The National Association of Realtors reported this week that sales of previously owned single-family homes, condos and co-ops for 3rd Quarter 2009 were 11.7% higher than 3rd Quarter 2008. While it is estimated that 30% of the sales were due to foreclosures and "short sales", and many of the sales were aided by low prices and the federal tax credit, a positive trend seems to be emerging. Ohio was not alone, as thirty-two (32) states also saw 3rd Quarter sales volume increases.

Prices also seem to be stabilizing in Ohio, even though many Ohio cities experienced some price decline. According to the NAR study, and the November 11, 2009 Cleveland Plain Dealer article: 'Existing-Home Sales Rise in Ohio and Nationwide' (by PD Reporter, Michelle Jarboe), the following Northeast Ohio metropolitan areas saw "modest price declines":

Cleveland-Elyria-Mentor: .5% ;

Akron: .8%;

Canton-Massilon: 9.3%.

According to Lawrence Yun, economist for the NAR, we are hopefully now experiencing a change from "a market in transition...to one that is becoming more balanced and stable".

(a Primer for Ohio Residential Property Landlords)

Most real estate professionals agree that the residential-rental property "game" is still a good investment in these uncertain economic times. One of my friends at Johnson Capital recently announced their arranging of a ten (10) year, $4.9 Million loan on a 217 unit apartment building in Kansas City and expressed to me that they are very active in the residential-rental real estate market.

As with any game, however, it is important to play by the rules. Real estate investors and landlords of commercial property should not lose sight of the fact that the rules regarding residential property leases are often more stringent than those in commercial property. Accordingly, residential leases must be drafted by those with expertise and knowledge of residential landlord-tenant laws. As a general rule, in commercial leases, judges most often defer to the language in the lease (absent illegal, unconscionable or non-discernable provisions), but in residential leases, judges normally defer to the “rules (law) of the game”, and the presumed, unequal bargaining positions of the parties.

In Ohio, real estate practitioners must be familiar with the “State rule-book”, the Ohio Landlord-Tenant Act (Ohio Revised Code Chapter 5321); as well as the local rules (many municipalities in Ohio have landlord-tenant laws that supplement the Ohio Landlord-Tenant Act).

While the Ohio Landlord-Tenant Act has been around since 1990, I have seen many leases that are not in compliance with the law. At a minimum, residential landlords in Ohio should remember the following:

Terms Prohibited in Rental Agreement (ORC Section 5321.13)

According to this Section of the Ohio Revised Code, the following terms are prohibited from being in a residential rental agreement in Ohio:

1) A Warrant of Attorney to Confess Judgment;
2) An agreement to pay a landlord’s or tenant’s attorney’s fees;
3) Agreements by a tenant to waive its landlord’s liability or indemnify its landlord;
4) Tenant’s waiver of landlord’s obligations to keep the premises habitable, and other landlord obligations under Section 5321.04.

Acts Prohibited by the Landlord (ORC Sections 5321.15; 5321.02)

According to Section 5321.15 of the Ohio Revised Code, landlords may not terminate utilities or services, exclude (without judicial process) the tenant from its premises, or make threats of any unlawful act against a Tenant, when attempting to recover possession. In other words, residential landlords may not utilize “self help” evictions. They must follow O.R.C. Chapter 1923 re: judicial eviction proceedings. In addition, landlords may not seize the furnishings or possessions of a tenant, for the purpose of recovering rent, unless ordered by a court. A landlord who violates Section 5321.15 is liable not only for damages to a tenant but also for reasonable attorney’s fees. Also, pursuant to Section 5321.02 of the Ohio Revised Code, Landlords may not retaliate against tenants by increasing rent, decreasing services, or threatening to bring an action because a tenant has complained of a building/housing/health or safety code applicable to the premises, or the tenant has complained that the landlord has violated its obligations to the tenant pursuant to O.R.C. Section 5321.04. Tenant may also recover actual damages and reasonable attorneys fees for a landlord violation of Section 5321.02.

Obligations of the Landlord (ORC Sections 5321.04; 5321.08)

The Ohio Landlord Tenant Act also contains specific requirements and regulations regarding security deposits (Section 5321.08) and required obligations of the landlord, regardless of whether the same are contained in the Lease (Section 5321.04). There are also provisions in the Act pertaining to tenant obligations, but the majority of the Act is dedicated to protecting the tenant from the landlord, who typically has greater financial strength and bargaining position.

Don't Forget the "Local Rules"

Many real estate practitioners believe that the Ohio Landlord Tenant Act is the only source of “rules” in Ohio pertaining to residential tenancies. They would be wrong, and may already have found that out “the hard way” (in court). Even though there is a statutory Landlord- Tenant Act in Ohio, there are also many court decisions that have interpreted the Act, and have established rules of law for residential landlord-tenant issues, not covered in the Act. Additionally, there are local and municipal ordinances that must always be reviewed and evaluated.

