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Category Archives: Commercial Real Estate

Ohio Supreme Court affirms rejection of bulk sales valuation

Author By Christopher P. FinneyPosted on

Our legal practice includes a healthy portion of property tax valuation work — challenging excessive valuations of real property by County Auditors to ultimately reduce the tax burdens for our clients. Ā In that practice area, weĀ occasionally represent real estate developersĀ who hold developed residential and commercial lots, and or condominiums that areĀ have similar characteristics.

One generally accepted appraisal method for such property thatĀ is accepted as a valuation technique generally (by buyers, lenders, etc.) is the “bulk sales” valuation method. Ā Under the “bulk sales” valuation method, the question is if a series of like properties were sold in bulk today, ratherĀ than one-by-one over time, what price would they yield? Ā Typically thatĀ valuation is lower than aĀ parcel-by-parcel sale.

We see this valuation challenge arise where a developer owns many residential lots, or an entire building full of residential condominiumĀ units. Ā He has a choice of selling each lot and each unit over a period of years, which involves, interest cost, taxes, insurance and maintenance costs until all are liquidated. Ā The alternative would be to sell the lots of condominium units “in bulk” to a single buyer, and to sell them all at once. Ā In such circumstance, even if individual sales might yield a purchase price of 15% to 25% higher than a “bulk sale,” theĀ “bulk sale” is preferred to avoid the expense and risk of sittingĀ on the inventory.

The Ohio Supreme Court has ruled thatĀ for purposes of valuing property for taxation purposes, it simply will not accept the bulk sales valuation method. Ā Rather, each individual parcelĀ or condominium unit must be valued separately for tax purposes.

This was recently reaffirmed in Dublin City Schools Board of Education v. East Bank Condominiums, LLC,Ā Slip Opinion,Ā 2014-OHIO-1940.

Please let us know how we can make a difference for you with our real estate tax valuation team.

Decision in Foreclosure Case Highlights Importance of Retaining Experienced Attorneys

Author By Bradley M. GibsonPosted on

Litigation is expensive; however, the cost of failing to retain experienced counsel may be devastating to your case. The 8th District Court of Appeals in Cuyahoga County recently issued a decision that provides a cautionary tale for litigants who proceed with inexperienced counsel or decide to represent their own interests.

In Provident Funding Associates, LP v. Turner, 2014-Ohio-2529, homeowners appealed the trial courtā€™s decision of foreclosure in favor of the bank. While the appeal was pending the foreclosed property was sold at a sheriffā€™s sale, and the court entered a decree of confirmation of the sale. The homeowners then filed a timely notice of appeal of the courtā€™s judgment confirming the sale.

Although the homeowners had two valid appeals pending before the appellate court, they never filed a separate motion to stay the foreclosure proceedings, nor did they file a motion to stay the distribution of the proceeds from the sheriffā€™s sale. Before their appeal was heard, the property was sold and the proceeds of the sale were disbursed pursuant to court order.

When the appellate court reviewed the homeownersā€™ appeal, it determined that the case was ā€œmoot.ā€ In other words, the appellate court determined that there was no remedy it could provide to the homeowners regardless of whether their appeal had merit, because the property was already sold to a third party and the sale proceeds were disbursed. As a result, the appellate court dismissed the appeal.

At first blush this seems like a harsh result. The homeowners timely appealed the trial court decisions and were set to present arguments to an appellate court in an effort to reverse the decree of foreclosure. Despite complying with the requirements for appealing a decision to the district court, however, the homeowners failed to preserve their potential remedies by failing to file separate motions to stay the foreclosure proceedings and to stay the distribution of the sale proceeds. By failing to file these simple motions, the homeowners rendered their appeal ā€œmootā€ meaning there was no basis for the appellate court to review the merits of the appeal, regardless of whether the homeownersā€™ claims were valid.

The world of litigation is complex and detailed. If the homeowners had retained qualified counsel they would have at least had their day in court before the 8th District. The attorneys at the Finney Law Firm are experienced litigators who will guide you through the difficult litigation process. Please do not hesitate to contact our firm if you are in need of legal representation.

Consider consequence of sales price on real estate consideration form

Author By Christopher P. FinneyPosted on

When closing a real estate transaction, every state requires that one or both parties report to the local taxing authority the sales price of the property. Ā This report is used for two primary reasons: (i) to establish the amount of the transfer tax or conveyance fee for the transaction and (ii) to establish the taxable value of the property for real estate taxation purposes going forward.

