Topics include: - Recent Changes – HUD & Receiver - Agency Law Contract Formation - License Law and Additional State Law – Commercial Real Estate - Estate Considerations - Foreclosures and Lender-Owned Properties - Land Banks

1. Paul T. Saba, Esq.
William J. Patterson, Esq.
STAGNARO, SABA & PATTERSON, CO., L.P.A.
2623 Erie Avenue, Cincinnati, Ohio 45208
513.533.2700
pts@sspfirm.com || wjp@sspfirm.com

2.  This presentation is offered for
informational use only. Nothing in this
presentation constitutes legal advice,
and an attorney-client relationship with
either the presenter or Stagnaro, Saba &
Patterson, Co. L.P.A. is not created with
any member of the audience based
solely upon this presentation.
Disclaimer
2

3. Topics
 Recent Changes – HUD & Receiver
 Agency Law
 Contract Formation
 License Law and Additional State Law –
Commercial Real Estate Considerations
 Foreclosures and Lender-Owned Properties
 Land Banks
3

4. Know Before You Owe
4

5. 5

6. 6

7. 7

8. 8

9. 9

10. 10

11. 11

12. 12

13. Receiver Sales
 Most significant changes in decades
 House Bill No. 9
 Resolves Uncertainty on Authorities
 Amends ORC 2333.22, 2735.01, 2735.02
 Modifies and expands ORC 2735.04
13

14.  Every Person or entity with a lien as
reflected on the PJR must receive at
least 10 days advanced notice
 Notice and opportunity to all interested
parties to object to the sale
 Court may require the Receiver to solicit
and consider additional offers
 Creates the Possibility of being a
Stalking Horse bidder
 Receiver can sell the assets by auction
or sealed bids if approved by the Court
14

15.  Eliminates the need for the Court to
confirm the sale if you follow the
procedures
 The Receiver must file a report of sale
and serve it upon everyone identified in
the PJR.
15

16. 30 minutes
16

17. Definitions
 Principal
 Broker v. Salesman
 Buyer Brokerage
 Seller Brokerage
17

18. Agency Duties – ORC 4725.62
 Confidentiality
 Full Disclosure
 Following Instructions of Principal
 Advancing Interests of Principal
 Due Diligence
 Fiduciary Responsibilities
18

19. Agency Duties - continued
 Representing Purchaser – ORC 4735.65
 Duties to Seller – ORC 4735.63
 Prohibitions
 Representing Seller – ORC 4735.64
 Representing Purchaser – ORC 4735.65
 Disclosures to Purchaser – ORC 4735.67
19

20. Agency Law
 Waiver of Fiduciary Duties
 ORC 4735.621 – Ohio House Bill 150
○ Minimum Services Bill – October 9, 2006
○ Licensees Owe Client Full Fiduciary Duties
Outlined in Ohio Revised Code
20

21. Duties That Can Be Waived
 Accept Delivery of Offers/Counteroffers
 Present Offers/Counteroffers
 Answer Questions re: Offers/ Counteroffers
 Assist Client in Developing and Presenting
Offers/Counteroffers
 Answer Questions re: Steps Client Must Take
to Fulfill Terms of Any Contract
21

22. Duties That Cannot Be Waived
 Exercise Reasonable Skill and Care
 Perform Terms of Written Agency Agreement
 Follow Client’s Lawful Instructions
 Loyalty to Client’s Interests
 Comply with Laws, Statutes, Rules, Regulations
 Disclose Material Facts
 Advise Client to Obtain Expert Advice
 Account in a Timely Manner for Money/Property
 Maintain Confidentiality
 Exceptions to Confidentiality – ORC 4375.74(b)
22

23. Dual Agency – ORC 4735.70
 How Dual Agencies Arise
 Hazards of Dual Agencies
 Duties of Broker and Management Level
Licensee – ORC 4735.72
23

