Don’t Get Knocked Out of the Gate before the Race Starts: Ohio Supreme Court Holds that Filing of Tax Complaint by Property Manager is Unauthorized Practice of Law


By: Stephen D. Richman, Esq.-Senior Counsel, Kohrman, Jackson & Krantz
Answering the “what, when, where and why questions” relating to real estate tax complaints in Ohio is a lot easier than answering “who” can file real estate tax complaints. The Ohio Supreme Court in Greenway Ohio, Inc. v. Cuyahoga Cty. Bd. of Revision, Slip Op. No. 2018-Ohio-4244, however, recently provided a little guidance as to answering the “who question.”

I.                   The What/When/Where/Why of Real Estate Tax Complaints in Ohio
What: Property owners, concerned that their real property tax values are too high may file a complaint to reduce the same. Those tax values, multiplied by local tax rates result in the amount that property owners will pay in real estate taxes. 
When: Complaints may only be filed between January 1 and March 31 (April 1, 2019 for tax year 2018) to contest the prior year’s tax value. For example, if a complaint is filed in 2019, it relates back to the tax value of the property as of January 1, 2018. Pursuant to Ohio statutory law, as well as Ohio Department of Taxation rules, real property in all Ohio counties is required to be reappraised every six years, and updated every three years. Normally, owners can challenge a county auditor's valuation just one time in each three-year cycle (a “triennial”) unless the property was sold in an arm's length transaction, the property lost value due to a casualty, substantial improvement was added to the property or there was an increase or decrease of at least fifteen per cent in a commercial property's occupancy.

Time is definitely “of the essence” with regard to tax complaints. If a complaint is filed even one day late, it will be dismissed.
Where/How: Property values are challenged via a "Complaint Against Valuation" that is filed with the local Board of Revision (“BOR”). The same complaint form is used statewide. It can be downloaded from county auditor websites as well as from the Ohio Department of Taxation's website. It is important to fill out the form carefully, because incorrect information can result in the dismissal of a case.  
Why: Basically, complaints are filed to petition for lower property values, because lower property values means lower property taxes. Common reasons to challenge property values include declining market values, declining rents/increased vacancies for income-producing property, obsolescence and casualty damage. In addition, people who recently purchased a property in an arms-length transaction for less than their county auditor's value, often have a strong basis for filing a tax appeal (due to case law which provides that the sale price in an arm’s length transaction between a willing seller and a willing buyer is usually considered good evidence of value).
What if there is no recent sale involved? Does it still make sense to challenge your property’s increased valuation?
The answer is, of course, it depends. It depends on the amount of additional taxes that will need to be paid, for how long, and the attorney, appraiser and other fees involved with a complaint.   For example, let’s say the county increased the value of your property by $20,000. While that number is significant, if your county’s tax rate as a percent of market value is 2%, your taxes would only increase by $400/yr.  On the other hand, a $100,000 valuation increase on a commercial property with the same tax rate would result in taxes increasing by $2,000/yr. Since valuation in Ohio is updated every three years, you could be faced with a $6,000 increase (in our commercial example) if the year of increased valuation is the first year of a triennial.  If an appraisal costs, say $2,000, and an attorney will take the case on a contingency basis, the challenge would be worth it.  You basically need to do a cost/benefit analysis for every situation in order to determine if it makes sense to challenge your property’s increased valuation.
II.                II.  Who may File a Real Estate Tax Complaint in Ohio

§ Property owner;

§ An attorney, licensed to practice law in the State of Ohio, representing any party properly before a BOR; and

§ Any other entity named in Ohio Revised Code Section 5715.19 (A).

Background:  At one time, the list of who could file a tax complaint was limited to attorneys and individual property owners, as a result of then current court precedent, most notably, Sharon Village Ltd. v. Licking Cty. Bd. of Revision, 78 Ohio St.3d 479 (1997).  In the aftermath of the Sharon Village decision, the General Assembly enacted legislation (H.B. 694, effective March 1999) that (among other things) expressly authorized certain non-attorneys to file tax valuation complaints on behalf of property owners, namely: (1) spouses; (2) appraisers; (3) real estate brokers; (4) accountants; and (5) officers, salaried employees, partners or members of a corporation or other business firm owner of real property (See Ohio Revised Code Section 5715.19(A)).

Two sub-issues (regarding who may file): Two sub issues have arisen, however, after the supposed clarity that H.B. 694 and O.R.C. 5715.19(A) was initially thought to provide. The first sub-issue centers around what a non-attorney agent may do during the tax complaint process, without being guilty of the unauthorized practice of law. While, at first glance, H.B. 694 appeared to provide some practicality and legal cost savings by allowing a number of non-attorney agents to file real estate tax complaints, the Supreme Court of Ohio in Dayton Supply & Tool Co., Inc. v. Montgomery Cty. Bd. of Revision, 2006-Ohio-5852 clarified that while a corporate officer (or other authorized, non-attorney) may prepare and file a complaint with a local board of revision, without engaging in the unauthorized practice of law, the non-attorney cannot do much else. In other words, corporate officers and other authorized, non-attorneys cannot make legal arguments, examine witnesses or undertake any other tasks that can only be performed by an attorney.

