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

 

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.

 

Legal articles provided in the OAR Daily Buzz are intended to provide broad, general information about the law and is not intended to be legal advice. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney. 

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