Welcome To Build On This

By Grant M. Yoakum, Esq.

 As the busy months of summer unfold, we hope that our clients and friends in the real estate and construction industries are experiencing a successful season. This issue of Build on This addresses changes in two different areas of Ohio real estate law. John Slagter and I have written an article on a recent court decision concerning the termination of a commercial lease. This information may be significant to both commercial landlords and tenants.  

Ohio law has also recently changed with regard to condominiums and condominium associations. David Lindner’s article summarizes these differences and highlights those that are most likely to affect condominium developers.

Grant Yoakum is a Shareholder and member of the Real Estate & Construction Law and Business Law Practice Groups.  He can be contacted at gyoakum@bdblaw.com or 216.615.7356.

Requirements for Termination of a Commercial Lease

By John P. Slagter, Esq. and Grant M. Yoakum, Esq.

Ohio law now provides that there is no statutorily required notice to terminate a commercial “holdover” or periodic tenancy.  Historically, if a landlord or tenant wanted to terminate such a tenancy, it had to provide notice equal to the period of rent payments under the lease being terminated.  For example, if the tenant was in a holdover month-to-month lease (rent paid monthly), a 30-day notice was required.  If the tenant failed to leave the premises after the notice period, a second notice, a notice of eviction (commonly known as a three-day notice) was required prior to filing an eviction action.  This two-stage process did not apply to default situations.  Under the new law, it is no longer necessary to provide notice of the termination of the holdover or periodic commercial tenancy although a landlord must still provide a three-day notice prior to filing an eviction action. 

The case in question was Maggiore v. Kovach (2004), 101 Ohio St.3d 184, in which the primary question was whether the Ohio Landlord Tenant Act (Chapter 5321 of the Ohio Revised Code) requires a commercial landlord to give 30 days’ notice to a tenant prior to terminating a month-to-month tenancy. 

Maggiore owned a commercial property that he leased to Kovach on a month-to-month basis.  After Kovach allegedly failed to pay his rent for several months, Maggiore hand-delivered a notice to Kovach dated January 23, 2002 stating, “By this letter, I am hereby terminating your tenancy at 2535 Fulton Road, Canton, Ohio, effective February 28, 2002.  Please make arrangements to move out of the building on or before that date.”

When Kovach failed to vacate the premises, Maggiore filed an eviction action.  On appeal, Kovach argued that Maggiore’s letter was not adequate notice of eviction and that the eviction notice cannot be served until the tenant has been given 30 days’ notice of termination of the lease as required by the Landlord Tenant Act.  Maggiore agreed that Kovach was entitled to a three-day eviction notice, but argued that his January 23^rd letter fulfilled the requirement and that commercial tenants, such as Kovatch, were not entitled to the 30 days’ notice required by the Landlord Tenant Act.   

The Supreme Court of Ohio agreed with Maggiore and held that commercial landlords are not required to give tenants the 30 days’ notice provided for in section 5321.17 of the Landlord Tenant Act prior to terminating a month-to-month lease.  Although section 5321.17 itself does not distinguish between commercial and residential tenants, the Court pointed out that R.C. 5321.01 defines a “Tenant” as a person entitled to “use and occupancy of residential premises.”  Since this definition, and the reference to residential tenancies, apply throughout the Landlord Tenant Act, the notice provisions in 5321.17 protect only residential tenants.

The Court further held that the letter Maggiore sent to Kovach satisfied the requirement under section 1923.04 of the Revised Code that a tenant be given at least three days’ notice to leave the premises prior to the initiation of an eviction action.  While section 1923.04 mandates the specific language that must be used in a three-day notice given to a residential tenant, the Court noted that no specific language is required when giving notice to a commercial tenant.  As such, Maggiore’s letter was sufficient notice to Kovach that he was about to be evicted. 

With its decision in Maggiore v. Kovach, the Supreme Court has made it clear that the Ohio Revised Code does not provide the same protections for commercial tenants as it does for residential tenants.  The basis for the distinction between commercial and residential tenants appears to be an assumption that commercial tenants are more sophisticated than residential tenants and have greater leverage to negotiate the terms of their lease with a landlord. 

Although this case appears to benefit landlords, it may also have a negative impact.  For example, the 30-day notice requirement to terminate a month-to-month tenancy was an obligation on both the landlord and the tenant.  Now a tenant may provide notice that it is terminating the tenancy on the last day of the month or, arguably, provide no notice at all and have no obligation to pay rent thereafter, including the next month.  Under the prior law, the required 30-day notice would have obligated the tenant to pay rent for the month during which the notice period was running.  The recent decision presumably does not prevent a commercial landlord and tenant from including notice requirements in the lease, including, for example, a 30-day-notice requirement for a holdover tenant to terminate its tenancy.   

Over the last couple years, the Ohio Supreme Court has addressed some significant commercial leasing issues, including a commercial landlord’s duty to mitigate and this interpretation of the commercial leasing law and notice periods.  It seems the current Ohio Supreme Court is more willing to define commercial landlord and tenant rights and establish case law for the future.

Editor’s note.  The material appearing in this article is meant to provide general information only and not as a substitute for legal advice.  Readers should seek the advice of their attorney or contact the authors of this article.  Special thanks to David Lindner of Buckingham, Doolittle & Burroughs, LLP for his contribution to this article.

John Slagter is a Shareholder and a member of the Real Estate & Construction and Litigation  Practice Groups.  He can be contacted at jslagter@bdblaw.com or 216.615.7331.  Grant Yoakum is a Shareholder and member of the Real Estate & Construction Law and Business Law Practice Groups.  He can be contacted at gyoakum@bdblaw.com or 216.615.7356.

New Condominium Law Enacted

By:  David J. Lindner, Esq.

