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Bill would modify property receivership statute

Special to the Legal News

Published: October 11, 2013

In its second Senate committee hearing, House Bill 9 was described as both “important” and “flawed.”

The proposed legislation, sponsored by Rep. Peter Stautberg, R-Cincinnati, would add to and clarify the powers of a receiver and provide a procedure for a receiver’s sale of real property.

If enacted, the bill would modify state law prohibiting any party, attorney or person interested in an action from being appointed receiver except by consent of the parties.

It provides that the consent be from all parties to the case and all other persons holding a recorded ownership interest in, or financial lien on, the property that is subject to the proceeding.

The measure was unanimously passed by the House in April.

Last week, before the Senate Civil Justice committee, Tyson Crist offered proponent testimony for HB 7 on behalf of the Ohio State Bar Association while Samuel Shellhaas, a Dublin attorney, submitted written testimony against the bill.

“This is an important piece of legislation,” Crist said. “This bill, which traces its roots back to House Bill 610 and Senate Bill 388 that were introduced in the 129th General Assembly, will make a number of changes to the Ohio receivership statutes.”

Crist said current receivership provisions and the case law interpreting it are “somewhat sparse and have left this area of law to be made on a court-by-court basis that can vary from one county to the next.”

He said HB 9 would detail the powers of receivers, bring more uniformity to receivership practices and ensure that good title can be obtained through receivership sales.

“This will help to facilitate the use of receivership in Ohio, which is a valuable alternative to commercial bankruptcy and foreclosure and helps to maximize the on-going value of businesses and property,” Crist said.

Appointed by the court, a receiver is charged with taking control of property that is the subject of court action.

That person must manage the property during the course of the proceeding and, in some cases, sell the property under the court’s direction.

The proposed legislation seeks to expand the powers of receivers to include the execution of deeds, leases, or other documents of conveyance of real or personal property and to open and maintain deposit accounts in the receiver’s name.

If HB 9 is signed into law, Crist said it would be a “significant improvement and provide a more stable foundation for receivership practice in Ohio.”

Shellhaas, who has been admitted to practice law for 21 years and has spent the last 14 years employed by various title insurance companies working on title insurance claims and underwriting title insurance policies, said HB 9 is flawed in that it “creates two, different statutory schemes permitting an officer of the court to sell real property in satisfaction of a debt secured by a mortgage.”

“I submit that such court officers who are selling real property should follow the same procedures,” he said.

Under current law, Shellhaas said the sheriff of the county where a piece of real estate is located is charged with selling foreclosed real estate when the court has ordered a sale.

“These statutory requirements were enacted as part of legislation which reformed foreclosures in Ohio. Prior to 1853, a foreclosing lender could have the property sold or could elect to receive the property once the court found the mortgage terms had been breached,” he said.

“Because of the process, mortgage holders often received more than they were owed on the debt and nothing required the lender to return any equity to the borrower. I submit that HB 9, as proposed, has the potential to return us to the foreclosure laws that existed prior to 1853.”

HB 9 has yet to be scheduled for additional hearings.

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