Ohio city’s point of sale ordinance found to be unconstitutional

9 Replies

For all of you that have to deal with POS - this is not the first time I heard of this but makes me wonder how other cities will react.

Ohio city’s point of sale ordinance found to be unconstitutional -On February 12, 2018

By Peg Ritenour, Ohio REALTORS Vice President of Legal Services/Administration

In a decision issued late last week, the federal district court for the southern district of Ohio ruled that the point of sale ordinance of the City of Oakwood is unconstitutional. Moreover, the court certified the case as a class action, paving the way for the refund of fees to hundreds of sellers who sold property in this Dayton suburb over a six-year period.

The suit was brought by property owner Jason Thompson and the 1851 Center for Constitutional Law, a non-profit entity. At issue in the case was whether the City’s ordinance violated the Fourth Amendment, because it subjects homeowners to a warrantless inspection of their property. (A similar challenge is also pending in the federal court for the northern district of Ohio involving the point of sale inspection of the City of Bedford, a Cleveland suburb. That case has also been certified as a class action.)

Under the Oakwood ordinance, it was unlawful for a property owner to transfer title or any equitable ownership of the property or change tenants without having an inspection conducted by the city. Upon completion of the inspection the city issued a “certificate of occupancy.” Without such a certificate the new owner or tenant could not legally occupy or use the property. The fee for the inspection was $60 and any owner who failed to comply with the inspection requirement or who occupied the premises without the certificate of occupancy was guilty of a minor misdemeanor.

In its lawsuit the plaintiffs sought a declaratory judgment that the ordinance was unconstitutional, an injunction against the city from enforcing the ordinance and restitution of the $60 inspection fee. Shortly after the suit was filed, Oakwood agreed to a preliminary injunction that suspended its enforcement of certain provisions of the ordinance. Two months later, Oakwood passed an emergency order repealing the ordinance and replacing it with one that provides for an administrative warrant procedure. The plaintiffs in this lawsuit did not challenge the amended ordinance.

In reaching its decision that the prior ordinance violated the Fourth amendment, the court relied on a 1967 U.S. Supreme Court case as well as a recent federal court case that struck down a Portsmouth, Ohio ordinance as unconstitutional. The Portsmouth ordinance also made it a misdemeanor for a property owner to refuse to allow the city to conduct an inspection of his rental property. Relying on these prior decisions, the court in this case held that a municipality violates the Fourth Amendment when it requires a property owner to consent to a warrantless inspection of their property or face criminal penalty. The court then granted the plaintiff’s claim for unjust enrichment and restitution, finding that it would be unequitable for Oakwood to retain the $60 fee that was collected pursuant to an “unconstitutional and coercive ordinance.”

Finally, the court considered the plaintiff’s motion to have this case certified as a class action. In granting this motion, the court found that there are sufficient members of the class who share common issues of law and that requiring each potential plaintiff to file individual legal action would be cost prohibitive given the dollar amount of each claim.

After reaching the decision to certify this case as a class action, it was also necessary for the court to define the members of the class. Under federal law, class action claims are subject to a two year statute of limitations. However because the court granted summary judgment to the plaintiffs on the unjust enrichment claim the court applied the statute of limitations for that claim, which is six years. Therefore the court certified the class to include all individuals and businesses that have sold houses within the City of Oakwood since May 25, 2010 and who paid the pre-sale inspection fee.

So what does this decision mean for those communities that have pre-sale or point of sale or rental inspection ordinances? Are such ordinances all unconstitutional? The answer to that question is “not necessarily.” Whether an ordinance would be subject to a successful constitutional challenge depends upon the specific provisions of each ordinance. This ordinance, like the Portsmouth ordinance, was struck down for two reasons: (1) there were criminal sanctions for persons who failed to allow the inspections; and (2) the ordinance did not provide for an administrative warrant that assured that there was a judicial determination that probable cause existed to issue the warrant. Like Oakwood, many municipalities have amended their ordinances in recent years to provide for such a warrant process to avoid a constitutional challenge.

At this point it is not known if Oakwood will appeal the court’s ruling. Also, it should be pointed out that this decision is not binding on other jurisdictions outside the Southern District of Ohio (although in my opinion this constitutes a strong precedent that is very likely to be followed by other courts).

We will keep you posted on the future developments in this case, as well as the litigation pending against the City of Bedford.

http://ohiorealtors.org/2018/02/12/ohio-citys-point-of-sale-ordinance-found-to-be-unconsitutional/

Best of luck fighting a city on this. POS are just another way of the city to collect $$$$. Why I stay out of them

Interesting. Waiting to how the other districts will reflect on this. Thank you for sharing. 

Bedford has since suspend its POS so these cases are bringing about change.

Government regulation at its finest. Allegedly designed to protect the public but more likely to create a cash-cow for the government and more problems for the people they were elected to help.

Originally posted by @Adam Craig :

For all of you that have to deal with POS - this is not the first time I heard of this but makes me wonder how other cities will react.

Ohio city’s point of sale ordinance found to be unconstitutional -On February 12, 2018

By Peg Ritenour, Ohio REALTORS Vice President of Legal Services/Administration

In a decision issued late last week, the federal district court for the southern district of Ohio ruled that the point of sale ordinance of the City of Oakwood is unconstitutional. Moreover, the court certified the case as a class action, paving the way for the refund of fees to hundreds of sellers who sold property in this Dayton suburb over a six-year period.

