A Primer on Ohio's Mechanics' Liens
In any industry, getting paid for the work performed is of paramount importance. Unfortunately, we no longer live in a world where a handshake is the best way to secure payment. In the construction industry, securing payment for the improvements you or your company has made to privately owned property in Ohio is made a bit easier by the availability of mechanics’ liens. The Ohio Mechanics’ Liens Act governs mechanics’ liens in Ohio, and provides options to better ensure that you get paid for the work you have performed. (R.C. 1311.01 to R.C. 1311.23).
A mechanics’ lien is an extremely valuable tool for contractors, subcontractors, laborers, material suppliers, and in some cases, architects and engineers, to place a security interest on the property on which work was performed. To properly perfect and secure the mechanics’ lien, the courts require specific steps to be taken, and if they are not properly followed, the lien can be null and void, and you would lose the ability to place a security interest on the property.
Who can file a Mechanics’ Lien?
Any person who performs work or labor upon or furnishes material in furtherance of any improvement under an express or implied contract with the owner, part owner, or lessee; as well as any subcontractor, laborer, or material supplier that performs any labor or work or furnishes any material to an original contractor or any subcontractor in performing any improvement.
Material suppliers may file a lien on the project if any of the following occur (R.C. 1311.12):
materials were supplied with the intent to incorporate the materials in the project;
materials were in fact incorporated in the project;
materials were specially fabricated for incorporation in the project and not resalable;
materials were used for the improvement or operation of machinery or equipment on the project; or
tools and equipment were used on the project, if the tools and/or machinery were rented, or if the tools or machinery were purchased for the project and have no substantial value to the lien claimant after the completion of the project.
How do I protect my statutory rights?
An owner that contracts for improvements to real property that may give rise to a mechanics’ lien must first record a Notice of Commencement with the recorder in the county in which the real property is located before beginning any work or labor, or furnishing any materials.
The Notice of Commencement must be an affidavit and also must include:
The property’s legal description
A brief description of the improvements to be made
The name and address of the contracting party if different than the owner
The fee owner if a lessee or purchaser contracts for the improvement
The owner’s designee, if any
All original contractors or a statement that multiple original contractors are involved if the improvement involves a single family or double family dwelling and more than one contractor
All lending institutions that provide financing for the improvement, if applicable
All sureties issuing a bond that guarantees payment of the original contractor’s obligation under the contract for the improvement
The person who prepared the Notice of Commencement
The date the owner first executed the contract that work either began or is about to begin or materials have or are about to be furnished to the real property
An affidavit by the owner that verifies the Notice R.C. 1311.04(B)
This Notice of Commencement must be recorded with the county recorder where the real property is located. Additionally, it must be served on the original contractor. A copy of the Notice of Commencement must also be posted conspicuously on the project site unless the improvements are subject to a home purchase contract. Lastly, a copy must be served upon the subcontractor, material supplier, or laborer within ten (10) days after a written request for a copy of the Notice of Commencement is received.
If the owner properly files a Notice of Commencement, any subcontractor and/or material supplier that is not in privity of contract with the owner must serve a Notice of Furnishing to preserve their lien rights and to provide notice to the owner that a subcontractor is performing work on the property or that a material supplier is furnishing materials and supplies to the project.
The Ohio Mechanics’ Lien Act provides the information which should be included in the Notice of Furnishing, which includes the following:
Name and address of the owner (or the owner’s designee) as listed in the Notice of Commencement
The name of the subcontractor or material supplier (known as the Claimant)
The original Contractor listed in the Notice of Commencement
The party that the Claimant had a contract with, if different from the original contractor
A brief statement that the Claimant performed work or furnished materials on the project
A description of the improvements to the property
The date that the Claimant first performed work or supplied materials to the project
A statutory warning to the owner to seek legal assistance if there are questions about the process R.C. 1311.05(B)
Perfecting the Mechanics’ Lien
If all of the necessary steps are taken, a mechanics’ lien will attach a security interest to the property on the date that the Claimant first performed work or furnishes materials. An Affidavit for Mechanics’ Lien will then be prepared and recorded with the recorder in the county in which the property resides. A copy of the Affidavit for Mechanics’ Lien must be served upon the owner (or the owner’s designee within thirty (30) days of recording the Affidavit for Mechanics’ Lien.
The Affidavit of Mechanics’ Lien must include (a) the amount due over and above all set-offs, (b) a description of the property subject to the lien, (c) the name and address of the person for whom the work was performed or the material provided, (d) the name and address of the owner, (e) the name and address of the lien claimant, and (f) the first and last dates that work was performed or supplies were provided.
It is critical that the Affidavit for Mechanics’ Lien be filed timely. On a commercial project, you have seventy-five (75) days of the date last worked. On a residential project, you have sixty (60) days to file, and in the case of an oil, gas, or injection well, you have one hundred twenty (120) days from the last day of work or last day of furnishing materials. R.C.1311.06(B).
Serving the Mechanics’ Lien
Revised Code 1311.19(B) sets forth that service of the mechanics’ lien is deemed complete upon receipt, so ensuring receipt is of paramount importance. Generally, service can be done by sheriff, certified mail, overnight delivery, hand delivery or any method that provides for written evidence of receipt.
What is the priority of a Mechanics’ Lien?
Mechanic’s liens, pursuant to §1311.13 are effective from the date the first labor is performed, or the first machinery, materials, or fuel is furnished by the contractor under the original contract. Such liens shall be preferred to all other titles, liens, or encumbrances which may attach to or upon such construction, excavation, machinery, or improvement, or to or upon the land upon which they are situated, which shall either be given or recorded subsequent to the commencement of said construction, excavation. However, it will be held that priority is given to mechanics’ liens over other liens and encumbrances when given or recorded subsequent to the commencement of said construction, excavation, or improvement.
What happens when you get paid on the Mechanics’ Lien?
Ohio law requires that you release the mechanics’ lien within thirty (30) days after receipt of full payment on the mechanics’ lien. If you fail to properly release the lien after getting payment, you could be liable for damages to the property owner for an amount up to and including the amount of the contract. Should you have any questions about any aspect of mechanics’ liens, please contact Law Offices of Kevin C. Cox for more information.