As Introduced

127th General Assembly Regular Session 2007-2008

H. B. No. 361

Representative Yuko 

Cosponsors: Representatives Driehaus, Foley, Healy, Williams, B., Fende, Koziura, Ujvagi, Luckie, Skindell, Lundy, Chandler, DeGeeter 

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A BILL

To amend sections 5313.01, 5313.02, 5313.06,

1

5313.08, and 5321.01 and to enact sections

2

5321.20, 5321.21, 5321.22, 5321.23, and 5321.99 of

3

the Revised Code to require that specified

4

residential units conveyed pursuant to a land

5

installment contract receive an appraisal and an

6

inspection prior to the execution of the contract,

7

to define residential lease option contract, to

8

regulate residential lease option contracts under

9

the Ohio Landlord and Tenant Law, and to provide

10

penalties.

11

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. That sections 5313.01, 5313.02, 5313.06, 5313.08,	12
and 5321.01 be amended and sections 5321.20, 5321.21, 5321.22,	13
5321.23, and 5321.99 of the Revised Code be enacted to read as	14
follows:	15

Sec. 5313.01.  As used in Chapter 5313. of the Revised Code:

16

(A) "Land installment contract" means an executory agreement	17
which by its terms is not required to be fully performed by one or	18
more of the parties to the agreement within one year of the date	19
of the agreement and under which the vendor agrees to convey title	20
in real property located in this state to the vendee and the	21
vendee agrees to pay the purchase price in installment payments,	22
while the vendor retains title to the property as security for the	23
vendee's obligation. Option contracts for the purchase of real	24
property, including "residential lease option contracts" as	25
defined in section 5321.01 of the Revised Code, are not land	26
installment contracts.	27

(B) "Property" means real property located in this state	28
improved by virtue of a dwelling having been erected on the real	29
property.	30

(C) "Vendor" means any individual, partnership, corporation,	31
association, trust, or any other group of individuals however	32
organized making a sale of property by means of a land installment	33
contract.	34

(D) "Vendee" means the person who acquires an interest in	35
property pursuant to a land installment contract, or any legal	36
successor in interest to that person.	37

(E) "Legal description" means a description of the property	38
by metes and bounds or lot numbers of a recorded plat including a	39
description of any portion of the property subject to an easement	40
or reservation, if any.	41

(F) "Residential structure" means a structure that contains	42
one to four dwelling units with each unit intended for occupancy	43
as a home, residence, or sleeping place by one or more persons who	44
maintain a household. "Residential structure" includes a	45
single-family home.	46

Sec. 5313.02.  (A) Every land installment contract shall be	47
executed in duplicate, and a copy of the contract shall be	48
provided to the vendor and the vendee. The contract shall contain	49
at least the following provisions:	50

(1) The full names and then current mailing addresses of all	51
the parties to the contract;	52

(2) The date when the contract was signed by each party;

53

(3) A legal description of the property conveyed;

54

(4) The contract price of the property conveyed;

55

(5) Any charges or fees for services that are includable in	56
the contract separate from the contract price;	57

(6) The amount of the vendee's down payment;

58

(7) The principal balance owed, which is the sum of the	59
specified in divisions (A)(4) and (5) of this section less the	60
specified in division (A)(6) of this section;	61

(8) The amount and due date of each installment payment;

62

(9) The interest rate on the unpaid balance and the method of	63
computing the rate;	64

(10) A statement of any encumbrances against the property	65
conveyed;	66

(11) A statement requiring the vendor to deliver a general	67
warranty deed on completion of the contract, or another deed that	68
is available when the vendor is legally unable to deliver a	69
general warranty deed;	70

(12) A provision that the vendor provide evidence of title in	71
accordance with the prevailing custom in the area in which the	72
property is located;	73

(13) A provision that, if the vendor defaults on any mortgage	74
on the property, the vendee can pay on the mortgage and receive	75
credit on the land installment contract;	76

(14) A provision that the vendor shall cause a copy of the	77
contract to be recorded;	78

(15) A requirement that the vendee be responsible for the	79
payment of taxes, assessments, and other charges against the	80
property from the date of the contract, unless agreed to the	81
contrary;	82

(16) A statement of any pending order of any public agency	83
against the property.	84

