenges this year.

As we discussed in a blog entry here, because of the unique timing of real property valuations versus billing, Ohio property owners impacted by COVID-19 rent reductions and closures really could not bring successful COVID-related valuation challenges before Boards of Revision in 2021.

To exacerbate that problem, Hamilton, Clermont, Butler and Montgomery Counties had the first year of the tax triennial in 2020 (for challenges in 2021). Therefore, if a property owner attempted a COVID valuation challenge in 2021 and lost, a property owner would be stuck with a bad (high) valuation for three years (tax years 2020, 2021 and 2022, billed and payable in 2021, 2022 and 2023).

This placed owners of certain properties in significant financial straits: Owners of apartment buildings near a university where student-based occupancy plunged or downtown when nearby office buildings cleared out, owners of large office buildings that could not rent because of COVID-related vacancies, owners of hotels and motels and other properties in the travel and hospitality industry, owners of restaurant properties and owners of malls and retail strip centers.

That all changed two weeks ago when Governor DeWine signed into law S.B. 57 which adds a second challenge period in 2021 narrowly targeted to COVID-related property valuation reduction (i.e., not that of general market conditions).

Here is the quick overview:

  • “Second bite” challenges may be filed with the Auditor only between July 26 and August 25, 2021.
  • “Second bite” challenges must narrowly be tailored to valuation reduction as a result of COVID-19.
  • The target valuation date for “second bite” valuations is October 1, 2020.
  • The “second bite” valuation reduction is retroactive to January 1, 2020 (before the pandemic hit America).
  • The “second bite” valuation reduction will last for the remainder of the triennial (in Hamilton, Clermont, Butler, and Montgomery Counties thru the 2022 tax year, billed and paid in 2023).
  • The bringing, and “win” or “loss,” of a valuation challenge for the “second bite” hearings is in addition to the general challenge filed before March 31, 2021 and does not prejudice non-COVID-related (i.e. general market conditions) challenges in later years.
  • The legal and evidentiary hurdles associated with “second bite” challenges are the same, as we see it, to challenges brought in Ohio, meaning an appraisal (supported by testimony from the appraiser) and presentation by a qualified attorney are strongly recommended.

If you have a “second bite” property that would benefit from a challenge narrowly targeted to COVID-19 economic impact, please quickly contact Chris Finney (513) 943-6655) or Casey Jones (513-943-5673) to allow us to help you secure this tax savings.

Who has the duty to maintain and repair an easement?

Author By Jennings D. KleemanPosted on

Sometimes a client comes to the Finney Law Firm concerned about their neighbor’s rights to an easement over their land leading to the question: who has the duty to maintain and repair the easement? A big concern for these clients is the cost of the maintenance and repair of the easement. These easements tend be associated with driveways and sewer lines. This blog post is designed provide some general background as to what easements are and address the cost concern for individuals in similar situations.

Background on easements

An easement is an interest that may burden another persons’ land. The interest entitles the owner of the easement to use the land in some limited way. The extent of that interest is determined by the process which creates the easement.

There are two kinds of easements, the easement appurtenant, and the easement in gross. The easement appurtenant deal with two pieces of land (e.g., two neighboring parcels) and tend to be conveyed with a sale of the land. The easement in gross deal with one piece of land (e.g., one parcel and another person’ right to use the one parcel) and tend to not be conveyed with a sale of the land.

This blog post deals with easements appurtenant.

Creation

An easement may be created by deed, prescription, or implication from the particular set of facts and circumstances. Likewise, some courts allow for an equitable easement, which is referred to as an easement by estoppel.  The dominant estate benefits from the easement. The burdened land is referend to as the servient estate.

Who maintains and repairs?

Generally, it is the duty of the dominant estate to maintain and repair the easement. Likewise, the dominant estate must make the necessary repairs to prevent the dominant estate from created an annoyance or nuisance to the servient estate.

That said, the servient estate can expressly undertake the duty to maintain and repair the easement. This may be done in many ways (e.g., through a maintenance agreement, a grant in a deed, or operation of law).

What if the servient estate also uses the easement?