The second sub-issue is whether or not O.R.C. 5715.19(A)  limits non attorney agents who may file complaints on behalf of an owner to those specifically listed in the statute; and if not, what other, non-attorney agents may tax file complaints.

Greenway Ohio, Inc. v. Cuyahoga Cty. Bd. of Revision: The “second sub-issue” discussed above was recently analyzed in Greenway Ohio, Inc. v. Cuyahoga Cty. Bd. of Revision. Specifically, this case involved whether or not a property manager is among the non-lawyers authorized under O.R.C. 5715.19(A) to file a valuation complaint on behalf of a property owner.

In Greenway, the CEO of real estate management company “Property Advisors” prepared and filed (in January, 2016) a tax complaint seeking to lower the value of the property that Property Advisors managed for the owner (Greenway Ohio, Inc.; “Greenway”). The Orange City School Board of Education (“BOE”) filed a motion to dismiss the complaint on the basis that the Cuyahoga County Board of Revision (“BOR”) had no jurisdiction to hear the matter, since Mr. Sweeney, the CEO of Property Advisors was not a person authorized under O.R.C. 5715.19(A) to file a tax complaint on behalf of the owner. The BOR indicated that Mr. Sweeney was not authorized to file (and accordingly, engaged in the unauthorized practice of law), however, the BOR issued a decision on the merits, upholding the then property value of the Cuyahoga County Fiscal Officer. Greenway then appealed to the Ohio Board of Tax Appeals (“BTA”). Without conducting a hearing, the BTA determined that Mr. Sweeney was not a person authorized under O.R.C. Section 5715.19(A) to file a tax complaint, and that therefore, the BOR had no jurisdiction. The BTA then remanded the case back to the BOR with instructions to dismiss the complaint. Greenway then appealed to the Ohio Supreme Court.

The underlying premise of Greenway’s argument is that the list of persons specified in O.R.C. 5715.19(A) is not an exhaustive list and that a management company, as an authorized agent of the property owner should be able to file a complaint on the owner’s behalf. In support of its argument, Greenway cited a 2010 Ohio Supreme Court case that held for the taxpayer, and also dealt with a real estate management company (Toledo Pub. Schools Bd. of Edn. v. Lucas Cty. Bd. of Revision, 124 Ohio St.3d 490, 2010-Ohio-253). The court in Toledo Pub. Schools even acknowledged that the statute’s “list of persons is not intended as a restriction of those who may file a valuation complaint on behalf of an owner.” In fact, the Toledo Pub. Schools court stated that the statute’s intent is the opposite of limiting. The intent of O.R.C. 5715.19(A), according to the Toledo Pub. Schools court is towiden the pool [of persons authorized to file tax complaints]by specifying that certain non-lawyers may file on behalf of an owner in spite of considerations relating to the unauthorized practice of law.”

Notwithstanding this seemingly supportive language to Greenway’s argument, the court in Greenway easily distinguished the Toledo Pub. Schools case as not relevant because in Toledo Pub. Schools, an attorney for the owner’s management company filed the complaint, vs. the management company’s non-lawyer CEO (as was the case in Greenway), and the statute certainly did not intend to prevent lawyers from filing complaints. The court in Toledo Pub. Schools came to this same conclusion by stating: “But when, as in the present case, a lawyer has prepared and filed the complaint, the list of persons who may file on behalf of the owner in O.R.C. 5715.19(A) is not relevant.”

If there is any thought left as to whether or not the “window is still open” regarding authorized agent, non-lawyers filing tax complaints who are not listed in O.R.C. 5715.19(A), the court in Greenway seemed to close any window it may have opened by concluding that “non-lawyers who are not specified in RC 5715.19(A) are not authorized to file on behalf of a property owner.”

III.               III. What is the Moral of this Story?

Don’t get “knocked out of the gate before the race starts.” Hire a qualified attorney to file your complaint and do what lawyers are trained to do (i.e., make legal arguments, examine witnesses, file appeals and undertake any other tasks that can be performed only by an attorney).

If a non-lawyer is determined to have engaged in the unauthorized practice of law, because he/she was not authorized to file a tax complaint, or he/she validly filed a tax complaint (pursuant to O.R.C. 5715.19(A), but then crossed the “practicing law line” during the hearing, the complaint can be dismissed, and if dismissed, you won’t be able to file another complaint until the next tax year.  

