OREIA-Government Report
December 2017

                                                                                

Testimony on Criminal Mischief Bill

OREIA-Gov's Dan Acton testified on a bill the OREIA Legislative Committee recommended as a high priority. House Bill 282 sponsored by Representative Steve Hambley allows owners to file a charge of Criminal Mischief against tenants knowingly damaging our units. OREIA Legislative Cmte. Chair Jim Pirko said this bill is welcome, but long overdue. While investors have rallied in support, several groups have risen to protest various portions of the bill.

 

OREIA members Joe and Betsy Klapp invested considerable time crafting written testimony and traveling to Columbus to testify before the House Cmte debating this bill. Joe did a wonderful job providing compelling stories that reinforced the need for Rep. Hambley's bill. OREIA appreciates their commitment. 

 

We anticipate several proposals to change HB 282 in the committee process. The Housing Authority association is opposed to part b of the bill which prohibits tenants from receiving public housing subsidies for three years for those that are convicted of Criminal Damaging of rental property. Our stance is that if those families don't wish to jeopardize their subsidies, then simply don't trash the properties. #PrettySimple. 


Lawmakers Field Debate Over Property Tax Challenges, Undeveloped Land

Business and government interests squared off Tuesday over legislation involving property taxes, including one bill dealing with valuation challenges and another that would restrict the value of undeveloped land zoned for residential purposes.

Taking up much of a House Ways & Means Committee meeting that spanned most of the morning was debate over a plan to require additional actions by government entities when seeking property valuation changes through local boards of revision (HB 343).

 

Sponsored by Rep. Derek Merrin (R-Maumee), the measure would require school boards and other local taxing authorities to pass resolutions prior to filing property tax complaints with BORs and that notices be sent to property owners. The bill stems, in part, from concerns that governments are unduly giving rein for attorneys to file complaints on their behalf to boost revenue.

On the opponent side of the issue are government groups who say the bill proposes unnecessary hurdles for tax challenges and could lead to unintended consequences, including more drawn-out legal proceedings. Proponents point to circumstances in which boards were unaware of complaint specifics and property owners were treated unfairly with additional tax burdens.

The County Commissioners Association of Ohio kicked off testimony on the bill, with research director Brad Cole warning that its provisions could lead to redundancies given that current law already requires sufficient notice. He also questioned the additional resolution requirements for taxing authorities.

"Compliance with the provisions of HB343 could prove burdensome both for boards and legislative authorities filing complaints and counterclaims, and BORs attempting to enforce the provisions of the bill," he said.

Mr. Cole and others testifying said interested party meetings had been held with the sponsor, but that disagreements persisted. He told Rep. Teresa Fedor (D-Toledo) that while the bill could be improved by reducing resolution and notice requirements, "I doubt we're going to be a proponent. Maybe we could be an interested party."

Ryan Jenkins, treasurer and chief financial officer for the Pickerington Local School District, said the current system for property tax complaints provides a "balanced playing field" between taxing entities and property owners.

The bill, he said, would "require every entity other than a property owner to take unnecessary and time-consuming procedural steps before responding to or initiating a property tax valuation case." Among those is the mandate for local government boards to pass resolutions on every single BOR case it wants to participate in versus adopting a blanket policy with a set approach to such challenges, he said.

"House Bill 343 would cause delay, promote enmity, and won't help owners or school boards determine properties' true values. In short, the measure would add heat, but wouldn't shed light," he said.

Mr. Jenkins did propose some alternative approaches to the bill. Those include the adoption by school boards of guidelines for filing tax complaints, increasing the monetary threshold for filings, prohibiting contingency fee-based attorney contracts for school tax cases, and limiting challenges to commercial properties.

Barbara Shaner, also relayed opposition to the bill on behalf of three statewide education groups - the Buckeye Association of School Administrators, the Ohio Association of School Business Officials and the Ohio School Boards Association. She called the proposal "unnecessary" and "highly objectionable."

