The foreclosure process in Ohio begins with the filing of a foreclosure complaint in the appropriate county court. The borrower is served with a summons and complaint, with 28 days to file an answer. If no answer is filed, the complainant may seek a default judgment. If the court rules in favour of the complainant, then the court issues a judgment and decree of foreclosure and orders the sale of the property. The property is then appraised, a sheriff’s sale is scheduled and advertised for three weeks, and the property can be sold for not less than two-thirds of its appraised value. Following the sale, the court confirms the sale, and the new owner may initiate eviction proceedings if the property has not been vacated.

When a borrower pledges equity interests (eg, membership interests in an LLC or shares in a corporation) as collateral for a loan, the lender obtains a security interest in that personal property. If the borrower defaults, the lender may enforce its rights under Article 9 of the Uniform Commercial Code (UCC), which allows for non-judicial foreclosure of personal property.

Key steps in the UCC Article 9 foreclosure process are as follows:

• default occurs – the borrower fails to meet the obligations outlined in the security agreement;
• notice of disposition – the lender must provide reasonable notice to the debtor and any other secured parties of the intent to dispose of the collateral;
• disposition of collateral – the lender may sell, lease, licence or otherwise dispose of the collateral in a commercially reasonable manner; and
• application of proceeds – proceeds from the disposition are applied to the outstanding debt, with any surplus returned to the borrower and deficiencies potentially pursued further.

Reasonable notice is required for any non-judicial foreclosure process – written notice, by certified mail, if necessary.

Under Ohio Revised Code § 2329.33, a borrower can redeem their property at any time before the court confirms the foreclosure sale. To redeem, the borrower must deposit with the clerk of the court the total amount of the judgment, including:

• the principal balance owed;
• accrued interest;
• court costs and fees; and
• interest on the purchase price from the date of sale to the time of deposit, typically at 8% per annum.

All claims related to the foreclosure can – and should – be brought at the same time.

The timing for completion of a foreclosure action, from filing through sale confirmation, can be as short as several months or as long as several years depending on the complexity of the issues in the case and the jurisdiction.

Yes, a deficiency judgment is available following a foreclosure action and is determined by subtracting the sale price from amount of debt owed, which may include fees, interest and other expenses.

In Ohio, the limited liability company is the most commonly used form of entity to facilitate real estate joint ventures. Joint ventures require co-operation in terms of contributions, decision-making and exit strategies.

Under Ohio law, joint venturers are considered fiduciaries to one another, meaning they are legally obligated to act in each other’s best interests. Key fiduciary duties include a duty of loyalty, duty of care, duty of good faith and fair dealing, and a duty of disclosure.

Under Ohio’s Revised Limited Liability Company Act (Ohio Revised Code 1706), if an LLC’s operating agreement lacks specific provisions regarding decision-making, the LLC is presumed to be member-managed, decisions are made by a majority vote of the members based on their ownership interests and – where deadlock – mediation, arbitration or judicial intervention may be necessary. In certain instances, the LLC can be dissolved and other equitable remedies applied.

For partnerships and joint ventures without clear dispute resolution mechanisms, partners generally have equal rights in the business, and decisions are made by a majority of the partners. Where deadlock occurs, the parties may look to judicial intervention, arbitration or mediation, and the partnership may be dissolved and other equitable remedies applied.

Ohio recognises cognovit provisions – or confessions of judgment – in non-consumer transactions. There are very specific statutory requirements, including a warning, that must be placed in a certain location in the document for the cognovits to be valid.

Wind down of a joint venture will be governed by the terms of the joint venture agreement. If there are none, then Ohio common law principles of equity, fair dealing and reasonableness will be applied.

Typically, the authors see limited guarantees in their real estate practice, with limitations on the duration and extent of the guarantee.

“Bad boy” guarantees are limited by the terms of the guarantee agreement.

No response has been provided in this jurisdiction.

No response has been provided in this jurisdiction.

No response has been provided in this jurisdiction.

No response has been provided in this jurisdiction.

No response has been provided in this jurisdiction.

To maintain the status quo during a lawsuit, a party may seek a temporary restraining order (TRO) or a preliminary injunction under Civil Rule 65. The chief difference between these two mechanisms is that a TRO can be obtained without notice to opposing parties but generally will only last for 14 days; whereas a preliminary injunction requires notice, usually involves an evidentiary hearing and, if granted, will last until the conclusion of the case on the merits.

Further, at the conclusion of matters at the trial court level, a party may seek a stay of proceedings to enforce the judgment under Civil Rule 62, or a stay pending appeal under Appellate Rule 7. These requests should initially be made to the trial court, but an appellate court can also provide relief if the trial court has refused to do so or if circumstances make it impractical to ask the trial court first.

