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Category Archives: Residential Real Estate

Why the type of deed matters when negotiating and closing on the sale of real estate

Author By Casey A. JonesPosted on

Most legitimate real estate contracts, both residential and commercial, include a provision dictating the specific form of deed that will be exchanged between the Seller and Buyer at Closing. However, particularly for relatively inexperienced parties, this can seem like a “throw away” provision that doesn’t hold a great deal of weight. This could not be more wrong.

In Ohio, we generally see four different types of deeds: (i) a general warranty deed, (ii) a limited warranty deed, (iii) a quit claim deed, and (iv) a fiduciary deed. The type of deed selected to transfer the property has implications concerning the title conveyed from Seller to Buyer and the Seller’s potential liability for any title defects moving forward, often independent of any owners’ policy of title insurance (if one exists).

Before diving into these different types of deeds, perhaps the more basic question to understand is: What is title? Title to real estate relates to any rights or claims to a property. It encompasses the right to own, possess, use, control, enjoy, dispose/sell, or exclude others. Buyers seek as clear of title as possible and as many guarantees of the same as the Seller is willing to give. On the other hand, the Seller should be mindful of the promises it is making based on the type and language of the deed.

General Warranty Deeds

Perhaps the most common form of deed, especially in the residential context, is a general warranty deed. The inclusion of the words “general warranty” constitutes a promise by Seller that:

  • Seller is the fee simple owner of the property;
  • The property is free from all encumbrances;
  • Seller has the right to sell the property; and
  • Seller will defend Buyer relative to each of these promises, forever, against the lawful claims or demands of all persons.

Ohio Rev. Code 5302.06. Thus, for example, if a property is transferred with general warranty covenants, and someone later claims to have an easement over the property, the Seller has an affirmative duty to defend the Buyer’s title, which also includes payment of Buyer’s attorneys’ fees. You can read more on the duty to defend here: https://finneylawfirm.isoc.net/ohio-real-estate-law-triggering-duty-defend-general-warranty-deed-claim/.

This is obviously a tall order for two relatively unassuming words and therein lies the importance of understanding what they mean and their implications.

Limited Warranty Deeds

When transferring a property via limited warranty deed, the Seller is promising to convey as good of title as he or she received. Essentially, this means Seller is promising that Seller did not do anything to impair or encumber the title to the property. However, it is not as broad as a general warranty deed which covenants the same relative to periods both prior to and during Seller’s ownership of the property.

Fiduciary Deed

A fiduciary deed transfers property from a Seller acting as—you guessed it—a fiduciary (e.g., a trustee, executor of an estate, etc.). This connotes that the Seller is not the direct owner but is selling the property on behalf of another person or entity, that they are duly appointed to serve in that capacity, that they have legal authority to sell the property, and that they have followed all statutory requirements. A fiduciary deed does not make any warranties relative to title. Otherwise, fiduciaries could face liability relative to title defects for property that isn’t even directly theirs, resulting in a chilling effect where individuals would seldom wish to serve in such capacity for fear of such repercussions.

Quit Claim Deed

A Quit Claim Deed, likewise, makes no warranties or representations relative to the title of the property being transferred. It is somewhat akin to an “as is” clause but, instead of the physical condition of the property, it relates to the title.

Differences between the Contract and Deed

Scenario 1: Seller makes broad representations in the Contract to Purchase or Purchase and Sale Agreement (PSA) that he or she is conveying good, clear title free from all encumbrances, but then there is only a limited warranty deed.

Scenario 2: Seller is skittish and does not wish to make any representations as to title but will otherwise agree to convey title to the property using a general warranty deed.

Unless the Contract or a particular provision therein specifically states that it will survive Closing then, at the Closing, the Contract merges with the Deed. This means that any conflicts as between the Contract and the Deed are resolved in favor of the Deed and what the Deed says is what controls. In Scenario 1 above, the Seller would only be liable, and the Buyer would only have recourse against the Seller for, any defects that occur during Seller’s ownership. In Scenario 2 above, Buyer could concede on requiring representations in the Contract because the general warranty deed covenants have the same effect and those are what will control should an issue arise post-closing. These are but a couple of examples illustrating the practical effects of the type of deed used to convey property and the ways in which the type of deed can impact contract negotiations and ongoing liability as well.