Another Local Point of Sale Ordinance in Ohio Held to be Unconstitutional


By: Stephen D. Richman, Esq. - Senior Counsel- Kohrman, Jackson & Krantz

(Criminal Penalties and Lack of Warrant Procedure Held to be Key Failings of Bedford, Ohio’s Former Point of Sale Ordinance)



The U.S. District Court for the Northern District of Ohio has held in Pund v. City of Bedford, Case No.1:16-cv-1076 (N.D. Ohio Sept. 10, 2018) that a prior version of the point of sale inspection ordinance of the City of Bedford (suburb of Cleveland), as well as its rental inspection provisions, were unconstitutional, in violation of the Fourth Amendment of the U.S. Constitution.

This is the second Ohio federal court to strike down ordinances of this type. Earlier this year, the U.S. District Court for the Southern District of Ohio in Thompson v. City of Oakwood, Case No. 3:16-cv-169 (S.D. Ohio Feb 9, 2018) ruled that the point of sale ordinance of the City of Oakwood (suburb of Dayton) was unconstitutional.

Point of Sale Ordinances

While this type of ordinance can take many forms, the most common makes it unlawful to transfer ownership of any real estate, or lease to a new tenant, without having obtained a pre-sale inspection of the property under the applicable municipal code. The pre-sale inspection procedure usually requires the property owner to complete an application, schedule and appear for an inspection of the property with a code official, pay an inspection fee, and correct or otherwise address identified violations of the municipality’s fire, zoning, building, and/or property maintenance codes in order to obtain a certificate of occupancy authorizing the property’s sale or rental. The violation of pre-sale inspection requirements in this type of ordinance is usually punishable as a misdemeanor.

Municipalities usually defend their point of sale ordinances as valuable tools to increase the value of properties within their borders and ensure such properties and the residents occupying the same will be and remain safe. While these ordinances often contain a “criminal component”, municipalities rarely enforce the criminal penalties, but deem them necessary to cause compliance.

Notwithstanding the laudable intentions behind this type of point of sale ordinance, and the usual reluctance of municipalities to enforce the criminal penalties associated therewith, the United States District Court for the Northern District of Ohio in Pund has followed the lead of the Southern District of Ohio (in Thompson) in  holding point of sale ordinances with criminal penalties, but without warrant procedures (such as those formerly enacted in Oakwood, Ohio and Bedford, Ohio) unconstitutional violations of the Fourth Amendment of the U.S. Constitution.

Bedford’s Former Point of Sale/Rental Inspection Ordinance

Bedford’s former Point of Sale Inspection Ordinance required homeowners to obtain a Certificate of Inspection (“Certificate”) before selling their home. A Certificate, valid for twelve months, was issued after a building official inspected “all structures or premises used for dwelling purposes and all secondary or accessory structures to determine whether such structures or premises conform[ed] to the provisions of th[e] code.” On inspection, the building official could enter the property at any reasonable time and inspect all areas of the home, including basements, bathrooms, electrical equipment, roofing, walks and driveways. Obtaining a Certificate required homeowners to apply for and consent to a warrantless inspection of the home and to pay an inspection fee ranging from $50 to $200. If the home did not pass inspection, either (i) the homeowner was required to perform repairs before the sale, or, (ii) the buyer could deposit money in escrow to ensure payment for repairs to be made after the sale. Homeowners that violated the ordinance or refused an inspection were guilty of a misdemeanor and could be fined and imprisoned.                             

Similarly, Bedford’s rental inspection ordinance required landlords to schedule a warrantless inspection of their rental units every two years, or each time a new tenant was secured. A landlord was to obtain a Certificate in order to lease its property to a tenant. Landlords paid an inspection fee ranging from $20 to $50 per unit, and failure to comply could result in criminal penalties including fines and imprisonment.

It is important to note that approximately two months after the plaintiffs’ action was filed, the City of Bedford passed an ordinance that repealed the then existing pre-sale inspection ordinance and replaced it with a new one. The new ordinance adds an administrative warrant process for inspections and eliminates criminal penalties.

Background of Pund v. City of Bedford

The plaintiffs filed a legal action against the City of Bedford on behalf of Ken Pund  (an area landlord who was forbidden from selling a home he owns to his daughter, in which she resides); John Diezic (a homeowner who was prevented from selling his home in Bedford due to minor cracks in his asphalt driveway); and (1) all other individuals and businesses that have been subjected to Bedford’s point of sale inspections between September 10, 2014 and January 30, 2017 (and paid the requisite inspection fees); and (2) all individuals and businesses that have been subjected to rental inspections between September 10, 2014 and February 14, 2017 (and paid the requisite rental inspection fees).

Basically, the plaintiffs in Pund sought: 1) an injunction against enforcement of the ordinances containing a warrantless inspection requirement; 2) a declaratory judgment that Bedford’s point of sale and rental inspection ordinances were unconstitutional (and that defendant City of Bedford has been/continues to be unjustly enriched as a result therefrom); and 3) restitution of the inspection fees plaintiffs paid pursuant to such ordinances.

