Client Alert: County Boards of Revision May Continue to Oversee Expedited Tax Foreclosure Case

In a much anticipated decision, the Ohio Supreme Court has upheld the County Board of Revision’s authority to oversee tax foreclosure cases for abandoned property and, under certain circumstances, to order the County Sheriff to transfer the property directly to a County land bank. This expedited foreclosure process was authorized by Ohio lawmakers in 2006 under Ohio Revised Code Sections 323.65 through 323.78, and is one of the ways community-minded organizations are able to acquire distressed properties for rehabilitation to control blighted properties in the community, which ramped up drastically after the housing crash.

However, this expedited foreclosure scheme came into question about three years ago when a Cuyahoga County Property Owner challenged the BOR’s authority and the general process after his property had been foreclosed on and transferred to the Cuyahoga County Land Reutilization Corporation, better known as the County Land Bank, through expedited tax foreclosure proceedings initiated two years before his complaint. During the BOR proceedings, the Property Owner failed to appear at all of the hearings, did not exercise his option to “redeem” the Property by paying the delinquent taxes owed, and did not appeal the final order of foreclosure and forfeiture. Eventually, the case made its way to the Ohio Supreme Court, which issued its final decision on May 28, 2020. The Property Owner claimed that the BOR tax foreclosure process and the BOR’s authority to oversee and dispose of these types of cases is unconstitutional. However, the Court was able to make its decision without actually diving into the constitutional arguments made by the Property Owner. [1]

The Court ultimately upheld the BOR’s authority to oversee and dispose of the tax foreclosure cases as it has done for over a decade pursuant to Ohio statute. This is great news for the communities that have established County land banks and non-profit community development organizations that acquire distressed properties through the expedited tax foreclosure process in order to remove blight and restore the properties to their useful purpose, including as tax generating assets in the community. The expedited foreclosure process is an invaluable tool to that end and can be credited for much of the rehabilitation that has taken place across Cuyahoga County since the housing crash.

Further, the Court’s decision should relieve the concerns of those title companies that have temporarily refused to insure title for properties with a BOR tax foreclosure action in the chain of title. The Court’s decision should make it clear that the title to a property that went through the BOR tax foreclosure process is not clouded simply due to that fact.

Additionally, pending the Court’s final decision in this case, all tax foreclosure cases that would have gone in front of the BOR for an expedited process have been diverted to the Cuyahoga County Common Pleas Court. This, coupled with the hesitation or refusal of some title companies to issue policies, has frustrated the purposes of the expedited process. It is important to note that the BOR never lost its authority to oversee the expedited tax foreclosure proceedings, and that the transfer of these cases to the Common Pleas Court was voluntary and out of an abundance of caution. The question now for each county with a Board of Revision is whether to return to the normal BOR process for newly-filed tax foreclosure cases in light of the Court’s decision. It is arguable that they should, based on the Court’s ruling re-affirming the BOR’s authority on these matters. No announcement has been made as to whether the Cuyahoga County BOR will resume overseeing newly-filed tax foreclosure cases regarding vacant and abandoned property now that this decision has been issued. [2]

A property owner can avoid the consequences of tax foreclosure by doing the following:

1. Pay their real estate taxes;

2. Update their tax mailing address with the County Treasurer in order to ensure that they are receiving their tax bills and put on actual notice of any tax foreclosure proceedings;

3. Contact the County Treasurer regarding a payment plan for any unpaid or delinquent real estate taxes;

4. Contact an attorney as soon as they receive notice of the tax foreclosure, if they are unsure of their rights or how to proceed.

5. Participate in the tax foreclosure action, whether it is before the BOR or Common Pleas Court, by paying close attention to deadlines and showing up for all required appearances throughout the process; and

6. Request that the BOR action be transferred to the Common Pleas Court or file a timely appeal of the BOR action with the Common Pleas Court.

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[1] Specifically, the Court declined to decide whether the BOR’s authority and tax foreclosure process was a violation of due process, separation of powers, and was an unconstitutional taking of real property without any compensation. The Property in question was valued at about $144,500.00 and had delinquent taxes in an amount of about $65,189.94. It went through the tax foreclosure process and was transferred directly to the County Land Bank, which then transferred it to a third party. The Property Owner argued that had the Property been sold for its assessed market value, he would have received some proceeds as compensation and the delinquent taxes would have been satisfied, to the benefit of the County and tax payers. This specific “takings” argument was dismissed earlier in the case, and the Court determined it did not need to decide the other constitutional issues in order to rule on the validity of the BOR’s authority.

[2] A class action lawsuit has been filed based on the same takings argument explained above: alleging property owners and tax payers are deprived of proceeds that they are constitutionally entitled to when tax delinquent properties that are worth more than the amount of delinquent taxes are transferred directly to the land bank through the BOR tax foreclosure process, instead of going to public auction. It is unclear whether new tax foreclosure cases will return to being filed with the BOR or if they will continue in the Cuyahoga County Common Pleas Court pending a final decision from the class action lawsuit filed in federal court, which makes similar unconstitutional takings arguments dismissed from the case just resolved by the Ohio Supreme Court.

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