Ordinance No. 1844A-99 (the City of Cleveland Landlords and Tenants Law)

In Cleveland, for example, Ordinance No. 1844A-99 (the City of Cleveland Landlords and Tenants Law) should always be consulted. Residential landlords in Cleveland may particularly wish to review their leases to ensure compliance with the following:

A. Automotive Renewal Provisions (Section 375.02B)

This Ordinance requires any automatic renewal provision in a lease to be set forth in bold type and in conspicuous (twice the size of the other print) type if the lease is for six months or longer.

B. Fees for Late Payment of Rent (Section 375.02C)

This Ordinance creates a maximum monthly amount for any fee for late payment of rent. The maximum amount is the greater of $25.00 or five percent of the monthly rent. There are additional rules for subsidized housing.

C. Tenant’s Payments for Gas, Electric or Water (Section 375.05)

This Ordinance permits landlords to require enants to pay for such utilities only if three conditions are met:
1. The utility services are provided through an individual meter or sub-meter that measures tenant’s usage only;
2. The rental agreement provides in clear language that the tenant shall pay for the utility service during its tenancy only; and
3. The tenant has (and the Rental Agreement provides as such) reasonable access at all times to the meter or sub-meter.

D. Minimum Statutory Damages

The Cleveland Ordinance also establishes a tenant remedy of “minimum statutory damages” (between $50 and $500) for certain landlord conduct that the Ohio Landlord Tenant Act prohibits, such as the knowing use of an unlawful lease term, unlawful entry of the dwelling unit, unlawful self-help eviction, and unlawful seizure of a tenant’s personal property.

Knowing all the rules of the residential-related real estate game (state laws, local laws, and court decisions), is the only way to truly win. Otherwise, the penalties can be very costly.

According to news reports released on Monday, October 12, 2009, the University of Dayton is in discussions with NCR Corp.to potentially acquire the former NCR world headquarters building in Dayton. That would be great news for the Dayton commercial real estate market.

Click here to access the news article at the Dayton Daily News web site.

There are a couple more real estate-oriented continuing education seminars scheduled for the coming months:

First is a seminar sponsored by the Stirling Education Services, Inc. on December 1, 2009 in Akron, Ohio titled "Real Property Foreclosure in Today's Market". The seminar runs from 8:30 am to 4:30 pm, with registration beginning at 8:00 am, at the Hiltron Akron Fairlawn, 3180 West Market St. To register or for more information, call 715-855-0498 or go online at www.sterlingeducation.com.

Second is a seminar sponsered by the National Business Institute on December 2, 2009 in Cleveland, Ohio titled "Road and Access Law: Researching and Resolving Common Disputes." The seminar runs from 9:00 am to 4:30 pm, with registration beginning at 8:30 am, at the Holiday Inn Independence, 6001 Rockside Road in Independence. To register or for more information, call 800-930-6182 or go online at www.nbi-sems.com.

The National Business Institute is sponsoring a one-day seminar on "How to Obtain Good Title in Real Estate Transactions" on December 10, 2009. The seminar will be held at the Holiday Inn Independence on 6001 Rockside Road, in Independence, Ohio.

The course has been approved for CLE and State Bar College credit. Credit for insurance and real estate are pending.

For more information, call 1-800-930-6182 or go online at www.nbi-sems.com.

Condo associations, like developers and lenders, are facing significant issues due to the foreclosure crisis. Increasing foreclosures leads to less income from condo assessments as owners cannot pay their condo fees. The lower assessment income means insufficient operating funds to cover expenses such as insurance and maintenance.

To stave off financial disaster, condo associations are having to get creative. For example, some condo associations are using reserves to buy foreclosed units, and then renting them out until the sale climate improves and the unit can be sold at a decent market value. This action provides 2 advantages: the unit is prevented from being sold too far below market and the association is able to recoup some additional funds.

Some courts have ordered receivers in bankruptcy to collect rents where owners have rented the unit out but weren't paying the condo assessments and use the rental income to pay overdue condo assessments.

Some condo association that had banned owners from renting their units are relaxing those rules, or creating hardship exceptions, to allow owners to avoid foreclosures.

These are extraordinary times and it calls for creative action.

The Ohio State Bar Association is sponsoring a live simulcast program titled "Residential Real Estate Transactions" on November 4, 2009 in 8 cities: Akron, Cleveland, Columbus (live and via webcast), Fairfield, Steubenville, Toledo, Wooster and Youngstown.

The program is eligible for CLE, Real Property: Residential Law Specialization hours, Title Insurance CE (pending), and Real Estate CE (pending).

For more information, contact the OSBA at (800) 232-7124 or online at www.ohiobar.org.