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Category Archives: Commercial Real Estate

Landlord’s rights when a tenant files for bankruptcy

Author By Isaac T. HeintzPosted on

If a tenant files for bankruptcy, an automatic stay goes into effect. The automatic stay immediately prohibits a landlord from taking any action against the tenant or its property. The landlord cannot send default notices, file or continue an eviction action, collect a judgment against the tenant, demand the payment of delinquent rent or other amounts, or terminate the lease (even if the lease provides that the landlord may terminate if the tenant files bankruptcy) without first obtaining relief from the bankruptcy court.

If a landlord violates the automatic stay, the landlord can face damages for such a violation. The tenant may seek actual damages, punitive damages, attorney’s fees and costs. Further, the landlord can face consequences for contempt (violating a court order) because the automatic stay is a court order. The sanctions a court can order for contempt include fines, attorney’s fees and damages.

Despite the automatic stay, the tenant must pay rent first coming due after the bankruptcy filing, but the landlord must be prepared to enforce this right in the bankruptcy court. Bankruptcy Code Section 365(d) requires debtors to perform all commercial lease obligations until the lease is assumed or rejected. If the tenant fails to pay rent or other amounts first coming due after the bankruptcy filing and thereafter, the landlord can move for the bankruptcy court to compel payment.

The tenant has three options for dealing with the lease in the bankruptcy case.

One option is to assume the the lease. If the tenant elects to assume the lease, it must cure all defaults under the lease and the lease will otherwise continue in accordance with its terms.

A second option is to assume and assign the lease to a third party. This is likely to happen if the tenant is selling its business as part of the bankruptcy. If the tenant elects to assume and assign the lease, the tenant must cure all defaults, and the assignee must demonstrate the ability to perform all future obligations under the lease.  Generally, the tenant may assign the lease regardless of any assignment prohibitions in the lease or requirement for landlord’s consent.  If the lease is assigned, the tenant will be relieved of all future obligations under the lease, and the assignee will be the new tenant under the lease.

The third option is to reject the lease. If the lease is rejected, all obligations of the tenant will cease, the landlord may retake the space, and the landlord may file a claim for damages just like any other creditor.

If a tenant files bankruptcy, it does not render a landlord helpless.  Instead, the landlord must work within the framework of the bankruptcy laws in exercising its rights and remedies.  Since bankrupt tenants are often permitted to disregard valid lease provisions absent an objection from the landlord, landlords should consult with experienced counsel to ensure their rights are enforced in the bankruptcy case.

Extinguishing a Land Installment Contract where the buyer is in default

Author By Christopher P. FinneyPosted on

We recently completed a litigation project for a commercial client to extinguish a Land Installment Contract where the buyer was in default and the owner wanted to lease or sell the property to another party by judicially extinguishing the buyer’s rights under the Land Installment Contract.

As a starting point, this article explains, in seller financing situations involving real property, there are several options available to structure and document the transaction.  As we explain, a Land Installment Contract is more difficult to extinguish than a lease with option to purchase, but less involved than a foreclosure action under a note secured by a mortgage against the property to be sold.

Thus, in the specified assignment, we proceeded with an action for “forfeiture” in Common Pleas Court before Hamilton County Judge Beth Myers.

Ohio’s Land Installment Contract statute requires that a foreclosure action be pursued in situations where the buyer has made payments under contract for more than five years or paid more than 20% of the principal portion of the purchase price.  O.R.C. Section 5313.07.  (In such case, the buyer is then entitled to any excess of the sale price from foreclosure sale over the remaining balance of the purchase price under the Land Installment Contract.)  However, Ohio Courts have found that this protection extends only to residential purchasers, and does not protect buyers in commercial real estate transactions.  See, e.g., P.M.D. Land Co. v. Warner Realty, 2009-Ohio-6704 (11th Dist., 2009).

