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Ohio Land Bank Direct Transfer — Bypassing Auction Under ORC 323.78 and ORC 5722

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Ohio Land Bank Direct Transfer — Bypassing Auction Under ORC 323.78 and ORC 5722

Reusable edge-case explainer. Legal information, not legal advice. Last verified: 2026-06-10.

What this edge case is

Ohio law provides two distinct statutory pathways under which a tax-delinquent or tax-forfeited parcel can be transferred directly to a land bank or other governmental entity without going through a competitive public auction. These mechanisms operate outside — or parallel to — the standard sheriff’s sale and treasurer’s sale that constitute the normal tax-sale pipeline. When either pathway is invoked, the parcel disappears from the auction market; private investors, junior lienholders, and the former owner each face materially different consequences than they would face after an ordinary tax sale.

The two primary pathways are:

  1. ORC 323.78 (Alternative Redemption Period — Direct Transfer): A county treasurer may elect to invoke an “alternative redemption period” in a foreclosure petition for abandoned land. If a qualifying entity requests the property during that period and no other person has redeemed, the court orders a deed transfer directly to the requesting entity without appraisal and without a sale.

  2. ORC Chapter 5722 (Land Reutilization Program — Pre-Sale Selection and Automatic Vesting): An “electing subdivision” — a municipal corporation, township, county, or county land reutilization corporation that has adopted the land reutilization program — may select nonproductive delinquent parcels before they are advertised for public sale. Selected parcels are advertised on a separate list; if no qualifying bid is received at the auction, the electing subdivision is deemed the winning bidder by operation of law, for no monetary consideration beyond the costs of foreclosure.

These pathways exist alongside a third mechanism under ORC 5723.04, which authorizes the county auditor to transfer forfeited land (property that has twice failed to sell at public auction) to a county land reutilization corporation (CLRC) directly by auditor’s deed, free and clear of all taxes, assessments, charges, penalties, and interest.

The controlling statutory rules

Pathway 1: ORC 323.78 — Direct Transfer After Alternative Redemption Period

Trigger: The county treasurer must affirmatively elect to invoke the alternative redemption period under R.C. 323.78(A) in the foreclosure petition. Not every abandoned-land foreclosure uses this election; if the treasurer does not invoke it, the 323.78 direct-transfer mechanism is unavailable.

Alternative Redemption Period: Under R.C. 323.65(J), the alternative redemption period is 28 days after the adjudication of foreclosure is journalized by the court or county board of revision. The right to redeem by paying all impositions exists through this period. Upon expiration, all redemption rights terminate (R.C. 323.76).

Owner/Lienholder Rights During the Period: Under R.C. 323.69, any party is entitled to redeem the land by paying the total impositions at any time before confirmation of sale or transfer or before expiration of the alternative redemption period. Under R.C. 323.72, a record owner may plead that impositions have been paid or are inapplicable, and may raise service-of-process challenges or abandoned-land status challenges; if the owner does not prevail, the board proceeds under R.C. 323.73 for public auction or under R.C. 323.78 for direct transfer. A party may also request transfer of the proceeding to common pleas court under R.C. 323.691 to preserve security interests of record.

Who May Request the Property: R.C. 323.78(B) lists the eligible entities: a municipal corporation, township, county, school district, community development organization, or county land reutilization corporation. The entity must request the transfer during the foreclosure proceeding.

The Transfer Itself: If a qualifying entity requests transfer and no party has redeemed during the alternative redemption period, the court or board of revision shall order: “the parcel shall be transferred by deed directly to the requesting [entity] without appraisal and without a sale, free and clear of all impositions and any other liens on the property.” R.C. 323.78(B) (as amended by HB 315, 135th General Assembly, effective April 3, 2025). The deed conveys fee simple title. All pre-existing liens are extinguished.

If No Entity Requests Transfer: R.C. 323.78(C) provides that the court or board shall order the property sold through the standard foreclosure sale procedures under R.C. Chapters 323 and 5721. If no bid is received at any such sale, the parcel forfeits to the state.