The servient estate may also use the land on which the dominant estate enjoys an easement. However, that use must be in a way that is not contrary to the dominant estate’s limited use of the land. When an easement is used jointly by the dominant estate and the servient estate, the cost of maintenance and repair of such easement must be apportioned between the dominant estate and the servient estate, based on relative use.

Conclusion

So, if you have a similar situation to those clients that come to the Finney Law Firm concerned about their neighbor’s rights to an easement over their land and who bears the maintenance and repair costs, then it might be time to call the Finney Law Firm.

 

Property-Tax

Mortgagee remedies and Ohio statute of limitations

Author By Jennings D. KleemanPosted on

“A mortgage is a conveyance of property to secure the performance of some obligation, which is designed to come void upon due performance thereof.”[1] The Ohio Revised Code characterizes mortgages as “liens.”[2] Mortgage liens are only applicable to real property, as with the land and the buildings attached to it.

Mortgagors (the party granting the mortgage) tend to grant mortgages to secure payment of money from the mortgagee (the party granting a loan in consideration for the mortgage).[3] The instrument evidencing the debt secured by the mortgage is generally referred to as a “note.” However, mortgagors may grant mortgages to secure the performance of other obligations, like an environmental indemnification.

Notes and mortgages, as contracts, are negotiable by the parties to them. As such, notes and mortgages include all sorts of obligations and remedies. That said, there are three basic remedies that a mortgagee can pursue to enforce the note and mortgage.[4] Mortgages can pursue all three of the following remedies at the same time or separately.[5] However, in doing so, a mortgagee must keep in mind the different statute of limitations periods for each remedy.

(1) An action on the debt secured by the mortgage (the note).

When a mortgagee brings an action on the debt secured by the mortgage, the mortgagee is bringing an action for a personal judgment debt evidenced by the note against the mortgagor (or any other maker of the note, even if they did not sign the mortgage).[6]

In Ohio, written instruments, such as notes, have a six-year statute of limitations, running from the due date(s) or, if applicable, the date the debt is accelerated.[7] When the statute of limitations runs on the note, the mortgagee can still go after the mortgagor with a foreclosure action, as the statute of limitations on the mortgage is longer. The statute of limitations for the foreclosure does not run by virtue of the statute of limitations on the note running.[8]

(2) An action to foreclose on the mortgaged property.

When a mortgagee brings an action to foreclose on the mortgaged property, the mortgagee is attempting to secure the mortgagee’s conditional interest (conditional on mortgagor default) in the property.[9] If the mortgagee succeeds here, the mortgagee will have superior title to the property than that of the mortgagor.[10] The go-to remedy for mortgagees is that of an action to foreclose on the mortgaged property.[11]

In Ohio, foreclosure actions have an eight-year statute of limitations, running from the date that the breach occurred.[12] The statute of limitations for foreclosures was changed from fifteen years to eight years on September 28, 2012.[13] For breaches that occurred before September 28, 2012, the statute of limitations runs at the end of the fifteen-year period from the breach or September 27, 2020, whichever is earlier.[14]

(3) An action of ejectment against the occupier of the mortgaged property.[15]

When a mortgagee brings an action of ejectment against the occupier of the mortgaged property, the mortgagee is attempting to take possession of the property.[16] In doing this, the mortgagee is taking advantage of the mortgagee’s superior title to the property to that of the mortgagor. [17]

In Ohio, ejectment actions have a twenty-one-year statute of limitations, running from the date that the mortgage becomes due.[18]

The aforementioned information regarding the statute of limitations does not apply to the mortgage itself. A mortgage, that is unsatisfied or unreleased of record, remains in effect for twenty-one-years from the date of the mortgage or twenty-one-years from the date of the maturity date (if any), whichever is later.[19] This, however, deals more with the purchasing of encumbered property free from the prior mortgage, and the mortgagee’s ability to enforce a prior mortgage against purchaser.

If you, as a mortgagee, have a mortgagor in default and want to enforce the note, mortgage, or both, call the Finney Law Firm today!

[1] Barnets, Inc. v. Johnson, Case No. CA2004-02-005, 2005 Ohio App. LEXIS 703, *8 (Ohio App. 12th Dist. Feb. 22, 2005), citing Brown v. First Nat. Bank, 44 Ohio St. 269, 274 (1886).