In any event, we always recommend that Buyers purchase an owner’s policy of title insurance (this is in addition to the lender’s policy, which only protects the lender). This is especially true where the Buyer is taking title via limited warranty, fiduciary, or quit claim deed, as their recourse against the Seller will be extremely limited, if not non-existent.

For help negotiating the purchase or sale of real estate or understanding the terms thereof, including the deed provisions, please reach out to Attorney Casey A. Jones at (513) 943-5673 or Casey@FinneyLawFirm.com. We are happy to assist clients who are buying or selling with or without a real estate agent; however, if you do have an agent, we will work alongside your agent to ensure the most appropriate and comprehensive representation to protect your interests.

 

Owners have an absolute right to view homeowner association and condominium association records in Ohio

Author By Mickey S. McClanahanPosted on

If you live in an Ohio condominium or homeowner’s association (HOA) you are part of a community that is governed by laws, regulations, bylaws, and a board of directors. The board of directors handles everything from budgets to maintenance decisions to what kind of decorations you can put up at Halloween. These decisions are made by the association’s board, but they are not meant to happen behind closed doors.

Ohio law gives association members/property owners the right to access many of the records the board keeps which helps ensure both transparency and accountability.

Regardless of if you are curious about how your association spends assessment funds, you want to review meeting minutes or simply wish to better understand your community’s rules, it is imperative to know what records you are entitled to see and what information the board can legally withhold.

From where your rights come 

Under the Ohio Revised Code, two different laws protect your ability to see association records: The Condominium Property Act (O.R.C. 5311.091) and the Planned Community Law (O.R.C. 5312.07). While these laws are worded differently, the idea is the same: you, as a member of these organizations, have the right to look at the records your association keeps. However, these laws also allow the board to set reasonable rules around how you can inspect records such as by scheduling a time during regular business hours or charging a fee for copies.

What are you entitled to see (and what you are not)

Generally, a resident in a community governed by an association can review documents that show how the community is being run and how money is being spent. This includes financial statements, budgets, and records of assessments collected and bills paid. Further, meeting minutes are open for inspection once they have been approved as well as the community’s governing documents such as their declaration, bylaws, and any rules or regulations that the board has adopted. Generally, contracts with service providers like insurance carriers, maintenance crews, and landscaping companies are also fair game.

However, your ability to view your Associations records are limited. Boards are entitled to keep certain information confidential. Residents in an Association cannot review personnel files for employees, communications with the association’s attorney, or documents tied to ongoing contract negotiations. Records about enforcement actions against other owners are also off -limits (unless explicitly allowed by the by-laws). Finally, a resident cannot demand records older than five years. These restrictions exist to protect privacy, preserve legal strategy, and to avoid undermining the association’s business dealings.

How to appropriately request records

In Ohio, the governing documents of the Association will explain exactly how to make a request for records. Most Associations require requests to be made in writing, but even if they don’t, it t is best practice to put your request in writing and be as specific as possible as to what you are asking for. Association Boards are allowed to set reasonable procedures for access, so you have to be prepared to work within their scheduling guidelines and to cover any costs associated with copying costs.

In most cases, Boards will comply. However, if your request is denied you can follow up by referencing the specific sections of Ohio law that applies to your community. If they still refuse, consult an attorney for assistance and to understand your options.

What if the board refuses to provide records?

If the board won’t provide records, the first step is usually a written reminder of what Ohio law, or your governing documents, require. In many cases, that is enough to encourage compliance. If the refusal continues, owners may have no choice but to seek legal help.

When it comes to recovering attorney fees, Ohio courts follow what is known as the American Rule: each side pays its own legal cost. The only exceptions are when the association’s governing documents specifically allow fee recovery or when the court finds that the board acted in bad faith. Without one of those clear bases, even a successful records request lawsuit will leave an owner responsible for their own legal expenses.

Conclusion

Transparency in recordkeeping is not just a legal requirement, but it is an important part of keeping an association thriving. Having access to these documents allows residents, like you, to understand how decisions are made, how funds are managed, and if your association is complying with their own rules. It also keeps the board accountable to the people it serves: the owners.

 

J. Andrew Gray

Small win on brokerage commission claim equals #MakingADifference

Author By J. Andrew GrayPosted on

On June 12, Judge Donald E. Oda II of the Warren County Court of Common Pleas ruled in favor of the sellers of a home, represented by attorneys Andrew Gray and Christopher Finney, dismissing claims for breach of contract and fraud made by their realtor. The sellers, a couple moving from their home in Warren County, had terminated their contract with the original realtor and eventually successfully sold their home with a new realtor. The original realtor was not paid a commission by the brokers in the transaction, and filed suit against his employer and the sellers.