Surplus on Resale: A critical mechanism limits the equity exposure created by direct transfer. Under R.C. 323.78(D), when the recipient entity later resells the property, it must: (1) calculate total costs — taxes, assessments, penalties, interest, charges due at the time of transfer plus foreclosure costs and expenses incurred by the entity; (2) if the sale proceeds exceed that sum, deliver the excess to the county treasurer within 45 days after the sale; (3) the treasurer then treats those excess proceeds as surplus under R.C. 5721.20, distributing notice to the former owner and holding the funds for the statutory claim period. Source: R.C. 323.78(D)(2) (retrieved 2026-06-10). https://codes.ohio.gov/ohio-revised-code/section-323.78

Records: Recipient entities must maintain records of all transfers and proceeds for three years; those records are public records under R.C. 149.43. R.C. 323.78(D)(3).

Pathway 2: ORC Chapter 5722 — Land Reutilization Program (Nonproductive Land)

Program Adoption: A municipal corporation may enact an ordinance, or a township or county may adopt a resolution, to become an “electing subdivision” under R.C. 5722.01. A county land reutilization corporation (CLRC) designated by the county is also treated as an electing subdivision. Source: R.C. 5722.01 (retrieved 2026-06-10). https://codes.ohio.gov/ohio-revised-code/section-5722.01

“Nonproductive Land” Defined: R.C. 5722.01(F) defines nonproductive land as delinquent vacant or delinquent land where foreclosure has been initiated AND at least one condition applies: (a) no buildings or structures exist; (b) the land qualifies as abandoned land; (c) all structures are vacant and the government has initiated removal/demolition for unsafe conditions; or (d) all structures are vacant at foreclosure initiation and the entity determines eligibility. Source: R.C. 5722.01 (retrieved 2026-06-10). https://codes.ohio.gov/ohio-revised-code/section-5722.01

Pre-Sale Selection (Delinquent Land): The county prosecuting attorney delivers a list of delinquent parcels with pending foreclosure actions to the electing subdivision. The subdivision selects which nonproductive parcels it wishes to acquire before advertisement. Selected parcels are advertised separately from other delinquent land, with a notice that the electing subdivision will receive the parcel if no minimum bid is entered. If no qualifying bid is received, “the electing subdivision…shall be deemed to have submitted the winning bid at such sale, and the land is deemed sold to the electing subdivision for no consideration other than” foreclosure costs. Upon deed recording, title is “incontestable…and free and clear of all liens and encumbrances,” with limited exceptions for pre-existing easements or covenants of record. Source: R.C. 5722.03 (retrieved 2026-06-10). https://codes.ohio.gov/ohio-revised-code/section-5722.03

Forfeited Land Parallel (ORC 5722.04): An identical pre-selection mechanism applies to forfeited land on the county auditor’s forfeited-land list. Selected parcels are separately advertised; if no qualifying bid is received at the forfeiture sale, title vests in the electing subdivision for no consideration. Source: R.C. 5722.04 (retrieved 2026-06-10). https://codes.ohio.gov/ohio-revised-code/section-5722.04

Deed-in-Lieu (ORC 5722.10): An electing subdivision may also accept a deed directly from an owner of delinquent land — bypassing foreclosure entirely — with county auditor consent. Source: R.C. 5722.10 (retrieved 2026-06-10). https://codes.ohio.gov/ohio-revised-code/section-5722.10

Lien Extinguishment (CLRCs under ORC 5722.21): When a county land reutilization corporation acquires eligible delinquent land under R.C. 5722.21, the lien for delinquent taxes and costs is “extinguished simultaneously with the transfer of title” regardless of taxing authority consent. This is the broadest extinguishment provision in the chapter. Source: R.C. 5722.21 (retrieved 2026-06-10). https://codes.ohio.gov/ohio-revised-code/section-5722.21

Disposition (ORC 5722.07): Land banks may sell acquired property without competitive bidding, at not less than fair market value. With taxing district approval, below-market sales to other political subdivisions for public use are permitted. Source: R.C. 5722.07 (retrieved 2026-06-10). https://codes.ohio.gov/ohio-revised-code/section-5722.07

Tax Exemption (ORC 5722.11): Land bank property is tax-exempt until sold. Source: R.C. 5722.11 (retrieved 2026-06-10). https://codes.ohio.gov/ohio-revised-code/section-5722.11

Tax Removal (ORC 5722.15): When an electing subdivision acquires nonproductive land, the county auditor removes all taxes, assessments, charges, penalties, and interest that were due at the time of sale from the tax lists. Source: R.C. 5722.15 (retrieved 2026-06-10). https://codes.ohio.gov/ohio-revised-code/section-5722.15

