Real Estate Advisor Law Blog : Ohio Real Estate Lawyer & Attorney : Ulmer & Berne Law Firm : Columbus, Cleveland OH

In the past, we have spoken about grants and loans available through the Ohio Department of Development for advanced energy residential projects, such as solar and wind energy installation.  Federal funding is also available for residential energy-reduction projects through The American Recovery and Reinvestment Act of 2009 (ARRA).  A total of $250 Million from ARRA was allocated to HUD for its Assisted Housing Green Retrofit Program (GRP).  Under GRP, HUD is offering up to $15,000 per residential unit for projects that reduce energy costs, reduce water use, and improve indoor environmental quality.  HUD expects to fund about 25,000 units (approximately 300-350 properties), with an average $10,000 provided to each unit.

Beginning June 15, 2009, HUD is accepting applications for GRP funding on a first come, first served basis, and subject to allocations for project categories, geographic location and owner/affiliate concentration.  HUD may offer either a Green Retrofit Grant or a Green Retrofit Loan repayable from a share of surplus cash and from sale and refinancing proceeds.  The performance period for completing all Green Retrofits will generally be twelve (12) months, but in no event may it exceed twenty-four (24) months.  The program requirements differ depending on the type of project-based assistance contract and depending on the owner entity (nonprofit or for profit).

The properties eligible to receive GRP funding are the following: Section 202 funded properties that have at least 32 units; Section 811 funded properties that have at least 8 units; properties receiving assistance pursuant to Section 8 with USDA Section 515 loans and which have at least 20 units; and all other Section 8 funded properties having at least 72 units.

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The rights of owners and tenants in post-foreclosure property have been dramatically altered by new legislation signed by President Obama. On May 20, 2009, President Obama signed the “Helping Families Save Their Home Act,” which contained provisions to aid renters whose landlords go through foreclosure. Title VII of the Helping Families Act (the “Act”) is entitled “Protecting Tenants at Foreclosure” and generally requires the immediate successor-in-interest on foreclosed property to recognize the lease rights of existing tenants on the property. 

The Act applies to any property where there has been a foreclosure on a “federally-related mortgage loan or on any dwelling or residential real property” after May 20. “Federally-related mortgage loan” is defined in RESPA as being limited to mortgages on property “designed principally for the occupancy of from one to four families.” Therefore, the Act’s requirements apply only to residential, and not commercial, property. 

If there are “bona-fide-tenants” on the property that signed leases prior to the foreclosure, the Act appears to require landlords to recognize the remaining term of the lease, although there is some ambiguity in the text of the Act regarding whether a landlord may choose instead to require existing tenants to vacate on ninety-days notice. “Bona-fide tenant” is a defined term essentially meaning that the tenant’s lease was the product of an arms-length transaction. 

There are two situations under the Act where it is clear a post-foreclosure owner may require a tenant to vacate upon ninety-days notice. First, if the new owner sells a tenant’s unit to a purchaser who will occupy it as a primary residence, the owner may require the tenant to vacate after expiration of the notice.  Second, a tenant who does not have a lease or whose lease is terminable at will must also receive a ninety-day notice before being required to vacate. The Act does not displace any federal or state requirements for terminating subsidized tenancies, or any state laws that offer greater protections to tenants. If not renewed, the Act will expire on December 31, 2012. 

It is especially important for lenders to be aware of this new law, as many are becoming owners of real property through foreclosure proceedings. Anyone acquiring property post-foreclosure must carefully examine existing tenancies to ensure it recognizes leases or gives appropriate notice as required by the Act. Hopefully, better guidance will be offered in the near future concerning when a landlord may terminate an existing tenancy after giving proper notice.

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Ohio’s Transfer on Death Statute became effective at the beginning of 2002. Prior to the law being passed, there was much buzz in the real estate and trusts and estates legal community about why Ohio did not have a vehicle permitting owners of real estate to transfer real property on death to a named beneficiary, thereby avoiding probate of the property. After all, bank accounts could be transferred by naming a transfer on death beneficiary. Why could the same not be done for real estate? Ohio’s transfer on death statute had several problems, most notably the ambiguity with respect to whether or not joint tenants could be transfer on death grantors and, if so, what was the effect of the death of one, but not all, joint tenants? The debate and discussion became so heated that a multiple choice question was circulated on the Ohio State Bar Association’s Real Property Listserv suggesting five different vesting possibilities with the sixth multiple choice answer being “I don’t give a rat’s @$$. I have heard entirely too much on this topic and I want to be left alone.” Choice 6 knocked all others out of the ballpark.      

 A new Senate bill was introduced on April 30 which throws out the old transfer on death statute, getting rid of transfer on death deeds entirely, and replacing them with a transfer on death affidavit. In fact, the bill actually answers many of the questions that those of us in the real estate business have been debating since the law’s inception. For example, it makes very clear that joint tenants may name a transfer on death beneficiary. It also clarifies that upon the death of one joint tenant, the property is owned by the remaining joint tenants. In the event that there is a transfer on death affidavit in effect upon the death of the last joint tenant, the property transfers to the beneficiary. The bill cleans up the confusion of transferring on death to the trustee of a trust when the trustee of the trust may change. It also addresses ambiguities left open in the original statute with respect to a spouse’s dower interest.

In fact, the new bill is so well drafted that I thought it was the perfect fix. That is, until I described the changes to my trusts and estates colleagues. They expressed the concern that they will now have to do a full title search on every individually owned piece of real property in every estate to confirm that there is no transfer on death affidavit of record. Previously, they only obtained the last deed of record which would contain the transfer on death beneficiary, if any. As a real estate attorney who regularly orders title commitments, I believe that this is a small price to pay for the clarity that the statute brings to the dreaded transfer on death deeds. Hopefully it will put a stop to multiple choice questions on the Real Property Listserv.       

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A mechanics’ lien claim can give the contractor, subcontractor or material supplier making the claim a significant amount of leverage over a property owner in a payment dispute. This makes sense, of course, because the concept behind mechanics’ lien law is to provide some assurance that people will receive payment for work and materials they provide to improve real property. But what can the owner do where the claim for payment is disputed and the mechanics’ lien threatens to put the owner in default of its mortgage covenants or disrupt a sale or refinancing of the property?

When there is no external pressure from a lender or pending sale of the property, the owner does not necessarily need to do anything to address a lien. Ohio mechanics’ liens are valid only for a period of six years from the date of recording. If the owner believes the lien is invalid and therefore unlikely to be foreclosed upon, the owner can simply wait six years until the lien expires. 

If, however, the lien needs to be removed prior to the expiration of the six-year period, the owner has several options. Ohio’s mechanics’ lien law is complex and contains many traps for the unwary that may render a mechanics’ lien invalid.  For instance, on commercial projects, a mechanics’ lien claimant only has 75 after the last date of work in which to file the lien affidavit with the recorder’s office. The lien must then be served upon the owner or owner’s designee within 30 days. Failure to meet either of these deadlines will render the lien invalid. 

Another stumbling block for potential lien claimants occurs when the owner has recorded a notice of commencement (which the owner typically should). The recording of the notice of commencement triggers an obligation on behalf of subcontractors or material suppliers to serve a notice of furnishing upon the owner in order to preserve their right to claim a lien. Check to see that a notice of furnishing was properly served by the lien claimant. If not, the claimant may have lost the right to file a lien. Note that the requirement to serve a notice of furnishing does not apply to someone who has a contract directly with the owner. 

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