"We agree with the bill sponsor's assertion in sponsor testimony that school board members should be aware that the district is taking action to challenge property values when believed to be valued too low. However, it is not appropriate for the board members to be aware of and act on challenges to the property values of individual property owners, either residential or commercial," Ms. Shaner said.

"This step would have the effect of politicizing the decisions as to which properties would be challenged. Also, HB343 opens the process to become politicized by giving property owners the ability to put pressure on the board not to challenge property values. This would likely remove all objectivity from the process."

Rep. Doug Green (R-Mt. Orab) asked about consistencies with school board tax challenges lodged against commercial versus residential properties. Ms. Shaner said in most districts, the residential tax changes aren't as significant as those for commercial properties so it's not as beneficial cost-wise to challenge home valuations.

Chairman Rep. Tim Schaffer (R-Lancaster) asked what protections there are for "mass filings" by school tax attorneys that serve to "harass homeowners."

Ms. Shaner said that while the groups' members haven't been surveyed on the issue, anecdotally there's an understanding that most operate on a fee-for-service basis with tax attorneys versus contingencies, so there is no incentive for such an approach.

Rep. Steve Hambley (R-Brunswick) questioned the groups' opposition to the requirement that every parcel challenge be brought before school boards, saying that in his experience in local government, he was always made aware of such lawsuits.

OSBA lobbyist Jay Smith said the boards set the policies on which the challenges are based. Ms. Shaner added that board members may not be aware of the specifics of every case but do set the direction for such tax complaints.

Warren County Auditor Matt Nolan, testifying as an interested party for the County Auditors' Association of Ohio, said the bill could lead to "unintended consequences" including jurisdictional questions, delays in BOR processes and confusion.

Rep. Merrin said an amendment he has prepared would eliminate the parcel-based resolution mandate and replace it with one based on who owns the properties in question.

Proponents of the bill, including the Ohio Real Estate Investors Association, argued that property owners deserve the right to be better informed about complaints that could impact their taxes.

"OREIA supports this bill because we want you to understand that investors operate on razor thin profit margins for a property," government affairs Director Dan Acton said. "The increase in property tax is directly related to a reduction in overall resources available to an owner for a property."

"Under current law, schools or legislative authorities can file a counter-complaint defending the assessed value or to assert a different value if a property owner initiates a complaint to reduce property values. We see this bill as the continuation of allowing a counter-complaint process for both parties, but it gives the property owner, the individual with the most direct stake in the assessed value, notice that an entity is seeking an increase in property taxation not of their own initiation."

Countering opponent testimony, Mr. Acton said requiring resolutions be adopted for each parcel that's subject to a tax complaint is a "fair process for all parties because each property is different, even in the same housing subdivision."

"It is unfair to an individual property owner that they be lumped together with every other property in a specific subdivision or neighborhood due to variations in lot size, individual improvements or home size. Each property should be judged on its own merits for taxation purposes," he said.

Gary Trame, CFO of Aveda Fredric's Institutes in West Chester, relayed how the school of cosmetology was blindsided when the owner of the building it leases in part told operators of a large property tax hike that was being passed through to tenants.

Speaking in support of the measure, he said such "surprise increased taxation" makes it "very difficult for businesses to operate."

"Local governments and school districts benefit from the economic activity derived from our investments, jobs created, and the education we provide our students. The unexpected tax change, without notification may cause going concern issues," he said. "The lack of transparency in the process to effectively increase our taxes was troublesome. I would have welcomed the opportunity to have dialogue with my local elected officials and explain how the Board of Revision complaint would negatively impact our business and the local community."

Rep. Emilia Sykes (D-Akron) and Rep. Janine Boyd (D-Cleveland Hts.) questioned whether the bill would resolve the issues brought forward by Mr. Trame, considering he is a tenant and not a property owner.

The witness responded that getting better notice of the increase could have provided the school with a chance to weigh in on legal proceedings. He added that he would seek a notice requirement from the landlord before he signed another lease.