Pathway 3: ORC 5723.04 — Forfeited Land Transfer to CLRC by Auditor’s Deed

If land has been twice offered at public auction without selling and is listed as forfeited under R.C. Chapter 5723, the county auditor may transfer title directly to a CLRC by auditor’s deed upon the CLRC’s request. The deed conveys fee simple title “free and clear of all taxes, assessments, charges, penalties, interest, and costs.” All subordinate liens are “deemed fully and forever satisfied and discharged.” No auction or appraisal is required. Source: R.C. 5723.04 (retrieved 2026-06-10). https://codes.ohio.gov/ohio-revised-code/section-5723.04

How the three pathways compare

FeatureORC 323.78 (Alt. Redemption Period)ORC 5722.03/5722.04 (Land Reutilization — Pre-Selection)ORC 5723.04 (Forfeited Land — Auditor’s Deed)
TriggerCounty treasurer elects alternative redemption period in foreclosure petitionElecting subdivision adopts ordinance/resolution; selects parcels before advertisementProperty has twice failed to sell at auction; CLRC requests
Eligible recipientsMunicipal corp., township, county, school district, community development org., CLRCElecting subdivision (municipal corp., township, county, CLRC)CLRC only
Auction held?No — transfer bypasses public saleYes — advertised separately; land bank is automatic buyer if no qualifying bidNo — post-failure transfer; never re-listed
”Without appraisal and without a sale”Yes (express statutory language)Effectively yes — land bank is deemed the only bidder at $0 considerationYes
Lien extinguishment”Free and clear of all impositions and any other liens""Incontestable…free and clear of all liens and encumbrances” (with easement exception)“Free and clear…all taxes…charges…penalties…interest” plus all subordinate liens
Surplus on resaleYes — excess above costs due to county treasurer within 45 days; treated per ORC 5721.20Not expressly addressed in ORC 5722.03 for the pre-selection/deemed-bid path; see needs_verificationNot expressly addressed in ORC 5723.04
Owner redemption window28-day alternative redemption period before transfer orderThrough the auction date (must pay minimum bid); earlier if redemption occurs before advertisementNone — property was already twice unsold

Surplus, Tyler v. Hennepin County, and Ohio’s Constitutional Compliance

The Tyler ruling

In Tyler v. Hennepin County, 598 U.S. 631 (2023), the U.S. Supreme Court held that a government’s retention of property equity above the tax debt constitutes an unconstitutional taking under the Fifth Amendment. A government entity may collect what is owed in taxes plus costs, but it “could not use the toehold of the tax debt to confiscate more property than was due.” Minnesota’s absolute-title forfeiture with no mechanism for the former owner to recover surplus equity was held unconstitutional. Source: https://www.supremecourt.gov/opinions/22pdf/22-166_8n59.pdf (retrieved 2026-06-10).

Ohio’s statutory response

Ohio has never operated a “pure absolute forfeiture” system. Under both the ORC 323.78 and Chapter 5722 pathways, Ohio maintains these protective mechanisms:

  1. Pre-transfer redemption opportunity. Under R.C. 323.69, owners and parties with recorded interests may redeem by paying all impositions at any time before confirmation of transfer or expiration of the alternative redemption period. Under R.C. 5722.03, owners may redeem before the designated auction date by paying the minimum bid amount. The Supreme Court in Tyler identified the existence of a statutory opportunity to recover equity as distinguishing a lawful “opportunity to recover” scheme from a taking.

  2. Surplus-on-resale obligation (ORC 323.78 path). When a direct-transfer recipient later sells the property, any proceeds exceeding the accumulated costs must be remitted to the county treasurer and treated as surplus under R.C. 5721.20, giving the former owner a claim window. R.C. 323.78(D)(2). This deferred-surplus mechanism provides a route for former owners to recover the equity value of the property — though only when and if the entity sells, and the claim runs from the time of the entity’s sale, not the time of the original transfer.

  3. Venue transfer right. Under R.C. 323.691 (referenced in State ex rel. US Bank Trust, Natl. Assn. v. Cuyahoga Cty., 2023-Ohio-1063), a party may request transfer of the board of revision proceeding to the common pleas court to assert security interests and preserve litigation rights. The Ohio Supreme Court held that a mortgagee who did not use this avenue had not been denied an adequate remedy in the ordinary course of law.

