Q:       What is a “right of first refusal”?

            A:        A right of first refusal is a right to match an offer to purchase property. Let’s say that you put your home up for sale, knowing that your neighbor, Sally, might be interested in buying it. You might choose to give Sally the right to match any purchase offer you may receive for your home.

Q:       How does a “right of first refusal” work?

A:        Let’s say you decide you want to sell your home to your friend, John, for $200,000 under certain conditions. However, since you gave your neighbor Sally a right of first refusal to purchase the home, you must first offer it to Sally under the same terms as those you offered to John before you can sell it to John. If Sally exercises her right of first refusal and follows through with the purchase, John will not be able to buy your home.

Q:       When I draft a right of first refusal, what issues should I cover?
A:        You should address these issues: 

·       Cleary identify what real estate is subject to the right of first refusal.  Suppose you give Sally a right of first refusal for your home as well as the lot next to it. The right of first refusal agreement should address what will happen if, for example, a potential purchaser, such as John, wants to buy only the home and not the next-door lot, and what the price will be.

·       Non-cash offer.  A right of first refusal should address what will happen if, for example, a potential purchaser wants to exchange his home for yours. In this case, Sally, who holds a right of first refusal, cannot match such an offer. The right of first refusal should say exactly how much Sally must pay in cash to match a non-cash offer.

·       Timing.  It is important to carefully draft provisions about when rights of first refusal can be exercised. For example, you should notify Sally within a certain number of days after you receive another offer, and Sally should have an opportunity to exercise her right within a certain number of days. You should also make it clear how Sally will be notified (such as by mail or in person). You should also specify the date of closing, or require Sally to close on whatever date a potential buyer might specify in an offer. The right of first refusal also should have a termination date. After that date, Sally would no longer have the right of first refusal.

Q:       Is a right of first refusal transferable?

            A:        Unless you’ve said, in writing, that Sally cannot transfer her right, then Sally may transfer it to a third party. So, as the property owner, you should state specifically that the right is personal only to Sally, or that Sally can transfer the right of first refusal to a third person. A right of first refusal also should be drafted so that it is binding upon entities or trusts that you own or have an interest in. For example, it could state that, if you transfer your property to a company you own and that company receives an offer to purchase, Sally may still exercise the right of first refusal. You should also state what happens upon your death, as an owner. For example, it may state that the right of first refusal will terminate when you die. Otherwise, the right of first refusal may continue to apply to whoever inherits the home.

Q:       What happens if Sally declines to exercise her right of first refusal?

            A:        Some rights of first refusal provide, for example, that if Sally accepts the right but is unable to complete the transaction, she will no longer have the right in the future. Others provide that the right continues if the property is sold to another party. If the right of first refusal document says nothing about this issue, then there may be differences of interpretation.

Q:       What if either Sally or I change the terms of the purchase?

            A:        Typically, slight variations to the offer by you, as owner, and Sally, who exercises her right of first refusal, are acceptable. In general, you and Sally may not “materially vary” from the terms of the original offer. Obviously, the meaning of “materially vary” may be disputed.

            A carefully drafted right of first refusal addresses most of the issues listed above. However, many rights of first refusal are not complete and specific. Even a well-drafted right of first refusal is subject to dispute, as are most agreements that anticipate future matters.

This "Law You Can Use" column was provided by the Ohio State Bar Association. It was prepared by Avon attorney Marsha L. Collett of Wickens, Herzer, Panza, Cook & Batista Co. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

Q:       I’m thinking of buying a home, and my friend says a house purchase is a “buyer beware” situation. What does that mean?

A:        “Buyer beware,” also known as the doctrine of “caveat emptor,” is an age-old doctrine. It means that, if you intend to buy property, you generally bear the responsibility for finding out about the property’s condition before purchasing it. This doctrine appears to place the entire risk on the shoulders of the homebuyer, but only does so if 1) the condition of the property is open to observation or discoverable upon reasonable inspection to the buyer; 2) the buyer had the opportunity to examine the property; and 3) there is no fraud or wrongdoing on the part of the seller.

