Constitutionality of Ohio Board of Revision Tax Foreclosures

Tax Foreclosures

On September 17, 2018, a Complaint for Writs of Prohibition and Mandamus with Supporting Affidavit by Relator Elliott Feltner (“Feltner”) was filed with the Ohio Supreme Court challenging the constitutionality of the Cuyahoga County Board of Revision Tax Foreclosures (“BOR Foreclosures”).  The complaint challenges the results of a foreclosure filed with and decided by the Cuyahoga County Board of Revisions (the “BOR”).  The property at issue is a commercial site owned by Feltner located in the city of Cleveland. Following the foreclosure, the property was transferred by Sheriff’s Deed to the Cuyahoga County Land Reutilization Corporation (the “Land Bank”).

Counts

Currently, there are 2 counts pending with the Ohio Supreme Court[i].  The motion to dismiss by the Cuyahoga County respondents was granted as to the remaining counts (service of process is not an issue in the pending case).

  • Count I – Prohibition: Count I alleges that the General Assembly incorrectly gave a judicial power to the Board of Revision, thus exceeding its constitutional power. As a result, the BOR exercised jurisdiction that it did not have in deciding BOR foreclosure cases.[ii]
  • Count III – Prohibition: Count III alleges that there is a conflict of interest in BOR foreclosure cases because the Cuyahoga County Treasurer (the “Treasurer”) is both the Plaintiff bringing the case and a board member of the Cuyahoga County BOR deciding the case. The Treasurer also sits on the board of directors of the Cuyahoga County Land Bank.[iii]

Following the passage of H.B. 294 and S.B. 353[iv], the BOR heard expedited delinquent tax foreclosure cases for vacant and abandoned real property in lieu of the judicial foreclosure process in the Cuyahoga County Court of Common Pleas (the “Common Pleas Court”).  One of many reasons for the passage of the above legislation is to allow responsible parties to take control of abandoned, distressed, and unproductive properties to prevent crime, safety hazards, and further degradation of neighborhoods.

Benefits

One of the benefits of using the BOR for tax foreclosures is that the cases move faster than foreclosure cases in the Common Pleas Court.  BOR Foreclosures encourage economic development in areas where properties are blighted, abandoned, and often in disrepair. After the BOR Foreclosure, property is frequently transferred to a land bank which is able to extinguish any taxes owed on the property.  This is made possible by the Ohio Housing Finance Agency, which reimburses the land banks for the cost of acquiring and demolishing the properties.

The Supreme Court case has had a negative effect on the real estate and title insurance industries.  Following the filing of the lawsuit, the title insurance industry recognized the possible impact of the Supreme Court case on insuring BOR Foreclosures.  Should the Supreme Court find in favor of Feltner, the title industry is concerned that the decision will apply retroactively to all previous BOR Foreclosures.  If it did, the decision would put a cloud on the title of any property that had ever been foreclosed using the BOR Foreclosure procedure.  In the ten (10) years since the enabling legislation, it is estimated that 33,000 BOR foreclosures have been insured in the State of Ohio.  If BOR Foreclosures are struck down, Ohio title insurers would likely receive numerous title claims.

The case is not only affecting Cuyahoga County.  Athens County recently ended its use of the expedited foreclosure process for blighted, tax delinquent property pending a ruling by the Supreme Court.  Robert Wasserman, Treasurer for the County of Athens, recently commented following this decision, that it was a “shame for the people in the community in which this dilapidated house sits on which taxes have not been paid for I don’t know exactly how many years… that we’re not hearing the case today, and that the whole situation has to be delayed until it can be heard on the docket of the Common Pleas Court.”[v]  Currently, Cuyahoga County is also sending all tax foreclosure cases that could have been heard by the BOR to the Common Pleas Court pending the Supreme Court decision.

What’s Next?

This case is being monitored closely by the title insurance industry, community development corporations, and land banks in the State of Ohio.  Oral arguments are expected to commence on November 13, 2019, with a decision not expected until 2020.

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[i] See State of Ohio, ex rel. Elliott G. Feltner, Relator v. Cuyahoga County Board of Revision, et al., Case No. 2018-1307
[ii] See Complaint for Writs of Prohibition and Mandamus with Supporting Affidavit, State of Ohio, ex rel. Elliott G. Feltner, Relator v. Cuyahoga County Board of Revision, et al., Case No. 2018-1307
[iii] Id.
[iv] See R.C. 323.65 through R.C. 323.79
[v] Morris, Conor, Athen News, June 26, 2019, https://www.athensnews.com/news/local/county-officials-differ-on-how-land-bank-should-work/article_4f669a74-983f-11e9-af9a-b7d1d9afd92d.html.