“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.

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.

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.

As we explained previously, the pandemic relief bill that has been approved by both Houses of Congress, but still awaits the President’s signature, contains good and bad for our nation’s market-rate residential landlords. From the article:

  • It extends the CDC eviction moratorium through January 31, 2021 (and it is expected to be extended further from there under the Biden Administration).
  • Tenants can qualify for up to 15 months of federal rental assistance.
  • The criteria for qualification are not clear as of yet.
  • This assistance partly will cover months of unpaid back rent, rewarding landlords who have not evicted during the COVID-19 pandemic. A landlord cannot get back rent if the tenant has already left.
  • Rental assistance money will be distributed by states and cities.
  • Renters will apply for the help, and the money will be sent directly to their landlords. If a landlord doesn’t cooperate, the tenant can access the funds directly.
  • Renters looking for assistance can call 211 or go to the website www.211.org. It’s a confidential referral and information help line and web site.

So, the landscape will be changing soon very significantly in the relationship between landlord and tenant in the affordable housing sphere.

We will post more detail as it becomes available.

Contact Chris Finney (513.943.6655) if you have questions.

Entertain us, if you will, as we serve as Jacob Marley to landlords in visiting the ghosts of eviction moratoriums, past, present and future.

After months of experience with the eviction moratorium imposed by the Centers for Disease Control, we now know that most residential evictions — even those for non-payment of rent — can proceed per normal procedures, at least until new regulations are issued and the moratorium never applied to eviction for issues other than non-payment (e.g., criminal activity and damaging the premises,)

The past

As reported here, the Centers for Disease Control on Friday, September 4, 2020 imposed a residential eviction moratorium for non-payment of rent in certain limited circumstances through the end of the year due to the impact of COVID-19. That relief required the tenant to certify that 1) the individual has used best efforts to obtain government assistance for the payment of rent, 2) the individual falls below the above-income thresholds ($99,000 for individuals and $198,000 for those filing jointly), 3) the individual can’t pay rent due to loss of income or medical expenses, 4) the individual is using best efforts to pay the rent or as much of it as he can, and 5) eviction would render the individual homeless.

And as we report here, the CDC clarified that Order, allowing for more vigorous actions by landlords pursuing eviction: Cross examination of a tenant who claims he has met the criteria, allowing commencement and pursuit of an eviction action even if the set out is not until after the first of the year, and imposing criminal penalties upon tenants making false certifications.

The present

Our experience in recent evictions is that many tenants cannot stand up under cross examination as to the CDC certifications: They usually have paid no rent at all, which hardly ever complies with the CDC “best efforts” criteria, and it is unlikely the eviction will result in homelessness for the vast majority of tenants.

In Hamilton County, before conducting the forcible entry and detainer hearing, the Magistrate has a separate evidentiary hearing on whether the CDC criteria are met — including allowing a landlord to cross examine a tenant — and then, when the tenant fails to meet this burden, allows the eviction hearing to proceed. In all, the takes an extra  5-10 minutes to try an eviction case and we have not yet failed to exceed the CDC standards.

The future

Add to all of this the fact that an eviction commenced today won’t result in a set out until well into January. Thus, the moratorium no longer has any application to new evictions being filed.

Finally, we don’t know either how the Trump administration will address the regulations after their year-end expiration until his term ends on January 19th, or how the new Biden administration will address the issue thereafter. For both Presidents, the issues are difficult: Millions of tenants are facing severe financial hardship as a result of the COVID-19 crisis, but on the other hand, landlords have to pay bank loans, real estate taxes, building repairs, and for insurance. Many can’t meet their obligations if tenants are not paying their rent. Then, if they start en masse to default on mortgage loans, it could destabilizing banks as in 2007-08. These are not easy issues for anyone.

So, the next few weeks and months will determine a new course for landlord-tenant legal relationships. Stay tuned for more updates, and contact Chris Finney (513.943.6655) with any Ohio or Kentucky eviction issues you may have.

A Realtor recently posed this question to me:

How often are the agents getting sued when/if a client falls at someone’s house during a showing? To me it seems unlikely but recently in a CE course they tried to scare us.

