Revisions to Ohio’s Foreclosure Procedures Have Arrived

By Larry R. Rothenberg

In an abrupt move to beat the summer recess, the Ohio legislature passed H.B. 390, which becomes effective September 28, 2016. Among the new provisions are a procedure to expedite foreclosures on vacant and abandoned residences; and a standardized process to request the use of a private selling officer in lieu of the sheriff, to conduct the sale. The details are too extensive for this article to cover completely, but a summary follows.

Vacant and abandoned residential properties (R.C. §2308.01 et seq)

The new procedure to request an expedited foreclosure on vacant and abandoned property applies to residential property only. The statute defines “residential property” as a structure containing four or fewer dwelling units, each of which is intended for occupancy by a separate household; a residential condominium unit; or a manufactured or mobile home that is taxed as real property.

The plaintiff may file a motion, and the court may determine that a residential property is vacant and abandoned upon finding that all of the following exist:

1. The preponderance of the evidence shows that the loan is in monetary default;
2. The preponderance of the evidence shows that the plaintiff is the party entitled to enforce the instrument secured by the mortgage;
3. The property is shown by clear and convincing evidence through multiple indicia on a list specified by the statute, that the property is vacant and abandoned;
4. No defendant has filed an answer asserting a defense or objection, which if proven, would preclude the entry of a judgment for foreclosure; and
5. No defendant has filed a written statement indicating that the property is not vacant and abandoned.

To show that a property is vacant and abandoned, at least three of the indicia shown the statute’s specified list, must be shown. The list includes: utilities disconnected; windows or entrances boarded up or broken; accumulation of trash, or hazardous or unhealthy materials on the property; furnishings, window treatments, or personal items absent; vandalism, loitering, criminal conduct, or physical destruction or deterioration of the property; a written statement expressing the intention of all mortgagors to abandon the property; no owner or tenant appearing to reside in the property at the time of an inspection by governmental officials; a written statement by an official indicating that the structure is vacant and abandoned; or other reasonable indicia of abandonment.

If the motion is filed before the last answer date has expired, the statute directs the court to decide the motion within 21 days after expiration of the last answer date, or within the time consistent with local rules. If the motion is filed after the last answer date has expired, the court is to decide the motion within 21 days of its filing, or within the time consistent with local rules

If the court finds that the property is vacant and abandoned and enters a final judgment for foreclosure, the property is to be offered for sale not later than 75 days after the clerk of court's issuance of the order of sale. However, this directive does not supersede other procedures adopted by the court, including mediation, to resolve the residential mortgage loan foreclosure action.

A “private selling officer" may be appointed to conduct the sale, in lieu of the sheriff (§2329.152).

In any foreclosure, the judgment creditor may file a motion for an order authorizing a specified private selling officer, who is an Ohio resident and is licensed both as an auctioneer under R.C. Chapter 4707, and as a real estate broker or real estate salesperson under R.C. Chapter 4735, to sell the real estate at a public auction. The property must still be appraised by the Sheriff, in order to establish the minimum bid of two-thirds of the sheriff’s appraisers’ appraised value.

The private selling officer may market the real estate and conduct the public auction online or at any physical location in the county. If online, the auction is to be open for bidding for a minimum of seven days.

The private selling officer is also authorized to hire a licensed title insurance agent or a title insurance company to assist in performing administrative services, including title, escrow, and closing services related to the sale; and the private selling officer is authorized to execute and record the deed to the purchaser. Fees of the title agent or the title insurance company are to be taxed as costs, but fees exceeding $500 are to be paid only if authorized by a court order.

The cost of the appraisal and the advertisement required by R.C. §2329.26 are to be taxed as costs in the case. The private selling officer's fee and other costs are to be taxed as costs in the case up to an amount equal to one and one-half percent of the sale price. Any excess is not to be included in the amount necessary to redeem the property under R.C. §2329.33 or in the calculation of any deficiency judgment under R.C. §2329.08, but is to be paid by the judgment creditor or from the judgment creditor’s portion of the proceeds of the sale.
The judgment creditor may instruct the private selling officer to postpone the sale one or more times, for up to 180 days after the initial sale date. The judgment creditor may also instruct the private selling officer to cancel the sale

A second sale is to be scheduled to take place if there are no bidders at the first sale (2329.52).

At the time a sale is being scheduled, a second sale will also be scheduled to take place between seven and 30 days after the first sale. If there are no bidders at the first sale, the second sale will proceed as scheduled, with no minimum bid requirement. If there are no bidders at the second sale, additional sales may be scheduled with no minimum bid requirement. If there is a bidder at the second or a subsequent sale, the judgment creditor and the first lienholder (if different) will each have the right to redeem the property within 14 days after the sale by paying the purchase price, and thereby become the purchaser.

Deposits by bidders at the time of sale (§2329.211).

For foreclosure sales of residential property, the judgment creditor will no longer be required to pay a deposit at the time of sale. Other successful bidders must pay a standardized deposit amount, as follows:

• For residential property appraised at less than or equal to $10,000, the deposit is to be $2,000.
• For residential property appraised at an amount from $10,001 to $200,000, the deposit is to be $5,000.
• For residential property appraised at greater than $200,000, the deposit is to be $10,000.

For commercial property, any requirement for a deposit is to be established for the sale, presumably by court order or local rule.

The county prosecutor may cause a sale to be scheduled in an inactive post-judgment mortgage foreclosure (R.C. §2329.071). 

If a post-judgment foreclosure of residential real property does not have a sale completed or underway within 12 months after the entry is filed, the prosecuting attorney may file a motion for authority to sell the property in the same manner as if the prosecuting attorney were the attorney for the party in whose favor the decree of foreclosure and order of sale was entered. The court is to decide the motion not sooner than 30 days after it is filed, and if granted, the prosecuting attorney may be ordered to issue a praecipe directing the property to be sold at the next available public auction, with no set minimum bid. If such a sale occurs, the judgment creditor will have the right to redeem the property within 14 days after the sale by paying the purchase price to the clerk of the court.

If the deed is not prepared and recorded within 14 days after confirmation and payment, the purchaser has a remedy (R.C. §2329.31).

If the deed is not prepared and recorded within 14 days after confirmation of the sale and payment of the balance due, the purchaser may file a motion for a court order, which may be used to complete the conveyance, without the need for a deed.

A statewide website is to be established allowing foreclosure sale bids to be entered online (2329.153).

The state department of administrative services is to arrange for an official public sheriff sale website and integrated auction management system to provide for a standardized method of posting sales, receiving bids, and postponing or canceling sales. For residential property, the use of the website is initially at the sheriff's option, but it becomes mandatory five years after the system becomes operational. For commercial properties, the sheriff may use the website, but unlike residential property, there is no provision for the website for sale of commercial properties to become mandatory.

Criminal mischief (R.C. 2308.04 and 2309.07)

New R.C. 2308.04 essentially duplicates R.C. §2909.07, in stating that a person is guilty of criminal mischief if the person knowingly and with purpose to diminish the value or enjoyment of the residential real property moves, defaces, damages, destroys, or otherwise improperly tampers with the person's own residential real property that is subject to a mortgage, after having been served with a summons and complaint for foreclosure, and at any time until confirmation of the sale. While R.C. §2308.04 applies to a person's own residential real property, R.C. §2909.07 also pertains to the property (not limited to residential real property) of another.