[2] Barnets, at *8.

[3] Barnets. at *9.

[4] Barnets, at *9.

[5] Barnets, at *9.

[6] United States Bank Nat’l Ass’n v. O’Malley, 150 N.E.3d 532 (Ohio App. 8th Dist. Dec. 26, 2019).

[7] ORC Section 1303.16.

[8] O’Malley, at 532.

[9] O’Malley, at 532.

[10] Search Mgmt. L.L.C. v. Fillinger, 2020 Ohio App. LEXIS 1966, *1.

[11] Barnets, at *9.

[12] ORC Section 2305.06.

[13]Ohio Real Property Law and Practice § 19.10 (2020).

[14] Ohio Real Property Law and Practice § 19.10 (2020)

[15] Barnets, at *9.

[16] Fillinger, at *1.

[17] Fillinger, at *1.

[18] Cont’l W. Reserve v. Island Dev. Corp., 1997 Ohio App. LEXIS 962, *1.

[19] ORC Section 5301.30.

Fraudulent transfers of assets to defraud creditors is a major “no-no.” Proceed with great caution.

Author By Jennings D. KleemanPosted on

Debtors that anticipate being subject to a judgment might fraudulently transfer their assets in an attempt to hide those assets from their creditors. This issue might even exist after the creditor obtains a judgment against the debtor. Just because a debtor might do this, does not mean that creditors are out of luck. 

Ohio’s Uniform Fraudulent Transfer Act, under ORC Chapter 1336, creates rights for creditors to set aside fraudulent transfers by debtors. The point of these rights is to do away with fraudulent transfers that “prevent a creditor from obtaining satisfaction of an underlying debt.” 

There are four general causes of action under ORC Chapter 1336. A fraudulent transfer, as the one described above, would likely fall under the cause of action provided by ORC Section 1336.04(A)(1). To succeed on such a claim, the creditor must prove that there was a transfer of an asset with actual intent to defraud, hinder, or delay present or future creditors. A creditor may prove “actual intent” through the use of circumstantial evidence. Types of circumstantial evidence, or badges, are listed in ORC Section 1336.04(B). 

If a creditor fraudulently transfers assets, ORC Section 1336.08 generally allows creditors to sue the transferees (i.e., parties that received the fraudulent transfers). The creditor can sue any of the transferees for the value of the transferred property, subject to certain defenses.” That is not to say that a creditor would be required to sue every single transferee. The only “necessary party would be the transferee (or participant for whose benefit the transaction was made) from whom recovery is sought.” The statute is written as such because in most fraudulent transfer cases, “the debtor is judgment-proof and the transfer was made to hide the property from the creditor.” 

ORC Section 1336.07 addresses creditor remedies, which include:

  1. an avoidance of the transfer; 
  2. an attachment or garnishment against the asset transferred or other property of the debtor;
  3. an injunction against further disposition of the asset transferred or other property of the debtor;
  4. an appointment of a receiver to take charge of the asset transferred; or
  5. any other relief that the circumstances of the case may require.”

Punitive damages may also be awarded. However, ORC Section 2315.21(C) states that punitive damages are not recoverable unless: 

  1. the actions or omissions of that debtor demonstrate malice or aggravated or egregious fraud, and 
  2. the trier of fact has made a determination of the total compensatory damages recoverable by the creditor from that debtor.

Attorneys’ fees may also be awarded. However, there is not an automatic award of attorney fees for those who prevail under ORC Section 1336. The creditor “may only recover reasonable attorney fees” when punitive damages are awarded.

So, if you are a creditor chasing a debtor who is actively fraudulently transferring assets to hide them from you, it might be time to call an attorney with the Finney Law Firm. 

Contact Jennings Kleeman at 513.797.2858 for assistance with a fraudulent transfer claim.

Time limits for Ohio Mechanics liens

Author By Jennings D. KleemanPosted on

Contractors, laborers, and materialmen tend to run into issues receiving payment for their work on certain projects. A terrific way for contractors, laborers, and materialmen to guard against not getting paid is to attach a Mechanic’s Lien to the property on which the contractors, laborers, and materialmen performed their work. From an extremely general point of view, to perfect a Mechanic’s Lien, contractors, laborers, and materialmen must file an “Affidavit for Mechanic’s Lien,” with the recorder’s office in the county where the property is located.