My answer follows:

Liability generally is fault-based: Did you do something negligent to endanger a client? The standard is the normal “standard of care” a buyer expects from his Realtor. If the Realtor has that duty, fails to adhere to it, and someone is injured as a result, then liability may ensue.

  • Does a Realtor have a duty to-pre-inspect for hazards on and about a property? To turn on lights, to check for loose floor boards, to smooth edges of carpet that have curled? To make sure a buyer does not stick their hand in the electrical panel?

I never have heard of a scenario in which the Realtor was accused of negligence of this type, but I assure you if someone is seriously hurt, the Plaintiff’s attorney will sue everyone involved and attempt to say you “fell below the expected standard of care.”

So, prudence would call for everyone (Realtors, lawyers, appraisers, contractors, investors) to each have commercial general liability insurance against these types of risks. For Ohio real estate salesmen, this insurance would typically be maintained by his broker, and that coverage would extend to the agent. Each agent should not need to obtain his own coverage.

It is generally not expensive, but it is helpful to have.

Beyond that, there are certain special coverages that are advisable: Errors and omission insurance (sort of malpractice insurance for real estate brokers and agents), fiduciary coverage in case your employees steal from you or steal client funds (or property), and auto liability coverage, which is auto insurance for those engaged in commerce on your behalf (driving to and from appointments, getting signatures on contracts or delivering contracts, delivering keys, etc.).

For every business owner and individual, we recommend selecting a qualified insurance agent, and sit with him as the business is created, and as it grows over time, to discuss the amounts, deductibles, and types of insurance to maintain. Someday, you may be very happy that you did.

 

The COVID-19 pandemic crisis has spurred a second suspension of jury trials in Hamilton County, this one “until further notice.”

This applies to to both civil and criminal jury trials. As far as other proceedings (from conferences with the Judge to non-jury trials), it is “hit or miss” and each case and each Judge may have a different schedule. However, our experience is that things are proceeding, if slower than normal.

Read more on WLWT.Com here.

 

The Centers for Disease Control and Prevention on Friday clarified the nationwide eviction moratorium that it had issued on September 4, 2020, lasting through the end of the year. That clarification (“Frequently Asked Questions”) is linked here.

Some important points from the FAQ:

  • The Order does not prevent owners from commencing eviction proceedings so long as the actual eviction (which we interpret to mean the set out) does not take place until January. As we see it, this means that evictions can proceed to writ, but the set out must wait until January.
  • As set forth in this blog entry, the protection to a tenant under the eviction moratorium is trigged when the tenant signs a CDC form that certifies all of the following (every adult residing in the unit must sign the form for the moratorium to take effect).
    • The individual has used best efforts to obtain government assistance for the payment of rent.
    • The individual falls below the above-income thresholds.
    • The individual can’t pay rent due to loss of income or medical expenses.
    • The individual is using best efforts to pay the rent or as much of it as he can.
    • Eviction would render the individual homeless.
  • An owner may cross examine (or perhaps conduct discovery as the Court would allow) as to the truthfulness of those certifications. Previously, the rule was ambiguous on this point, leading to inconsistent application throughout the thousands of jurisdictions handling executions in the nation.
  • Landlord are not required to inform tenants of their rights under the CDC Order.
  • The clarification reiterates that (a) tenants still owe their rent and (b) tenants have a duty to make partial rent payments as they are able.
  • The clarification reiterates the criminal penalties for tenants making material misrepresentations on the CDC form.

Friday’s FAQ pronouncement tilts the effect of the moratorium in favor of landlords. Given that the set out in Ohio typically is six-to-eight weeks after the start of the process (the 3-day notice), the real delay in recovering possession of a landlord’s property from a non-paying tenant is now under 30 days.

The scope of the moratorium is limited to situations where the default is solely the non-payment of rent. Our firm has successfully worked with landlords who need to recover possession of their property from hold over tenants, squatters, those causing physical damage to property, those involving illegal use and sale of drugs, too many occupants and other lease violations.

Please call our experienced landlord/tenant litigators if you have questions. Contact Julie Gugino (513.943.5669) for more information.