Under prior Ohio law, the requirement that a lender holding a mortgage lien had to timely file a release evidencing its satisfaction or face penalties only applied to residential mortgages and the penalty was paltry. Anyone who has refinanced commercial mortgages or has represented a lender or borrower on commercial mortgage refinancing, knows how often a prior mortgage that was paid off still shows up in the title report because the mortgage release wasn’t filed. This drives up the legal costs and can delay closing while the borrower and counsel are chasing down that lender to obtain the release that already should have been recorded.
Upon passage of Am. Sub. H.B. 201 (HB 201) earlier in 2015, the rules have changed. HB 201 was effective March 23, 2015 and does several things with respect to mortgage satisfactions:
- It expands the statute to cover commercial mortgages as well as residential.
- A current property owner can pursue the mortgage lender of a prior owner for damages (This is critical when a property transfer is involved and the new owner financed the purchase with a new loan. The fact that the prior owner’s lender failed to file its mortgage release may not be discovered until after closing.). The current owner’s right to seek civil damages of $250 remains but does not bar the current owner from seeking other legal damages and remedies.
- The mortgagee (i.e., the lender holding the mortgage) included the original lender/mortgagee and any successor or assignee of the original mortgagee.
- If a mortgage is not released upon 90 days of having been satisfied, the currently owner must provide written notice to the mortgagee of its failure to release the mortgage of records.
- The owner’s notice must notify the mortgagee of the following: (1) the duty to record a release, (2) the identify of the satisfied mortgage, (3) the mortgagee’s failure to record the release, (4) the consequences of failing to record the release within 15 days of receiving the notice (i.e., actions for damages, costs, and reasonable attorney fees, as provided in HB 201).
- If the mortgagee fails to record the mortgage satisfaction within the 15 days, the current owner will be entitled to seek recovery in a civil court action of reasonable attorney fees and costs that are incurred as a result of having to bring such action or otherwise obtain compliance by the mortgagee, plus damages of $100 per day for each day of noncompliance, up to a cap of $5,000. This does not preclude the current property owner from seeking other legal damages or remedies that might be available to the owner depending on the facts and circumstances of each individual situation.
- The property owner can seek both the initial $250 in damages plus the additional damages that become available after having provided the required notice.
- Mortgagees that timely file a release will not be held in violation of HB 201 just because a county recorder’s office or division fails to timely process the mortgage release.
While not perfect (I think the $5,000 cap is too low with respect to larger lenders for whom that amount is pocket change.), this is a huge step in the right direction.