Therefore, simple judicial action for “forfeiture” of the rights of the buyer is called for in a commercial setting.  It is not a truncated, expedited proceeding such as an eviction, but it is far less involved than a foreclosure action would be, and vests fewer rights in the buyer.

As it turns out, in our case the buyer defaulted and we then were able to quiet title in the name of our client, the property owner, the Land Installment Contract was judicially extinguished, and the title was thus quieted in favor of our client, freeing him to lease or sell the property to another tenant or buyer.

 

 

 

Advanced commercial real estate law: The power of Lis Pendens in Ohio

Author By Finney Law FirmPosted on 1 Comment on Advanced commercial real estate law: The power of Lis Pendens in Ohio

Lis Pendens, Latin for “suit pending,” means that any interest in real property acquired while a case is pending relating to that property is subject to the final determination of the case.

As set forth in R.C. 2703.26: “When a complaint is filed, the action is pending so as to charge a third person with notice of its pendency. While pending, no interest can be acquired by third persons in the subject of the action, as against the plaintiff’s title.”  Under this doctrine, the outcome of the litigation applies to, and is binding upon, any person who acquires an interest in the property; whether a party to the lawsuit or not. Indeed the purpose of the doctrine is to bind non-parties.

“The effect of lis pendens is that if a third party acquires an interest in the property while the lawsuit is pending, the third party takes the property subject to the final outcome of the suit.” Gunlock v. Z.B.P. Partnership, 1997 WL 598394, at *1 (Ohio App. 12 Dist., 1997). Indeed, “if the trial court awards the plaintiff rights in the property, the plaintiff takes free of any interest acquired by third parties during the lawsuit.” Martin, Rochford & Durr v. Lawyer’s Title Ins. Corp., 619 N.E.2d 1130, 1131, 86 Ohio App.3d 20, 22 (Ohio App. 9 Dist., 1993).

“In order for the plaintiff to utilize the doctrine of lis pendens, the property that is described for the purpose of invoking lis pendens must be at the very essence of the controversy between the litigants.” Levin v. George Fraam & Sons, Inc., 585 N.E.2d 527, 530, 65 Ohio App.3d 841, 846 (Ohio App. 9 Dist., 1990).

If the property is Unregistered Land, and the lawsuit is filed in the same county in which all of the property is located, Lis Pendens attaches upon the initial filing of a complaint relating to the ownership of real property and a description of the property in the complaint. Any interest in the property that is recorded after the filing of the lawsuit is subject to the Judge’s final ruling. If the suit is brought in a county other than that in which the property is located, a certified copy of the complaint must be filed with the Common Pleas Court in which the property is located (this also applies to property that straddles two or more county lines). See Civil Rule 3(F).

In a recent case we represented a buyer in a specific performance case.  Our client was under contract to purchase a parcel of unregistered land in Hamilton County. The seller informed our client that the seller would not complete the sale; rather he would sell to another buyer for a higher price. Our client was insistent on completing the purchase and forcing the sale.

Before the seller recorded the deed transferring the property to the third party, we filed suit for specific performance and included a notice of Lis Pendens in the complaint. After we filed the complaint, not only did the third party record a deed, that third party then sold the property to another third party who also recorded a deed. Bear in mind though, that each of these deeds were recorded after the lawsuit had been initiated, and thus those purchasers’ interests were subject to the outcome of our lawsuit.

Ultimately, we prevailed and the property was re-titled in the name of our client and the interests of the two third party purchasers were extinguished.  The third party purchasers now have to look to the original seller to recoup their money.

For Registered Land, Lis Pendens does not attach until after the complaint is filed with the Court and a Notice of Lis Pendens is filed with the County Recorder. Civil Rule 3(F) also applies where the suit is brought in county other than that in which all of the property is located.  What this means for purchasers of Unregistered Land is that certainty of your interest requires not only that you search the title, but that you also search the court filings for any litigation involving the property.

For a party seeking to invoke Lis Pendens over registered land, the process is slightly more complex. The party must first file the complaint with the court, then present a certified certificate of the pendency of the suit with the county recorder and a memorial of the suit entered on the certificate of title by the county recorder.

