Landlord Evicts Tenant Following Expiration of Term, Despite Renewal Communications

Ohio’s Eighth District Court of Appeals recently decided a landlord-tenant case addressing the requirements for parties to reach an enforceable contract when discussing a lease renewal.  In Realty Trust Servs., L.L.C. v. Mohammad, 2020-Ohio-3736, the Plaintiff sought eviction of the tenant from property following the expiration of the lease term after the parties attempted but failed to reach a definitive agreement on renewal.  The parties then exchanged emails about renewal, but the parties never finalized definitive renewal terms.

Once the term expired, the landlord served a statutory three-day notice, and the tenant tendered rent payments, which the landlord refused.  The landlord then filed an eviction action.

On appeal, the Eighth District Court of Appeals ruled that the landlord never extended an offer of definitive terms to the tenant, that the parties’ email exchange was a mere “invitation to negotiate,” and that the parties never reached a “meeting of the minds” on terms of renewal.  The Court of Appeals noted that there was no holdover tenancy because the landlord refused to accept rent following the expiration of the term.

This case serves as a useful reminder to landlords to be as clear as you possibly can in communications about renewals, and don’t accept rent following the expiration of a term if you want to immediately regain possession of the property.

ALTA’s Title Insurance Law Newsletter Features Sikora Law Case

Another well-respected title industry publication has picked up our firm’s most recent case law appellate victory on title coverage and closing protection coverage.  That case law victory was covered well in the October 2020 issue of the American Land Title Association’s Title Insurance Law Newsletter.  That article recognized our firm and our lead attorney on that case, Alex Goetsch, for the outstanding result.   Check out that article “Loan Closer Owed No Duty to Borrower” in the October issue of ALTA’s Title Insurance Law Newsletter by clicking here.

Statute of Frauds Applies to Easement Modifications

Recorded easements are subject to the statute of frauds and cannot be modified without a subsequent writing, proclaimed Ohio’s Tenth District Court of Appeals in a recent Decision in a hotly contested commercial real estate dispute.  Tower 10 LLC v. 10 W Broad Owner LLC, 2020-Ohio-3554.  In Tower 10, the owners of adjacent Downtown Columbus high-rise buildings entered into a written Declaration that granted “easements and cross easements” through pedestrian skywalks and internal passageways, to facilitate access by tenants and guests of both buildings to an attached parking complex.  The written Declaration specified that the pedestrian pathways would “be maintained open at all times during normal business hours … or at such other times as agreed to by the parties.”  The building owners also verbally agreed to create a keycard system that allowed certain individuals to access the pedestrian pathways on a 24/7 basis, and that understanding was in place for over 30 years.  But in 2011, one of those buildings was sold, and the new owner limited the keycard holder access to “normal business hours” only.  The owner of the adjoining building sued to restore 24/7 access for its keycard holders, and obtained temporary and preliminary injunctive relief and summary judgment in its favor.  The trial court concluded that keycard holders had “an express easement” to 24/7 access, even though that was not specifically stated in the written Declaration.

The Court of Appeals reversed, instead deciding that the parties’ agreement on the keycard system only amounted to a license, and did not grant a permanent easement for 24/7 access.  Because the building owners’ agreement had never been reduced to writing or recorded as a modification to the written Declaration, it “could not modify the rights granted in the Declaration.”

The Tower 10 Decision serves as a reminder that any modification of real property rights and interests should be memorialized in writing, preferably with the help of legal counsel.  Even decades of joint performance under a verbal agreement might not be enough to satisfy Ohio’s legal standard for creating or modifying an easement or changing real property rights that are stated in some instrument in the public records.

Commercial Real Estate Breach of Fiduciary Duty Case Dismissal Affirmed by Court of Appeals

The Eighth District Court of Appeals affirmed a Trial Court decision that dismissed breach of fiduciary duty claims brought against multiple local commercial real estate professionals, and now the Plaintiffs have asked the Ohio Supreme Court to hear the case.  See Tuttle v. Collins, 2020-Ohio-4062.

The facts of Tuttle begin in 2012, when the Dunhum Tavern Museum (“DTM”) acquired 2.28 acres of land (“Midtown Land”) in furtherance of DTM’s mission.  DTM is a non-for-profit corporation whose mission is to maintain, develop, and share the DTM campus for educational and cultural purposes; provide urban green space in Midtown Cleveland; and return the DTM to its roots by serving as a place for urban history, education, nature, and community.  Thereafter, DTM raised over $700,000 to be invested into the the Midtown Land.

In 2018, the Cleveland Foundation expressed an interest in purchasing 1.2 acres of the Midtown Land for its new headquarters.  David Wagner (“Wagner”) and the husband of another board member obtained an appraisal and attempted to have DTM move forward with the sale, which was opposed by 26 members of DTM.  Nonetheless, two separate votes by DTM’s Board went forward, and both votes resulted in the approval of the sale of a portion of the Midtown Land to the Cleveland Foundation.