Under Ohio Revised Code 4735.21, only a licensed real estate broker may file a lawsuit to collect commission or other compensation in connection with a real estate transaction, and a real estate sales person can only collect money in the name of their broker. In the lawsuit, however, the realtor, who was only a licensed real estate salesperson, only alleged his status as a realtor in the complaint.

After the Finney Law Firm and the attorneys for the broker both filed motions to dismiss the plaintiff realtor’s claims, the Court – only three days after the motion was fully briefed – dismissed the complaint in its entirety. First, all claims for breach of contract against the sellers were dismissed because seller’s contracts were with the broker alone, who brought no claims against the seller; additionally, the plaintiff realtor had no claims against sellers under R.C. 4735.21. Finally, all claims for fraud were dismissed because they were duplicates of the contractual claims.

This brings up several important points:

  • Being a “realtor” is not a status of licensure under Ohio law – it is only membership in the National Association of Realtors, or one of its local branches.
  • Licensure as a “real estate salesperson” or “real estate broker” is entirely separate from status as a realtor.
  • Any contracts that a consumer may have with a realtor or real estate salesperson are actually with the real estate broker; the real estate salesperson or realtor is only the “agent” of the broker.

The result may seem unfair at first but, upon reflection, the policy reasons for R.C. 4735.21 are relatively simple. Real estate brokers have a variety of salespersons in the field, showing, selling, leasing real estate. However, all of those funds are ultimately the responsibility of the broker themselves. In a real estate transaction, all funds are transmitted through the brokers; so, when a real estate salesperson is entitled to a commission, the payment of that commission is truly a matter between the broker and the salesperson, not between the salesperson and the parties to the transaction. R.C. 4735.21 is intended to prevent the employment compensation disputes between the brokers and salespersons from involving the parties to the transactions, which can range from large companies to individuals buying, selling, or renting a home.

Regardless of the reasoning, the case represents another victory and successful result for our clients.

 

Eminent Domain and Transportation/Utility Easements

Author By Casey A. JonesPosted on

Scenario:

You own a home or commercial property, and you receive a letter from the Department of Transportation, Duke Energy, or another utility provider seeking a temporary or permanent easement over your property for purposes of constructing a utility pole, water lines, traffic signals, etc.

Do you have to agree? What are your options?

The reality is that if a governmental or public utility company wants an easement over your property, they will – in almost every circumstance – get it, through litigation if all else fails. However, that does not mean that you have to agree to everything they are asking of or offering to you.

The easement sought may be a “taking” (on a temporary or permanent basis) of the right to use your property as you wish, the right to access certain areas of your property, or of parking spots for your customers. It could mean lengthy construction that may deter customers or make it difficult to see or access your business. Each of these situations have a value, tangible or otherwise, to you as the property owner.

Given the likelihood of the requesting entity eventually obtaining the easement (i.e., the right to use the property) that it seeks, via eminent domain proceedings or otherwise, attempting to fight the “taking” through litigation may or may not be the best option or strategy for you. If you have received one of these letters or “offers,” we would be happy to discuss your options and whether there are certain terms that we should focus on for purposes of negotiation. We have had great success with negotiating compensation (netting the client substantially more, even accounting for any legal fees) and/or addressing concerns over potential damage to the property, ensuring that the client is afforded adequate protections so that they will be made whole in such event, among other concerns.

Temporary or permanent easements can have a lasting impact on you, your property, and your business, and it is important to make sure you are covering your bases in negotiating reasonable and favorable terms, ensuring as much protection as possible, and yes – receiving adequate compensation. We understand this, as do the companies seeking the easement. They are generally receptive to negotiating the terms so that the parties can have an amicable agreement in place to allow the necessary improvements, while minimizing any adverse effects to the owners’ ability to use and prosper from their property. However, it helps to have an experienced attorney on your side to help advise you and present your negotiated terms in a manner most likely to be effective.

For assistance in assessing your options or negotiating easements, please contact Casey A. Jones, Esq. at casey@finneylawfirm.isoc.net or (513) 943-5673.

