Property Tax Reductions Available for Ohio Farmers

Under Ohio's Current Agricultural Use Value (CAUV) program, "land devoted exclusively to commercial agriculture" is valued based on the agricultural use of the land rather than its "highest and best probable legal use." A CAUV valuation often results in a significant reduction in property taxes.

In order to qualify for the CAUV program, property larger than 10 acres must be devoted exclusively to commercial agriculture (such as animal husbandry, field crops, or commercial timber).  If the property devoted exclusively to commercial agriculture is smaller than 10 acres, it must generate a gross average income of $2,500.

An initial CAUV application must be filed with the county auditor prior to the first Monday of March.  Renewal applications must be filed each year.  The auditor's office annually inspects each property to determine if the property qualifies for the CAUV program.

If CAUV land is converted to a non-agricultural use, the property is removed from the CAUV program and the property owner is assessed a recoupment charge equivalent to the tax savings over the previous three years.

For more information about the CAUV program, visit the Ohio Department of Taxation or the Ohio State Bar Association.

Just The Facts, Ma'am: Recording an Affidavit Related to Title

Ohio law permits anyone knowledgeable about facts which may affect the title to property to record an Affidavit of Facts Relating to Title with the county recorder.  This affidavit serves as evidence of facts and matters that have a bearing on title to the property.

The statute allows the affiant to state facts about a wide variety of matters, such as birth and death, the identity of parties, possession of the property, the location of physical features such as fences or streams and, most broadly, "[t]he happening of any condition or event that may create or terminate an estate or interest" in the property.

An Affidavit of Facts Relating to Title warns potential purchasers that another party may have an interest in the real estate.  Before purchasing a property, it is wise to do a comprehensive title search to ensure that you will receive clean title to the real estate.

Do You Know Your Surface Water Rights?

Spring is coming, and that means a lot of rain in my part of the country. This reminds me of some issues that have come up with clients who were surprised to when their backyards flooded what the law of surface water rights is.

The Supreme Court of Ohio has held that land of a lower elevation is burdened with a "servitude" to receive the natural flow of surface water from land of a higher elevation. That means that your neighbor with the higher ground has an implied right to allow his or her surface water to flow onto your property. But, do you have to take it? Yes ... well mostly. You only have to take that surface water onto your property so long as it comes in its natural state and quantity, and only so long as the flow of that surface water has not been altered by some artificial means. Your uppity neighbor cannot manage his or her flooding problems by building a channel that captures or redirects surface water and then causes it to flow as a stream onto your property.

Somewhat different rules apply if your land is considered to be in an urban location versus a rural location. The cases have not developed distinctions in the definitions of urban versus rural, so it is best to speak to a lawyer if you have questions.

Ohio's D.O.L.L.A.R. Deed Program

The 131st Ohio General Assembly is currently considering new legislation to give individuals and families another opportunity to stay in their homes and avoid foreclosure after default on a mortgage loan.

House Bill 303 would create the D.O.L.L.A.R. Deed Program, established in part by the Ohio Housing Finance Agency. Under the new program, if the borrower defaulted on a mortgage loan, the borrower and lender would enter into an agreement in which the borrower transfers his interest in the property to the lender by way of a deed in lieu of foreclosure. In return, the lender would then rent the property back to the borrower for a specified period of time. During the lease term, the borrower would be able to repurchase or refinance the property.

House Bill 303 was passed by the House on December 8, 2015 and is currently under consideration by the Senate Committee on Financial Institutions.

Is Your Property Fairly Taxed?

Every year, Ohio counties assess a property’s real estate taxes based on the market value the county places upon the property. However, the county's assessed value does not always accurately reflect the property’s true market value.

Ohio law gives property owners the right to challenge the value the county has placed upon their property if they feel it is in excess of the true market value by filing a complaint against the property's value with the county auditor. That complaint must be submitted by March 31, 2016.