It is key to remember that there are time limits that must be adhered to on the front end and back end of filing an Affidavit for Mechanic’s Lien.

The Front End

When it comes to the front end, the time limit will vary based on the type of project.

If the Mechanic’s Lien is associated with a residential property, like a family home or condominium, then a contractor, laborer, or materialman claiming a Mechanic’s Lien has sixty (60) days from the date that the last labor was performed, or material was provided by the contractor, laborer, or materialman.[1]

If a Mechanic’s Lien is associated with oil or gas wells or facilities, then a contractor, laborer, or materialman claiming a Mechanic’s Lien has one hundred and twenty (120) days from the date that the last labor was performed, or material was provided by the contractor, laborer, or materialman.[2]

For all other Mechanic’s Liens, a contractor, laborer, or materialman claiming a Mechanic’s Lien has one seventy-five (75) days from the date that the last labor was performed, or material was provided by the contractor, laborer, or materialman.[3]

The Back End

ORC Section 1311.13 deals with attachment of liens, continuance, and priority. ORC Section 1311.13(C) states that Mechanic’s Liens, under sections 1311.01 to 1311.24, continue for six years after the Affidavit for Mechanic’s Lien is filed with the county recorder, as required by ORC Section 1311. If a cause of action based on a Mechanic’s Lien is brought within the six years, then the Mechanic’s Lien will continue “in force until final adjudication thereof.”

If a cause of action based on a Mechanic’s Lien is not brought within the six-year period, then the rights associated with the Mechanic’s Lien are extinguished.[4] Thus, there is a six-year statute of limitations to bring a cause of action based on a Mechanic’s Lien.[5] Furthermore, “the statutory scheme for the filing and enforcement of [M]echanic’s [L]iens does not provide for the tolling or expansion of designated statutory time limits.”[6]

If you have a Mechanic’s Lien and need to act, please feel free to reach out to the Finney Law Firm, before it is too late!

_____________________

[1] ORC Ann. 1311.06(B)(1).

[2] ORC Ann. 1311.06(B)(2).

[3] ORC Ann. 1311.06(B)(2).

[4] Banner Constr. Co. v. Koester, 2000 Ohio App. LEXIS 1313, *1.

[5] Id.

[6] Id.

Ohio Estate Planning: Who do you “Trust” with your firearms?

Author By Jennings D. KleemanPosted on

Introduction

You may want to a use trusts for a multitude of reasons, including, but not limited to, avoiding probate, maintaining control of assets after death, and tax minimization. One of the more crucial reasons for you to use a trust is to allow for flexible property management.  The use of a trust to manage property is prudent when there are laws and regulations in place that limit the ownership, sale, and transfers of that property. This holds especially true when dealing with firearms. This post will discuss (a) some of the issues that the use of firearm trusts may address; (b) the relevant laws and regulations surrounding firearms; (c) what a firearm trust is; and (d) recommendations for planning for an estate that includes firearms.

What Issues Can Firearm Trusts Address?

Probate administration is an invasive process where the court makes much of your family’s private information public.  The types and values of the guns subject to probate administration are part of the public record.  Furthermore, if your firearms are part of the probate estate, then the parties receiving the firearms will be reflected in the public.  Often, this information is available online.  If you create a firearm trust, you can avoid the specifics of your firearm collection from becoming public knowledge and the recipients of the same.

Control of your firearms after death may be important considering the felonious implications of certain criminals and non-citizens possessing certain firearms. Those implications may make it difficult for you to legally transfer certain firearms to your heirs and beneficiaries, particularly when you do not know everything about their pasts. By creating a firearm trust, you can address that uncertainty.

In that same vein, under the current laws and regulations surrounding firearms, you may avoid certain regulatory requirements for the transfer of firearms at your death by putting your firearms into a firearm trust. For example, a transfer tax associated with the transfer of certain firearms may be avoided.

