Federal rules take effect on Friday, January 1, 2010, that mandate a new Good Faith Estimate ("GSE") form that urges consumers to shop around for the best loan and helps consumers compare lenders' mortgage offerings. The new rules were a part of an update to RESPA and were announced by the U.S. Department of Housing and Urban Development ("HUD") back in November 2008.

The complexity of sorting out the interest rates, fees, points, etc. is difficult for most consumers; and the lowest interest rate does not necessarily mean the best deal when the lender tacks on all sorts of fees to the transaction.

The new GSE is a standardized form that lenders and mortgage brokers will be required to give to consumers within 3 days of receiving a completed loan application. Lenders cannot increase the origination fee from the estimate, although certain additional charges, such as title services and recording charges may be adjusted to a limited degree. Estimates of other services provided third parties that the consumer selects are not subject to any such limits.

New HUD-1 forms used for closings will need to include a comparison of the estimated and final costs, as well as a summary of the loan terms.

Click here to access a link at HUD for the new GFE form.

“There are a few “exceptions, a few provisos and a couple of quid pro quos”- Genie (aka Robin Williams in Disney’s Aladdin).

Many buyers don’t concern themselves with the “provisos” of title insurance, and believe that if they are getting a title insurance policy before closing, they are protected. They will be protected, but from what? Just as property insurance might exclude water damage to a stamp collection in the basement, for example, or exclude the value of fallen 100 year trees that don’t fall on a roof, title insurance also has exclusions. To ensure that buyers get “good, marketable title” to property, as well as enough time to make that determination, buyers should insist upon (in the purchase agreement) a “title commitment” being delivered within a short time after signing the contract.

The “title commitment” is a contract by the insurance company to enter into an insurance contract with the buyer, whereby the title insurance company will guarantee good title, subject to exceptions it finds upon a title search of the property (e.g., easements and liens having been filed against the property).

Buyers should always insist, as a condition to closing, that all liens discovered by the commitment be removed at closing. Buyers will typically have a hard time insisting on utility easements or other similar restrictions of record being removed. However, if buyers have an early chance to review these items (via a title commitment), they can evaluate whether or not same will adversely affect the property they are purchasing, and exercise a right to terminate the contract if there are items that will adversely affect the buyer’s use or value of the property, that the seller won’t cure before closing (assuming such a right to terminate is in the contract).

Buyers should also insist, as a condition to closing, that the “standard exceptions” be removed at closing. The following six items are automatically excluded from coverage (the “standard exceptions”), unless the buyer requires otherwise:

-The “gap exception” excludes from coverage matters that show up after the filing of the Commitment, and prior to closing;

-The “claims not shown by public records exception” excludes coverage for claims or interests that are not recorded (an unrecorded easement, for example), that are discoverable by inspecting the land or inquiring of those in possession;

-The “survey exception” excludes from coverage facts that a current survey would disclose, unless such facts were otherwise discoverable in the public records;

-The “mechanic’s liens exception” excludes from coverage, protection against claims of materialmen or laborers for work done/materials furnished that have not yet been filed;

-The “rights of others in possession exception” excludes from coverage claims of persons other than sellers who exercise possessory rights against property (e.g., tenants or “squatters”); and

-The “taxes and assessments exception” excludes from coverage taxes and special assessments that are a lien, but not yet due.

It is very customary (especially in commercial transactions) for buyers to be entitled to have the standard exceptions removed… on one condition. They have to ask. Seldom is it volunteered in a seller-oriented form contract, or offered (without asking) by a title agent. The survey exception is easily removed by a new ALTA survey, or update of a relatively recent ALTA survey. The other standard exceptions are typically removed upon the seller signing form affidavits prepared by the applicable title company.

The moral of the story for buyers of real estate (residential and commercial)?
Have a real estate lawyer draft or review your contract, BEFORE you sign it, to ensure that you have: (1) the right to receive a title commitment and survey, (2) the right to have the standard exceptions removed, (3) the right to review and object to adverse title/survey matters, and (4) the right to terminate the contract if the seller won’t cure survey or title matters that adversely affect the use or value of the property you are buying.

Unfortunately, those who do not heed this advice may not live as happily ever after as those in Disney movies.

Pursuant to Ohio Revised Code Sec. 5302.30, Ohio’s Residential Property Disclosure Form ( the "Disclosure Form") is required to be filled out and signed by sellers of "Residential Property" (defined in the Statute as real property improved by a building or other structure with 1-4 dwelling units). The Disclosure Form is thought by many to have done away with the old adage “caveat emptor” (“let the buyer beware”), and also thought to have alleviated the need for inspections and due diligence (aka thorough investigation).

Neither thought is true. Inspections and other due diligence should always be done by the buyer of any property, regardless of any statements of the seller (whether on a Disclosure Form, in the form of representations and warranties in the contract, or otherwise). As President Ronald Reagan told Mikhail Gorbachev a number of years ago regarding reducing nuclear arms, “Doveryai, no Proveryai” (“Trust, but verify”). “Caveat Emptor” is still alive and well in Ohio, although there are exceptions for fraud and material misrepresentations/omissions.