Ohio Supreme Court: State ex rel. US Bank Trust, Natl. Assn. v. Cuyahoga Cty., 2023-Ohio-1063

The Ohio Supreme Court directly rejected the argument that Ohio’s land bank direct-transfer scheme violates the Fifth or Fourteenth Amendments. U.S. Bank, a senior mortgagee whose security interests were extinguished when several Cuyahoga County parcels were transferred directly to the county land bank, argued that the transfers constituted takings without just compensation. The Court held:

  • Ohio’s tax foreclosure process provides “adequate remedies in the ordinary course of the law” — including redemption, venue transfer, and appeal rights — that allow affected parties to protect their interests before a transfer occurs.
  • Because U.S. Bank had not used the available statutory remedies (including the R.C. 323.691 venue-transfer right and the right to redeem), it could not pursue an extraordinary writ as a substitute.
  • The direct transfer is not itself a constitutional taking where the affected party had an available, meaningful procedure to challenge or forestall the transfer. Source: 2023-Ohio-1063 (characterization based on retrieved secondary analysis; full opinion text not independently retrieved — see needs_verification). https://www.supremecourt.ohio.gov/rod/docs/pdf/0/2023/2023-Ohio-1063.pdf

Sixth Circuit: Howard v. Macomb County, No. 24-1665 (6th Cir. Mar. 28, 2025)

Although this case arose under Michigan law, the Sixth Circuit’s reasoning governs the federal constitutional analysis applicable to Ohio (which lies within the Sixth Circuit). The court held that a county’s retention of surplus tax-foreclosure proceeds does not constitute a taking under the Fifth Amendment when state law provides the owner with a reasonable opportunity to claim the surplus and the owner fails to use it. “A county that allows property owners to obtain any surplus after a foreclosure and keeps the residual only if the owners do not seek it does not commit a taking.” Note: Howard is a Michigan-law decision; its application to Ohio’s distinct ORC 323.78 pathway — where surplus arises only on the entity’s subsequent resale, not from an immediate auction — is not yet resolved by direct Ohio precedent. Source: Howard v. Macomb Cnty., No. 24-1665 (6th Cir. 2025). https://www.opn.ca6.uscourts.gov/opinions.pdf/25a0070p-06.pdf (PDF, retrieved 2026-06-10, content not extractable but opinion confirmed via search results).

Remaining constitutional uncertainty (ORC 5722.03/5722.04 path)

The surplus-on-resale mechanism in R.C. 323.78(D) applies expressly to the ORC 323.78 path. The ORC 5722.03 and 5722.04 pre-selection paths do not contain an equivalent express surplus-on-resale provision in the retrieved statutory text. Whether the former owner retains a constitutional surplus claim when a land bank acquires property under R.C. 5722.03 and later sells it at a profit remains under-litigated at the federal level. The Center for Community Progress and commentators have flagged this as an unresolved post-Tyler question for states operating pre-auction selection models. needs_verification

Effect on Junior Lienholders and Mortgagees

Under all three pathways, the deed conveys title “free and clear” of liens, including recorded mortgages that are junior to the tax lien. This creates significant exposure for:

  • Senior mortgagees holding loans secured by delinquent properties: the direct transfer extinguishes the mortgage without a sheriff’s sale bid that might cover the note balance. The mortgagee’s remedy is to redeem before the transfer is ordered — paying all outstanding impositions — which preserves its position, or to intervene and transfer the proceeding to common pleas court under R.C. 323.691.
  • HOA liens: Ohio does not recognize a super-priority position for HOA liens above tax liens; HOA liens are extinguished along with other junior liens. See hoa-super-priority.
  • Federal tax liens: The federal government’s right of redemption under 26 U.S.C. § 7425 is preserved for 120 days after the sale or transfer. For transfers under R.C. 323.78, the IRS notice requirement under 26 U.S.C. § 7425(b) still applies — a transfer without proper IRS notice is ineffective against a federal tax lien. See federal-tax-lien-redemption.
  • CERCLA/environmental liens: Environmental liens assessed by the federal government under CERCLA may attach despite state deed language. See environmental-liens.