(B) No vendor shall enter into a land installment contract	85
for real estate that contains a residential structure unless that	86
vendor has obtained, and has attached to the contract, both of	87
the following:	88

(1) A copy of a written appraisal report of the real property	89
and the residential structure, conducted within the previous year	90
by a person who is a state-certified residential real estate	91
appraiser pursuant to Chapter 4763. of the Revised Code;	92

(2) A copy of an inspection of the residential structure	93
conducted by a home inspector who is a member of the American	94
society of home inspectors.	95

(C) No vendor shall hold a mortgage on property sold by a	96
land installment contract in an amount greater than the balance	97
due under the contract, except a mortgage that covers real	98
property in addition to the property that is the subject of the	99
contract where the vendor has made written disclosure to the	100
vendee of the amount of the mortgage and the release price, if	101
any, attributable to the property in question.	102

No vendor shall place a mortgage on the property in an amount	103
greater than the balance due on the contract without the consent	104
of the vendee.	105

(C)(D) Within twenty days after a land installment contract	106
has been signed by both the vendor and the vendee, the vendor	107
shall cause a copy of the contract to be recorded as provided in	108
section 5301.25 of the Revised Code and a copy of the contract to	109
be delivered to the county auditor.	110

(D)(E) Every land installment contract shall conform to the	111
formalities required by law for the execution of deeds and	112
mortgages. The vendor of any land installment contract that	113
contains a metes and bounds legal description shall have that	114
description reviewed by the county engineer. The county engineer	115
shall indicate histhe engineer's approval of the description on	116
the contract.	117

Sec. 5313.06. (A) Following expiration of the period of time	118
provided in section 5313.05 of the Revised Code, forfeiture of the	119
interest of a vendee in default under a land installment contract	120
shall be initiated by the vendor or by histhe vendor's successor	121
in interest, by serving or causing to be served on the vendee or	122
his the vendee's successor in interest, if known to the vendor or	123
histhe vendor's successor in interest, a written notice which:	124

(A)(1) Reasonably identifies the contract and describes the	125
property covered by it;	126

(B)(2) Specifies the terms and conditions of the contract	127
which have not been complied with;	128

(C)(3) Notifies the vendee that the contract will stand	129
forfeited unless the vendee performs the terms and conditions of	130
the contract within ten days of the completed service of notice	131
and notifies the vendee to leave the premises.	132

Such(B) The notice provided pursuant to this section shall	133
be served by the vendor or histhe vendor's successor in interest	134
by handing a written copy of the notice to the vendee or histhe	135
vendee's successor in interest in person, or by leaving it at his	136
the usual place of abode of the vendee or the vendee's successor	137
or at the property which is the subject of the contract or by	138
registered or certified mail by mailing to the last known address	139
of the vendee or histhe vendee's successor in interest.	140

(C) Except as otherwise provided in section 5313.07 of the	141
Revised Code, any action for forfeiture of the vendee's interest	142
in a property that contains a residential structure may be brought	143
only pursuant to an action for forfeiture and restitution as	144
provided in section 5313.08 of the Revised Code.	145

Sec. 5313.08.  If the contract has been in effect for less	146
than five years, in addition to any other remedies provided by law	147
and after the expiration of the periods prescribed by sections	148
5313.05 and 5313.06 of the Revised Code, if the vendee is still in	149
default of any payment the vendor may bring an action for	150
forfeiture of the vendee's rights in thea land installment	151
contract and for restitution of histhe property under Chapter	152
1923. of the Revised Code. When bringing the action under Chapter	153
1923. of the Revised Code, the vendor complies with the notice	154
requirement of division (A) of section 1923.04 of the Revised	155
Code by serving notice pursuant to section 5313.06 of the Revised	156
Code. The court may also grant any other claim arising out of the	157
contract.	158

Sec. 5321.01.  As used in this chapter:

159

(A) "Tenant" means a person entitled under a rental agreement	160
to the use and occupancy of residential premises to the exclusion	161
of others.	162

(B) "Landlord" means the owner, lessor, or sublessor of	163
residential premises, the agent of the owner, lessor, or	164
sublessor, or any person authorized by the owner, lessor, or	165
sublessor to manage the premises or to receive rent from a tenant	166
under a rental agreement.	167