In May of 2019, Appellants filed a lawsuit naming Tim Collins (“Collins”) and Wagner as Defendants, asserting claims of breach of fiduciary duty, violating bylaws relating to conflicts of interest, and violating bylaws relating to voting procedures.

The Trial Court found that the Appellants’ allegations were merely conjecture and supposition, and that they lacked any factual basis.  Ohio’s Eighth District Court of Appeals concluded that the Complaint failed to provide sufficient facts to support the elements of the claims, and affirmed the Trial Court’s dismissal of the case.  To review the Court of Appeals’ Decision, click here.

Had that case gone the other way, it really could have created a slippery slope and dangerous precedent for all sorts of claims to be brought against commercial real estate professionals – especially those who serve on boards.  Thankfully, the Trial Court and the Court of Appeals reached the correct conclusion.

No Stay + No Bond = No Lis Pendens Says Ohio’s First District Court of Appeals

Sikora Law obtained its 32nd appellate victory (now on 25 different real estate title and escrow subjects) in an Opinion focused on lis pendens.  Clinton v. Home Investment Fund V, LP, 2020-Ohio-4555 (1st Dist.).  Plaintiffs filed a quiet title action, seeking to confirm that a mortgage originally granted in favor of Huntington National Bank and its nominee MERS, and later assigned to Home Investment Fund, had been extinguished in a prior foreclosure case.  The trial court granted summary judgment in Plaintiffs’ favor, and rejected the mortgagee’s primary argument that MERS should have been named in the prior foreclosure case, in addition to Huntington.  After final judgment by the trial court, the mortgagee filed an appeal, but did not seek a stay of the trial court’s judgment or post a supersedeas bond.

After the mortgagee filed its appeal, the Plaintiffs sold the property, and our firm filed a Motion to Dismiss the Appeal as Moot.  The mortgagee vigorously opposed dismissal, arguing that the validity of the Huntington/MERS mortgage had not been finally determined, and that lis pendens continued during the appeal, preventing the parties’ dispute from becoming moot.  The Court of Appeals unanimously rejected the mortgagee’s arguments and dismissed the appeal.

To review the Clinton Opinion issued by Ohio’s First District Court of Appeals, click here.

Marketable Title Act and Dormant Minerals Act Afford Separate Paths to Extinguish Mineral Rights

A recent decision by Ohio’s Fifth District Court of Appeals upheld a Trial Court decision, finding that the Marketable Title Act (“MTA”) was applicable to severed oil and gas rights and that the Appellants’ interests had been extinguished by operation of law based upon the MTA.  See Cain v. Horn, 2020-Ohio-3171.

The dispute in Cain arose from disputed ownership of oil and gas rights related to approximately 110 acres of real property.   On December 27, 1926, Clara Burrett and Claude Burrett transferred their interest in fifty (50) acres of the property at issue to Viola Romans via a Warranty Deed (the “Warranty Deed”), which was recorded on February 24, 1927.   The Warranty Deed specifically reserved a one-half interest in the Burretts in all of the oil and gas underlying the fifty acre tract (“Burrett Reservation”).

Appellees obtained ownership of the property by virtue of two survivorship warranty deeds, recorded in 2002 and 2003.  Appellees initially filed an action to quiet title under the DMA and were unsuccessful upon the Appellants’ filing of a Claim to Preserve Mineral Interests pursuant to R.C. 5301.56.   Subsequently, Appellees filed a new action against Appellants seeking to quiet title to the oil and gas rights under the MTA.

The Trial Court found in favor of the Appellees and ruled that the Burrett Reservation was automatically extinguished by the MTA because that interest was not reflected in an instrument after the root of title under the MTA.  The Fifth District upheld the Trial Court’s decision and further held that the MTA and DMA are separate and distinct statutes, and that a determination under one is not dispositive of the other.

Cain provides a useful reminder of two of the separate and distinct ways in which mineral interests can be extinguished and the differences between them.

Failure to Strictly Comply with Cognovit Note Language Renders Provision Useless

Ohio’s Eighth District Court of Appeals recently mandated strict compliance with cognovit judgment language in order to enforce a cognovit note.  In 2017, L&M Estates, L.L.C. (“L&M”) executed a Cognovit Note in favor of Ace Property Group of Ohio, L.L.C. (“Ace Property”).  The Note stemmed from a commercial loan that L&M received from Ace Property (the “Note”).  As part of the commercial loan transaction, a principal of L&M, Lisa Cochran (“Cochran”), executed a personal guaranty (the “Guaranty”). After the borrower failed to timely make required payments on the Note, Ace Property obtained cognovit judgments against L&M under the Note and against Cochran under the Guaranty.  Cochran appealed on the basis that the Guaranty did not contain the required language under Ohio law to obtain a cognovit judgment.