Effect on Former Owners and Surplus Rights

ORC 323.78 path — deferred surplus claim

A former owner whose property was transferred under R.C. 323.78 does not receive an immediate cash payment at the time of transfer. The owner’s potential recovery is deferred until the recipient entity resells the property:

  1. When the entity sells, it must calculate surplus (sale proceeds minus accumulated costs).
  2. Surplus (if any) must be remitted to the county treasurer within 45 days (R.C. 323.78(D)(2)).
  3. The treasurer then follows the R.C. 5721.20 surplus procedure: notifies the former owner; the owner has 90 days from final notice to claim (R.C. 5721.20, as interpreted — exact 90-day window confirmed for R.C. 5721.20 path; applies to this pathway by express cross-reference in R.C. 323.78(D)(2)).
  4. Unclaimed surplus passes to the county treasury; the former owner retains a 3-year window to demand payment thereafter (R.C. 5721.20). After three years, unclaimed surplus may be forfeited to the county or the county land reutilization corporation fund.

Critical practical limitation: If the entity holds the property for many years before reselling — or never resells, but demolishes the structure and uses the land for a park or public purpose — the surplus mechanism may never generate an actual payment even if the property had equity at the time of transfer.

ORC 5722 path — surplus rights less certain

The ORC 5722 pre-selection path does not expressly create a surplus-on-resale obligation equivalent to ORC 323.78(D). R.C. 5722.07 allows disposition at not less than fair market value, but the statute distributes proceeds to the entity’s operating purposes rather than the former owner. needs_verification — former owners who believe equity value exceeded accumulated taxes and costs should consult an Ohio attorney before the transfer is completed; the window to redeem or request a venue transfer is the primary avenue for preserving equity claims on this path.

ORC 5723.04 path (forfeited land after failed auctions)

By the time a property reaches R.C. 5723.04, it has twice failed to sell at public auction. The surplus-recovery window at R.C. 5723.11 provides former owners one year from the date of the auditor’s sale to claim excess proceeds from the county treasurer. After one year, any excess is either disposed of by the treasurer or, in a county with a CLRC, paid to that corporation. Source: R.C. 5723.11 (retrieved 2026-06-10). https://codes.ohio.gov/ohio-revised-code/section-5723.11

For Investors / Operators

Ohio’s direct-transfer mechanisms remove targeted parcels from the competitive auction market before or instead of a public sale. Key investor risks:

  • Parcels designated “nonproductive” under R.C. 5722.03 are advertised on a separate list; if an electing subdivision has elected to receive them, the land bank is the automatic buyer at the minimum bid. Investors must bid above the minimum to compete.
  • Under R.C. 323.78, if the county treasurer has invoked the alternative redemption period and a qualifying entity has requested the parcel, no public auction occurs at all — the court orders a direct deed.
  • Junior liens (including mortgages held as investment instruments) are extinguished by the direct-transfer deed; the lien cannot be enforced post-transfer.
  • The IRS 120-day redemption right under 26 U.S.C. § 7425 survives the deed on properties with federal tax liens; verify IRS notice compliance before relying on clean title.
  • Land banks that have acquired property may sell directly without competitive bidding (R.C. 5722.07); some CLRCs publish “own it now” programs or accept direct acquisition proposals. This is an alternative route to access land-bank-held inventory.

For Former Owners

If your property was transferred to a land bank without a public auction, you were not necessarily left with nothing — but the window and path to recovery differ by mechanism:

  • Under R.C. 323.78: you had a 28-day alternative redemption period to pay all outstanding impositions and recover the deed. After the transfer, watch for the entity’s future resale; any surplus above costs must be remitted to the county treasurer within 45 days of the entity’s sale, and you then have a claim period under R.C. 5721.20.
  • Under R.C. 5722.03/5722.04: you had the right to redeem before the advertised sale date by paying the minimum bid. After the deed vests in the land bank, the surplus-on-resale mechanism is less clearly established; consult an attorney.
  • Under R.C. 5723.04 (forfeited land): you have one year from the auditor’s sale date to claim any excess proceeds at the county treasurer (R.C. 5723.11).
  • In all paths, if the transfer has already occurred, contact an Ohio attorney before that one-year or three-year window closes.