(C) "Residential premises" means a dwelling unit for	168
residential use and occupancy and the structure of which it is a	169
part, the facilities and appurtenances in it, and the grounds,	170
areas, and facilities for the use of tenants generally or the use	171
of which is promised the tenant. "Residential premises" includes a	172
dwelling unit that is owned or operated by a college or	173
university. "Residential premises" does not include any of the	174
following:	175

(1) Prisons, jails, workhouses, and other places of	176
incarceration or correction, including, but not limited to,	177
halfway houses or residential arrangements that are used or	178
occupied as a requirement of a community control sanction, a	179
post-release control sanction, or parole;	180

(2) Hospitals and similar institutions with the primary	181
purpose of providing medical services, and homes licensed pursuant	182
to Chapter 3721. of the Revised Code;	183

(3) Tourist homes, hotels, motels, recreational vehicle	184
parks, recreation camps, combined park-camps, temporary	185
park-camps, and other similar facilities where circumstances	186
indicate a transient occupancy;	187

(4) Elementary and secondary boarding schools, where the cost	188
of room and board is included as part of the cost of tuition;	189

(5) Orphanages and similar institutions;

190

(6) Farm residences furnished in connection with the rental	191
of land of a minimum of two acres for production of agricultural	192
products by one or more of the occupants;	193

(7) Dwelling units subject to sections 3733.41 to 3733.49 of	194
the Revised Code;	195

(8) Occupancy by an owner of a condominium unit;

196

(9) Occupancy in a facility licensed as an SRO facility	197
pursuant to Chapter 3731. of the Revised Code, if the facility is	198
owned or operated by an organization that is exempt from taxation	199
under section 501(c)(3) of the "Internal Revenue Code of 1986,"	200
100 Stat. 2085, 26 U.S.C.A. 501, as amended, or by an entity or	201
group of entities in which such an organization has a controlling	202
interest, and if either of the following applies:	203

(a) The occupancy is for a period of less than sixty days.

204

(b) The occupancy is for participation in a program operated	205
by the facility, or by a public entity or private charitable	206
organization pursuant to a contract with the facility, to provide	207
either of the following:	208

(i) Services licensed, certified, registered, or approved by	209
a governmental agency or private accrediting organization for the	210
rehabilitation of mentally ill persons, developmentally disabled	211
persons, adults or juveniles convicted of criminal offenses, or	212
persons suffering from substance abuse;	213

(ii) Shelter for juvenile runaways, victims of domestic	214
violence, or homeless persons.	215

(10) Emergency shelters operated by organizations exempt from	216
federal income taxation under section 501(c)(3) of the "Internal	217
Revenue Code of 1986," 100 Stat. 2085, 26 U.S.C.A. 501, as	218
amended, for persons whose circumstances indicate a transient	219
occupancy, including homeless people, victims of domestic	220
violence, and juvenile runaways.	221

(D) "Rental agreement" means any agreement or lease, written	222
or oral, which establishes or modifies the terms, conditions,	223
rules, or any other provisions concerning the use and occupancy of	224
residential premises by one of the parties.	225

(E) "Security deposit" means any deposit of money or property	226
to secure performance by the tenant under a rental agreement.	227

(F) "Dwelling unit" means a structure or the part of a	228
structure that is used as a home, residence, or sleeping place by	229
one person who maintains a household or by two or more persons who	230
maintain a common household.	231

(G) "Controlled substance" has the same meaning as in section	232
3719.01 of the Revised Code.	233

(H) "Student tenant" means a person who occupies a dwelling	234
unit owned or operated by the college or university at which the	235
person is a student, and who has a rental agreement that is	236
contingent upon the person's status as a student.	237

(I) "Recreational vehicle park," "recreation camp," "combined	238
park-camp," and "temporary park-camp" have the same meanings as in	239
section 3729.01 of the Revised Code.	240

(J) "Community control sanction" has the same meaning as in	241
section 2929.01 of the Revised Code.	242

(K) "Post-release control sanction" has the same meaning as	243
in section 2967.01 of the Revised Code.	244

(L) "School premises" has the same meaning as in section	245
2925.01 of the Revised Code.	246