Q:       What do I, as a buyer, have to do about a defect that may be found during a home inspection?

A:        A defect that is open, observable and can be discovered through inspection and inquiry is called a “patent defect.” You, as a buyer, are responsible for making efforts to obtain all information about such obvious defects or problems with the property. Also, you will be held responsible and liable for all defects that you could have discovered upon inspection, so make sure you make reasonable efforts to view and inspect the property before buying it.

            For example, you may notice such “patent” obvious defects as large cracks in the concrete foundation of the home, a hole in the roof or rotten wood on the home’s front porch. If you decide to buy the home in spite of these obvious defects, you could not later seek damages or a remedy against the seller for the costs of repairing them. The burden is on you to notice these issues before buying the property.

Q:       What about defects that are not obvious?

A:        The home may have “latent,” defects that are known to the seller, but cannot be easily discovered by the buyer or may present a dangerous condition. They are hidden in nature. As an exception to the doctrine of the caveat emptor/buyer beware doctrine, sellers must disclose latent defects to the buyer. This requirement provides protection for the innocent buyer.

            Latent defects are more complex than patent defects. For example, if a leaking roof can only be noticed when it rains, and an inspection shows no evidence of water damage, this would be a latent defect. Similarly, if a septic tank produces a bad smell occasionally, this would not be a readily observable problem. In such instances the burden falls on the seller. If the seller fails to disclose such issues, the buyer can seek a remedy, if necessary, in court.

            It is very important to retain a licensed property inspector to inspect the property before purchase, and make the purchase agreement contingent upon the property passing inspection. An inspector has the knowledge, skills, and experience necessary to thoroughly evaluate the property and notice issues you may never discover until it is too late.

            A seller is also liable for fraud or misrepresentations to the buyer. For instance, a seller cannot lie and tell the buyer the foundation is in great condition if the seller knows it is in need of repair or in danger of collapsing. Similarly, a seller cannot tell a buyer a roof has never had any leaks if the seller has replaced the ceiling’s drywall and paint to conceal the fact that the roof leaks every time there’s a severe storm.

Q:       What is an “as-is” clause?

A:        In certain circumstances, a seller does not have to disclose latent defects. If a real estate agreement contains an “as-is” clause, then the buyer assumes the risk that latent defects may exist. An “as is” clause relieves the seller of any duty to disclose, and means that the buyer cannot bring a lawsuit against the seller for any passive non-disclosure.

            For example, in Ferguson v. Cadle, 2009-Ohio-4285, the court held that sellers had no liability under an “as is” home sale contract for failing to disclose the existence of a steel support structure that was installed in a basement wall after the wall had sustained water damage.

This “Law You Can Use” consumer information column was provided by the Ohio State Bar Association. It was prepared by Andrew L. Smith, a senior associate attorney in the Cincinnati office of Smith, Rolfes & Skavdahl Company, LPA. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

Q:       Can a company use an existing pipeline easement on my property to construct a new pipeline?

A:        Ohio is crisscrossed with hundreds of miles of oil, gas, water and even coal pipeline easements that were granted in a different era. Some date back to the 1800s. Their validity depends on whether the easement:  was properly recorded; has been abandoned; contains an enforceable provision that provides for additional lines to be installed; and many other factors. To find out if your old pipeline easement can be used to install a new pipeline, you should ask a qualified attorney to review your easement document.

Q:       The old pipeline easement on my property says that the company only has to pay pennies per rod to install a new pipeline. Can that be enforced?

A:        In short, no. In such cases, even if the pipeline easement is otherwise valid, the compensation provision will not be valid. The Supreme Court of Ohio has held that decades-old compensation provisions are unenforceable due to factors such as inflation, increased land value and other changed circumstances that now render the old provision unfair and inequitable to the landowner. The company must pay the fair market value in today’s world for the property it wishes to use.