Rep. George Lang (R-West Chester Twp.) said in support of the bill that he was a trustee when Mr. Trame's situation arose. The increased tax threatened to put the school out of business, he said.

"The problem here comes down to notification," he said, adding that the school district was not aware of the impacts of its complaint because it had given its attorney free rein on such matters. Rep. Lang said the issue was finally resolved after the county auditor became involved.

Rep. Green questioned how till the bill would have changed the outcome of the BOR process. Rep. Lang said had the tenant been notified in a timely fashion, they could have challenged the increase through the existing process.

Charles Penzone submitted written testimony in support on behalf of his salon group.

Other opponents who testified in person or through written statements included the Ohio Coalition for Fair Taxation and several school districts.

Property Tax Exemption: Some of the same interests weighed in on a separate proposal from Rep. Merrin to hold property valuations steady on residential developments until parcels are sold or developed.

Mr. Nolan, of the CAAO, expressed his group's "strong opposition" to the measure, which he said "would authorize a tax exemption or freeze in the value of land in the pre-residential development stage and reduces property taxes for land purchased for residential development purposes."

The group's "serious concerns" stem in part from its impact on current appraisal methodologies, he said.

"Freezing the value under this bill is a drastic alteration of the uniform standards of appraisal practice and could have unintended and unpredictable consequences on the value of neighboring parcels," Mr. Nolan said. "The freeze applies to the newly purchased property and also continues in spite of streets, sidewalks, curbs, driveways or water, sewer or other utility lines having been instructed or installed."

Based on his very conservative calculations, the bill would lead to the loss of $2.745 million in tax revenue from Warren County governments, he said.

Rep. Michael Henne (R-Clayton) said the undeveloped property is not generating revenue even though owners have invested in the land.

Mr. Nolan said some fast-developing counties do incorporate "undevelopment factors" when determining property values, but the bill would take away developers' "holding costs" and make homebuilding "risk free" by taking the free market out of the equation.

Rep. Henne questioned that statement, opining that developers' investments should be taken more into consideration when determining property values.

Merle Stutzman, representing Wooster-based Weaver Custom Homes, argued as a bill proponent that keeping developer costs down would lead to additional revenues for taxing authorities down the line.

"House Bill 371 would directly impact overall land costs and would provide a savings to Ohio families and developers when purchasing a lot to build a new home," he said.

"New development within any city or municipality is a long-term investment for the whole community. If land remains undeveloped, there is no additional tax revenue. However, when land is developed and new homes are built, the community generates additional real estate taxes, income taxes, and dollars spent throughout the community by new homeowners. This creates unending revenue for the community."

OSBA lobbyist Jay Smith offered opponent testimony on behalf of the three school groups and other local government associations.

"The provisions to benefit property developers contained in HB371 could require other taxpayers to pay more than their fair share," he said, since levy millage rates are set based on the total valuation of the school district.

"The tax exemption or 'freeze' in value for these properties also has the potential to reduce property taxes for local governments and schools, especially in urban and suburban areas where the issuance of residential building permits is concentrated," he said. According to the (Legislative Service Commission) Fiscal Note, the revenue loss could be substantial, and could amount to several million dollars statewide. The majority of this loss will be sustained by school districts."

OREIA's Mr. Acton said his group "wants to support the idea of pre-residential development property and the taxation exemption of this property type because members have related that there are always delays that can halt the commencement of a project, whether it is on existing homes or not."

"We applaud the idea that increased taxation cannot occur on planned developments and believe that it can be a valuable tool for our members to invest in these types of projects, especially knowing that any of the issues identified above can cause costly deficits on their investment," he added.

The Mid-Ohio Regional Planning Commission submitted written opponent testimony.





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OREIA-Government Report

July 2017

In the last month, Dan Acton, OREIA Legislative Director,  had the huge privilege to speak with many friends in our Property Investors Network group in Toledo, Mahoning Valley REIA, and to make his first visit with Muskingham Area REIA along with Chuck Frobose, our executive director. OREIA is proud of our local associations and it was great to see firsthand the enthusiasm and professionalism each group has.