If you believe your property is not valued correctly, please contact our office to discuss whether it is in your best interest to file such a complaint, keeping in mind the deadline of March 31, 2016.

Ohio Updates Receivership Statute

Earlier this year, changes to Ohio’s statute governing court-appointed receivers became effective. The Ohio legislature passed, and Gov. John Kasich signed, legislation updating and clarifying various aspects of the law, including the qualifications of a receiver, the authority of a receiver, and the procedure for the sale of property.

In general, a receiver acts on behalf of the court to protect endangered property or assets, often while an underlying legal action such as a foreclosure is pending. Under the statute, a receiver may be appointed by the court to do such things as collect rents, take possession of property, or enter into contracts. The statute permits a receiver to be appointed in several specific circumstances, such as when a corporation has been dissolved, to carry a judgment into effect, or in some foreclosure actions.

It is important to note, however, that even if a court may appoint a receiver it is not required to do so. The court must use its discretion to determine if such an appointment is necessary to protect a party’s rights, in particular to prevent a party from suffering irreparable harm.

A detailed analysis of these important statutory changes affecting property and business owners is available from Porter Wright.

Property Deed Restrictions: Are They Enforceable?

When transferring property, an owner may wish to place certain restrictions in the deed to limit the new owner’s use of the property. Such restrictions typically “run with the land” – meaning they are not personal to the owner and will affect future owners.

Typical deed restrictions are the following:

• Grantee retains the right to use the land for hunting purposes.
• The Property may not be rented or leased to any third party. 
• Only one single-family residence is permitted on the Property. 
• No trees may be removed from the three acres of the Property bordering Buckeye Creek. 
• Grantee retains the right of first refusal and option to purchase, in the event Grantee wishes to sell the Property to a third party. 

While most deed restrictions are valid, those that are against public policy are unenforceable. For example, restrictions that bar the grantee from transferring the property are considered a restraint on alienation because they prevent the free flow of property. A restriction that limits transfer of the property to buyers of a certain race is invalid.

Ohio’s legislature and judiciary have also looked at specific restrictions in recent years. In 2003, the Ohio General Assembly amended the statutes to specifically provide that deed restrictions prohibiting flagpoles or the display of the American flag were invalid. In 2012, the Ohio Supreme Court held that a public school district could not sell a vacant school building for sale with a deed restriction preventing the property to be used for school purposes, because Ohio’s public policy supports community schools.

Sellers should consider whether they should insert deed restrictions into the transfer documents, particularly in cases in which they will live nearby or gain some value from the restrictions (be it a protected view, the option to buy back the property, or some other benefit). Likewise, before purchasing property, buyers should hire a reputable company to perform a title search to make sure that they are informed about any existing deed restrictions on the property.

Arkansas Law of Damages Released

One of our attorneys, Christian H. Brill, and his father, Prof. Howard W. Brill recently published the 6th edition of Law of Damages, a comprehensive treatise on damages law in Arkansas. The volume is now available for purchase from Thomson Reuters.

Completely rewritten for the first time in more than a decade, the 6th edition of Law of Damages covers both the general principles of damages law in Arkansas and the damages relating to substantive principles of the law.

Part one treats damages generally, discussing damages in their many forms. Part two puts these varieties into perspective, relating them to substantive areas of the law.

The text also:

• Provides in-depth discussions of different types of damages, including punitive damages, compensatory damages, attorneys fees, interest, and costs
• Includes instruction on procedural and evidentiary aspects of proving and calculating damages
• Discusses application of statutes and case law regarding damages to specific fields of law

With over 4000 judicial decisions and numerous statutory and secondary references, the new edition comprehensively covers Arkansas law. It includes expanded sections on compensatory damages, apportionment of damages, attorney fees, contracts, real property, restitution and wrongful death.

Previous editions have been cited over 200 times by Arkansas state and federal courts. As it has for 30 years, the volume will continue to be an essential text for every Arkansas attorney’s book shelf, and will serve as a tool for bench and bar.