Q:       If I have an old easement, can the pipeline company put the pipeline anywhere on my property that it wants?

A:        Old easements often describe easement boundaries as being the entire property and the property as being only the land that is bounded by some identified neighbors to the north, south, east and west. Even if such an old description is used, the easement does not extend to the whole property and is limited to what was actually used in installing and operating the pipeline. To establish how much of the property was actually used for pipeline installation and operation, you may be able to reference old photographs of the pipeline installation. Or, if a pipeline goes through woods rather than farmland, you can determine the width that was actually used by calculating the width of the woods that were cleared. If the pipeline company wants to use an area larger than what was established by the original pipeline’s installation and use, it must take that area by eminent domain and pay you just compensation.

Q:       Can a company use an existing pipeline easement on my property to construct a larger pipeline?

A:        An easement must be used in a way that does not place unreasonable new burdens (called a “surcharge”) on the property that it runs through. If an Ohio court finds that constructing a larger pipeline places unreasonable new burdens on your property, then that use will not be permitted.

Q:       What compensation will I receive if the pipeline takes my property through eminent domain?
A:        You are entitled to: 1) the value of the property taken and 2) the damage to the remainder of the property. The value of the property taken is determined by the fair market value of similar property in today’s marketplace. The damage to the remaining property includes the negative effect of the pipeline installation on the value of your entire property, and not just the area where the pipeline is installed. Land containing a large pipeline carrying flammable materials like natural gas petroleum is considered to be less valuable than comparable land that does not have a pipeline. You are entitled to be compensated for that decrease in value, which is often greater than the value of the property that is actually used for the pipeline. Other common elements of damage include crop damage, damage to drain tile and contamination of topsoil. You may also be entitled to compensation for other damages, but these can only be determined by careful inspection of the land involved.

Q:       Does a pipeline company have the right to enter my property before eminent domain proceedings?

A:        Yes. Ohio law permits private pipeline companies that transport natural gas and petroleum to enter your land to survey before any formal proceedings begin. However, the company must give you at least 48 hours’ notice. You are also entitled to receive compensation for any damages to your land, crops, structures and personal property resulting from the company’s entry onto your land. You should consult with an attorney before signing documentation providing access and/or permission to a pipeline company.

This “Law You Can Use” column was provided by the Ohio State Bar Association (OSBA). Michael Braunstein, a principal in the Columbus, Ohio law firm, Goldman & Braunstein LLP, which represents landowners in eminent domain cases, prepared this article. The column offers general information about the law.  Seek an attorney’s advice before applying this information to a legal problem.

Millions of families throughout much of the world now live in condominiums, and, as Americans pull out of recession, we likely will see this unique form of real property ownership continue to grow. The legal “device” known as a “condominium” provides a multitude of real property ownership opportunities.   

Q:       What, exactly, is a condominium?

A:        You cannot recognize a condominium or a condominium unit by sight, touch, smell or even use.  For example, a “condominium” might appear to be a duplex, a single family home development, an attached row, ranch, or town home, an apartment building or complex, an industrial park, a commercial office building or even an entire community. Condominiums may include residential housing, shopping centers, churches, schools, stables and even jails. You can’t fully tell what a condominium is by its Latin meaning (“joint dominion”) but aspects of that definition are key to condominium ownership and living. Technically, a condominium is any developed real property that has been “subjected to” a state’s statutes (written laws) allowing condominium development. 

Q:       How do the condominium statutes work?

A:        Condominium statutes vary from state to state. In Ohio, they allow a developer who meets certain requirements and takes certain legal steps to lawfully divide a piece of (usually already developed) real property into parcels of space that can be separately owned. Each parcel of space has all of the essential legal attributes of any other separate parcel of real property. This means that each can be separately owned, conveyed, taxed, mortgaged, liened, bequeathed and inherited. For people who want to own their own property, have their own mortgage(s), (hopefully) enjoy the benefit of increasing property values and other attributes of real property ownership, condominium units expand real property ownership options.