Generally, outright possession of a firearm limits possession to single individuals. However, if you create a firearm trust, one of the many results is flexibility of ownership. For example, if you name multiple co-trustees to the firearm trust, then those co-trustees may each enjoy the use of the firearms in the firearm trust. By knowing the laws and regulations, a competent estate planner should be able to take advantage of the many benefits provided by firearm trusts.

What Are the Laws and Regulations Surrounding Firearms?

There are many laws and regulations regarding firearms in the United States.  Generally, in accordance with the principles of federalism, states pass their own laws and regulations regarding firearms.  However, the federal government has its own firearm laws and regulations, including, but not limited to, the Gun Control Act of 1968 (the “GCA”); the National Firearms Action of 1934 (the “NFA”); and the various regulations implemented by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (the “ATF”).

Congress passed the GCA in response to the assassinations of John F. Kennedy and Dr. Martin Luther King Jr.  The GCA is composed of Title I and Title II.  Title I of the GCA addresses most firearms in the United States, including shotguns, rifles, and handguns.  Despite being under the GCA, Title I Firearms are not largely regulated by the federal government, unless those Title I Firearms enter interstate commerce.

The federal government’s abilities to regulate Title I Firearms in interstate commerce are addressed in Bezet v. United States, 714 F. App’x 336 (5th Cir. 2017). The Bezet Court found that the federal government may regulate, through the Commerce Clause, the importation of certain firearms and ammunition, and the use of certain imported parts in the assembling of firearms.  Furthermore, in Bezet, the GCA withstood intermediate scrutiny because Congress enacted the provision of issues with the important government objective of “buttress[ing] states’ individual efforts to curb crime and violence” through a “comprehensive national response.”  Using the same logic, the Bezet Court found that the federal government did not infringe on any Second Amendment rights because the law did not completely prevent consumers from obtaining firearms. The consumers merely had to overcome certain hurdles.  So, while the GCA may not impose many federal restrictions on firearms, it still has teeth.

Title II of the GCA “revises and incorporates provisions of the original NFA,” which Congress passed, under the Taxing Powers, in response to the organized criminal activity of the early twentieth century.  In its original form, the NFA governed the possession and sale of certain firearms and taxed the manufacturing and sale of said firearms.  The firearms regulated under the NFA were, and still are, accounted for under Title II of the GCA.  Consequently, the firearms that fall under Title II of the GCA (i.e., machine guns, short-barreled rifles, short-barreled shotguns, suppressors, and other destructive devices) have been deemed “Title II Firearms.”

The original NFA regulations on the manufacturing and transferring of Title II Firearms included requirements like (a) filing an application with the ATF; (b) paying a $200 stamp tax; (c) providing fingerprints; (d) providing photographs; (e) undergoing background checks; and (f) seeking approval from a Chief Law Enforcement Officer (“CLEO”).  Some of these original regulations did not apply to trusts, so estate planners and their clients started using the “Firearm Trust Loophole” as means to circumvent some of the NFA’s regulations. For example, estate planners and their clients used firearm trusts to bypass the fingerprinting and CLEO approval requirements. In lieu of those regulatory requirements, the ATF tasked the federal government with the job of verifying and investigating applications. The abuse of the Firearm Trust Loophole came to a head in 2013 to 2014, where trustees and officers of other entities filed over 160,000 Title II Firearm applications, none of which were subject to the close scrutiny imposed on individuals by the ATF.  In response to this, The ATF closed the Firearm Trust Loophole by implementing Rule 41F, in 2016.

The ATF does many things regarding the federal regulation of firearms.  For example, the ATF provides guidance as to which types of firearms will fall under the NFA.  Likewise, the ATF helps to enforce various federal firearm regulations. However, one of the more critical roles of the ATF is to create federal firearm regulation through notice and comment rulemaking, as seen with Rule 41F.

The ATF’s reasoning for Rule 41F was “to ensure that the identification and background check requirements apply equally to individuals, trusts, and legal entities who apply to make or receive NFA firearms.”  In that spirit, Rule 41F changed the NFA in multiple ways.  Rule 41F added the term “Responsible Persons” to broadly encompass entities that were not covered under the original NFA. Responsible Persons specifically refers to partnerships, associations, companies, corporations, and trusts.  Furthermore, Rule 41F did away with the requirement that a CLEO had to sign off on the manufacture and acquisition of Title II Firearms.  However, Rule 41F did not entirely remove CLEOs from the picture, in that Responsible Persons, who are attempting to transfer Title II Firearms, must forward an application to a CLEO in the Responsible Persons’ domicile.  In addition to those changes, the ATF created Section 479.90a of Rule 41F to regulate the unplanned possession and distribution of Title II Firearms at the owner’s death.