Brill, an Arkansas and Ohio attorney, has been practicing with Mallory Law Office, LLC since 2013.

Your New Sidewalk: Who Pays?

Ohio municipalities have the power to levy charges known as “special assessments” against properties. These assessments – which are distinct from property taxes – are used for a variety of purposes, including building sidewalks, removing snow, planting shade trees, and laying water pipes.

The process begins when a city, either by its own determination or a citizen petition, passes a resolution of necessity declaring the need for the improvement. The city must also determine the cost of the improvement, and the amount of each special assessment can be calculated in one of three ways:

1. By a percentage of the tax value of the property assessed;
2. In proportion to the benefits that may result from the improvement;
3. By the front foot of the property bounding and abutting upon the improvement.

According to Ohio law, special assessments must be limited to the special benefits conferred upon the property. The cost of the assessment cannot outweigh the benefit to the property. For example, when a proposed sidewalk would harm a property’s value by destroying shrubs and eliminating the home’s privacy, the special assessment was declared unlawful. (Martino v. City of Sidney, 140 Ohio App. 3d 340 (2000)).

If a property owner objects to the assessment, he must act quickly – an objection must be filed with the city clerk’s office within two weeks of notice of the resolution’s passage.  As illustrated by this recent example from Cleveland Heights, objections are heard by a equalization assessment board, which then makes a recommendation to the city council. After all objections are resolved, the city council passes a final resolution to move forward with the project.

The final assessment will be added to the real property tax bill.  In most cases, a special assessment may be paid at once or over a period of years – however, assessments not paid at once may be subject to interest.

A Tenant's Unpaid Water Bill: Who's Responsible?

Imagine this scenario. A tenant suddenly vacates her apartment and moves out of state, leaving her water bill unpaid. Who is liable for the outstanding bill?

Under Ohio law, landlords can be held responsible for a tenant’s unpaid water bills. A municipality has the power to place a lien on the property and collect the payment through property taxes or bring a lawsuit against the property owner to recoup the money.

Unpaid bills can mean a large financial loss for the city, so government leaders have a high incentive to collect. For example, a 2013 investigation in Toledo found that the city was owed almost $24 million in unpaid water bills.  If cities seek to recover these missing funds from property owners, a landlord's credit and bottom line can both be affected.

As a result, landlords should take some proactive steps to protect themselves and reduce their liability for a tenant's delinquent bills, such as:

1. Perform credit checks on prospective tenants as part of a background check. This can eliminate potentially risky tenants who might be unable to pay a bill. 
2. Consider requiring a co-signer for some tenants, such as students with limited income. 
3. Rather than putting water service in the tenant's name, put the service in the landlord's name and charge additional rent to cover the cost of water. 
4. Modify the lease to make a continued tenancy contingent on the payment of water bills. If the tenant does not pay the water bills, landlords may be able to begin eviction proceedings. 
5. In order to monitor and prevent potential problems, ask the utility company to send the landlord a copy of the tenant’s monthly bills.
6. Educate and encourage tenants to check for leaks or prevent wasteful water practices in order to reduce the possibility of unusually high bills.

Can You Hear Me Now? Leasing Property for Cell Towers

In addition to leasing property for mineral extraction, landowners may be approached by wireless companies proposing to lease the individual’s property for a cell tower site. As with any lease or contract, property owners can negotiate the terms to ensure the agreement is a win for both sides.

One of the most scrutinized provisions of the lease is the monthly rate paid to the property owner by the wireless company. As you might expect, rates vary widely. Essentially, the more valuable your land is to the company, the higher the monthly rate.

A variety of factors influence the demand for the land, and thus its value. For example:

1. Where is the site located? As with any commodity, demand drives price. Sites that are in heavily urban areas or along busy highways may bring a higher rate due to the number of potential wireless users.
   