 

The Ohio Legislature passed the State's bi-annual budget and which was signed by Governor Kasich after using his veto power on several amendments. The House and Senate will be basically on Summer break for the next couple months. Legislators will be in their districts and in Columbus doing both formal and informal meetings. Several are already in the works for OREIA to weigh in.

 

OREIA's primary focus during the budget process was advocating for Representative Derek Merrin (R-Toledo area) with his lead based paint fairness amendment. His proposal would have kept all lead based paint enforcement at the state level where it belongs. In the Toledo area, investors have already been put in an untenable situation by Toledo Council with discriminatory and ever-changing rules. Although Rep. Merrin had his amendment passed out of the House, the Ohio Senate failed to include it in their version. As yet another sign of Rep. Merrin's tenacity, after his amendment was killed, he introduced it as a stand alone bill we fully support. OREIA-Gov was extremely proud to have the Representative as our special guest in last month's Legislative Update. Stay tuned - we will be needing your help in contacting your legislators to help push this bill into law. We'd like to extend a huge thank you to our OREIA group in Toledo - Property Investors Network and their President Carol Walls for coordinating several members to make the long drive from Toledo to Columbus to testify on behalf of the real estate industry. We also had several other investors from the Toledo area. State Members also join us in the fight. We must stand shoulder to shoulder to combat the ever-increasing bullying of real estate investors by the government. 

Fighting to Make “Fair” Housing Fair:
The Helen Grybosky Saga

From January to July 2008, Helen Grybosky, a then-78 year old widow from North Kingsville, Ohio, received several calls to rent out a three unit home she owned in Conneaut. 

The first caller, who came to the property, asked Helen about allowing a “therapy dog” for her brother who had anxiety and needed the dog to help him sleep. After some discussion, Helen agreed to allow the animal for an additional $100 deposit. 

During another visit Helen told a prospect that she would not rent out the second story to small children because the noise between the floors was too much for the old house.

Another caller asked about a “seeing eye” dog, which Helen stated she would allow without a deposit. 

Unfortunately for Ms. Grybosky, the callers were not bona fide applicants looking for housing, but “testers” from a local housing agency, randomly checking landlords for possible housing discrimination—a common practice throughout the United States.

Round 1: The Housing Agency Demands Cash

In September 2008 the private, non-profit housing agency filed charges of housing discrimination against Ms. Grybosky based on the “therapy dog” and not allowing children in the second story.

The agency demanded that she pay it  $6,500, undergo housing education, and pay for an advertisement in the local paper announcing her shame.  These demands were further submitted to Helen by the Ohio Civil Rights Commission (“OCRC”) under threat that if she refused to pay the private agency the money and other terms it demanded, she would face prosecution by the State of Ohio and be subjected to even greater damages, plus mandatory attorney’s fees.

Ms. Grybosky refused to pay the settlement because she did not believe she committed any discrimination based on the testing, and the case was sent to the Ohio Attorney General. The AG filed a formal complaint against Helen and her son Gary, who was listed as owner of the property on the tax records, but whose legal status was actually as a remainderman in a life estate held by Helen.

Round 2: The Administrative Hearing

The case proceeded to an administrative hearing before an administrative judge employed by the Ohio Civil Rights Commission (OCRC).

Following a three day hearing in May 2010 and briefing by the parties, the administrative judge recommended that the OCRC find that Helen and Gary (who never spoke to any of the testers and had nothing to do with the operation or management of the property) committed acts of discrimination based on the “therapy dog” testing and Helen’s not wanting to rent to children on the second story.  The administrative judge’s recommended resolution: 

  • Helen and Gary pay $12,000 in actual damages
  • Plus $10,000 in punitive damages
  • Plus roughly $80,000 in legal fees to the Attorney General and the attorneys for the agency.