In Ohio the sale price is signed by the grantee under the deed, and is reported on a state-mandated conveyance fee form. Ā In Kentucky, the grantor and grantee must sign an affidavit of consideration attesting to the sales price. Ā Both forms are prerequisites to getting a deed of record.

Now, before we go any further with this post, it is important to note that the amount reported is not discretionary and not to be treated lightly. Ā In both Ohio and Kentucky, the reporting form is a sworn statement (i.e., under oath), the falsification of which is a felony. Ā So we are not suggesting misrepresenting anything on those forms. Ā But Ā an honest approach to the consideration question can yield different results depending on the circumstances.

With those itemsĀ as background, many considerations drive the reported sales price on the conveyance fee form or consideration affidavit: (i) the stated contract price, (ii) federal tax considerations (e.g. basisĀ and capital gains), (iii) the value to be “booked” for a sale, and (iv)Ā appearances for banksĀ and equity partners. Ā But frequently overlooked by the dealmakers is one of the most significant consequences of theĀ price reported: the real estate taxes for years and years going forward will either be dictated by or strongly influenced by the number appearing on that form.

Many times we find in our property tax valuation work that buyers and sellers thoughtlessly put a high value on those forms, which mayĀ include the value of the business operating inside the property, furniture, fixtures and equipment, and other factors unrelated to the actual value of the real estate acquired.

With annual rates of taxationĀ in Ohio rangingĀ betweenĀ 1.7% to 3.2% of the valuation and annual rates of taxation in Kentucky beingĀ around 1.1% annually,Ā the consequence of unnecessarily over-reporting the sales price can be costly year after year after year.

Thus, we carefully counsel buyers to consider strippingĀ Ā from the reported sales price the FF&E, the goodwill, cash and A/Rs of a business being acquired, andĀ other factors that are unrelated to the real estate transaction. Ā The net effect can be an annualized savings going forward of 1.1 to 3.2 percent of the excised property’s value going forward.

How can Chapter 13 Bankruptcy help me keep my home?

Author By Finney Law FirmPosted on

One of the most common questions people ask when considering filing for bankruptcy is whether or not they can keep their house. This makes sense as a house is often the most valuable asset you own and the place you live and raise your family. Many people fall behind on their payments due to an unexpected income reduction due to a job loss or illness. Later, they find a new job and/or their financial situation changes and they need a way to catch up their house payments to stop the bank from foreclosing against their property. Chapter 13 Bankruptcy offers homeowners a way to protect their homes and stop foreclosure lawsuits in their tracks.

When you file Chapter 13 Bankruptcy you receive the protection of the automatic stay. The automatic stops any creditorā€™s attempts to begin, continue, or complete a foreclosure lawsuit in state court. The automatic stay goes into place immediately after you file and will stop a court ordered sheriffā€™s sale from proceeding. The automatic stay allows you to breathe easier knowing that your house will not be lost on the courthouse steps.

Chapter 13 offers many benefits that allow you use your income to repay some or all of your debt. You may also have the benefit of paying your unsecured creditors back a reduced amount that is based on your income. Your bankruptcy attorney will propose a Chapter 13 Plan that allows you to pay back your past-due mortgage payments and penalties over the course of 36 to 60 months depending on your income. You are still responsible for making your standard monthly mortgage payment in addition to your new additional Plan payment, but your back payments are spread out over the course of the Plan to make them affordable.

Chapter 13 can be beneficial for you if you have a 2nd mortgage that is not secured againstĀ your property because your house is worth less than the balance of your first mortgage. An example is if your 1st mortgage is $100,000 and you have a 2nd mortgage or home equity line of credit for $20,000, and your house is only worth $85,000, you may be able to ā€˜stripā€™ off the 2nd mortgage and only pay back a percentage of the amount owed on the 2nd mortgage. At the end of your Chapter 13 your 2nd mortgage is eliminated and you will only owe the balance on your 1st mortgage. Please consult your bankruptcy attorney to see if you would qualify.

If you successfully complete your Chapter 13 by making all of your plan payments, you debt will be discharged and your mortgage payments will be deemed current. From this time on you can continue to make your normal monthly payments until your mortgage is paid off. You will also have your other eligible debts discharged as well. Chapter 13 is a great vehicle for eligible homeowners to use to save their homes and reduce their debt. Contact Finney Law Firm today for a free consultation to see if Chapter 13 bankruptcy is the right option for you.

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