Q:       Can space be considered real property?    

A:        The “space as real property” concept is not part of our real property law heritage, which was derived from English property law. In fact, without the condominium statutes, the space constituting a tenth floor apartment, for example, could not be treated as a separate piece of real property. Ohio’s “enabling” condominium statutes, however, allow such space to become real property.     

Q:       What happens to the part of the property that is not included in the “space”?

A:        When a piece of real property becomes a condominium by using a state’s condominium statutes, the property is divided generally into “units” and “common elements.” In most condominiums a unit is simply a cubicle of space that may include various items, such as floors, ceilings, windows and doors, which a state statute or a drafter of condominium “governing documents” may provide. 

            All other parts of a “typical” condominium property that are not defined as a part of a unit (including, in Ohio, the underlying land) are common elements.  These common elements are not considered separate parcels of real property. Rather, an “undivided” portion or percentage of the common elements is allocated to (and owned by) each unit as “an appurtenance” —a part of the legal title—to that unit.  So, if you buy a condominium unit, you also will own an “undivided” portion of the condominium’s common elements.  For instance, your portion of the condominium’s common elements might be one-tenth in a ten-unit condominium, even though your portion cannot be physically identified, and will always remain unidentified and unidentifiable!

Q:       So, if I say I’m buying a condominium, I’m really only buying a share in a condominium. Is that right?

A:        Yes. Although most people, including many of those in the real estate industry, talk and write about buying and selling “condominiums,” they really mean they are buying and selling UNITS in a condominium.

This “Law You Can Use” consumer legal information column was provided by the Ohio State Bar Association. It was originally prepared by Columbus attorney Dick Loveland, and updated by attorney Bill Loveland of Loveland Law, LLC, Upper Arlington, Ohio. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

Q:       A company has asked for access to shale deposits on our land. Would we be taxed on money we receive from allowing access?

A:        Almost certainly, yes. Royalty, bonus or other income paid to landowners in exchange for access to resources on their land is generally categorized as ordinary income. Depending on filing status and total income amount, taxpayers typically do need to report these earnings to the IRS.

Q:       We’ve been asked to sign a natural resource extraction agreement. How would we report payments from that lease agreement?

A:        Natural resource extraction agreements involve “delay rental,” “royalty” and “lease bonus” payments. Landowners who receive these payments are “royalty owners” who typically do not have a working interest in the extraction operations. This income is reported on Part I of Schedule E (Form 1040), Supplemental Income and Loss. Landowners who do have a working interest in the extraction operations must file using Schedule C (Form 1040), Profit of Loss from Business.

Q:       If we get a bonus in addition to lease payments, how would we report that income?

A:        Taxpayers who lease their property so a company can extract natural resources may receive a lease bonus. The bonus may be paid in a lump sum or over several years. The company leasing the land should provide you with a Form 1099-MISC, Miscellaneous Income, noting the amount of bonus payments as “Rents” in Box 1. Taxpayers usually report lease bonus income as rent on Schedule E.

Q:       How would we report periodic payments for our share of profits from the natural resources?

A:        The company may periodically pay you for your share of profits generated from your property’s natural resources. These “royalty payments” must be based on natural resource production on a recurring or intermittent basis, according to your lease terms. The company should give you a Form 1099-MISC, noting the payments as “Royalties” in Box 2. Most taxpayers report royalty payments they receive as “royalty income” on Schedule E.
            Both rental and royalty income (or loss) is also calculated on Schedule E, transferred to Form 1040, Line 17, to be combined with other sources of income.

Q:       Do we get tax credit for the depletion of our resources?

A:        Possibly. Depletion is the “using up” of natural resources through mining, drilling, quarrying of stone or cutting of timber. The IRS allows a “depletion deduction” so taxpayers who own economic interests in natural resources can reduce their taxable income and account for the reduction of reserves.