While the road to Lis Pendens against registered land is more cumbersome for the plaintiff, the third party buyer can rest easy that he has good title by simply looking at the county recorder’s certificate of title for the property to see if there is a memorial of a lawsuit on the certificate. Simply stated with registered land, the certificate of title tells the whole story.

Chris Finney featured in new book, the “Site Seer”

Author By Christopher P. FinneyPosted on

A former site selection and development professional for McDonalds Restaurants and Albertsons Supermarkets,  Mike Emmert, has authored a new book, The Site Seer.

In that book Mike Emmert shares his knowledge and experiences as a real estate professional.  Finney Law Firm founder Chris Finney has been privileged to work with Emmert on development projects in Ohio and was impressed with his skills.  As a result, they formed a fast and lasting friendship.

Chris Finney is featured in Emmert’s new book with a quote of endorsement and encouragement.

We heartily recommend the book for the reading of any real estate professional, or aspiring investor, or student of real estate.

Read it about it and buy it through this link.  Read Mr. Finney’s comments here.

What quality of title are you getting in that real estate contract?

Author By Christopher P. FinneyPosted on

The essence of a real estate contract is an exchange of (i) cash from the buyer for (ii) some conveyance of title, and some quality of title from the seller.  Certainly, there are many other provisions of a contract that are important and we review each of these, but the exchange of money for title to real estate is the core transaction taking place.

When I review a purchase contract, the first place my eyes go, is asking “what is the standard of title, the quality of title that the seller has to convey to the buyer.”  The standards in the “industry” are markedly divergent on this issue (there is no legal requirement of the minimum quality of title to be conveyed; it is a matter of contact).  The most common standards are:

o   Good, clear and marketable title, subject to “no” exceptions.  This quality of title basically does not exist for most properties located in an urban area because of subdivision covenants, utility easements, and other standard encumbrances.

o   Good, clear and marketable title subject to such exceptions as will not interfere with the use and enjoyment of the property for its intended use (e.g., residential  retail, manufacturing, etc.).  This is the most common form of residential title provision and this is the provision presently in the standard Cincinnati Area Board of Realtors contract.  As a practical matter this provides the buyer the right to object to title matters through the closing.

o   The Buyer checks the quality of title and within a number of days approves the quality or rejects the quality, terminating the contract.  If he does not reject title exceptions within “x” number of days, he is bound to accept them.  This is the type of title exception most common in commercial real estate contracts.

These provisions are fundamentally different standards that, depending on the circumstances, could materially affect the buyer’s rights under the contact.  (There are other standards as well; each contract may be different.)

I once appeared before a Judge who posited to me that Ohio’s Marketable Title Act,  R.C. §5301.47, et seq., dictates as between a buyer and a seller the quality of title that must be conveyed at the closing.  This is unquestionably a misapplication of the statute.  Ohio’s Marketable Title Act defines marketable title as an objective standard.  This may be helpful for interpreting contract provisions relative to the quality of title to be conveyed (i.e., if the parties promise one another that marketable title is what will be delivered, or perhaps the standard in the absence of a contractual provision), but the contract itself will define what the parties have promised one another and are therefore obligated, respectively, to deliver and accept.

Each buyer and seller should carefully consider the consequences of the title covenants in a contract, because those covenants will dictate how they must proceed thereafter and their relative rights and responsibilities under the contract.  This typically is the centerpiece of the relationship under a real estate contract.

Please join us Tuesday and Thursday nights for free property tax valuation classes

Author By Christopher P. FinneyPosted on

Thisx week, Christopher Finney will present “Reducing your property taxes” in two forums:

1) The consistently ground-breaking Empower-U lecture series will host Christopher Finney at Connections Christian Church, 7421 East Galbraith Road, on Tuesday, February 24, from 7 to 8:30 PM.  You can register and read about all of their course offerings for the Spring here.

