Ohio Supreme Court upholds “expedited tax foreclosures,” allowing county land banks to acquire unoccupied, tax delinquent properties free of charge

Jeffry D. Harris
Bricker & Eckler LLP.

In May 2020, the Ohio Supreme Court issued an opinion that carries importance for county elected officials and community and economic developers. Rejecting an activist effort to invalidate “expedited tax foreclosures,” the Court upheld the practice in Ohio by which county Boards of Revision (BOR) may directly transfer unoccupied, tax delinquent properties to county land banks.

County land reutilization corporations, commonly known as land banks, are designated by their county commissioners to operate as a more powerful form of Community Improvement Corporations (CICs) under Ohio Revised Code (R.C.) Chapter 1724. These types of CICs may employ the land banking statutes available under Ohio law (R.C. Chapter 5722).

Since 2006, county land banks have wielded particular power to acquire property free of charge in certain tax foreclosure suits, cleanse property title of all liens and other blemishes, and then place the property back on the open market. This form of property reuse has been especially helpful in removing neighborhood eyesores or site-assembling parcels for economic development.

Under this so-called expedited tax foreclosure process, a county land bank directly receives title to real property from its county BOR, and the BOR formally deems such property as “abandoned.” The process is set forth in R.C. Sections 323.65 – 323.79, with direct transfer to a county land bank occurring 28 days after a board’s order is issued. Once transferred, title is cleansed of all delinquent taxes and assessments, interest and penalties, as well as all other subordinate liens.

Attorneys and property rights activists filed suit in 2019 in the Ohio Supreme Court, seeking to invalidate the expedited tax foreclosure process on constitutional grounds (i.e., separation of powers and due process). The filed complaint had an immediate chilling effect across Ohio’s more than 50 county land banks, as title insurers refused to insure property sold on the open market by county land banks as the case was being decided.

We can now say that expedited tax foreclosure remains good law in Ohio, as the process has sustained its first real court challenge. The Court rejected the plaintiffs’ arguments on limited grounds, noting county boards of revision transfer properties to county land banks “with apparent (and presumptively valid) statutory authority.”

Thus, county land banks (formed as CICs with expanded powers) may continue to acquire property at no cost via direct transfer upon BORs finding the property “abandoned.” This method of acquiring property takes place in addition to (1) selecting parcels from county prosecutors’ lists of pending foreclosure actions, (2) merely selecting parcels from county auditors’ forfeited lands lists, (3) receiving property donations in lieu of filing tax foreclosures, or (4) engaging in arm’s length transactions to purchase property.

Bricker’s Public Finance team wishes to acknowledge the sudden passing in June of one of Ohio’s most ardent proponents of county land banks, Robin Darden Thomas. Integral to launching dozens of county land banks across the state during the past several years, Robin was a consummate professional and deeply knowledgeable of her craft.