OHIO APPELLATE COURT REFUSES TO REIMBURSE MORTGAGEE FOR $12,000+ IN ADVANCES FOR CONDOMINIUM DUES

Last month the Eighth Appellate District of Ohio affirmed the lower court’s order denying  Lakeview Loan Servicing, LLC’s (Lakeview) request for post-judgment reimbursement for condominium association dues paid on real property located in Cuyahoga County (“the Property”). Lakeview Loan Servicing, LLC v. Soldat, 2024-Ohio-4676, ¶ 1. In Soldat, Lakeview successfully foreclosed its mortgage interest and obtained a final judgment.[i] The judgment explicitly allowed Lakeview to make post-judgment advances to pay for property protection, taxes, insurance, inspections, and appraisals.[ii]

After the sale of the Property, Lakeview filed a motion for reimbursement seeking $26,638.53 for post-judgment advances including $12,965.97 for condominium association dues.[iii] The trial court awarded $13,672.56 in advances but refused to reimburse Lakeview for the association dues.[iv] The court concluded that Lakeview (1) failed to specifically request association dues in its complaint, (2) failed to object to the magistrate’s written recommendation which did not list association dues as a permissible advance, and (3)  failed to appeal the final judgment which adopted the magistrate’s recommendation.[v] Lakeview appealed these findings; however, the Eighth District affirmed the lower court.[vi]

Firstly, it is noteworthy that Lakeview’s complaint included a request for  “advances made pursuant to the terms of the mortgage…”[vii] The mortgage, attached to the complaint, included a condominium rider which allowed the lender to pay “condominium dues and assessments” if the borrower failed to do so.[viii] The rider also indicated that any monies advanced would “become additional debt of the Borrower” and be secured by the mortgage. Consistent with these provisions, on appeal Lakeview argued that both “the condominium rider to the mortgage and R.C. 5311.18(B)(5)” allowed for the reimbursement of association dues.[ix]

The Eighth District disagreed. The Court found the mortgage rider (an attachment to the complaint) to be insufficient without a specific allegation in the complaint requesting condominium dues.[x] The Court also noted Lakeview failed to reference the rider in its complaint.[xi] Further, the Court concluded that a claim for condominium dues does not “fall within the purview of costs contemplated by R.C. 5301.233” which reads in pertinent part:

In addition to any other debt or obligation, a mortgage may secure unpaid balances of advances made, with respect to the mortgaged premises, for the payment of taxes, assessments, insurance premiums, or costs incurred for the protection of the mortgaged premises, if such mortgage states that it shall secure such unpaid balances.

Ohio Rev. Code Ann. § 5301.233 (West).

The Court’s strict interpretation of this provision to exclude association dues is troubling since payment of the dues could clearly be considered a “cost[] incurred for the protection of the mortgaged premises.” Notwithstanding, a likely reason for this result was the Eighth District’s standard of review which was for an abuse of discretion, an extremely difficult standard to satisfy.[xii] This standard required that Lakeview demonstrate “the court’s attitude was unreasonable, arbitrary or unconscionable” meaning the court’s determination was unsupported by “sound reasoning.”[xiii]

The procedural posture of the case is also noteworthy. The Eighth District noted repeatedly that Lakeview should have objected to the magistrate’s decision and should have appealed the final judgment because neither explicitly stated Lakeview could be reimbursed for the payment of association dues.[xiv] Although that is technically true, neither the magistrate’s recommendation nor the final judgment explicitly prohibited the advancement for association dues either.[xv] As mentioned above, such advances could reasonably be considered a cost to protect the property and therefore permissible advances under R.C. 5301.233.

Regardless, neither the trial nor appellate court saw it that way. The Eighth District noted: “If an…entity believes that the order of foreclosure fails to accurately reflect an interest in the property, the proper means to challenge the court’s determination is by appealing the order of foreclosure.”[xvi] Since Lakeview failed to object to or appeal the judgment, the “interests and priorities of the lienholders” was set so Lakeview could only challenge the accuracy of the dollar amounts advanced for “inspections, appraisals, property protection, and maintenance.”[xvii] Given the abuse of discretion standard of review and the limited substantive issues the Court could consider on appeal, the result is disappointing but not surprising.

[i] Soldat, at ¶¶1, 4.

[ii] The language in the judgment mirrored the language in Ohio Revised Code § 5301.233 which allows for reimbursement for advances made for “taxes, assessments, insurance premiums, or costs incurred for the protection of the mortgage premises…” Soldat, at ¶10. Future references to this case are to this citation until indicated otherwise.

[iii] Soldat, at ¶11.

[iv] Soldat, at ¶14.

[v] Soldat, at ¶14, 27.

[vi] Soldat, at ¶14.

[vii] Soldat, at ¶5. Obviously, both the trial and appellate courts deemed this request for advances to be too general.

[viii] Soldat, at ¶6. Future references to this case are to this citation until indicated otherwise.

[ix] Soldat, at ¶22.

[x] Soldat, at ¶27.

[xi] Soldat, at ¶7

[xii] Soldat, at ¶¶17-19.

[xiii] Soldat, at ¶¶19.

[xiv] Soldat, ¶¶14, 27.

[xv] Soldat, at ¶¶8-9.

[xvi] Soldat, at ¶27.

[xvii] Soldat, at ¶17.