Ohio recently enacted an extensive revision to Ohio’s condominium law.  While some of the alterations are technical or grammatical, the revised law contains some significant changes that affect the way condominiums and condominium associations are developed and operated in Ohio. 

Many of the changes are designed to give developers, condominium associations, and owners more freedom to create the type of community that best suits their needs.  This added flexibility, however, means that more care must be taken in drafting the condominium’s governing documents (e.g., the declaration, bylaws, rules and regulations) to ensure they achieve the desired result.  In addition, most current “form” documents will be obsolete because they do not meet the technical requirements of the new law.  While the changes are too numerous to describe in detail in this alert, we have summarized a few of the more significant differences below:

• Certain costs, such as rubbish removal, landscaping, legal, accounting, and management expenses may now be split equally among the units owners.  Under the old law, all expenses had to be split among the owners according to each owner’s percentage of ownership interest.  This change is in response to many people’s feeling that it was unfair to assess some units more than others for services that benefited all units equally.  The association declaration and bylaws must now be drafted to specify clearly which expenses, if any, will be divided equally. 

• The new law permits the board of directors to delegate any common element to the use of a certain unit or units to the exclusion of other units if the declaration reserves that common element as an exclusive-use area.  This provision will allow developers to be more creative in establishing certain common elements, even if they only benefit certain areas.  If the owners are unhappy with the delegation of a common element, the board of directors will have the authority to change it.

• A developer must now include additional information in the condominium declaration, including a statement that a successor owner of the condominium property or additional property is not liable, under specified conditions, for harm caused by the developer.  Due to this and other changes, the old “form” documents used by many developers will no longer meet the requirements of the Condominium Act.

• The new condominium law establishes certain procedures that must be followed, including written notice and an opportunity for a hearing, prior to a board of directors imposing a charge on a unit owner for damages or an enforcement assessment for a violation of the declaration, bylaws, or rules.  The declaration and bylaws of any new condominium must be reviewed and modified so as not to conflict with these provisions.

• A parking space may now be included as part of a unit, whereas before parking spaces had to be part of the common or limited common area.  This change can be used to give owners a greater degree of ownership and control over their parking space and may help to eliminate disputes in condominiums with limited parking areas.

• The condominium association will now be able to evict tenants under certain circumstances, such as where the tenant violates the declaration or rules of the condominium.  The declaration and bylaws must be drafted to ensure this power is used responsibly and in the best interest of the owners.

In addition to these examples, many other changes affect technical and substantive requirements for the disclosure statement, the declaration, the drawings, the bylaws, and other aspects of the development.  While not all of the changes will apply to every condominium project, it is clear that any developer contemplating a new condominium project will need to review the new requirements in detail with his or her attorney and make the required changes to the condominium documents. 

If you are planning a condominium development, or would like more information on the requirements of the new condominium law, please contact a member of Buckingham, Doolittle & Burroughs’ Real Estate and Construction Practice Group.

                Akron:                      James Fisher, Esq.       1-800-686-2825

                Canton:                    Rick Lolli, Esq.             1-888-811-2825

                Cleveland:                John Slagter, Esq.         1-888-843-2825

                                                Grant Yoakum, Esq.

                Columbus:                Brent Rosenthal, Esq.   1-888-686-2825

David Lindner is an Associate attorney  and member of the Real Estate & Construction Practice Group.  He can be contacted at dlindner@bdblaw.com or 216.453.4290.

Save the Date for this Upcoming Presentation:

Nicholas T. George (Buckingham Akron^SM), John P. Slagter and David J. Lindner (Buckingham Cleveland^SM) will be speaking at the Home Builders Association of Portage and Summit Counties on July 16^th.  Their presentation will focus on the changes to Ohio’s condominium law and its effect on builders and developers.

Donald B. Leach, Jr. (Buckingham Cleveland^SM) will be presenting Implementing Strategies to Minimize the Risk of Mechanics' Liens and "Paying Twice" at the OSBA/CLE Institute on September 8, 2004.  In addition, Mr. Leach will be speaking at the Professional Education Systems Institute, LLC on December 1-3, 2004.

Out and About – Recent Presentations:

On April 14, 2004, Michael F. Copley (Buckingham Columbus^SM) was a program instructor at the Builders Exchange of Central Ohio, where he presented “Managing the Problem Project.”  The course offered several concepts for decision-makers and managers trying to handle the repercussions that may occur when a project goes sour.

On June 18, 2004, James L. Fisher (Buckingham Akron^SM) participated in a forum on “Residential Open Space:  Planning, Design, and Management of Natural Landscapes,” sponsored by the Smart Growth Foundation.  Mr. Fisher’s topic covered the legal aspects of establishing, improving, and maintaining commonly-owned private open space.

On June 8, 2004, Donald B. Leach, Jr. (Buckingham Columbus^SM) was a program instructor at the Builders Exchange of Central Ohio, where he presented “Ohio Mechanics’ Lien Law:  The Hows and Whys of the Paperwork.”  Mr. Leach’s session was geared towards general contractors, owners, architects and lenders and focused on the preservation of lien rights and the perfection of a lien.   In addition, Mr. Leach spoke on Ohio's Mechanics' Lien Law: Perfection and Priorities at the Ohio Land Title Association on May 7-8, 2004.  He also spoke on Ohio's Mechanics' Lien Laws: Using the Laws to your Advantage for the AGC Young Construction Forum on April 2, 2004. 

If you are interested in obtaining information on upcoming seminars or would be interested in having speakers from Buckingham, Doolittle & Burroughs, LLP make a presentation to your organization, please contact: Lorna J. Henderson, Client Relations Administrator at lhenderson@bdblaw.com or 800.686.2825 ext. 473.