What is a Firearm Trust?

A firearm trust is just what it sounds like, a trust used to legally transfer and possess firearms, and avoid regulatory requirements to that effect.  Firearm trusts can be used to ensure privacy, create situations where multiple beneficiaries may use the trust firearms, and ensure that firearms do not fall into the wrong hands.  Despite their continued utility, firearm trusts were once special compared to other trusts in that they were considered separate entities from the trustees and the beneficiaries. However, this became less true when the ATF passed Rule 41F.

Currently, trusts are bound by the regulatory requirements regarding the acquisition, ownership, and transfer of Title II Firearms. That being the case, it is important, now more than ever, for your estate planner to understand the relevant firearm laws and regulations that may surround your firearms, and how to draft an estate plan accordingly.

How Should Your Estate Planner Draft a Trust for Your Firearms?

Because of the laws and regulations surrounding firearms, there are certain things you should consider when creating a firearm trust, including, but not limited to, the type of trust, the language in the trust, the trustees and their powers, and the beneficiaries of the trust.

Regarding the type of trust used, you should consider creating a revocable inter vivos trust. Regarding the firearm trust language, your estate planner should use terms that reference the specific firearms you own and the applicable federal and state firearm laws and regulations. Likewise, the estate planner should use language that makes clear your intent to comply with said laws and regulations. To allow for the most utility, the language of the firearm trust should ensure that the firearm trust is a stand-alone trust, not one incorporated by another trust.

Regarding naming a trustee for the firearm trust, as with any other trust, there are factors to consider.  First, if dealing with a revocable inter vivos trust, you should consider naming yourself as a trustee, or co-trustee, which would allow you to benefit from the use of the trust firearms during your lifetime. Second, the trustee and the successors should be individuals who are legally capable of owning firearms (i.e., non-felons and citizens who have not renounced their citizenship).  Third, you and your estate planner should consider the possibility that a trustee, who is eligible at the time the estate planner drafts your firearm trust, may later become ineligible. To remedy that issue, your estate planner should draft a provision that outlines the appropriate course of action to deal with said situation.  Those provisions might take the form of treating an ineligible successor trustee as predeceasing a successor trustee, or a trust protector provision that allows an individual to elect eligible successor trustees.

Regarding the trustee’s powers, you and your estate planner should grant the trustee broad powers.  The broad powers should ensure that the trustee can fill out the requisite transfer forms, be reimbursed for costs that the trustee incurs while owning and transferring firearms, and have discretion regarding if, and when, the trustee must transfer firearms to beneficiaries.

Regarding naming beneficiaries, you should name eligible beneficiaries. Likewise, you and your estate planner should come up with an alternate plan of disposition to address situations where a beneficiary might later become ineligible to legally own certain firearms.  That may be done by providing a charitable remainder to certain entities that can possess and dispose of the firearms correctly.  Alternatively, you could decide to leave the firearms in further trust for other beneficiaries or dissolve the trust and distribute the firearms outright.

 

Conclusion

The creation of a firearm trust is a responsible thing for you to do. However, if you do not plan for the disposition of your firearms, the executor of your estate is not going to be entirely without direction. The ATF created Section 479.90a of Rule 41F to guide executors of estates through the disposition of Title II firearms in unplanned estates.

Section 479.90a provides that an executor of an estate may possess a decedent’s registered firearms but must apply to transfer the firearms to the decedent’s heirs before the close of probate.  In said application, the executor must, among other things, name the estate as the transferor and sign on behalf of the decedent. To avoid having to deal with uncertainty and regulatory red tape associated with unplanned estates and Section 479.90a, please feel free to contact the Finney Law Firm.

Please contact Isaac Heintz (513.943.6654) or Jennings Kleeman (513.797.2858) to discuss your estate planning needs.