The relatively recent 8th District Court of Appeals case, Gee v. Sun, (Gee v. Sun, 2008-Ohio-6282 [8th Dist. Ct. of App., Cuyahoga Cty.]) illustrates why the Ohio Residential Property Disclosure Form Act should not be relied upon by buyers as a guaranty of rescission, or as a guaranteed basis for a fraud/misrepresentation claim against a seller of "residential property".

In Sun, the seller listed her property in December of 2004, completed the Residential Property Disclosure Form and indicated on the form that she did not know of any problems with the sewer system and had no knowledge of any recent or proposed assessments regarding same. After the buyer (Gee) purchased the property in 2005, he discovered that the City adopted a pending ordinance for a new sewer system and hefty assessments to pay for same. Gee sued the seller to rescind the contract and for damages due to alleged material omissions and misrepresentations on the Disclosure Form.

The 8th District Court of Appeals in Gee v. Sun affirmed the trial court’s decision and held:

1) Rescission was not an available remedy. Pursuant to R.C. Sec. 5302.30 (K)(3)(d), rescission is only available under the Statute prior to the date of title transfer (date of closing); and

2) Seller was not liable for the fraud/misrepresentation/omission claims of the buyer. Pursuant to R.C. 5302.30(F)(1), “A transferor of residential real property is not liable in damages in a civil action for injury, death, or loss to person or property that allegedly arises from any error in, inaccuracy of, or omission of any item of information required to be disclosed in the property disclosure form if the error, inaccuracy, or omission was not within the transferor’s actual knowledge”.

The Court in Gee v. Sun reasoned that perhaps, the seller should have known about the City’s ordinance to replace the sewers, as stories regarding same had been published in the local newspapers for three issues in a row. However, the Court, in citing the above statute reminded the parties that there can be no liability without actual knowledge, and there was no evidence that the seller actually knew about the sewers/assessments (in fact, the seller’s mailbox had been missing for some time and the seller claimed that was why she did not know anything about the sewers).

The moral of this story? The Ohio Residential Disclosure Form Act has its limitations. First, the Act was not intended to circumvent existing law which makes it difficult to prove fraud/misrepresentation. Second, rescission is not a post closing remedy under the Statute. Finally, information disclosed on the Disclosure Form is made with a "built-in qualification" (to seller’s actual knowledge), meaning there is no requirement that a seller should know about particular problems, or even make inquiries about its property to discover if there are any problems. Thorough inquiries about a property to be sold have always been, and should always be a buyer responsibility, and if a buyer does not so inquire, caveat emptor.

The National Association of Realtors reported this week that sales of previously owned single-family homes, condos and co-ops for 3rd Quarter 2009 were 11.7% higher than 3rd Quarter 2008. While it is estimated that 30% of the sales were due to foreclosures and "short sales", and many of the sales were aided by low prices and the federal tax credit, a positive trend seems to be emerging. Ohio was not alone, as thirty-two (32) states also saw 3rd Quarter sales volume increases.

Prices also seem to be stabilizing in Ohio, even though many Ohio cities experienced some price decline. According to the NAR study, and the November 11, 2009 Cleveland Plain Dealer article: 'Existing-Home Sales Rise in Ohio and Nationwide' (by PD Reporter, Michelle Jarboe), the following Northeast Ohio metropolitan areas saw "modest price declines":

Cleveland-Elyria-Mentor: .5% ;

Akron: .8%;

Canton-Massilon: 9.3%.

According to Lawrence Yun, economist for the NAR, we are hopefully now experiencing a change from "a market in transition...to one that is becoming more balanced and stable".

(a Primer for Ohio Residential Property Landlords)

Most real estate professionals agree that the residential-rental property "game" is still a good investment in these uncertain economic times. One of my friends at Johnson Capital recently announced their arranging of a ten (10) year, $4.9 Million loan on a 217 unit apartment building in Kansas City and expressed to me that they are very active in the residential-rental real estate market.

As with any game, however, it is important to play by the rules. Real estate investors and landlords of commercial property should not lose sight of the fact that the rules regarding residential property leases are often more stringent than those in commercial property. Accordingly, residential leases must be drafted by those with expertise and knowledge of residential landlord-tenant laws. As a general rule, in commercial leases, judges most often defer to the language in the lease (absent illegal, unconscionable or non-discernable provisions), but in residential leases, judges normally defer to the “rules (law) of the game”, and the presumed, unequal bargaining positions of the parties.

In Ohio, real estate practitioners must be familiar with the “State rule-book”, the Ohio Landlord-Tenant Act (Ohio Revised Code Chapter 5321); as well as the local rules (many municipalities in Ohio have landlord-tenant laws that supplement the Ohio Landlord-Tenant Act).

While the Ohio Landlord-Tenant Act has been around since 1990, I have seen many leases that are not in compliance with the law. At a minimum, residential landlords in Ohio should remember the following:

Terms Prohibited in Rental Agreement (ORC Section 5321.13)

According to this Section of the Ohio Revised Code, the following terms are prohibited from being in a residential rental agreement in Ohio:

1) A Warrant of Attorney to Confess Judgment;
2) An agreement to pay a landlord’s or tenant’s attorney’s fees;
3) Agreements by a tenant to waive its landlord’s liability or indemnify its landlord;
4) Tenant’s waiver of landlord’s obligations to keep the premises habitable, and other landlord obligations under Section 5321.04.