24. Forms: Company or Office
Policies Contents of Policy and Furnish to Client
 ORC 4735.54 and 4735.55
 Agency Disclosure Statement – ORC 4735.57
 Timing at Auction Sales – ORC 4735.58
 Timing of Disclosure to Purchaser – ORC 4735.60
24

25. Litigation, Arbitration &
Mediation Breach of Lease and Related Claims/Damages
 Breach of Contract and Related
Claims/Damages
 Commission Claims
 Procuring Cause v. Agency Representation
25

26. Commercial Broker Lien Law
 ORC 1311.86
26

27. 30 minutes
27

28. General Contract Law
Principles Offer
 Mirror Image Required; Master of the Offer
 Open-ended Offer Periods; Rule of Perpetuities
 Can Be Rescinded Before Acceptance
 Setting Time Periods For Acceptance
 Statute of Frauds
 Statute of Conveyances
28

29. General Contract Law
Principles Acceptance
 Methods of Acceptance
 Fax Signatures
 Execution and Delivery
29

30. General Contract Law
Principles Consideration
 Promise in exchange for promise
 Earnest money not consideration
 Meeting of the Minds
 Mistake
 Mutual / Unilateral
 Void / Voidable
30

31. General Contract Law
Principles Types of Contracts
 Purchase
 Land Installment
 Lease
 Option to Purchase
 Management
 Mortgage
 Security Agreements
 Lease Purchase Agreement
31

32. “Key” Provisions
 Price/Rent
 Fixed
 Variable
 Acreage
 CPI
 Market
 CAM Charges
32

33. “Key” Provisions
 Property Description
 Defining property
○ Legal Description
○ Survey
○ Auditor’s Plat
○ Auditor’s Parcel Numbers
○ Address
○ Caution When Using Acreage
33

34. “Key” Provisions
 Property Description
 Acreage “To Be Determined”
○ Definition of “Net Acreage” Critical
○ Exclusions
○ Right to “Opt Out” If Calculation Not As Anticipated
 Easements and other agreements
 Terms of Reciprocal Easement Agreement
 Utility Facilities
 Common Use Agreements
34

35. “Key” Provisions
 Signage
 Use of Premises
 Subordination (Non-Disturbance)
 Insurance/Subrogation/Indemnification
 Assignment/Subletting
 Security Deposit
35

36. “Key” Provisions
 Construction and tenant build-out
 What
 Changes
 Who Pays
 When to Be Completed
 What Happens If Completion Late
36

37. “Key” Provisions
 Options
 To Purchase
 To Expand
 To Renew
37

38. “Key” Provisions
 Right of First Refusal v. Right Of First Offer
 Contingencies
○ Closed-ended Date
○ As “Tight” As Possible
○ Who Benefits
○ Clear Terms of Exercise
○ Performance of Contingency in Good Faith
○ Reflect the Transaction and Protect Client
○ Types
38

39. “Key” Provisions
 Deadlines / Timeframes
 Warranties and Representations (“As Is”)
 Closing
 Possession
 Authorized Parties and Signatures
39

40. “Key” Provisions
 Parties
 Buyer/Tenant – Correct Name, Entity, State
○ Ohio Secretary of State
 Principals and Structure of Principal
○ Evidence of Structure
○ Evidence of Authority
○ Signature Lines and Acknowledgments
 Guarantors
○ All Principals and Spouses
○ Corporate
40

41. Parties
 Credit Worthiness
 Profit and Loss Statement
 Balance Sheet
 Audited v. Unaudited
 Authority
 Corporate
 Mortgagee Consent
 Bankruptcy / Receivership Issues
 Estoppel Certificates
 Title Impairments
41

42. Guaranty of Lease
 Review of Financials
 Shell LLC
 Parent Corporation
42

43. Due Diligence
 Survey, Environmental and Third-party Reports
 Financing
 Regulatory and Governmental Approvals
 Tax Incentives
 Title Issues, Easements/Private Land Use Restrictions
 Inspections/Site Issues
 Utilities and Necessary Capacity
 Road Access & Frontage/Perpetual Vehicle Access
 Economic/Business Review and Feasibility
43