On appeal, the Eighth District Court of Appeals overturned the trial court’s decision.  The Court of Appeals held that cognovit provisions must strictly comply with Ohio law in order to be enforceable.

The Ace Property case is a helpful reminder to commercial real estate professionals to make sure cognovits provisions strictly comply with the requirements of Ohio law if enforcing it is important to you.

Appellate Victory in Title Coverage and Closing Protection Coverage Case

Sikora Law obtained its 31st appellate victory (now on 24 different real estate subjects) in an Opinion affirming a Jury Trial verdict in favor of a major title insurance underwriter.  Johnson v. U.S. Title Agency, Inc., 2020-Ohio-4056.   Plaintiff asserted claims for breach of contract and bad faith stemming from mechanic’s liens that were recorded after the issuance of an Owner’s Policy of Title Insurance and also asserted a claim for breach of the Closing Protection Letter.   After a nine-day Jury Trial, the jury specifically found that the underwriter had not breached the terms of the Policy or Closing Protection Letter, and entered a defense verdict on all claims.

In a 44-page Opinion, the 8th District Court of Appeals unanimously affirmed, specifically rejecting each of the Plaintiff’s assignments of error, and affirming that, based on the evidence presented at Trial, the mechanic’s liens at issue were not covered matters under the Owner’s Policy because those liens arose after the Owner’s Policy was issued.  Plaintiff’s transactional counsel claimed to have given vague, oral closing instructions to the closing agent, which testimony Plaintiff then used to argue that Plaintiff should be considered a third-party beneficiary of the lender’s closing instructions.   That important subject became the main issue at Trial, and Plaintiff was defeated on that point – both at Trial and on Appeal.

To review the Johnson v. U.S. Title Opinion, click here.

Court Orders Eviction Despite Arguments Raised by Tenant

Commercial lease disputes continue to rise.  Meanwhile, the Eighth District Court of Appeals recently held that a landlord may evict a tenant for nonpayment of rent, even when a tenant has made a claim against the landlord for failure to make repairs and where the tenant unilaterally deposited its rent with the court.  In Di Fiore v. Booker, the tenant challenged the Trial Court’s judgment for restitution that was granted to a landlord in a forcible entry and detainer action.

The dispute in the Di Fiore case started in early 2018, when the tenant filed an action against the landlord over financial responsibility for certain repairs to the premises and water and sewer bills (“2018 Case”). After the Trial Court issued the preliminary injunction, the landlord served a three-day notice for failure to pay rent on January 4, 2019, based upon rent that was due on January 1, 2019.   The tenant began to tender its monthly rent payments to the Trial Court on March 1, 2019.

The landlord then filed an eviction action (“2019 Case”), at which point the Trial Court denied the tenant’s request for injunctive relief, consolidated the 2018 Case with the 2019 Case, and ordered that the consolidated case move forward.  Ultimately, the Trial Court ordered eviction of the tenant due to nonpayment of rent and rejected the retaliation argument asserted by the tenant on the basis that a retaliation claim cannot prevail when the tenant is in default of its rental obligations.  The Court of Appeals concluded that the lease provided for monthly rent payments to the landlord, there was no court order that allowed the tenant to tender its rent payments to the Trial Court, and therefore the tenant could not avoid eviction.

As more and more tenant default and lease disputes occur as a result of the Covid-19 pandemic and associated economic distress, Di Fiore is a reminder that lease obligations must generally be strictly complied with, unless there is a court order to the contrary, and that a retaliatory eviction claim should not succeed when the tenant is default due to non-payment of rent.

Disputes Between Landlords and Tenants Heating Up

As the COVID-19 pandemic continues to take its toll on the economy, especially the retail, restaurant, and hospitality sectors, more and more tenants have stopped paying rent, forcing landlords to take more aggressive action to obtain payment.  Contention between landlords and tenants in the retail sector has really intensified.  In one day alone, the entity that owns Easton Town Center in Columbus filed a dozen separate lawsuits against tenants, nearly all of which are well-recognized name brand national retailers.  The following day, Abercrombie & Fitch Stores, Inc. filed suit in Franklin County Common Pleas Court against all of its Simon Group landlord entities, 69 Simon Group landlord defendants in total, asserting that Abercrombie paid April and May rent “under protest,” and asking the Court to order that those rent payments be refunded.

As the economy struggles to reopen in its entirety, certain sectors will continue to suffer financially, increasing the stress on the commercial real estate system, and leading to more disputes.  Our commercial real estate developer and owner Clients are selectively having us play a greater role, generally with helping them obtain payment in their most severe situations, although the threshold for severity seems to be lower and interest that landlords have in taking action now is greater than it has been over the past several months.