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Real Property Sales by Receivers: The differences between Ohio, Kentucky and Indiana
Posted in Real Estate

The sale of real estate in foreclosure actions by receivers is handled differently from state to state. With Ohio, Kentucky and Indiana all upholding different laws about the subject, what do you need know about the differences?

Real property sales and receivers in Ohio

The sale of Ohio real estate in foreclosure actions by receivers (both privately and by auction), rather than through the traditional public auction conducted by the county sheriff, has become increasingly commonplace. Several recent decisions by both Ohio trial courts and courts of appeal have held that a receiver has the power to sell real estate if authorized by the court. Ohio courts have also recently addressed procedural requirements of a receiver’s sale.

The advantages of a receiver’s sale over a sheriff’s sale include the receiver’s ability to:

  1. engage a realtor under conventional terms;
  2. avoid a set public sale date deadline; and
  3. market the non-real estate assets in a bundle, such as a hotel or restaurant.

However, concerns by title insurance companies regarding the property of a receiver’s sale has prompted Ohio land title interests and various practice groups in the Ohio State Bar Association to work together to propose amendments to R.C. 2735 (the Ohio receivership statute) to make explicit the receiver’s power to sell real estate and establish procedures for such sales. A bill was introduced in the Ohio House of Representatives earlier this year to achieve those goals. The bill also is intended to resolve continuing disputes over a receiver’s liability for pre-receivership utility bills. In addition, the legislation – consistent with evolving practice – provides that all receivership expenses are to be taxed as court costs and therefore prime all other liens on the real estate in receivership.

Real property sales and receivers in Kentucky

Sales of real estate in Kentucky foreclosure actions are usually conducted by the Master Commissioner who is appointed by the judge or judges of the circuit court in which the action is pending. Local rules and forms govern the Master Commissioner sale process. Sales are by public auction. The Master Commissioner receives a fee for the sale based on the sale price. Sale of real estate in Kentucky by a court-appointed receiver is less common. However, Kentucky courts do appoint receivers to collect rents and manage the real estate while the foreclosure action is pending. Master Commissioner public auction sales can be conducted by auctioneers retained and supervised by the Master Commissioner, although there is no Kentucky statutory authority for private sales.

Real property sales and receivers in Indiana

In Indiana, a receiver can sell real estate so long as the court authorizes the receiver to make such a sale, and the mortgagor of the real estate provides consent. Indiana Code generally states that a “receiver may, under control of the court or judge … sell property in the receiver’s own name …” Prior to 2010, Indiana courts had interpreted that language to mean that courts could grant receivers the power to sell real estate after allowing any interested parties the right to object and be heard, with the sale transferring the real estate free and clear of existing liens (with any liens attaching to the proceeds of the sale).

In 2010, in the case of Wells Fargo v. Tippecanoe Associates, LLC, the Indiana Court of Appeals held that a receiver cannot sell real estate without the mortgagor’s consent. Citing Indiana’s statutory right of redemption, the Tippecanoe court reasoned that to allow a receiver to sell real estate without also obtaining the mortgagor’s consent would deprive a mortgagor of its statutory right to redeem its property. Therefore, receivers in Indiana must now also obtain the mortgagor’s consent, as well as authority from the court, to sell real estate.

If you have questions about real property sales by receivers in your state, please contact a member of the Real Estate group at Bingham Greenebaum Doll LLP.

DISCLOSURE REQUIRED BY CIRCULAR 230. This Disclosure may be required by Circular 230 issued by the Department of Treasury and the Internal Revenue Service. If this article, including any attachments, contains any federal tax advice, such advice is not intended or written by the practitioner to be used, and it may not be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. Furthermore, any federal tax advice herein (including any attachment hereto) may not be used or referred to in promoting, marketing or recommending a transaction or arrangement to another party. Further information concerning this disclosure, and the reasons for such disclosure, may be obtained upon request from the author of this article. Thank you.

  • Partner

    Grant is the chair of the firm’s Real Estate Litigation Team. He concentrates his practice on representing clients in real estate and construction matters, including contract disputes, mortgage foreclosures, mechanic’s ...

  • Senior Partner

    Mr. Boydston practices in the areas of bankruptcy (including representation of creditors, debtors and of committees and bankruptcy litigation), receiverships, debtor/creditor relations, and commercial transactions and ...

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