Finally, in any case involving a particular parcel of real property, the doctrine of lis pendens prevents a third party from taking any interest in that property as against the plaintiff’s title while the case is ongoing. This means that, for example, if a plaintiff lender is suing to foreclose on an asserted lien, any third party who purchases the property while the case is pending would take title to the property subject to the litigation and the alleged lien. Notably, the plaintiff does not need to file a separate notice of lis pendens in Ohio; third parties are charged with constructive notice simply by the nature of the case being pending in court. Although lis pendens does not prohibit the transfer of property subject to litigation, its practical effect is to discourage a reasonable purchaser from proceeding to closing. 

To prevent the sale or encumbrance of real property during a dispute in Ohio, creditors have several provisional remedies:

• lis pendens – provides notice to third parties that the property is subject to litigation, ensuring any interests acquired are subordinate to the lawsuit’s outcome;
• injunctive relief – temporarily restrains parties from transferring or encumbering the property;
• writs of attachment – secures a lien on the property to satisfy potential judgments; and
• receivership – places the property under the control of a court-appointed receiver to manage and preserve it during litigation.

TROs, preliminary injunctions and stays pending appeal take a great deal of time to brief and argue to the court. Preliminary injunction hearings, for example, can last multiple hours and even days; they often resemble miniature trials. So, the principal risk of imprudently pursuing such a remedy is that significant legal fees could be expended without obtaining the desired result.

A less serious but possible risk is that an opposing party might move for sanctions if the moving party’s arguments are not supported by a good faith basis in law and fact. Courts are generally reluctant to avoid sanctions but will do so if a party is clearly acting in bad faith. This can result in the sanctioned party being forced to pay the attorneys’ fees that the other side incurred in defending against a motion the court deems to be frivolous.

TROs in relation to real property are probable as there is often evidence of some irreparable harm to the unique real estate asset. These orders only remain for 14 days and then must either be released or converted to a preliminary injunction. Injunctions require a showing of a likelihood of success on the merits, irreparable harm, a balancing of the interests in favour of the injunction and a public interest. 

In general, real estate disputes are good candidates for a TRO or preliminary injunction, given courts’ usual view of impacts on real property as unique and irreparable, but courts are hesitant to provide such relief if the facts suggest that the status quo would be altered, as opposed to preserved. This leads to creative advocacy over convincing the court as to just what the status quo is that should be preserved. An ideal fact pattern to prove irreparable harm is if a building is about to be demolished. If a piece of property is simply being sold, for example, a court may view that as an injury that could be remedied with money damages if necessary.

General contractors, subcontractors, labourers and material suppliers who have provided labour or materials for a construction project in Ohio may file a mechanic’s lien if they are not paid. Prerequisites include serving a notice of furnishing to the property owner and the original contractor within 21 days of first providing labour or materials, and filing an affidavit of mechanic’s lien with the county recorder’s office in the county where the property is located. The lien must be filed within:

• 60 days for residential projects;
• 75 days for commercial projects; and
• 120 days for oil, gas or injection well projects.

After filing, a copy of the lien must be served on the property owner within 30 days. Service can be made via certified mail, registered mail or personal delivery.

If payment is still not received after filing the lien, the claimant may proceed to foreclose the lien by filing a lawsuit within six years from the date the lien was filed; alternatively, if the property owner serves a notice to commence suit, the lienholder must file the lawsuit within 60 days of receiving the notice. 

At the state level, REITs are subject to certain statutory requirements in Chapter 1747 of the Ohio Revised Code, including registration procedures and special language that must be included in conveyance instruments. Failure to comply with such requirements can expose a REIT to liability for fines.

At the local level, some municipalities may have land use or zoning regulations that impact the ability of a foreign landlord to lease residential units. Rental registration requirements are common. Although some localities have allowed for the introduction of accessory dwelling units (ADUs) in single-family zoning districts, that allowance is often coupled with a requirement that the ADU be maintained by an on-site resident in control of the property. Some localities may have additional requirements related to inspections, particularly for rental properties with a history of building code or property maintenance code violations. Many localities have increased their efforts to hold landlords accountable for property maintenance conditions, in the form of nuisance abatement actions and related proceedings that can be costly and time-consuming to defend against. Foreign landlords would be well-advised to engage local counsel to understand and navigate the particular requirements for owning, maintaining and using property in a particular local jurisdiction in Ohio.

A frequent topic of conversation in city halls is the affordability and availability of high-quality housing units. The national housing crisis is a real concern throughout Ohio, and larger municipalities in particular are especially interested in removing or streamlining regulatory barriers to the construction of new housing, particularly affordable housing. This is probably the number one topic of discussion in any zoning hearing involving a residential development.

Equity is another concern that is frequently discussed in the context of any real estate development, whether residential or commercial. Some localities are focused on “reconnecting” communities that have been physically separated by redlining, the interstate highway system, urban renewal and other historical trends in the 20th century. Developers who can position themselves as bringing needed housing or amenities to underserved areas of a particular community may have an opportunity to take advantage of this political moment.