Changes to Ohio's Foreclosure Law

As some of you are aware, House Bill 390 became effective on September 28, 2016.  Many of the changes will be beneficial to community associations by providing potential expedited processes in several aspects of a foreclosure action.  As many of the processes are new, the manner in which the changes are gradually worked into the current system will be constantly developing.  We are keeping a very close eye on how these changes are progressing and will keep you informed on any updates, as they become available.

Expedited Foreclosure Process

For vacant and abandoned units, the foreclosure process can be expedited.  An Association will have to prove that certain conditions exist to warrant deeming the property vacant and abandoned.  There are 11 conditions; we have to prove 3 out of 11.

If we meet 3 out of the 11 conditions, we can file a motion with the Court to deem the property abandoned.  The Court will be required to rule on our motion within 21 days, and may then order that the property be sold through a foreclosure decree, which must occur within 75 days of the foreclosure decree issuance.

Damage of Foreclosed Property Subject to Criminal Prosecution

The new law provides that if any person, whether an owner, occupant, or otherwise a party to the foreclosure, can be charged with criminal mischief for damaging, defacing, destroying or otherwise tampering with the property after they are served with a summons for the foreclosure.  This would affect properties that are commonly “stripped” of fixtures by defaulting owners.

County Prosecutor May Request Sheriff’s Sales

If there is no activity within one year after a foreclosure decree is issued, then the county prosecutor’s office may move to set the sheriff’s sale, without consent of the creditor.  If the Court allows the county’s intervention in the process, the property will be sold with no minimum bid. 

Multiple Sales

Two sheriff’s sales may now be set at the same time, similar to the manner in which tax foreclosure sales are set.  If two sales are requested at once, they will be held within 30 days of one another, with no additional fee to set the second sale.  The first sale will start the bidding at 2/3 of the appraised value, and the second sale will have no minimum bid (but costs and taxes must be paid).  This should assist in selling properties where we have historically had trouble obtaining bidders because they were not willing to pay the minimum bid.

Private Selling Officers

Private selling officers (PSO) may now sell properties that would otherwise go to sheriff’s sale.  The PSO’s must be licensed appraisers and real estate agents, and we must request to appoint a specific person in the motion to appoint a PSO.  The PSO must start the bidding at two-thirds of the appraised value, and may either conduct a public auction in person, or use online bidding where the bidding is open for 7 days.  This is one of the processes that will be developing, and we have not seen any creditors take advantage of this provision yet. 

The private selling officer will obtain title insurance and be paid a commission of up to 1.5% of the purchase price.  Any of these expenses will be taxed as costs through the Clerk of Courts.

All-Ohio Bidding Process

The new law also provides that within five years, sheriff’s sales for all of Ohio’s 88 counties will be held online via a unified website, and that sheriff’s sales will no longer be held in person.  The initial process calls for bids on the system from technology developers.  This will be one aspect of the new law that will likely dramatically change the process, but not immediately. 

Changes in Sale Deposits

For property appraised at $10,000 or less, the deposit will be $2,000.

For property appraised at $10,001 to $200,000, the deposit is $5,000.

For property appraised above $200,000, the deposit is $10,000.

If it is written in the foreclosure decree, the Plaintiff shall not be required to pay a deposit.

Due Date of Balance of Sheriff’s Sales

Previously, a purchaser was required to pay the full bid price plus costs/taxes within 30 days of the sale date.  Now, the full bid price plus costs/taxes must be paid within 30 days of the confirmation date, which will allow purchasers usually at least another month or two to put funds together.

More on Community Associations