Residential Foreclosures: The Procedural, Pre-suit Pitfalls

Author By Diana L. EmersonPosted on

Pursuing a residential foreclosure is not for the faint of heart. The foreclosure process is fraught with procedural pitfalls – many of which arise even before initiating the formal legal process in court.

This is especially true in the case of a residential mortgage foreclosure, where a borrower (“debtor”) has defaulted upon his or her mortgage payments and the mortgagee (“creditor”) is attempting to collect the entirety of the loan through a judicial sale of the debtor’s residential property.

The creditor must not file immediately upon the debtor’s defaulted payment. Instead, the creditor should understand what pre-suit obligations he or she may have by reviewing (1) the contractual requirements under the note and mortgage, (2) the statutory requirements under R.C. §1349.78, and (3) any regulatory requirements that may be applicable to the loan.

Failing to abide by any of these pre-suit requirements may be fatal to a foreclosure action.

Before initiating a formal foreclosure action, it is paramount that a creditor reviews the note and mortgage for any contractual pre-suit requirements. Although it is not common, some notes and mortgages require written notice of actual acceleration of amounts due in the event of default. Regardless of whether this provision is or is not included, reviewing the note and mortgage should be the first step any creditor takes towards pursuing a residential foreclosure.

After reviewing any contractual pre-suit requirements, a creditor must then review his or her statutory pre-suit requirements. Under §1349.78, a creditor is required to send a cure letter to the debtor if: (1) the debt is secured through a mortgage lien on the debtor’s residential real property, (2) the debt is not in the first mortgage position, and (3) the debt has been accelerated or is in default according to the terms of the promissory note. This letter must be sent at least thirty days before the initiation of a foreclosure action, and must include specific language outlined in R.C. §1349.78.

Depending upon the type of loan, there may also be regulatory pre-suit requirements.  These requirements are often applicable when the loan is backed by the federal government.

Once a creditor has completed these pre-suit requirements, they can then begin preparing the complaint and pursuing formal legal action against the debtor.

As demonstrated, foreclosure actions are procedurally complex – even before filing the formal suit against the debtor. Failure to abide by any of the above-mentioned requirements could result in the ultimate dismissal of the subsequent foreclosure action.

What should I expect with Ohio property tax abatements?

Author By Christopher P. FinneyPosted on

We have gotten calls from property owners inquiring about how their municipal property tax abatement should work.

The inquiries usually commence with a misunderstanding that an exemption (typically a 100% exemption on improvements for some period of time) means that the owner will never pay taxes on an assessed value for more than that in place at the time the abatement commenced.  This is not so.

The Ohio statute that empowers municipalities to provide property tax abatements is Revised Code Section 3735.67.

Section (A) of that statute allows an abatement “of a percentage of the assessed valuation of a new structure, or of the increased assessed valuation of an existing structure after remodeling began.”  So, two things there: (a) the assessment is not on the land value and (b) the abatement is not for a specific amount of the cost of the improvements at the time they are built, but “a percentage of the assessed valuation of ” those improvements.  Therefore, at the commencement of the abatement, the County Auditor needs to assess the value the improvements added to the property as a percentage of the value of the improvements. And as the abatement period rolls forward, to apply that percentage on the improvement value.

In ensuing triennial reassessments by the County Auditor, he should then calculate separately the value of the land and the value of the improvements for every parcel in the County. As to the abated parcel, that initial percentage attributable to the value of the abatements (as a percentage of the improvement number) should be abated (either at 100% or whatever percentage of the abatement as was initially agreed or granted)  The land value along with the new value of the unabated percentage of the improvements would be subject to taxation.

The reason taxpayers are inquiring (or one of the reasons) is that our upwardly-dynamic housing market (and in some cases commercial market) since the COVID pandemic means that over the three-years of the triennial, some neighborhoods are seeing cumulative valuation hikes overall of 50% or more.  Even if the abatement is properly included in the tax bill calculations, when compared to the initial pre-abatement valuation, some taxpayers assume “there must have been some mistake” in calculating that abatement.  Sometimes there is a mistake, many times there is not — or not enough of a mistake to wade into the adjustment process to make it worthwhile.

It’s fairly easy to calculate the abatement that is due with entirely new construction: If that abatement is 100% of increased improvement valuation for a period of time, during that interval, only the land would be taxes, and even that land value will (may) go up in valuation over time.

But calculating the abatement due to renovations are more complicated.