In its final decision on October 10, 2013 the Commission found that Helen and Gary committed discrimination on both charges,  but modified the recommendations by their administrative judge and ordered Helen and Gary to pay:

  • $2,513.05 in actual damages to the agency
  • Attorney fees of $4,933 to the Ohio Attorney General,
  • Attorney fees of $4,185 to the attorneys for the agency.

So after a five year battle, even the Commission had to admit that there was no basis for the $6,500 demand.  The Gryboskys appealed the Commission’s decision to the Ashtabula Common Pleas Court.

What’s Really at Stake Here…
Read This Even if You Just Scanned the Rest

It’s important to understand that the key issues in this case are not about whether what Helen Grybosky said could constitute discrimination were an actual applicant involved.

What is important is that the system be changed so that landlords have the opportunity to resolve charges of discrimination in a fair and balanced manner, that they are not faced with mandatory attorney fees, and that private agencies are not permitted to manufacture discrimination as a means to create a profit.

The issues in this case will potentially affect the legal rights of every rental property owner in the United States. There are crucial constitutional and procedural questions about how fair  housing law is enforce, like:

  1. How does a private housing agency sustain any damages by sending a “tester”—a person posing as a member of a protected class to which they do not belong, and pretends to be seeking housing that they are not seeking— to investigate how a landlord might respond to hypothetical issues? In the law, damages are based on injury flowing from a person’s wrongdoing. In the random testing cases, agencies investigate potential discrimination and do not sustain any injury based on the responses. In other words, there cannot be damages when no one has actually been denied housing, and yet the Ohio Civil Rights Commission allows for the agency to recover “actual damages” where none exists.
  2. What evidence can a landlord demand to establish that a tenant has a bona fide need for an assistant animal due to a “disability” What evidence is reasonable? Every day now, we hear more stories about people who claim the need for therapy animals for a growing list of ‘disabilities’. An industry has developed that sells tenants and applicants letters (purportedly from medical or psychiatric professionals) stating that they have a need for a “helper animal”. In fact, such a diagnosis can be purchased off the internet for less than $50.

 What is not clear in the law—and thus is widely used by housing agencies to engage in testing—is whether anxiety, sleeplessness, etc rise to the level of ‘disability’, necessitating reasonable accommodations under fair housing law. Housing providers don’t deny housing to animals capriciously; animals do measurable damage to units, make multifamilies harder to rent, and present a risk of liability.

Who decides when an animal is a true service animal, necessary for a tenant’s day to day functioning, vs. a comfort animal that the tenant wants but doesn’t truly “need”?

  1. 3. Due process issues in the prosecution of fair housing offenders. In Ohio, if an accused landlord does not resolve the charge “through conference, conciliation, and persuasion” (that is, by paying the money demanded by the agency), the case goes to a hearing and if any discrimination is found, the landlord must pay “reasonable attorney fees” and is subjected to potential punitive damages. 

            As in the Grybosky case, these attorneys fees can total in the tens of thousands of dollars and guess what: there is no provision for the landlord to recover attorney fees or punitive damages if no discrimination is found—regardless of how frivolous the charges may be.

            In addition, fair housing hearings at the OCRC are different than in a true court of law. Once the case is accelerated to that level, the landlord faces prosecution for any discrimination, not limited to the allegations in the complaint and not even limited to the parties in the complaint.  The commission, while presided over by an administrative judge, is not subject to the usual rules of due process.

  1. The impossibility of following requirements that are vague and inconsistent. The statute obligates the landlord to make a “reasonable accommodation” for a “disability,” but also prohibits any inquiry about the extent of the disability and does not provide any specific standard of what is reasonable, or even what constitutes a “disability.”

            In other words, you might think you’re making a reasonable accommodation by allowing an applicant’s “anxiety pit bull” with a $500 refundable pet deposit, and still lose a claim because there is no real guidance as to the definition of disability, service animal, or reasonable accommodation.

      It’s for these reasons that OREIA, its members and member organizations, have been supporting Ms. Grybosky’s legal fund and following her case so intently for the past 3 years.