(M) "Sexually oriented offense" and "child-victim oriented	247
offense" have the same meanings as in section 2950.01 of the	248
Revised Code.	249

(N) "Preschool or child day-care center premises" has the the	250
same meaning as in section 2950.034 of the Revised Code.	251

(O) "Residential lease option contract" means any executory	252
agreement without regard to its title, description, or whether	253
comprised of a single document, a portion of a document, or a	254
number of documents, that does all of the following:	255

(1) Contains an option agreement that confers upon the tenant	256
a qualified or unqualified right to purchase the landlord's	257
interest in the residential premise that the tenant occupies or	258
intends to occupy;	259

(2) Requires the tenant to pay a fee for the option to	260
purchase upon execution of the contract and to pay rent during the	261
term of the contract;	262

(3) Retains the landlord's legal and equitable title to the	263
residential premise until the tenant exercises the option and	264
purchases the property.	265

"Residential lease option contract" does not include a lease	266
for agricultural, business, or commercial purposes, personal	267
property, intangible personal property, a lease with a tenant	268
that is not an individual, or a contract to purchase that is a	269
"land installment contract" as defined in section 5313.01 of the	270
Revised Code.	271

(P) "Option agreement" means a contract or the portion of a	272
contract that is executory in nature and defines the terms and	273
conditions under which a tenant may purchase the residential	274
premise that the tenant occupies or intends to occupy.	275

Sec. 5321.20. (A)(1) A residential lease option contract is	276
deemed to be a rental agreement that is subject to the	277
requirements of this chapter. A person who offers a residential	278
lease option contract to a tenant is a landlord pursuant to this	279
chapter and a person who enters into a residential lease option	280
contract as a tenant is a tenant pursuant to this chapter.	281

(B) A residential lease option contract shall clearly state	282
that the tenant is renting the property and has all rights and	283
responsibilities of a tenant pursuant to Chapter 5321. of the	284
Revised Code. The contract shall contain the following statements	285
printed clearly and conspicuously in boldface type of the same	286
size font as used for the text of the contract and in close	287
proximity to the statement of the amount of the option fee:	288

The tenant is renting this property and has all rights of a	289
tenant under The Ohio Landlords and Tenants Law, Chapter 5321. of	290
the Revised Code.	291

The tenant has paid an additional fee of $...... for the	292
right to purchase the property located at ..................	293

If the tenant does not pay the monthly rent or violates other	294
terms of the lease, the landlord may initiate eviction proceedings	295
pursuant to Chapters 5321. and 1923. of the Revised Code.	296

Sec. 5321.21. (A) Any residential lease option contract shall	297
clearly set forth that the contract is not a contract to purchase.	298
The contract shall contain, at the top of the first page of the	299
contract and again directly above the tenant's signature on the	300
same contract, the following printed in at least fourteen-point	301
boldface type in all capital letters:	302

THIS IS NOT A CONTRACT TO BUY. THIS CONTRACT GIVES YOU THE	303
RIGHT TO BUY THE PROPERTY DESCRIBED IN IT. YOU WILL NOT OWN THE	304
PROPERTY UNTIL YOU FIND FINANCING TO PAY THE PURCHASE PRICE IN	305
FULL AND FULFILL THE OTHER TERMS OF THIS CONTRACT.	306

(B) A residential lease option contract shall disclose the	307
amount of the option fee and include a statement that sets forth,	308
in United States dollars, the amount of the option fee that will	309
be credited against the purchase price if the tenant exercises the	310
option to purchase. The contract shall contain the following	311
statement printed clearly and conspicuously in at least	312
fourteen-point boldface type in all capital letters:	313

THE OPTION FEE PAID PURSUANT TO THIS CONTRACT IS NOT A	314
SECURITY DEPOSIT AND MAY NOT BE REFUNDED IF YOU DO NOT BUY THE	315
PROPERTY FOR ANY REASON.	316

(C) No landlord shall offer a residential lease option	317
contract to a tenant unless that contract contains all of the	318
following in addition to any other requirements of this chapter:	319

(1) The full name and mailing address of each party to the	320
contract;	321

(2) The date each party signs the contract;

322

(3) The amount of the tenant's monthly rent;

323

(4) The period of time during which the tenant may exercise	324
the right to buy the property;	325