In the case of a renovation the calculation of what is abated: “it’s complicated.”  Imagine a property with an initial $100,000 in land value and $400,000 in building value before the renovation.  And to that existing structure, the owner adds a building addition along with a kitchen and two-bathroom do-over.  The total improvements to the property cost $200,000.

Three years later, the Auditor makes a new triennial valuation of the property, assessing the land at $250,000, and the building (before abatement) at $750,000, for a total valuation before considering abatement of $1,000,000.  What amount of the valuation should be abated?

The proper calculation would consider that the improvements are 33.3% abated ($200,000 of improvements are 33.3% of the $600,000 value of the improvements at the time they were made [$400,000 in initial value + $200,000 of improvements] [these numbers assume these were the correct “value of these respective improvements at that time.])  Thus, the land value is now $250,000 and two-thirds of the improvement value would be $500,000, for a total post-assessment taxable valuation of $750,000.

Now, one client who recently called said “wait a minute, the percentage of increase in the land valuation exceeded the percentage of increase in the building valuation.”  From a purely mathematical perspective, that is correct in the foregoing example: 250% increase in land valuation versus a 25% increase in the improvement valuation.  I get it.  But as we walked thru the land valuation issues given the dynamic marketplace, the land valuation was not wrong.

The County Auditor is charged with independently determining these components of value — it’s one of the prerogatives of the elective office.  The taxpayer can challenge these valuations before the County Board of Revision, but the challenge cannot be based upon the relative valuation differences of land versus building.  The percentage increases do not need to track one another.

In short, there are three take-aways on Ohio tax abatement valuation questions:

  1. Do not enter into a tax-abated transaction with the assumption that the taxable valuation will never increase over the term of the abatement period.  This is foundationally incorrect.
  2. Land value for all abated transactions can adjust each triennial for both new construction and renovations.
  3. Throughout the abatement period, the amount of the unabated improvement portion of a renovation should track the percentage of valuation of the unabated improvements versus the abated work at the time the work was concluded, and that percentage should remain consistent throughout the abatement period.

If you have tax abatement questions, Finney Law Firm team members Eli Krafte-Jacobs (513.797.2853), J. Andrew Gray (513.943.6658) or Casey Jones (513.943.5673) who are each familiar with tax abatement issues.

Big Finney Law Firm “Tree Case” win upheld by 1st District Court of Appeals

Author By Christopher P. FinneyPosted on

On November 3, 2023, we won a big victory for our client, a humble carpenter who lives in Clifton, at the First District Court of Appeals of Ohio.  In the decision, the Appeals Court affirmed a verdict in our client’s favor for the removal of a large tree from his property without his permission.

At trial, our firm not only proved the trespass and actual damages but also proved malice by the Defendant by “clear and convincing evidence,” entitling the client to receive as part of his award reasonable attorneys fees and expenses for taking the case to trial.

A copy of Friday’s appellate court decision is here.

Background

We regularly counsel our clients on the time, expense and sometimes disappointing outcomes in civil litigation.  It is a major part of the challenges our firm and our clients face in court.  And typically small dollar cases — regardless of how just the cause may be — are just not worth pursuing.

Nonetheless,  in 2019 we met with client William Chapel at his property and discussed the removal of his 50+ foot black walnut tree by his neighbor without permission.  He came home from work one day, and the tree was gone, it was taken down, along with an old wood screening fence that had been on his property, all without his permission.  We believed in the case and in the client, so we accepted the case.

Scorched earth strategy of defendants

It is typical in litigation that opposing counsel does not intend to win on the merits of their case, but rather by running out the clock and running the bill to heights that the amount in dispute will not justify, hoping our firm and our clients will “just go away.”   Well, we never “go away.”

Victory at trial court

We here wrote about the $222,836.53 verdict that was rendered in our client’s favor last December before the trial court for the removal of that tree, the majority of that verdict being punitive damages, attorneys fees and out-of-pocket expenses associated with the exhaustive litigation path chosen by the Defendants.

Conclusion

In addition to the $222,836.53 award at the trial court, the Court indicated that attorneys fees and expenses incurred in collections matters and in appellate work would supplement the award, so this week we will be preparing a supplemental fee application,  hoping to finalize the significant win for our client, and the delivery of justice to our community.

Thanks to our able and persistent team of Christopher Finney, Julie Gugino, and Jessica Gibson who saw this case through to the end.