44. Closing / Title / Escrow
 Examination, Title Commitment, Title Insurance
 Documents Affecting / Creating Interest in Title
 ORC 5301 and 5302
○ Deeds, Mortgages, Liens, Releases, Leases, Easements,
Land Installment Contracts, Powers of Attorney
○ UCC filings, Security Agreements, Bills of Sale,
○ Corporate Resolutions and Organizational Documents
 Trusts / Wills
 Escrow v. Round Table Closing
 Tenants-in-Common and Co-Tenancy Agreements
44

45. 30 minutes
45

46. License Law and Additional State
Law
Commercial Real Estate
Considerations
 Out-of-State Broker Law – ORC 4735.022
 Procedure
 Proper Documentation
46

47. 30 minutes
47

48. Foreclosures
 Sheriff’s Sale
 Payment
 Confirmation and Distribution Entries
 Sheriff’s Deed
48

49. Auctions
 Bids/Contracts
 Terms and Conditions
 Conditional v. Unconditional
 AS/WHERE IS
 Deposit
 Payment Structure
 Assumption of Leases, Contracts,
Obligations, etc.
49

50. Lender-Owned Properties
 Contract
 Assignment/Assumption of Leases and Estoppel
Certificates
 Execution and Delivery
 Deposit
 Deadlines, Timeframes, “Time is of the Essence”
 Contingencies
 Representations and Warranties
 Authorized Parties and Signatures
50

51. Representation Agreement
“You agree not to execute a lease or other
acquisition agreement until the landlord,
sublessor, assignor, owner, seller, or similar party
has agreed in writing to pay us a commission on
terms reasonably acceptable to us.”
51

52. Request for Proposal/Offer
 Must clearly detail broker’s compensation
 Percentage or amount
 When payment due
 Stipulate that broker is not responsible for, and
broker’s compensation is not dependent on,
tenant’s creditworthiness, ability to perform, etc.
 Broker makes no representations as to tenant’s
creditworthiness
52

53. Commission Agreement
 Signed before lease
 No representations as to tenant’s
creditworthiness
 Broker not responsible for tenant’s performance
 Commission not subject to tenant default
 Payable on execution
53

54. Commission Agreement
 Lease must state that landlord is responsible for payment of
commissions to broker in accordance with terms of the lease
 Tenant’s right to offset in event landlord doesn’t pay commission
 “If Landlord fails to pay Broker any commission amounts due to
Broker in connection with this Lease or any expansion, extension,
or renewal thereof, or any purchase of the property or a portion or
interest therein, and such failure shall continue for a period of five
days after written notice is tendered by Broker, then such payment
shall bear interest at the Interest Rate defined in the Lease, and
Tenant may elect to pay broker its commission and deduct and
setoff such amount together with accrued interest thereon, against
all base rent and additional rent due under this lease.”
54

55. Eminent Domain
 Amendment V and Introduction
 No person shall be held to answer for a capital, or otherwise
infamous crime, unless on a presentment or indictment of a
Grand Jury, except in cases arising in the land or naval
forces, or in the Militia, when in actual service in time of
War or public danger; nor shall any person be subject for
the same offence to be twice put in jeopardy of life or limb;
nor shall be compelled in any criminal case to be a witness
against himself, nor be deprived of life, liberty, or property,
without due process of law; nor shall private property be
taken for public use, without just compensation.
55

56. Eminent Domain
 Power of the State over Private Property
 Police Powers of Government
 Health, Safety, Welfare
 Public Use and Purpose
 Basic rule – taking only for public use
 Narrow view – use by public
 Broad view – public advantage
 Kelo Case
56

57. Eminent Domain
 Just Compensation and Fair Market Value
 ORC § 163.09
 Property Interests That May Be Compensated
 Easement/Ownership Interest
 Partial Taking – Springboro Case
 Other Damages (Consequential)
 Inverse Condemnation
 Governmental Activity Invading Land/Airspace
○ Physical or Indirect
57