Operator due diligence checklist

Before bidding on an Ohio tax-sale parcel, or when evaluating a county’s auction calendar:

  1. Check whether the county has an active land reutilization program (ORC 5722). Counties that have adopted the program by ordinance or resolution will be designating parcels as nonproductive before advertisement. Ask the county auditor or prosecutor’s office whether a nonproductive-land list exists for the current sale.

  2. Compare the delinquent-tax roll to the public auction list. If the auction list is materially shorter, land bank pre-selection is likely. The prosecutor is required to deliver the list to the electing subdivision before advertisement under R.C. 5722.03.

  3. Read auction advertisements for separate-list designations. Ohio law requires that nonproductive-land parcels selected under R.C. 5722.03 be “advertised separately” with notice of the land bank fallback. A separate list or special header in the auction notice signals a land-bank minimum-bid floor.

  4. Check whether the county treasurer invoked the alternative redemption period under R.C. 323.78. If yes, and if a qualifying entity has already filed a request for direct transfer, no auction will occur on that parcel. The court or board of revision will simply order a deed.

  5. Identify the active CLRC in the county. Ohio has CLRCs in many counties (e.g., Cuyahoga Land Bank, Montgomery County Land Bank, Lucas County Land Bank). CLRCs frequently publish their acquisition and disposition programs online. Some accept direct purchase proposals or maintain “own it now” inventories.

  6. Check IRS notice of federal tax lien before relying on title. A land-bank deed extinguishes state-law liens but the IRS 120-day redemption right under 26 U.S.C. § 7425 survives unless the IRS received proper notice at least 25 days before the transfer. Verify by searching the county recorder’s index for IRS notice of federal tax lien and confirm the foreclosure attorney notified the IRS. See federal-tax-lien-redemption.

  7. Run a title search on previously land-bank-conveyed property. A parcel that has already passed through a land bank and been reconveyed may have a substantially cleaner title chain than a typical tax deed — lien extinguishment is statutory. Confirm the land bank deed contains the R.C. 5722.03 or R.C. 323.78 statutory recitals and was properly recorded.

  8. Check bankruptcy filings. A pending bankruptcy stay under 11 U.S.C. § 362 applies to all collection and foreclosure proceedings, including the board of revision proceedings that lead to direct transfer. See bankruptcy-automatic-stay.

Illustrative cases

  • us-bank-trust-v-cuyahoga-county (State ex rel. US Bank Trust, Natl. Assn. v. Cuyahoga Cty., 2023-Ohio-1063) — Ohio Supreme Court rejected mortgagee’s takings claim against land bank direct transfers, holding that adequate statutory remedies (redemption; venue transfer to common pleas; appeal) existed and were not pursued. The primary lesson: a lienholder who fails to use available Ohio statutory remedies before a direct transfer cannot pursue a constitutional claim afterward.

  • tyler-v-hennepin-county (Tyler v. Hennepin County, 598 U.S. 631, 2023) — The controlling landmark establishing that surplus equity retention by government is a Fifth Amendment taking. Ohio’s deferred-surplus-on-resale mechanism under R.C. 323.78(D) and its pre-transfer redemption opportunities are the primary compliance responses to this ruling.

  • harrison-v-montgomery-county — Inherited fractional interests are at risk under Ohio’s direct-transfer and abandoned-land paths; illustrates the heirs-property dimension of land bank acquisitions where multiple owners hold fractional shares.

ohio, land-bank-programs, right-of-redemption, surplus-funds, sheriff-sale, treasurer-sale, tyler-v-hennepin-county, us-bank-trust-v-cuyahoga-county, harrison-v-montgomery-county, bankruptcy-automatic-stay, federal-tax-lien-redemption, environmental-liens, hoa-super-priority, heirs-property, due-process-notice, quiet-title-after-tax-sale

Sources

Legal information, not legal advice. This page describes Ohio law as of the last_verified date and does not account for county-level variation in land bank program adoption, subsequent statutory amendments, or local ordinances. The constitutional analysis is ongoing; federal courts continue to develop the post-Tyler framework and a case directly testing Ohio’s ORC 323.78 deferred-surplus mechanism has not been retrieved. Former owners and lienholders facing an impending land bank direct transfer should consult a licensed Ohio attorney before the alternative redemption period or auction date passes. Investors should verify land bank program status and parcel designations directly with the county auditor, treasurer, or prosecuting attorney before bidding.

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