Defendant’s Arguments

The City of Bedford put forth two basic arguments: 1) it was entitled to summary judgment on plaintiffs’ claims because its amended ordinance rendered such claims, moot; and 2) it did not commit any constitutional violation because the plaintiffs consented to the inspections.

The Court’s Analysis in Pund V. City of Bedford

As with the court in Thompson, the court in Pund agreed with the defendant’s argument that the amended ordinance rendered the plaintiffs’ injunction claims, moot. Citing precedent (prior cases on point), the court in Pund explained that “[W]hen the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome,” a case (or case issue) becomes moot. And, since Bedford’s amended ordinance provided plaintiffs the injunctive relief they sought; the court in Pund declared the injunction portion of the plaintiffs’ claims no longer live, and therefore, moot. However, further citing precedent, the court  clarified that “[W]here a claim for injunctive relief is moot, relief in the form of damages for a past constitutional violation is not affected.”  In other words, the Pund court held that plaintiffs retained a “backward-looking right to challenge the original law”; in terms of their claims for a declaratory judgement and monetary damages relating to the prior ordinance. The City of Bedford tried to argue away plaintiffs’ right to a declaratory judgement (leaving simply, a claim for monetary damages), however, the court in Pund disagreed, explaining that “Declaratory relief is part and parcel of [a] claim for monetary relief, which is live.”

To address the defendant’s argument that there was no constitutional violation, and accordingly no damages to be awarded (because plaintiffs consented to the search, and accordingly did not violate the Fourth Amendment), the court in Pund first summarized the general rule of (and quoted precedent with regard to) such amendment, before evaluating whether or not the general exception to the general rule (namely, that consented-to searches do not require a warrant) applied.

The court in Pund stated, as a general rule, that “The Fourth Amendment protects people in the privacy of their homes and against ‘unreasonable searches and seizures’;” and that searches of the home by the government “conducted outside the judicial process, without prior approval by a judge or a magistrate judge [e.g., via a warrant], are per se unreasonable subject only to a few specifically established and well-delineated exceptions.” As you may recall from high school government class, “Plain view”, “search incident to a lawful arrest”, “exigent circumstances” and “voluntary consent” are some of the more common “warrant exceptions,” where a warrantless search or seizure would still be considered reasonable and not run afoul of the Fourth Amendment.

The defendant and its counsel in Pund were certainly aware of the “consent exception,” and in fact used it to justify their argument for summary judgement in their favor. The plaintiffs, however countered that “voluntary consent to inspection, necessary for the City’s compliance with the Fourth Amendment, was impossible for any homeowner to give under the terms of the ordinance because the only alternative to consent was criminal penalty.”

In holding for the plaintiffs, the court in Pund  first recognized and agreed that voluntary consent to search is in fact a well-established exception to the Fourth Amendment’s warrant requirement, by simply stating that, “A homeowner’s voluntary consent to a search satisfies the government’s Fourth-Amendment obligations.” However, just as general rules of law always have exceptions, exceptions to exceptions are just as common, and ruled the day in Pund v City of Bedford. Quoting precedent (establishing an exception to the consent exception) by the court in Thompson, and others before it, the court in Pund agreed with the plaintiffs and held that “consent given under threat of criminal penalty can never be deemed voluntary.”  Applying the facts to the law, the Pund Court summarized that the Bedford inspection ordinances were unconstitutional because they required a homeowner to obtain a certificate in order to sell a home, which in turn allowed a building inspector to enter and search the property without a warrant, failure to comply was punishable as a misdemeanor of the first degree, and consent to the search could not be considered voluntary because of the criminal penalties which would ensue without such consent.

Would it have made a difference if the City of Bedford never enforced its inspection ordinances against any property owner?

While not discussed in the Pund case, the court in Thompson clearly provided that such facts would make no difference, by stating: “Here, even if Oakwood has never denied a certificate of occupancy or enforced the criminal provisions of its ordinance, the mere possibility of such action is enough to render any consent involuntary as a matter of law.”

Holding of Pund V. City of Bedford

Specifically, the court in Pund ruled as follows: “the City’s Point of Sale Inspection Ordinance and Rental Inspection Ordinance, as they existed on May 4, 2016, are unconstitutional both facially and as applied to Plaintiffs because they violate the Fourth Amendment to the U.S. Constitution. [The Court] further declares that fees resulting from searches under those Ordinances resulted in unjust enrichment and that Plaintiffs are entitled to compensation.”  

The case is still moving forward, however on issues involved in determining class action participation and the amount of compensation due. 