The suit was brought by property owner Jason Thompson and the 1851 Center for Constitutional Law, a non-profit entity. At issue in the case was whether the City’s ordinance violated the Fourth Amendment, because it subjects homeowners to a warrantless inspection of their property. (A similar challenge is also pending in the federal court for the northern district of Ohio involving the point of sale inspection of the City of Bedford, a Cleveland suburb. That case has also been certified as a class action.)

Under the Oakwood ordinance, it was unlawful for a property owner to transfer title or any equitable ownership of the property or change tenants without having an inspection conducted by the city. Upon completion of the inspection the city issued a “certificate of occupancy.” Without such a certificate the new owner or tenant could not legally occupy or use the property. The fee for the inspection was $60 and any owner who failed to comply with the inspection requirement or who occupied the premises without the certificate of occupancy was guilty of a minor misdemeanor.

In its lawsuit the plaintiffs sought a declaratory judgment that the ordinance was unconstitutional, an injunction against the city from enforcing the ordinance and restitution of the $60 inspection fee. Shortly after the suit was filed, Oakwood agreed to a preliminary injunction that suspended its enforcement of certain provisions of the ordinance. Two months later, Oakwood passed an emergency order repealing the ordinance and replacing it with one that provides for an administrative warrant procedure. The plaintiffs in this lawsuit did not challenge the amended ordinance.

In reaching its decision that the prior ordinance violated the Fourth amendment, the court relied on a 1967 U.S. Supreme Court case as well as a recent federal court case that struck down a Portsmouth, Ohio ordinance as unconstitutional. The Portsmouth ordinance also made it a misdemeanor for a property owner to refuse to allow the city to conduct an inspection of his rental property. Relying on these prior decisions, the court in this case held that a municipality violates the Fourth Amendment when it requires a property owner to consent to a warrantless inspection of their property or face criminal penalty. The court then granted the plaintiff’s claim for unjust enrichment and restitution, finding that it would be unequitable for Oakwood to retain the $60 fee that was collected pursuant to an “unconstitutional and coercive ordinance.”

Finally, the court considered the plaintiff’s motion to have this case certified as a class action. In granting this motion, the court found that there are sufficient members of the class who share common issues of law and that requiring each potential plaintiff to file individual legal action would be cost prohibitive given the dollar amount of each claim.

After reaching the decision to certify this case as a class action, it was also necessary for the court to define the members of the class. Under federal law, class action claims are subject to a two year statute of limitations. However because the court granted summary judgment to the plaintiffs on the unjust enrichment claim the court applied the statute of limitations for that claim, which is six years. Therefore the court certified the class to include all individuals and businesses that have sold houses within the City of Oakwood since May 25, 2010 and who paid the pre-sale inspection fee.

So what does this decision mean for those communities that have pre-sale or point of sale or rental inspection ordinances? Are such ordinances all unconstitutional? The answer to that question is “not necessarily.” Whether an ordinance would be subject to a successful constitutional challenge depends upon the specific provisions of each ordinance. This ordinance, like the Portsmouth ordinance, was struck down for two reasons: (1) there were criminal sanctions for persons who failed to allow the inspections; and (2) the ordinance did not provide for an administrative warrant that assured that there was a judicial determination that probable cause existed to issue the warrant. Like Oakwood, many municipalities have amended their ordinances in recent years to provide for such a warrant process to avoid a constitutional challenge.

At this point it is not known if Oakwood will appeal the court’s ruling. Also, it should be pointed out that this decision is not binding on other jurisdictions outside the Southern District of Ohio (although in my opinion this constitutes a strong precedent that is very likely to be followed by other courts).

We will keep you posted on the future developments in this case, as well as the litigation pending against the City of Bedford.

http://ohiorealtors.org/2018/02/12/ohio-citys-point-of-sale-ordinance-found-to-be-unconsitutional/

 Bring on the eye rolls. POS(es?) are complicated and frustrating. I can see where they "benefit" the public, but for the most part, they can be annoying. Luckily, it seems cities are backing down a bit.

Shaker is under attack on theirs too. It's probably the worst one in the area. Keeps the flippers that learned how on HGTV from playing in their sandbox, but makes it pretty difficult to get anything done when you have to escrow over $100k and then still pay your contractors. 

@Matt Motil I walked away from a great house in Shaker because of their POS rules. I found it difficult to believe that I needed to put approx $30,000 in cash in an escrow account and then raise funds to complete the reno. It was eye opening and has kept me from even looking at properties in Shaker Heights. 

OREIA is working hard at raising money for this.

I have donated time with new investors that have paid into the fund to fight it. I also do classes on wholesaling and finding off market deals for my local REIA and let them keep all of the proceeds to put toward the legal fees to fight POS and rental registration. We are having a Real Estate Investor golf outing this spring and will probably raise somewhere around 8-10k that will all go toward the fight!

My point is, as investors we need to stick together and fight this or we will be taken out by these BS laws. If you have experience or something of value to donate, I encourage you to get with your local REIA and see what you can do to fuel the fund for the cause!

Just my 2 cents.

@Federico Gutierrez We already won the fight with the city of Oakwood, no luck needed. It applies to the southern half of Ohio. 

The precedent is set, and it'll be much easier for someone to win the case for northern Ohio and other areas.

As @James Wise said Bedford has already suspended their ordinance to relook at it, and other cities are doing the same.

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