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CLIENT ADVISORY - February 8, 2008

Weltman, Weinberg & Reis Co., L.P.A. Testifies At Ohio Senate Hearing To Improve Foreclosure Process

by Larry R. Rothenberg, Esq.

The Ohio Legislature has been active in proposing legislative "solutions" to problems relating to foreclosures.  WWR is doing its best to try to keep the Legislature from doing more harm than good.

House Bill 138
Cities have been expressing frustration because some purchasers of foreclosure properties were delaying the recording of the sheriff's deeds, and therefore, the cities have difficulty notifying the purchaser about building code violations or other issues related to the property. In response, the legislature proposed H.B. 138, which among other things contains provisions directing sheriffs to record the sheriff's deeds, rather than allowing the purchasers to do so.  It would require out-of-state purchasers, including mortgage companies, to designate a natural person residing in Ohio to receive notices or inquiries related to the property. 

I convened meetings with the other Ohio foreclosure firms and the chief sponsor of H.B. 138, in order to make suggestions for a better solution.  On February 5th, the Ohio Senate’s Civil Justice Committee conducted a hearing on the bill where I testified with regard to problems the bill would create.  I made recommendations for amendments to the statutory scheme for foreclosures, in order to improve the efficiency of the foreclosure process and eliminate unnecessary costs. 

Among my recommendations were:

  • Implement a short form order confirming the sheriff’s sale, which would expedite the post-sale process while providing the purchaser’s information needed by the cities.

  • Change the “Lis Pendens” date to the date the complaint is filed rather than the date service is completed.  This will significantly shorten the foreclosure process in many cases by eliminating the need to amend the complaint to join additional lienholders.

  • Shorten the time for service of the summons by publication from six weeks to three weeks.  This will be especially helpful in cases where the property is vacant and abandoned or where the borrower is deceased.

  • Eliminate the costly inclusion of the property’s full legal description in the notice of service by publication and in the notice of sheriff’s sale.  In addition to benefiting the lender, this reduction in the expense of foreclosures would ultimately benefit the borrower, by reducing the amount required to reinstate the loan or reducing the deficiency judgment amount.

  • Authorize the Plaintiff’s attorney to prepare the sheriff’s deed for the sheriff, thereby relieving the sheriff of such burden.  This would expedite the issuance of the deed and eliminate frequent errors in the deeds prepared by the sheriffs.

  • Impose a strict 30-day period for the purchaser to pay the balance due to the sheriff to complete the sale, unless an extension is granted by the judge.
     
  • Eliminate delays by allowing the use of a master commissioner, rather than the Sheriff, to conduct sheriff’s sales in counties where the sheriff is backlogged.
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    The Senate’s Civil Justice Committee took my recommendations under advisement, and I am hopeful that at least some of my recommendations can be incorporated in the legislation.

    Senate Bill 281
    S.B. 281 was introduced on January 29th.  It would increase a debtor’s exemptions of property from execution.  In the case of a judgment lien, the bill would exempt $20,200 from execution.  The bill would only affect involuntary liens, such as judgment liens, and would not be applicable to mortgages.

    House Bill 440
    This bill was introduced on January 22nd.  It would change the law regarding the termination of rental agreements when the property is foreclosed.  It would subject the purchaser at a sheriff’s sale to a tenant’s existing rental agreement.  In other words, the tenant could pay rent to the purchaser and not be evicted until either the rental agreement expires in accordance with its terms or is terminated due to a default.  The provisions of this bill are particularly problematic because lenders or third-party purchasers could be burdened with an unreasonable, undesirable, or even a fraudulent rental agreement.  If enacted, this bill would, to say the least, have a chilling effect on bidding by third-party purchasers, and could invite fraudulent rental agreements to frustrate the purchaser’s attempt to gain possession.  We will voice these concerns to the legislature and keep you advised of further developments.

    You can view complete copies of each bill and a copy of my written testimony by clicking on the links below.

    House Bill 138
    Senate Bill 281
    House Bill 440
    Written Testimony

    If you have any questions on this information, please contact Mr. Larry R. Rothenberg, Esq.

    Larry Rothenberg 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, “Dunaway, The Law of Distressed Real Estate”. The firm handles foreclosures and related litigation throughout Ohio, Kentucky, Indiana, Illinois, Pennsylvania and Michigan. Larry can be reached at (216) 685-1135 or via e-mail at lrothenberg@weltman.com.

    Client Advisory is published by Weltman, Weinberg & Reis Co., L.P.A., an organization providing comprehensive creditor representation.  The information contained in this advisory is a summary of legal information and is not intended to constitute legal advice on specific matters or create an attorney-client relationship.  Contact any of our offices or visit our website at realestatedefaultgroup.com for more real estate related information, company facts and attorney profiles. ©2008