Moral of the Story

Most municipalities infuse their building and zoning codes with criminal penalties for violation of the same. In their defense, enforcing compliance with ordinances is often difficult without the threat of criminal penalties. Usually, such ordinances provide more “bark than bite” and are only enforced as a last resort.

However, as provided in Pund v City of Bedford (and Thompson V. City of Oakwood), it seems that Ohio point of sale ordinances that call for criminal penalties (whether or not actually enforced) will most likely be held unconstitutional, at least where no administrative warrant procedure is provided. In other words, if it was not clear after Thompson, it is definitely advisable now for those municipalities who have not yet done so, to clearly review their point of sale/inspection ordinances and revise them accordingly.

Electronically Signed Email Exchange May Constitute Enforceable Real Estate Contract


By: Stephen D. Richman, Esq. - Senior Counsel- Kohrman, Jackson & Krantz
(A Watch Your Language Series Article)


(Watch your language when creating contracts [and when not intending to create a contract])



As established in other “Watch Your Language” articles for this Blog, as a general rule, courts will typically uphold commercial document provisions unless they are contrary to public policy or statutory law, or the subject of a mutual mistake. Courts traditionally presume that commercial parties are on more of an equal playing field and are more sophisticated concerning commercial transactions, since both parties will usually have attorneys to review their documents. More and more, parties to residential real estate contracts are being held to the same standard governing commercial transactions. Because courts often defer to the specific language of real estate documents, unintended results are often the norm for parties who do not carefully draft their documents.


 Because of this judicial deference to “plain language” within real estate and other documents, and the fact that courts, as a general rule will not look outside the four corners of a document (to consider extrinsic evidence of intent) if the language is unambiguous, you must “watch your language, and say what you mean, precisely, or a judge will decide what you meant.”

This watch your language precept is just as (if not more) important in cases determining whether or not a contract has been created, than it is in cases determining the meaning of language within a legally created contract. The Court of Appeals for the First Appellate District of Ohio was recently faced with this very issue in Mezher v. Schrand, 2018-Ohio-3787.

Background of Mezher v. Schrand.

This case involves the alleged sale of a high-end residential property in Mt. Adams, Ohio owned by defendants-appellees Karri and Jeff Schrand (“Seller[s]”). Plaintiffs-appellants Joseph and Mike Mezher (“Buyer[s]”) argued that the Sellers agreed by a series of email exchanges (electronically signed) to sell their home to the Buyers and that the Sellers breached that agreement. The Sellers argued that no agreement existed because of the requirements of the Statute of Frauds.

The email exchange between the Buyers and the Sellers in Mezher started with both parties going back and forth on price. These introductory emails contained a general description of the property (address) and clearly identified the parties. The last three emails in the exchange were as follows:

Buyer (Sept 29, 2017): “However, will split it [price difference] again with you because I want to be flexible. I am good at $982,500 for a purchase price. Based on inception [sic] and customary closing, we can get a simple contract drafted Monday and have it signed by us Tuesday with the earnest money cashier check to you upon acceptance of contract by Tuesday. Please let me know, Mike[.]”

Seller (Sept 30, 2017): “We accept.”

Buyer (Sept 30, 2017):  “Great, I agree too.”

When the parties met on October 5, 2017, an argument ensued, and the Sellers refused to sign a written form contract the Buyers brought with them. The Buyers then filed a complaint against Sellers, requesting specific performance of the real estate contract allegedly established by e-mail exchange. The trial court granted summary judgment in favor of the Sellers, finding that the September 29-30 email exchange between the parties did not satisfy the Statute of Frauds, because the emails did not describe the subject property with particularity. The Buyers then appealed to the Hamilton County Court of Appeals.


What is the Statute of Frauds?

In Ohio (and most other jurisdictions), the “Statute of Frauds” (originating from a 1619 Act of Parliament) basically establishes that certain contracts must be memorialized in a signed writing to be enforceable. Specifically, Ohio’s Statute of Frauds (ORC §1335.05) provides, in pertinent part that: “no action shall be brought …upon a contract or sale of lands… or interest in or concerning them,… unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith...”. There are limited, “equitable” exceptions to the rule, such as “part performance”, “unjust enrichment” and “promissory estoppel” that courts have imposed in order to avoid unfair legal remedies. See “An Oral Contract to Buy Real Estate is not Worth the Paper it is not Written on” — Ohio Real Estate Blog, April 30, 2010.

Does an email or other electronic form of writing satisfy the Statute of Frauds?

Yes. While not contemplated in 1619, the “electronic age of contract formation” has been with us in Ohio since the turn of the century. Pursuant to ORC §1306.06 (C)-(D), if a law requires a record and/or signature to be in writing, an electronic record and/or signature satisfies the law. To erase any doubt with respect to contracts, ORC §1306.06 (B) provides: “A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.”

What writing is sufficient to satisfy the Statute of Frauds?