2. Are there available alternative sites? A landowner has an advantage if he owns the best site in a twenty mile radius.
3. How expensive is construction of the tower? A freestanding tower will likely cost more than simply adding an antenna to an existing church steeple. Topography of the land or existing availability of utilities can also affect cost.
   
4. How long will the approval process take? If the community’s zoning or development approval is minimal and straightforward, the wireless company can more quickly place the tower into service.

Of course, monthly rates are not the only provision of a cell tower lease to consider. To make sure you are maximizing your lease potential, please consult an attorney.

Forfeiture of Mineral Leases

When a landowner performs a title search on his property, he or she may discover that someone else has leased the oil or gas rights on the property, even though the landowner has never received royalties or even seen any drilling equipment. Under Ohio law, an owner or lessor cannot lease the property if another person or company holds an existing mineral lease, even if the conditions in that lease have not been fulfilled. Ohio Revised Code § 5301.332 provides the statutory procedure for forfeiting a mineral lease if the lessee has not kept specific covenants in the lease.

First, after the lease is discovered, further research must be done to determine the current lessee. Particularly in the case of old leases, the original lessee may have transferred the lease to another person or company.

Once the current lessee is identified, Ohio law requires that the lessor notify the lessee in writing that the lease has been forfeited, describing the specific ways that the lease has been violated. This requires careful examination of the lease document. For example, a lease may state that it remains in effect as long as oil or gas is produced from the land; or as long as lessor is paid royalties.

After thirty days of providing notice, the lessor can file an affidavit of forfeiture with the county recorder’s office reciting, among other things, the failures to abide by the lease. In response to this notice of forfeiture, the current lessee may release the lease or respond with an affidavit detailing why the lease may still be in effect. If there is no response within sixty days, the lease can be canceled by the county recorder.

This process is similar to the procedure under the Ohio Dormant Mineral Act, discussed in a previous blog post, which allows a property owner to claim another individual’s abandoned rights to the minerals located beneath the landowner’s property.

Supreme Court Strengthens Property Rights

Although today's start of the Supreme Court's new term brings prediction after prediction about the important cases on the docket, it can be difficult to forecast the impact of the Court's decisions.  For property owners, for example, the June 25 decision in Koontz vs. St. Johns River Water Management District could have just as far-reaching an effect as the more high-profile cases involving the Voting Rights Act or Defense of Marriage Act.

This case began in 1994, when Coy Koontz, a Florida landowner, applied for a permit to develop a portion of his property. Because his land was designated as wetlands under Florida law, Koontz was required to enhance wetlands elsewhere as part of his application. He proposed to develop 3.7 acres and give his remaining 11 acres to the district for conservation.   

The permitting agency, the St. Johns River Water Management District, refused to approve Koontz’s construction unless he met one of two conditions: 1) reduce the size of his development to 1 acre and reserve the remaining 14 acres for conservation; or 2) continue with his existing proposal and pay for conservation improvements on district-owned wetlands elsewhere. 

When Koontz sued, the courts were forced to interpret the case based on previous Supreme Court decisions which allowed government to condition land permits only if there was a “nexus” and “rough proportionality” between its demand and the effect of the land use. In Koontz, the Supreme Court ruled that these requirements still applied, even though Koontz’s permit was denied (not approved with conditions) and even though his land was not taken (and only financial demands were made). “We hold that the government’s demand for property from a land-use permit applicant must satisfy the requirements of Nollan and Dolan even when the government denies the permit and even when its demand is for money.” (Koontz at 22). 

This broad reading of the Constitution’s Fifth Amendment Takings Clause, which seemingly requires government to show a connection between its land requirements and its financial demands, promises to strengthen the rights of property owners and developers while placing additional burdens on local governments. Potentially, every governmental financial demand may be constitutionally challenged by property developers, and much litigation is likely to result as future courts grapple with the ramifications of the Koontz decision.