2) Cincinnati Realtor Ellie Kowalchik and Summit Funding’s Aaron Denton team up for an informative evening on Thursday, February 26, from 6:30 to 8 PM at the Oasis Conference Center, Loveland, Ohio.  You may RSVP by emailing Ellie at [email protected] by February 18th.

All are invited to each of these courses.  We look forward to seeing you there!

Today, we launch the on-line presence of Ivy Pointe Title, LLC

Author By Christopher P. FinneyPosted on

Ten days ago experienced real estate attorney Rick Turner and his capable staff of Patti Gillespie and Evan Meredith joined our operations by launching Ivy Pointe Title, LLC, performing residential and commercial title and closing services.

Today, we are proud to announce their arrival with their new web site,  www.IvyPointeTitle.Com, and Facebook, Linkedin and Twitter accounts.

Further, we have implemented on-line ordering and will be serving our clients with a sophisticated client portal.  These are our first important commitments to evolving technology in the title industry.

 

County Auditor Dusty Rhodes joins Chris Finney for Tax Valuation class

Author By Christopher P. FinneyPosted on
Chris and Dusty 2
Chris Finney and County Auditor Dusty Rhodes

Each year for the past six years, we have been pleased to co-teach with County Auditor Dusty Rhodes a continuing education class to the Cincinnati Area Board of Realtors entitled “How to Reduce Your Property Taxes.”

The 3-hour class is designed to teach Realtors in detail how their Ohio tax bill is calculated and presented, and the process for challenging the Auditor’s valuation before Ohio’s 88 Boards of Revison.

This year the class, at the Board offices, was held on Wednesday, January 21.

’tis the season — for property tax valuation challenges!

Author By Christopher P. FinneyPosted on

Finney Law Firm’s attorneys  are experienced practitioners before the Boards of Revision throughout Ohio and the property valuation administrators of Kentucky to challenge the valuation of real property — thus resulting in a reduction of real estate taxes.

March 31 is the statutory deadline each year in Ohio to file a challenge to the valuation of real property.  If you miss that deadline, you must wait until the next tax year, and tax refunds for over-valued property only cover the current tax year.  Thus, a missed deadline is a missed potential refund of taxes.

If you desire for Finney Law Firm to analyze the valuation of your real property for a possible reduction, please contact Christopher P. Finney at 513-943-6655 for a free preliminary assessment.

Condominium versus Landominium — what’s the difference under Ohio law?

Author By Christopher P. FinneyPosted on

The most popular question this week at our seminar on Ohio Condominium law was:

What’s the difference between a condominium and a landominium under Ohio law?

Well, we hate to give such a lawyerly answer, but the question requires it.

We are taught to think of rights in real estate as a bundle of straws with an infinite number of straws in it.  One straw might be the right to possession for a year, another straw might be the mineral rights under the property, another straw might be the right to occupy in common certain areas of the property, such as a shared easement.  The owner of property has the right to parcel out these rights contractually as he sees fit.

Ohio law does not define a landominium, and a developer signing a declaration “dividing up” these property rights can thus largely on his own determine the contractual rights and obligations under the landominium documents, such as what are common areas, what areas the association maintains, voting rights of owners, etc.  Acccordingly, a landominium is largely whatever a developer says it is.  And it will be different project -to-project.

In some degree of contrast, Ohio law does define a condominium.  And a declaration dividing up those property rights in a condominium has some minimum contents under the Ohio condominium statute.  For example, all condominium property is divided between “unit” and “common areas,” and “common areas” are divided between “general common areas” and “limited common areas,” i.e., limited in use to fewer than all unit owners.

But, again, the creation of a condominium is largely a creature of contract, not statute.  So, within the minimum constraints of the condominium statute, the developer largely decides what the declaration will contain and how to allocate the rights among the unit owners.

So, in short, to be a “condominium” under Ohio law the declaration must contain the minimum requirements of the statute, and a “landominium” is whatever the developer says it is.

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