More perplexing than whether or not a writing exists, is the question of what writing is sufficient to satisfy the Statute of Frauds. The general law in Ohio is that in order for a real estate contract to comply with the Statute of Frauds, it is necessary that the signed contract or memorandum: (1) identify the subject matter; (2) establish that a contract has been made (both parties to the contract must assent to its terms and have a “meeting of the minds” as to those terms); and (3) state the essential terms with reasonable certainty.

What are the essential terms of a real estate contract?

In Ohio, courts have identified the essential terms of a real estate contract as: “the identity of the parties to be bound; the subject matter of the contract; consideration; a quantity term and a price term”. What is not essential? According to recent Ohio court decisions, a written contract for the sale of land need not include the character of the deed to the executed, specify who should pay taxes on the sale or state whether a mortgage must be given to secure the purchase money in order for the contract to still comply with the Statute of Frauds. Additionally, the contract does not violate the Statute of Frauds because the writing does not state a specific date of performance (i.e. closing date) or because of the failure to designate the nature of the interest being conveyed.

Analysis of Mezher v. Schrand.

The court of appeals in Mezher reversed the trial court’s decision, easily concluding that the emails at issue did in fact describe the subject property with particularity. While a list of personal property (appliances, window treatments…) was not specified, the address of the real estate was embedded within the subject line of each email in the exchange and all the other essential terms could be found in the body of the emails. According to the appellate court in Mezher, a list of ancillary personal property is clearly a non-essential term in a contract for the sale of real property.

The appellate court, however, also remanded the case back to the trial court on the issue of whether or not a “meeting of the minds” occurred within the emails vs simply a price negotiation to be followed up by a more complete written contract. Recall that the Mezher email exchange contemplated that the parties would sign a formal document shortly after the email exchange.

As explained by the court of appeals in Mezher, “Given the circumstances surrounding the parties’ email exchange and later discussions, including that other terms of the sale had yet to be agreed upon, an issue of fact exists as to whether the parties had a present intention to be bound at the time of the email exchange, or whether the parties did not intend to be bound until execution of the more formal contract.”

The Mezher court did cite precedent establishing that an agreement can be specifically enforced even where the parties contemplated execution of a later, formal written document, so long as the parties (at the time of the “informal contract”) have manifested an intent to be bound and their intentions are sufficiently definite. The determination of intent, however would be a matter for the trier of fact, not the court of appeals.

What is the moral of this story?

First, “say what you mean, precisely, or a judge will tell you what you meant.” The general rule in Ohio is that when the parties have clearly agreed to the “critical terms” of a real estate transaction, the court may determine on its own the meaning of any ambiguous or uncertain terms. While courts will typically factor in to their decisions, what they believe the parties’ mutual understanding to be, more often than not, a court’s determination does not match up with a party's actual understanding and someone goes home from court unhappy.

Second, there is no hard and fast rule or finite list as to what is and what is not an “essential” term of a real estate contract. While we know that price, identification of the parties and property description are essential terms, and that the closing date and description of personal property are non- essential terms, there are limitless provisions that could be deemed essential by a court of law, the absence of which could render the contract unenforceable. In other words, don’t worry about the number of pages in your contracts, worry about what is reflected within the pages.

Third, the enforceability of a real estate contract containing essential terms depends… on whether the parties have manifested an intention to be bound by such terms and whether these intentions are sufficiently definite to be specifically enforced. Unless absolutely clear in the “contract”, however, the intent of the parties will be based on a fact finder’s (judge or jury’s) evaluation of not only the language itself, but the circumstances surrounding the language. The fact finder certainly will not have a better idea of the parties’ intentions than the parties themselves, but will have the power to nonetheless, make the call. In other words, if you don’t want your preliminary negotiation or letter of intent to be construed as a final contract, spell that out, clearly and definitively. It is no guarantee, but a clear statement that the document “is not intended to be binding” will always be evidence of non-intent to create a binding contract.

Finally, get with the times. These days, contracts can be created in cyberspace, as easily as they can be on a written document entitled “contract.” If you don’t want your emails to be binding contracts, don’t sign them, or better yet, don’t write them in the first place.




A Greenhouse Building is not a Building but a Movable Business Fixture according to Ohio Board of Tax Appeals


By: Stephen D. Richman, Esq. – Senior Counsel, Kohrman, Jackson & Krantz

That old adage, if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck” holds true for…waterfowl and a host of persons, places and things, but not for greenhouses in the recent Ohio Board of Tax Appeals decision, Viola Associates, LLC v. Lorain County Board of Revision, Case Nos. 2016-1273, 1274 and 1275.                                                                                                                                                          
The facts of the case are simple enough; the law, not so much.

