CUYAHOGA COUNTY, Ohio — Attorneys filed a federal class-action lawsuit this week against Cuyahoga County, asking the court to order the county to pay back the owners of foreclosed properties that were turned over to the Cuyahoga Land Bank.
Marc Dann, former Ohio Attorney General and managing partner of Dann Law, said his clients should have been compensated when their properties were transferred to the Land Bank or sold.
“There have been millions of dollars of people’s equity taken in this process,” Dann said, noting that he believes there are more than 7,000 property owners in the county who are owed money. He said he filed a similar case in Montgomery County, in the Dayton area.
A spokesperson for Cuyahoga County said county lawyers are reviewing the lawsuit and will defend it.
What happens to a property that is in foreclosure
Prior to 2006, Dann said, courts decided what to do with foreclosed properties.
“Historically, a tax-foreclosed property would go to a sheriff’s sale,” Dann said. “They’d sell to the highest bidder. The taxes would be paid off. The cost of the foreclosure would be paid, any mortgages or other liens would be paid and then anything that was left would go back to the property owner because that’s their property, and all that the mortgages, including the tax liens, secure are the obligations for those particular debts.”
According to the lawsuit, in 2006, the Ohio General Assembly “created an alternative means for county boards of revision to foreclose on real property with outstanding property tax liens” if the property is abandoned, which eliminates the need for a public auction and allows for a property to be transferred directly to a county land bank or other entity.
“All of which may be fine, cause the legislature said that they can do it,” Dann said. “The problem is that the Constitution in Ohio and the Constitution of the United States [say] that the government can’t take people’s property without compensating them.”
Dann said the two plaintiffs named in the lawsuit weren’t compensated.
“Because those properties have value in excess of the tax liabilities, the government has an obligation if they decide to take it—which they can, just like sometimes they buy houses to build roads or tear down old buildings to build new government buildings,” Dann said. “The government has the right to eminent domain, to exercise its right for the good of the community to take property. But what it can’t do is to take those properties with compensating the people that own them.”
Cuyahoga Land Bank responds
The Cuyahoga Land Bank is a private nonprofit corporation, separate from county government.
Gus Frangos, president and general counsel of the Cuyahoga Land Bank, said owners of abandoned properties have ample time and opportunity to get their property back in order.
"It’s not the county’s job to babysit an owner who now claims, after all these years, that he has equity in the property,” Frangos said.
He noted that it often takes years from the time property owners become delinquent on taxes to a foreclosure action being filed.
“In these cases, a person has not paid their taxes for many, many years,” Frangos said. “They don’t respond to collection notices. Then they get sued, don’t respond to that. They get notice of a hearing, they don’t attend the hearing. And then at the end of that, you’ve got another 28 days after a decree of foreclosure to still come in and enter into a payment plan, to try to make some kind of arrangement so that your property’s not taken.”
Frangos said he believes the lawsuit has no legal merit.
"To me, it’s very disingenuous to say that people are the victims here, when really the county taxpayers, the rest of them, are victims, because these are people that haven’t paid their taxes for years on blighted properties,” Frangos said.
These are not homes in which people are living, according to Frangos.
“These cases, number one, are cases that are vacant and abandoned. Nobody’s being removed from their property,” Frangos said. “These are the worst of the worst properties.”
He described some of the properties as places with code violations or in which crime occurs.
"People have been killed in these properties, meth labs are going on in these properties,” Frangos said. “That’s the stuff that we’re dealing with.”
The Land Bank, Frangos said, usually receives properties at no cost to them, but what comes next can be expensive.
“There’s no shortcut,” Frangos said. “We have to go in, we have to inspect them, we have to trash them out. And there’s like two feet of garbage in a lot of these properties.”
From there, while every property is different, a demolition costs $12,000 on average, but it can range from $10,000 to $30,000, depending on asbestos levels. Frangos said rehabbing a house can cost $50,000 to $100,000, which the Land Bank then can sell to try to recoup costs.
“There’s a lot to getting one house back into productivity, but who’s going to do it but us?” Frangos said. “Nobody’s out there that’s going to take these bad properties and do that kind of work.”
Core funding for the Land Bank comes from penalty and interest on collected delinquent taxes, according to Frangos, “so we’re not taking any taxes from the public to do this.”
What happens next
One of the two plaintiffs listed in the lawsuit owned a fast food restaurant, now abandoned at the corner of East 116th Street and Miles Avenue. The other was a woman who lived in Old Brooklyn and, according to Dann, moved to the suburbs.
“She should have done something,” Dann said. “She could have put it for sale. She didn’t do that. She could have paid the taxes on it and just kept it, and she chose not to do that.”
The house, Dann said, was eventually transferred to the Land Bank. The difference between the house’s value and the delinquent taxes, according to the lawsuit, was more than $60,000, money Dann said his client should have received.
“We’re not saying that our clients are pristine and did the right thing all the way through,” Dann said. “In fact, most of them didn’t do anything to protect themselves. But at the end of the day, that doesn’t matter, because our state Constitution, our federal Constitution, protects property rights, including the right to compensation when the government takes your property.”
He emphasized he supports the work the Land Bank does in Cuyahoga County.
“They do worthy things and they should continue to do worthy things, but they can’t do it in violation of the Constitution,” Dann said. “The Land Bank hasn’t done anything wrong. They’ve just accepted properties that were taken from people without compensation.”