Acts Prohibited by the Landlord (ORC Sections 5321.15; 5321.02)

According to Section 5321.15 of the Ohio Revised Code, landlords may not terminate utilities or services, exclude (without judicial process) the tenant from its premises, or make threats of any unlawful act against a Tenant, when attempting to recover possession. In other words, residential landlords may not utilize “self help” evictions. They must follow O.R.C. Chapter 1923 re: judicial eviction proceedings. In addition, landlords may not seize the furnishings or possessions of a tenant, for the purpose of recovering rent, unless ordered by a court. A landlord who violates Section 5321.15 is liable not only for damages to a tenant but also for reasonable attorney’s fees. Also, pursuant to Section 5321.02 of the Ohio Revised Code, Landlords may not retaliate against tenants by increasing rent, decreasing services, or threatening to bring an action because a tenant has complained of a building/housing/health or safety code applicable to the premises, or the tenant has complained that the landlord has violated its obligations to the tenant pursuant to O.R.C. Section 5321.04. Tenant may also recover actual damages and reasonable attorneys fees for a landlord violation of Section 5321.02.

Obligations of the Landlord (ORC Sections 5321.04; 5321.08)

The Ohio Landlord Tenant Act also contains specific requirements and regulations regarding security deposits (Section 5321.08) and required obligations of the landlord, regardless of whether the same are contained in the Lease (Section 5321.04). There are also provisions in the Act pertaining to tenant obligations, but the majority of the Act is dedicated to protecting the tenant from the landlord, who typically has greater financial strength and bargaining position.

Don't Forget the "Local Rules"

Many real estate practitioners believe that the Ohio Landlord Tenant Act is the only source of “rules” in Ohio pertaining to residential tenancies. They would be wrong, and may already have found that out “the hard way” (in court). Even though there is a statutory Landlord- Tenant Act in Ohio, there are also many court decisions that have interpreted the Act, and have established rules of law for residential landlord-tenant issues, not covered in the Act. Additionally, there are local and municipal ordinances that must always be reviewed and evaluated.

Ordinance No. 1844A-99 (the City of Cleveland Landlords and Tenants Law)

In Cleveland, for example, Ordinance No. 1844A-99 (the City of Cleveland Landlords and Tenants Law) should always be consulted. Residential landlords in Cleveland may particularly wish to review their leases to ensure compliance with the following:

A. Automotive Renewal Provisions (Section 375.02B)

This Ordinance requires any automatic renewal provision in a lease to be set forth in bold type and in conspicuous (twice the size of the other print) type if the lease is for six months or longer.

B. Fees for Late Payment of Rent (Section 375.02C)

This Ordinance creates a maximum monthly amount for any fee for late payment of rent. The maximum amount is the greater of $25.00 or five percent of the monthly rent. There are additional rules for subsidized housing.

C. Tenant’s Payments for Gas, Electric or Water (Section 375.05)

This Ordinance permits landlords to require enants to pay for such utilities only if three conditions are met:
1. The utility services are provided through an individual meter or sub-meter that measures tenant’s usage only;
2. The rental agreement provides in clear language that the tenant shall pay for the utility service during its tenancy only; and
3. The tenant has (and the Rental Agreement provides as such) reasonable access at all times to the meter or sub-meter.

D. Minimum Statutory Damages

The Cleveland Ordinance also establishes a tenant remedy of “minimum statutory damages” (between $50 and $500) for certain landlord conduct that the Ohio Landlord Tenant Act prohibits, such as the knowing use of an unlawful lease term, unlawful entry of the dwelling unit, unlawful self-help eviction, and unlawful seizure of a tenant’s personal property.

Knowing all the rules of the residential-related real estate game (state laws, local laws, and court decisions), is the only way to truly win. Otherwise, the penalties can be very costly.

According to news reports released on Monday, October 12, 2009, the University of Dayton is in discussions with NCR Corp.to potentially acquire the former NCR world headquarters building in Dayton. That would be great news for the Dayton commercial real estate market.

Click here to access the news article at the Dayton Daily News web site.

There are a couple more real estate-oriented continuing education seminars scheduled for the coming months:

First is a seminar sponsored by the Stirling Education Services, Inc. on December 1, 2009 in Akron, Ohio titled "Real Property Foreclosure in Today's Market". The seminar runs from 8:30 am to 4:30 pm, with registration beginning at 8:00 am, at the Hiltron Akron Fairlawn, 3180 West Market St. To register or for more information, call 715-855-0498 or go online at www.sterlingeducation.com.

Second is a seminar sponsered by the National Business Institute on December 2, 2009 in Cleveland, Ohio titled "Road and Access Law: Researching and Resolving Common Disputes." The seminar runs from 9:00 am to 4:30 pm, with registration beginning at 8:30 am, at the Holiday Inn Independence, 6001 Rockside Road in Independence. To register or for more information, call 800-930-6182 or go online at www.nbi-sems.com.