Facts of the Case

Green Circle Growers Inc. and Viola Associates, LLC (collectively, “Green Circle”) own approximately 186 acres of land improved with greenhouses, packing and storage facilities, a residence and barn. Lorain County valued (in 2016) the property for tax purposes at approximately $40 Million. Green Circle filed complaints with the Lorain County Board of Revision (“BOR”) seeking a reduction in value to approximately $22 Million. Shortly thereafter, the appellee, Firelands Local Schools Board of Education (“BOE”) filed a counter complaint in support of maintaining the auditor’s $40 Million value. The primary issue addressed by the BOR (and afterwards, by the Board of Tax Appeals) was whether the greenhouses situated on the property should be treated as real property, and accordingly included in the assessment of the subject property’s total true value; or as personal property that should be excluded from the subject’s value for purposes of real estate taxation.

At the BOR hearing, Green Circle claimed that the greenhouses, while attached to the land, are removable, and therefore constitute personal property that should not be included in the auditor’s valuation. Green Circle presented testimony from several witnesses who testified that “the method by which a greenhouse is affixed to the ground and constructed is similar to an erector set, in that it can be deconstructed and reconstructed with limited damage” and that “there is an active secondary market for the resale of greenhouses, which are deconstructed and then sold to again be used for horticulture.” Green Circle also offered testimony from an appraiser who opined that the greenhouses were personal property and should not be included in the value of the subject real property because they could be removed from the property with relative ease, and would yield little value to anyone other than someone in the horticulture business. The BOE cross-examined Green Circle’s witnesses, but did not offer any independent evidence of value.

In spite of all of the testimony, the BOR ruled that Green Circle presented insufficient evidence to support a reduction in value, and that therefore, the initial assessed valuation of $40 Million was to be maintained. Green Circle then appealed the BOR decision to the Ohio Board of Tax Appeals.

Applicable Law

Distinguishing between personalty and realty is a vexing issue in many real estate and tax related arenas. In landlord-tenant law, for example, the issue usually centers on who is entitled to remove and/or retain the item in question (e.g., a supplemental HVAC system bolted to the roof) at the end of the lease. In a foreclosure, the issue is whether or not the item is realty, and can be foreclosed upon, or personalty, and not part of the property being foreclosed. The distinction in tax law can determine what are qualifying REIT assets, the amount of a taxpayer’s Investment Tax Credit, what gets capitalized and whether or not property qualifies as a 1031 Exchange.

At early common law, the general rule was that everything attached to realty became part of the realty, and therefore was deemed irremovable. Friedman on Leases, Sec. 24.1 at 1414 (2005). In modern times, as is the case with many “general rules,” the exception (removability) seems more general rule than exception. While most would agree that a 20 story office building is realty and a lawn mower is personalty, between the extremes is much more difficult to assess. In other words, how does one classify grain bins, silos, electronic billboards, cold storage cooler rooms, oil tanks and amusement park rides?

Unfortunately, there is no one size fits all definition. In Ohio, the answer for landlord-tenant issues can be found in common law decisions. See, e.g., Perez Bar & Grill v. Schneider, 2012-Ohio-5820; Household Finance Corp. v. The Bank of Ohio, 62 Ohio App. 3d 691, 694 (1989) and Friedman on Leases, Sec. 24.1 at 1414 (2005). The definition of real property for various income tax issues can be found in the U.S. Tax Code and corresponding regulations for the applicable tax issue.

In determining whether a landowner’s real estate should increase in value for real estate tax purposes (or not be affected because the item in question is personal property), county auditors must look to the statutory definitions of real property and personal property in the Ohio Revised Code. 

R.C. 5701.02 defines “real property” (as used in Title LVII of the Revised Code [Taxation]) as follows:

(A) 'Real property,' 'realty,' and 'land' include land itself . . . with all things contained therein, and, unless otherwise specified in this section or 5701.03 of the Revised Code, all buildings, structures, improvements, and fixtures of whatever kind on the land…”

The definitions of “buildings”, “fixtures”, “improvements” and “structures” appear in R.C. 5701.02 (B) - (E), respectively.

R.C. 5701.03 defines “personal property” (as used in Title LVII of the Revised Code [Taxation]) as follows:

“(A) ‘Personal property’ includes every tangible thing that is the subject of ownership . . . including a business fixture, and that does not constitute real property as defined in Section 5701.02 of the Revised Code.

(B) ‘Business fixture’ means an item of tangible personal property that has become permanently attached or affixed to the land or to a building, structure, or improvement, and that primarily benefits the business conducted by the occupant on the premises and not the realty. 'Business fixture' includes, but is not limited to, machinery, equipment, signs, storage bins and tanks, whether above or below ground.  ‘Business fixture’ also means those portions of buildings, structures, and improvements that are specially designed, constructed, and used for the business conducted in the building, structure, or improvement, including, but not limited to, foundations and supports for machinery and equipment…”
It is important to note that in 1992, the Ohio General Assembly amended the definition of “personal property” to include “business fixtures.”