Fraud Is Real: Don’t fall for it

Author By Christopher P. FinneyPosted on

Fraudsters — both high-tech and old school — daily attempt to use real estate and other transactions to scam our law firm, our title company and our clients out of money and property.  To date, we have not been hit (some of our client have been), but we are always on guard.  Fraudsters forever keep trying.

As you are growing your business — and these tips apply to businesses large and small, old and new — it is a good idea — from time to time — to gather your financial team and key executives, along with your IT professionals, and simply have a conversation about “tightening things up” and avoiding common scams.

  • Are your checks (and cash) — incoming, outgoing and blank checkbooks — tightly secured and under watchful eyes?
  • Are your systems too open and accessible (a simple question such as automatic screen savers with passwords that trigger when an employee is away from his desk)?
  • Do you have proper insurance to protect your real risks?
  • Do you have proper training and systems in place to avoid common and emerging risks?

In the end, we all have some exposure.  So, eternal vigilance, the latest technology protection and training of employees new and old, is the only answer.  Part of this caution is constantly “tightening up” and “changing up” your transactional practices and security procedures to avoid the latest scam.

Here are some common scams we and our clients have seen:

  1. In the low-tech world, fraudsters simply borrow money based upon false promises and representations.  This is a time-tested and common scam.  It is borne of two human instincts: (a) we want to trust people and (b) we are lured by the promise of a better-then market return on investment (if it’s “too good to be true,” it’s probably fraud).  Many of these fraudsters have the appearance of business stability and financial success, but are willing to offer above-market interest rates for a personal or business loan.  In the end, these loans are not properly secured and are not properly guaranteed, and the fraudster never had the ability or intent to pay back the monies.
  2. Similarly, we have seen clients purchase assets or entire businesses that are subject to liens or governmental enforcement actions, or the purchase price is based upon false financial documents or hidden property condition.  In a business transaction, be careful of slippery buyers, sellers and attorneys who can make fraudulent closing adjustments as the numbers are flying about in a closing.
  3. Another low-tech fraud is thieves who rifle U.S. Postal Service mail boxes (both the blue drop boxes and mailboxes at your home or business), steal checks, and then change the payee and amount on the check and cash it.
  4. Pay attention here: In the high-tech world, fraudsters hack into a Realtor, investor or title company email system, and steal their email signature and logo, and the details of an imminent transaction.  Then, they establish a similar email domain (with maybe one letter changed or a “dot” added).  Using the new domain, they send an email to the party who is to originate a wire with false wire instructions — instructions straight into the fraudster’s overseas wire address.  The email by all appearances looks entirely legitimate and it’s from a name you know and with whom you actively are dealing.
  5. We have written about sellers who don’t own actually property attempting to mortgage or sell the same.  Read here and here.
  6. Finally, fraudsters use sophisticated hacking and ransomware viruses to invade your critical computer systems.  They corrupt your data and hijack control of your systems, relenting only when an exorbitant ransom has been paid.  Extortionists have taken over critical infrastructure such as oil pipelines, hospitals, and municipalities.  Most recently, the vendor running the Cincinnati Multiple Listing Service and dozens of MLSes nationwide was the victim of a weeks-long ransomware attack that was costly and disruptive.

So, how can you protect yourself in this world increasingly fraught with risk of theft of your valuable data, money and time by those with malintent?

Here are a few ideas:

