Company & Industry News

Last week, Senate Bill 39 – the Transformational Mixed-use Development Tax Credit Bill – was favorably voted out of the Ohio House Economic and Workforce Development Committee by a vote of 10-1. Yesterday, that Bill passed on the House floor by a vote of 82-1.  This extremely important Bill for the commercial real estate industry is now poised to move to the Ohio Senate for concurrence with the House amendments and then to the Governor’s desk for signature.

This Bill would incentivize mixed-use developments with $50,000,000 or more in total project costs (and 15 stories or 350,000 square feet) for developments in or around cities with a population of 100,000 or more, or smaller scale but still transformational mixed-use developments that are located more than 10 miles outside of a major city.

Our firm drafted portions of Senate Bill 39. Unlike any other commercial real estate economic development law – it includes a first of its kind, built-in return on investment calculation and methodology to ensure that additional state and local taxes generated by the development will exceed the amount of the tax credits awarded to the developer.

If this Bill becomes law, it will be help stimulate the economy and the commercial real estate business, in particular, by promoting additional commercial real estate development activity of significance – that is, by definition, transformative.

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.

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.

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.

Click here to learn how Sikora Law can help CRE Developers & Owners streamline their legal needs.

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.