            Depending on the type of resource, you may have the option to use either “cost” or “percentage” depletion. If you qualify for both options, use the method that yields the greater deduction. For federal tax purposes, the percentage depletion rate varies according to the mineral being produced. Taxpayers claim depletion and other allowable deductions on the “Expenses” section in Part I of Schedule E. See IRS Publication 535, Business Expenses, for more information.

Q:       If we had a working interest in the extraction operations, would we get any deductions?
A:        Possibly. If you have working interests in extraction operations, you may be able to offset your natural resource income by deducting expenses such as overhead, dry holes and certain legal and administrative fees and county health department water testing fees. You also may deduct business expenses such as depreciation, tangible or intangible costs, utilities, as well as car, truck and travel expenses related to resource extraction. Severance tax and operation expenses must be detailed on an Authorization for Expenditures (AFE) statement provided by the exploration company.

           

Q:       Must I report the free gas the company is offering?

A:        It depends. If the company returns natural gas extracted from your property to you, the value of the gas received is probably nontaxable. However, free natural gas from the company may be taxable if the gas you receive is not from your retained ownership interest. Generally, ownership of raw gas extracted by a leasing company is based on the lease terms and state law.

Q:       Is federal tax withheld from natural resource income?

A:        Typically, no, so you may want to make estimated tax payments. See Publication 505, Tax Withholding and Estimate Tax, for more information. Income from leasing mineral property and royalty payments for extraction of natural resources can be significant, so familiarize yourself with the tax rules to avoid an unexpected tax bill. See Publication 525, Taxable and Nontaxable Income, and the Instructions for Form 1040, Schedule E and Form 1040, Schedule C.

The information for this “Law You Can Use” column was provided by the Internal Revenue Service (www.irs.gov). It was prepared by the Ohio State Bar Association. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

Q:       I’ve been living with someone for ten years, and now we’re splitting up. Can we use a divorce court to divide our assets and debts, even though we aren’t married?

A:        No. If you are not married, Ohio law does not give you the right to stand in front of a court and request an equal or equitable division of your property. The legislature has passed laws governing equitable and equal division of separate and joint property for married couples, but no such statute governs how to determine what is equitable when dividing property between co-habitants. 

Q:       Since we’ve lived together for so long, might we be considered to have a common law marriage?

A:        No. Common law marriage is no longer recognized in Ohio. Ohio law recognizes common law marriage only if it occurred before October 10, 1991 and was not ended by death, divorce, dissolution of marriage or annulment. However, Ohio will recognize a common law marriage if it was proper under the laws of another state for people who are now meeting all of Ohio’s residency requirements.

Q:       Is there a way we can divide our real property, even though we were never married?

A:        Yes. Most people hold their real property as “tenants in common” (meaning that they own it together) or as “tenants with the right of survivorship” (meaning, generally, that they own it jointly, and the entire property passes to one of them on the death of the other person). If you own property jointly as tenants in common, then one of you may wish to buy out the other. However, if you do not wish to do this or cannot agree on the price, you can file a civil action in a civil common pleas court. This is called a “partition action.” The court will consider the property appraisals and the interests of both parties, and decide who should have the property by the partition action. A partition action can be brought if you cannot end your relationship by selling or transferring your interest in the property to each other or to a third party. Also, if the property is not paid for, your interest can be lost, either through the partition action or through a foreclosure action.

Q:       The person I’ve lived with for ten years will not return my personal property. Does Ohio law address this issue even though we’re not married?

A:        Yes. If the other party is holding your personal property and will not release it, you can bring suit in municipal court requesting the return of your personal property. You must, however, be able to prove the suit by evidence such as other witnesses who know you owned the property, receipts for purchase, cancelled checks and such other evidence to show that it is your personal property

Q:       Can I sue my partner if she reneged on her promise to marry me?

A:        No. One co-habitant cannot sue another based only on the promise to marry. If you have lost property or have transferred property based on that promise, you can try to get the value of the property or the property back, but you cannot claim any “damages” (compensation for the injury your partner caused you) based on the promise alone.

Q:       Does Ohio have a Defense of Marriage Act?