      In October, Judge Yost of the Ashtabula County Common Pleas Court ruled on her appeal against the OCRC and the housing agency with mixed results (see the text of the case at www.OREIA.com) : the judge dismissed the disability discrimination based on the therapy dog, denied the agency any attorney fees, dismissed the charges against Helen’s son Gary

      However he did find discrimination based on the statements to the tester about not renting to children on the second floor and ordered Helen to pay damages of $1,104 and attorney fees of about $5,000.

Next Steps and How You Can Help Make Fair Housing Fair for All

      The next step is to appeal the case to the 11th District Court of Appeals and eventually to the Ohio Supreme Court.  

      We are hopeful the court will find:

  1. That the procedures in the statutes (including mandatory attorney fees against landlords), which allow the OCRC to engage in such extortion to be unconstitutional
  2. That the random testing does not create any damages for which the agency can recover any monies, and
  3. That the statute’s wording for disability and reasonable accommodation is ambiguous and unenforceable in a meaningful way.

      A win on these issues will literally even the playing field for you as a housing provider, making it impossible for fair housing organizations to extort money in cases where no damage has been done, making real cases of discrimination clearer and easier to prosecute, and making it far more obvious where the “line”, particularly with animals, is.

If every OREIA attendee gave just $25, we could take care of 1/2 of the expected legal bill this weekend.

      This is a rare chance to invest a tiny amount of money and see a huge, positive effect on our entire industry, so when the hat gets passed, be generous. It’s your own future you’re buying into.

See Court Ruling HERE

NOVEMBER LEGISLATIVE REPORT

2016

 

 

The legislature’s summer recess is coming to a close as all eyes now turn towards the 2016 General Election, which will determine the path of the country for years to come. While the top of the ticket always attracts most of the attention, there are some key down-ticket races that will appear before voters on November 8th. U.S. Senator Rob Portman defeated challenger and former governor of Ohio Ted Strickland. All 16 congressional seats were on the ballot. All 99 seats in the Ohio House of Representatives are up, as are 16 seats in the Ohio Senate. There are also two competitive races for the Ohio Supreme Court as Republican Pat DeWine faces Democrat Cynthia Westcott Rice and Republican Pat Fischer is opposed by Democrat John O’Donnell. Republican Maureen O’Connor is seeking a second six-year term as chief justice. She is unopposed for re-election this year. Republicans will hold a strong majority in both chambers, controlling 24 of the 33 seats in the Senate and holding a 66 to 33 seat advantage in the Ohio House.

 

                Legislators will return after the election for what promises to be a very hectic lame-duck session. Hundreds of bills remain pending before legislators, who will have less than two months to determine what policy measures are passed before the end of the year, and what issues will be put off until next session. Although it appeared as if the Senate was going to be meeting prior to the General Election in November, they ultimately canceled five of the six sessions that had been scheduled, meeting just one time in September. The House on the other hand did not schedule any session days prior to the election and had relatively few sessions scheduled in November and December. Nevertheless, in October, House Speaker Cliff Rosenberger announced two additional session dates to the calendar.

 

                Both Senate President Keith Faber and House Speaker Cliff Rosenberger have hinted at policies each chamber would likely address before the end of the year. President Faber stated that he would like to take up the issue of clean energy standards. This issue has been surrounded by controversy as Governor Kasich has pledged to veto any proposal that calls for the complete elimination of the renewable energy standards. Nevertheless, Faber believes that his chamber can work with the House and governor to reach a resolution during lame duck. President Faber also expects his chamber tweak the state’s ethics laws and he also has plans to create an outside commission designed to handle pay raises for elected officials. Speaker Rosenberger shares President Faber’s belief that the two chambers and the governor can find common ground on Ohio’s energy efficiency mandates. Rosenberger also said his chamber will work to implement the recommendations made by the Unemployment Compensation Reform Joint Committee.

 

                In other news, the Public Utilities Commission of Ohio (PUCO) has pulled the on sub metering. Chairman Asim Haque announced that the issue will be back on the agenda in the very near future.

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