Cleveland Housing Court Judge, Raymond Pianka, has been a trailblazer in enforcement actions against mortgage holders and investors who purchase properties through foreclosure and fail to maintain or repair the properties as required by the municipal building code. 

When property owners failed to appear for hearings in his court, Judge Pianka regularly conducted trials in absentia, which resulted in nearly $1.4 million in fines.  However, the Ohio Supreme Court recently issued a unanimous decision holding that state law does not permit such trials in the absence of a defendant.    Following the Supreme Court’s ruling, Judge Pianka stopped holding trials in absentia, but rather started fining absentee owners based on contempt of court, for failing to appear at multiple hearings.  More than $8.3 million in fines were issued through that method.

A few years ago, the Judge instituted the court’s “Warrant-Capias” list, (now 199 pages long) enumerating all of the parties who failed to appear for building code violation hearings.  Those listed were denied access to the Housing Court in other cases.  Hence, if a mortgage company that is on the list files an eviction action on an REO, the court will not process it until the company enters an appearance in the case for which it had been listed, even if it was listed for a different property.  

In June, Judge Pianka issued record fines on two sister South Carolina real estate companies for over $13 million, for their continuing failure to correct building code violations at several properties.  Although the City of Cleveland recommended much lower fines, the Judge imposed fines based on the maximum daily fine amount for the total number of days in which the violations continued.

The Judge has now announced a new method, stating that he is inviting owners of neighboring properties to appear at restitution hearings, and that he will award damages in their favor if they can establish that they suffered economic losses due to the owner of the neighboring property’s failure to maintain the property as required by the building code.  For example, a neighbor can seek restitution if he or she can prove that the value of his or her property was diminished due to the offending neighbor’s neglect, or for costs such as mowing the lawn or picking up garbage from the offending neighbor’s property.

This new approach is a novel and untested legal theory, without any statutory basis, and therefore, we expect that it will be challenged on appeal.  In the meantime, however, mortgage holders and investors who purchase properties at foreclosure sales or take deeds in lieu of foreclosure, should take this potential liability into account. 

For the Cleveland Plain Dealer’s August 2, 2010, article providing additional details regarding this procedure, go here.

If you have any questions or would like to discuss this issue in more detail, please contact Larry Rothenberg at 216-685-1135 or via email at lrothenberg@weltman.com. Larry is the partner-in-charge of the Cleveland real estate and foreclosure department of Weltman, Weinberg & Reis Co., L.P.A. He is the author of the Ohio Jurisdictional Section contained within the treatise, “The Law of Distressed Real Estate”, published by The West Group. The firm handles foreclosures and related litigation throughout Ohio, Kentucky, Indiana, Illinois, Pennsylvania and Michigan.