A:        Yes. Ohio’s Defense of Marriage Act was passed on Nov. 2, 2005. This act effectively changed Ohio’s constitution to define marriage as a contract between one man and one woman. Article XV, paragraph 11 of Ohio’s constitution says that “the state and its political subdivisions shall not create or recognize a legal status for relationships of unmarried individuals that intends to approximate the design, qualities, significance or affect of marriage.”

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by Dayton attorney James R. Kirkland of Kirkland & Sommers, Co., L.P.A. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

Q:       What is a “severed mineral interest”?

A:        If you buy a property, you may find you don’t own everything on that property. For example, a past owner may have sold the house and land, but kept an interest in minerals that might be found underneath the property. This is called a “severed mineral interest.” While it could be a reservation of gold or silver, today such an interest is usually in oil and gas. This severed interest may take different forms. A past owner may have reserved all mineral rights, all the oil and gas rights, half of the oil and gas royalty rights, the oil and gas leasing rights and part of the royalty rights, or some variation of these.

Q:       How do I know if my property has a severed mineral interest?

A:        Your deed may spell this out, but to be certain, you should have a qualified person do a complete oil and gas mineral search. This would involve an examination of public records going back to the 1880s.

Q:       Should I simply assume that I have the right to sign an oil and gas lease?

A:        If you sign, and later it is determined that you do not own all of the oil and gas rights, you will be notified and told to eliminate any outstanding oil and gas interests. However, eliminating those interests after signing a lease may be more difficult or costly.
            For example, if a severed oil and gas interest was only for part of the royalty interest, then the owner of that interest has no right to lease the property. That royalty interest would mean something only if oil and gas were being produced on the property. If you are currently leasing the property, the potential value of that royalty interest is automatically more valuable, so the owner of the interest would likely fight to keep that interest.

Q:       Should I sign an oil and gas lease if I do not own all of the oil and gas rights?

A:        If you do not own all of the oil and gas rights, it may be unwise to sign a lease for the reasons stated above.

Q:       If my property has an oil and gas problem, should I fix the problem or wait to see if the oil and gas company takes care of it?

A:            An oil and gas company will rarely take the legal action needed to eliminate an outstanding oil and gas interest affecting your property. Let’s say you own only half of the oil and gas leasing rights, while a previous owner has reserved the other half for his or her heirs. The oil and gas company may approach those heirs instead of you, and acquire their signatures on the lease. To avoid such a scenario, you should attempt to eliminate the severed minimal interest before signing a lease.

Q:       What can I do to eliminate any outstanding severed oil and gas interests on my property?

A:             You have several options, depending on what the deeds in your chain of title say and whether there is any oil and gas production on your property. One option is based on the 1989 Ohio Dormant Minerals Act. This remedy can be used only if, within the last 20 years, there has been no oil and gas production and no claim filed or recorded to preserve that interest. An amendment to this act, effective June 30, 2006, now requires that a notice be given to the holder of the severed mineral interest.

            You may also be able to use the Ohio Marketable Title Act, depending on the wording used in the deeds in the chain of title, beginning with the most recent deed that has been of record for at least 40 years. This option would require you to file a Quiet Title Action in court, which involves more time and costs than the first option. This remedy is also not available if there has been oil and gas production on your property in recent years.

            If the severed mineral interest was created using “words of inheritance” (such as “heirs and assigns”) in a deed made before June 13, 1925, you may be able to argue that the reservation was valid only during the lifetime of the individual who made the reservation, unless the deed includes words of inheritance or succession. After June 13, 1925, words of inheritance were no longer required to create a fee simple estate.

             

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by Woodsfield attorney Richard A. Yoss of the Yoss Law Office. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

Q:       What happens if the property I’m renting is in foreclosure?

A:        You probably make monthly rent payments to your landlord, while your landlord makes mortgage payments to a lender. If your landlord stops making payments, the lender may foreclose on your landlord, which will also affect you. In Ohio, the lender must file a foreclosure complaint before legally taking a house or apartment away from the landlord (owner). Your landlord still owns the property until a court grants a foreclosure judgment and approves a sheriff’s sale.