(5) The agreed upon sales price of the property and any	326
adjustments that may be made to the sales price, the circumstances	327
under which those adjustments may be made, and the amount of rent	328
that will be applied to reduce the sales price;	329

(6) A legal description of the property by metes and bounds	330
or lot numbers of a recorded plat, including a description of any	331
portion of the property subject to an easement or reservation;	332

(7) A statement of any known encumbrances or encumbrances	333
that could be reasonably ascertained against the property;	334

(8) A statement of any pending order of a public agency	335
against the property;	336

(9) A statement specifying any liens and mortgages against	337
the property for which the tenant will assume responsibility at	338
the time of closing and the current dollar amount of each;	339

(10) A statement that the landlord will remove any liens and	340
mortgages against the property prior to the time of the closing,	341
except those specified in the contract to be assumed by the	342
tenant;	343

(11) A statement that the tenant has received, reviewed, and	344
signed a completed copy of the residential real property	345
disclosure form the director of commerce prescribed pursuant to	346
section 5302.30 of the Revised Code;	347

(12) A statement of the landlord's ownership interest in the	348
property and information regarding the location of documentation	349
of that ownership interest;	350

(13) A provision requiring the landlord to provide evidence	351
of title and to deliver a general warranty deed, or the best	352
available deed if unable to deliver a general warranty deed, at	353
the closing upon exercise of the option;	354

(14) A statement setting forth which expenses of closing and	355
sale are the responsibility of the landlord and which are the	356
responsibility of the tenant.	357

Sec. 5321.22. (A) Prior to the tenant signing a residential	358
lease option contract, the landlord shall provide the tenant with	359
a completed and signed copy of the residential real property	360
disclosure form required pursuant to section 5302.20 of the	361
Revised Code, and any other documents federal, state, or local law	362
require.	363

(B) The landlord shall provide each tenant who is a party to	364
a residential lease option contract a copy of the contract signed	365
by the landlord and by each tenant and a receipt for any fees paid	366
to the landlord pursuant to the contract.	367

Sec. 5321.23. (A) Any landlord who enters into a residential	368
lease option contract, at the request of a tenant shall provide	369
an updated statement of the current purchase price that shows all	370
calculations used to reach that price, including any credit toward	371
the purchase price and any addition to the purchase price. The	372
landlord shall prepare the updated statement within ten days of a	373
tenant's request and either deliver the statement in person, with	374
the tenant signing a copy of the statement as evidence of its	375
receipt, or by certified mail to the property address. A landlord	376
is obligated to provide the information this division requires not	377
more than twice during any twelve-month period.	378

(B) During any year in which a residential lease option	379
contract is in effect, the fee for the option to purchase may not	380
exceed one and one-half times the amount that is charged for one	381
month's rent that year. During the entire term that the option is	382
in effect, the total of the fees charged for the option may not	383
exceed four times the amount of the monthly rent that was charged	384
during the first year of the option.	385

Sec. 5321.99. A court of competent jurisdiction may find any	386
landlord who fails to substantially comply with sections 5321.20	387
and 5321.21 of the Revised Code liable for damages in an amount	388
not less than ninety dollars and not more than five hundred	389
dollars for each violation, together with actual damages and	390
reasonable attorney's fees, and may void the contract and order	391
any fees or deposits be returned to the tenant. A tenant may seek	392
enforcement of sections 5321.20 to 5321.23 of the Revised Code in	393
a municipal court, county court, or court of common pleas and,	394
upon determining that the landlord has failed to comply with any	395
of these sections, the court shall grant appropriate relief.	396

Section 2. That existing sections 5313.01, 5313.02, 5313.06,	397
5313.08, and 5321.01 of the Revised Code are hereby repealed.	398

Section 3.  Section 5313.02 of the Revised Code is presented	399
in this act as a composite of the section as amended by both Sub.	400
H.B. 95 and Am. Sub. H.B. 473 of the 119th General Assembly. The	401
General Assembly, applying the principle stated in division (B) of	402
section 1.52 of the Revised Code that amendments are to be	403
harmonized if reasonably capable of simultaneous operation, finds	404
that the composite is the resulting version of the section in	405
effect prior to the effective date of the section as presented in	406
this act.	407