  • Stay in your lane.  Let lenders lend.  In most cases, they are good at it.  If a borrower is coming to you for a loan, it’s likely because he’s not eligible for conventional financing, and that ineligibility is for a good reason — he’s either lying, broke or both.
  • Carefully use due diligence and proper documentation.  If you are going to lend money or buy assets or a business, perform the kind of due diligence a prudent and sophisticated buyer or lender would undertake and obtain appropriate security and guarantees of a loan.  We discuss some of the pitfalls of private lending here.  Similar risks can exist in buying assets and buying whole operating businesses.  Part of this process is assuring that the borrower actually owns the assets he is selling or pledging (free and clear) and that your security interest is properly and timely perfected as against that asset.  In a real estate-based loan, title insurance is a key way to assure this is so.  In purchasing a business, the risk is even greater in that the corporate entity may have significant residual undisclosed liabilities or governmental enforcement problems. That seller — and your purchase monies — will completely disappear by the time you learn of the fraud.  Finally, the #1 “due diligence item” is to know your employees, know your borrowers, know your sellers.  The internet (and now artificial intelligence tools) is an incredibly powerful way to do background on parties to a business transaction,  Use it.  Cautiously heed the lessons of what you find.
  • Properly perfect security interests and document guarantees.  When banks lend money, they want proper security for their loans and appropriate guarantors for their repayment.  In most cases, banks are over-protected, and they want it that way.  You do too.  In both real estate and equipment-based transactions, we have seen borrowers pledge the same assets to different lenders as security for two or more loans.  Obviously, in that circumstance someone is going to be left holding the bag.  (Yes, fraudsters are that shameless.)  Using proper real and personal property title examinations and lien searches and using appropriate documentation for loans and guarantees is critical.  For example, in Kentucky, in order for a personal guarantee of debt to be enforceable, it must follow specific statutory requirements.  Without that, it’s worthless.
  • Don’t put checks or other key financial documents in blue U.S. Post Office boxes on the streets and don’t have checks sent to a mail box at your business or residence that is accessible by others.
  • As to wire fraud, you can’t be careful enough.
    • The sender of a wire should assume everything you see is a lie, the fax, the email, the logo, the wire instructions, the sender web site, the sender.  Everything.  Always verify everything via voice using a trusted and known telephone number for the wire recipient.
    • If you smell a rat, don’t initiate the wire.  Wait and check some more.  Urgency — especially inappropriate urgency — is a key indicator of fraud.
    • Read carefully the sender email addresses and the email.  Many times the email domain of a fraudster does not exactly match the domain name with which you have been dealing.  Note misspellings and grammatical errors in the text of an email that may come from a foreign sender or one unfamiliar with the parties and the transaction.
    • Note last-minute changes, especially of wiring instructions.
    • Note changes made on the Friday before a holiday weekend or before another holiday, and before the end-of-month, when Realtors and title company employees are more likely to be busy and careless.
  • Buy cyber insurance.  Your property and casualty insurance agent can offer your business cyber protection.  It requires you to use good practices for the insurance to invoke, but both the coverage and the required procedures are a critical part of best practices protection.
  • As to ransomware attacks, we have two pieces of advice:
    • First, according to the Harvard Business Review (citing IBM), 60% of cyber attacks originate inside your organization.  Either a malevolent employee or ex-employee intent on theft or vandalism (75% of attacks) or a negligent employee (25% of incidents) who falls for a phishing attack scam cause most losses.  So, hire and retain employees of good character, monitor their activities, and carefully, comprehensively and quickly cut off computer access of former employees.  Segregate access to data in your organization to those who need that data, and no one else.
    • Second, every computer system is vulnerable.  Every one.  But homegrown (premises-based and self-maintained) servers are more vulnerable to a hack (in my opinion).  As a result, we (a) have migrated the vast majority of our data into the Microsoft cloud (other providers are also available) (heaven help the world if they hack the Microsoft cloud!), (b) have segregated access to data to employees who need that access, and (c) have make serial backups of data that is not in the cloud.
  • Understand the risks, develop training and systems to avoid the risk, and train all of your employees on cyber security procedures.

As our attorneys can assist with due diligence and proper documentation (including title insurance) of your transactions, call us!

Latest real estate title fraud scheme: Seller impersonation

Author By Christopher P. FinneyPosted on

As real estate attorneys and licensed Ohio title insurance agents, we must constantly be on the lookout for the latest scheme to defraud buyers, sellers, lenders and others in real estate transactions.  We have already written about ever-persistent attempts at wire fraud.  (This one is never going away, we fear.)  But yet another fraud that is borne from the bountiful information available on and the anonymity of the internet is on the rise: Seller impersonation schemes.

According to one of our underwriters, First American Title Insurance, Seller impersonation schemes have increased 73% in 2023.  We personally have seen this attempted — but caught — to two separate commercial Realtor clients.

Here’s how the scam works, according to First American:

  1. Scammers search public records to identify real estate that is free of a mortgage or other liens. These often include vacant lots or rental properties. The identity of the landowner is also obtained through these public records searches.
  2. Scammers pose as property owners and contact a real estate agent to list the property for sale. All communications are through email and other electronic means and not in person.
  3. The listing price of the property is typically set below the current market value to generate immediate interest in the property.
  4. When an offer comes in, the scammer quickly accepts it, with a preference for cash sales.
  5. The title company or closing attorney transfers the closing proceeds to the scammer. The fraud is typically not discovered until the time of recording of transferring documents with the applicable county.