58. Regulation of Land Development
(Regulatory Takings)
 Property Rights and Police Power
 State v. Federal – San Remo Hotel Case
 Compensation/Damages for Unconstitutional
Land Use Regulation
 Lucas v. South Carolina
 Post-Lucas Cases and Decisions
 Other Remedies Not Presumptively Invalid
○ 42 U.S.C. § 1983
58

59. Regulation of Land Development
(Regulatory Takings)
 Off-Site Improvements
 Reasonable Requirements
 Typing Off-Site Improvements to Governmental
Approvals for Development of Rational Nexus Test
 Dedication of Land by Developers
59

60. Regulation of Land Development
(Regulatory Takings)
 Conditions for Approval by Governmental
Authority May Be Considered a Taking
 Nollan v. California Coastal Commission
 Dolan v. City of Tigard
60

61. 30 minutes
61

62. Background
 House Bill 294 (September 2006)
 Administrative tax foreclosures on distressed properties before BOR
 Senate Bill 353 – “Land Bank Bill” (January 2009)
 Can foreclose tax liens on abandoned land before BOR, upon its initiative
or by complaint of treasurer, tax certificate holder or county land bank
 Upon decree of foreclosure, BOR may order property transferred – without
payment – directly to land bank with free and clear title
 House Bill 313 (May 2010)
 Expanded Land Banking to Counties over 60,000
 Authorized formation of County Land Reutilization Corporations/Land Banks
62

63. Why?
 Vacant/Abandoned Buildings Magnet For Criminal
Activity
 Remain off tax rolls and lower value of surrounding
properties, further eroding real property tax base
 Signal that neighborhood is in decline
 Undermine a neighborhood’s sense of community and
discourage further investment
 Disinvestment often spreads across neighborhoods and worsens
the overall health of a city
Source: http://www.clevelandfed.org/research/policydis/pdp25.pdf
63

64. Why?
 Protection from state law liability (ORC
5722.22)
 Underground storage tank laws
 Air pollution control laws
 Solid & hazardous waste & substances laws
 Ohio EPA laws & regulations
 Voluntary action plans, emergency planning,
cessation of regulated operations
 Water pollution & water conservancy laws
 Common-law causes of action:
○ McLaurin v. City of Cleveland, 1994 WL 50657
(Negligence)
64

65. Land Banking Models
 Cuyahoga/Franklin
 Land Bank funds foreclosure
 Land Bank takes title
○ Holds Property, or Rehabs
 Buyer can take title with commitment to rehab
 Montgomery
 Pre-sold
 Buyer covers costs of foreclosure
65

66. Currently, 15 Counties in Ohio
have Land Banks
 Butler County
 Cuyahoga
County
 Erie County
 Franklin County
 Hamilton County
 Lake County
 Lorain County
 Lucas County
 Mahoning County
 Montgomery
County
 Muskingum County
 Portage County
 Stark County
 Summit County
 Trumbull County
66

67. Which Properties Qualify?
 Delinquent: taxes delinquent for more than 12 months
 Abandoned: unoccupied and appearing on auditor’s
delinquent tax list
 Vacant: unimproved and appearing on auditor’s
delinquent tax list
67

68. Expedited Foreclosure
Process End-user identifies desired property
 Treasurer’s office confirms eligibility
 Title commitment
 Prosecutor files foreclosure on behalf of Treasurer,
Land Bank, or Certificate Holder
 Hearing set 50-60 days from filing
 Property transferred to Land Bank with free & clear title
68

69. Law Protects Owners &
Lienholders ORC 323.69(B)(2) and 323.70(B) require board to dismiss
complaint upon request by owner within 20 days of service
 At that point, tax lien foreclosure must proceed judicially
 Owner's statutory right of redemption remains intact and
may be exercised even after property is sold, but before
confirmation of sale or transfer, by paying overdue taxes
 Lienholder may prevent direct transfer without auction by
timely filing a motion and proving that the impositions do not
exceed the fair market value of the land
69