Analysis of the BTA’s Decision in Viola

To reach its conclusion that the Green Circle greenhouses were personal property (and that the BOR decision should be overruled), the Board of Tax Appeals (“BTA”) in Viola first felt it necessary to determine if the subject greenhouses could be classified as buildings, structures or improvements. If so, the analysis would end there, and the greenhouses would be taxed as real property. The BTA reasoned that the definition of these items in R.C. 5701.02 (B) - (E) all shared “an element of permanence in their original fabrication or construction” (vs. a “fixture” or “business fixture” that starts out as an item of tangible personal property, that then becomes attached or affixed to the land or to a building, structure, or improvement). The BTA then determined the greenhouses were not buildings, structures or improvements, based upon the testimony presented by Green Circle’s witnesses that described the greenhouses as temporary, built to be removed and often sold on a secondary market following removal. According to the BTA, the greenhouses were a far cry from permanently constructed buildings built to shelter persons or property, or structures defined by the Ohio Revised Code to include bridges, dams and silos. The BTA was not swayed by the appellee’s argument that the greenhouses were permanent because they were attached to concrete. Although the concrete is incorporated into the real estate, according to the BTA, “that does not transform the item to which it is attached [to real estate], such as an… amusement park ride and its shelter, which retains its character as tangible personal property, albeit permanently affixed to the land.”  Moreover, personal property can include foundations and supports pursuant to R.C. 5701.03.

Once determined not to be structures, buildings or improvements, the next threshold question for the BTA to answer was whether or not the Green Circle greenhouses were “fixtures,” and accordingly, real property; or “business fixtures”, and accordingly, personal property.

According to the BTA, the “statutory test” for items not buildings, structures or improvements boils down to whether the item “primarily benefits” the business or the realty. This makes sense as the statutory definitions of “fixture” and “business fixture” are identical, except for the primary benefit language at the end of each definition. In other words, the greenhouses would be classified as “fixtures” and real property if they primarily benefit the realty; or “business fixtures” and personal property if they primarily benefit the business.

The BTA came to the conclusion that the greenhouses in question primarily benefited the business (vs. the realty), based on the evidence presented to the BOR and the BTA. As stated by the BTA in Viola, “Green Circle presented testimony from multiple individuals to demonstrate that the greenhouses in question were designed especially for growing plants…. primarily benefit Green Circle Growers’ horticulture business and would provide little value, if any, to another occupant of the land who was not engaged in the same or very similar business.” Also important to the BTA was the fact that “the greenhouses are outfitted with computer systems, shade cloths, irrigation systems, retractable roofs, and a number of other components that are specific to the sophisticated operation taking place at the property… that would [not] benefit the land or any other occupant of the property that was not engaged in a commercial horticulture business.”

What about precedent (prior decisions on point)? In fact, the BOE strongly argued that the Supreme Court of Ohio, in Green Circle Growers, Inc. v. Lorain Cty. Bd. Of Revision, 35 Ohio St. 3d 38 (1988) decided that these very same greenhouses were real property and should be taxed as such (for the applicable tax years in question). The BTA in Viola easily distinguished this case, however, because it was decided prior to the 1992 amendment to R.C. 5701.02 and 5701.03 that revised the definitions of real and personal property for taxation purposes, most notably adding the newly defined “business fixture,” which the Ohio General Assembly specifically excluded from the definition of real property. According to the BTA in Viola, “these definition changes demand reconsideration of the issue and lead to a different result.” Namely, that the greenhouses should be deemed personal property and not part of the real estate.

Adding “insult to injury”, the BTA in Viola also described two cases decided after the 1988 Green Circle case (and after the afore-mentioned 1992 amendments), in which the Supreme Court of Ohio held that the items of property in question were business fixtures and not real property fixtures. See Metamora Elevator Co. v. Fulton Cty. Bd. of Revision, 143 Ohio St.3d 359, 2015-Ohio-2807 (Grain Bins were held to be business fixtures and not real property); and Funtime, Inc. v. Wilkins, 105 Ohio St.3d 74, 2004-Ohio-6890 (amusement park rides and their accoutrements were held to be business fixtures and not real property).

Having found that the greenhouses in Viola are business fixtures and, therefore, should not be taxed as real property, the BTA’s final task was to examine the appraisals of the BOE and Green Circle and determine the appropriate value of the real property. Using the appellant’s cost approach for the residential property, and sales comparison approach for the commercial property, the BTA arrived at a total value of $10,200,000.

With an approximate $30 Million difference between the BOE’s opinion of value and the BTA’s determination of value, the appellee, reportedly has petitioned the Ohio Supreme Court to consider the matter. Only then will we know if what looked like a greenhouse building to the Ohio Supreme Court in 1988 is still a greenhouse building in 2018, or a business fixture as determined by the BTA in Viola.