The natural reaction of a Realtor or buyer is: “that it’s the job of the closing attorney or title agent to ascertain the true identity of the seller,” but in the cases of limited liability companies and corporations, there typically is no public information at all (including the Secretary of State’s records), to ascertain the true owners and officers of these entities.  In the case of individual sellers, if they are shipping to Ohio a notarized deed signed out of state, it is possible that no one even asked for their I.D.

Thus, not only is it not negligence on the part of the attorney or title agent to fully ferret out the “authority” question, it’s something that’s not even possible in many instances.  In short, it’s one of the inherent risks in real estate transactions.

Thus — and it sounds self-serving to say this, but it’s true — one of the only sure ways a buyer can protect himself against his scam is to purchase an Owner’s Policy of Title Insurance at the time of the acquisition.  (And, no, simply buying coverage for the lender is simply insufficient — it is in fact NO COVERAGE AT ALL for the buyer).  In the above scenario, a non-fraudulent buyer who purchases an Owner’s Policy is covered if they fall victim to this scam.

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We are tremendously proud of the title presence we have in Ohio and Kentucky through Ivy Pointe Title.  Our residential division headed by Rick Turner (513.943.5660), and our commercial division headed by Eli Krafte-Jacobs (513.797.2853) are — as our tag line says — “accurate and on time, every time.”  They are here to protect you from these kinds of scams and schemes.  Let us know how we can help you safely close your next transaction.

More on upcoming property tax valuation increases

Author By Christopher P. FinneyPosted on

For both commercial properties as well as single family homes, owners have flooded us with inquiries about their notices from County Auditors in Hamilton, Butler, Clermont and Montgomery Counties as to new property valuations.  We can’t imagine the number of calls the County Auditors must be getting.

A few guideposts for you:

  • First, read this important blog entry that essentially tells you that the first 30% of the valuation increases in southwest Ohio will not result in an increase (or at least not a significant increase) in your actual tax bill.
  • Second, Auditor’s property valuation is not some magical number — for the January 2024 tax bill, it is to be the fair market value as of January 1, 2023.  Thus, if your property was worth more then than in the prior valuation period, you should expect a valuation increase — perhaps one even above average for all properties in the marketplace.  Some clients seem to think that since valuations were less than what they thought the property was actually worth in the past, the Auditor’s valuation process is supposed to yield a lower number.  Well, it’s not.
  • Third, if your property was purchased since the last triennial valuation date (January 1, 2020), the sale price likely will be reflected in the valuation.  As this blog entry addresses, a recent arm’s length sale essentially — and largely irrebuttably — IS the value by law.
  • Fourth, if your property falls in one of the gazelle categories of properties whose values have leaped ahead of the market — single family homes, warehouse and industrial properties, and apartment buildings — you should both celebrate your good fortune and expect a bigger tax bill as a result.
  • Fifth, on the flip side, if you are a victim of the weak office market or the mall or downtown retail market weaknesses, you should should see some tax relief in the January tax bills.
  • Sixth, gas prices are up, grocery prices are up, car prices are up.  You have not had a valuation increase in three years.  Wouldn’t you expect your tax bill would rise some, at least modestly?
  • Seventh, for both buyers and sellers in today’s market, the looming valuation increases create both a possible problem and an opportunity as to contractual tax prorations for sales between now and January when the new — very different — valuations come out.  Read here for more detail on this.
  • Eighth, remember, the Board of Revision process to challenge property valuations is a two-way street.  If your property truly is undervalued, you risk an increase.  Cautiously keep in mind the upward dynamics of the real estate market over the past three years.  You could wind up with an increased valuation as opposed to the sought reduction if you overplay your hand.
  • Finally, I had a client recently ask me “why would single family home valuations be increasing in Cincinnati?” and I swear he must live under a rock.  I responded, “haven’t you seen newspaper articles explaining that Cincinnati has had one of the hottest housing markets in the nation since the start of COVID?”  The response, “ummm, no.”  It is surprising since we deal with this every day, and to some extent it is just denial of the obvious fact that we are blessed in Cincinnati with a fantastic housing and commercial real estate market.  Enjoy it while it lasts!

If, after reading this and the prior blog entry on the new valuations coming out in January, you still have tax valuation questions, please contact me (513.943.6655) or another member of our tax team.  We are glad to help.

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