Q:       How will I know if a foreclosure has been filed against my landlord?

A:        Generally, the lender (“plaintiff”) will name you as a tenant in the foreclosure complaint, but may only list you as “Jane or John Doe” or “unknown tenant at [your address].” You are unlikely to get a copy of the foreclosure judgment, but keep any notification you receive so you can find out how the case is progressing or get legal advice, if necessary.

Q:       How can I find out about the status of the foreclosure case?

A:        Check with your local clerk of courts for your county’s Court of Common Pleas. Many clerks have case information online (http://www.occaohio.com/countylist.aspx?qname=All). You may need to provide your landlord’s name to get information about the foreclosure, which is a civil lawsuit.

Q:       Can I stop paying rent if a foreclosure lawsuit is filed against my landlord?

A:        NO. Your landlord still owns the property until there is a judgment and sale, and if you stop paying your rent, your landlord could file an eviction action in court, even during a foreclosure action.

Q:       Can I break my lease if a foreclosure lawsuit is filed against my landlord?

A:        Generally, a foreclosure filing doesn’t allow you to break your lease unless your lease agreement says otherwise. If you do so, your landlord could sue you for money damages. If you decide to move, you may want to negotiate with your landlord to terminate your lease early. If you reach an agreement, make sure it’s in writing and signed by your landlord, yourself and anyone else on the lease.

Q:       Must my landlord maintain the property while it goes through foreclosure?

A:        YES. Until the court approves the sale, your landlord must still fulfill all obligations, such as making repairs, just as you must continue to pay rent.

Q:       Can my landlord still collect rent after the court issues a foreclosure judgment and approves the property sale?

A:        NO. Once a “confirmation of sale” has been filed with the court, it cuts off all the owner/landlord’s rights, including the right to collect rent, but you should continue to set aside rent payment so you can pay the new owner. Whoever purchased the property at the sheriff’s sale will become your new landlord, because the lease survives the foreclosure sale. The new owner should tell you where to make your rental payment, and the amount should not change. Also, the new owner must make any repairs that the lease or Ohio law would have required the old owner to make.

Q:       Can I stay in my apartment once the foreclosure process is completed?

A:        YES, for at least 90 days. Under the federal Protecting Tenants at Foreclosure Act (PTFA), which applies to anyone who bought a property on or after May 20, 2009 as the result of a foreclosure, the new owner generally must keep you as a tenant. Usually, the new owner is the lender (plaintiff), who buys the property back from the landlord at the sheriff’s sale, so the lending company may become your new landlord.

Q:       Can the new owner force me to move out?

A:        Possibly, but you should receive at least 90 days’ notice before the new owner can make you leave. If you are a “bona fide tenant” with a “bona fide lease,” then you have the right to stay in your home until your current lease ends. If, however, the new owner intends to live on the property, you must receive at least 90 days’ advance notice to move out. The new owner can evict you if you do not leave after being properly notified. (Note: You must meet certain criteria to be a “bona fide” tenant with a “bona fide” lease. Consult an attorney if you are unsure about your tenancy status.)

Q:       Can the court evict me through the foreclosure action?

A:        NO. If you are a “bona fide tenant” with a “bona fide lease agreement,” then the new owner must give you a 90-day eviction notice. If you do not move within 90 days, the new owner must: 1) serve you with a three-day Notice to Leave Premises and 2) file an eviction action. Under the PTFA, you may have the right to stay through the end of your lease.

Q:       Where can I get more information or legal help?

A:        Go to http://www.ohiolegalservices.org/programs  or call 1-866-LAW-OHIO (1-866-529-6446) to locate the legal aid program in your area. You must be financially eligible to receive services, including advice, from a legal aid program.

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by attorney Joe Maskovyak of the Ohio Poverty Law Center in Columbus. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.