Ohio Mechanic’s Liens Commercial and Public Projects in Ohio

 

By Patrick M. O'Neill, Esq.

 

A periodic review of Ohio’s Mechanic’s Lien laws is helpful in preserving payment rights.  Liens are an imperative tool in the collection of payment for improvements made to another’s property.  While nobody wants to see mechanic’s liens filed on a project, they are a necessary tool.  Liens are statutory creations that assist with securing payment for improvements to commercial and public projects (also for residential projects, which are not discussed here).  The statute and case law interpreting Ohio mechanic’s lien law mandate strict compliance with the statutory requirements in order to perfect the liens.

Purpose of a Mechanic’s Lien-  The purpose of a lien is to assist a claimant, whether contractor, subcontractor,materialman (supplier) or laborer, in obtaining payment by providing security for amounts that are due and unpaid for improvements to another’s real estate.  On a commercial project the lien literally attaches to the real estate that is improved, and is typically referred to as a “Mechanic’s Lien”.  On a public project, the lien does not attach to the real estate improved, but rather attaches to the funds that are set-aside for the principal contractor and remain unpaid to the principal contractor.  This lien is typically referred to as an “Affidavit for Lien on Public Funds”.

Notice of Commencement- A Notice of Commencement is a statutory document created by the owner, its representative or designee, and provides specific information about the project.  This information includes:

1.  The name and location, and project identification number (on public improvements) of the project;

2.  Name and address of the owner/tenant or public authority;

3.  Name and address of the principal or principal contractors;

4.  Date of the principal or principal contract;

5.  Name and address of financing companies on private projects;

5.  Name and address of the surety(ies) on the project;

6.  Name and address of the representative upon whom service must be made.

 

On public projects, the NOC must be made available to the public upon request.  On commercial projects, the NOC must be recorded with the office of the Recorder in the County where the property is located in order for the owner to have the protections afforded by the mechanic’s lien laws.  If a private owner does not record its NOC, then claimants are not required to serve Notices of Furnishing.

Notice of Furnishing- A Notice of Furnishing (“NOF”) is a statutory document created by the claimant and provides specific information about that subcontractor, materialman or laborer providing improvements to the real estate.  The NOF provides the owner or principal contractor notice of who is working on the project.  This information includes:

1.  The name of the claimant;

2.  The name of the original or principal contractor through whom the claimant is providing materials or services;

3.  The name of the contractor with whom the claimant has a direct contract (which may or may not be the original or principal contractor);

4.  The first date the claimant provided service or material on the project;

5.  A description of the real estate or public project;

6.  The book and page number, if any, the NOC was recorded.

The NOF is required on commercial projects when an NOC has been recorded, and for claimants not in direct contract with the owner.  If an NOC is not recorded then the owner is not entitled to receive a NOF.  On a public project, the public authority always (theoretically) has an NOC, so a NOF is always required when not in direct contract with the principal contractor.

Service must be completed within 21 days of first providing services or materials on the project, otherwise the claimant will lose lien rights for those services and materials provided more than 21 days prior to the service.

Mechanic’s Lien- Securing your claim for money.  The Mechanic’s Lien or Affidavit for Lien on Public Funds areto follow a statutory form that provides information about the claimant’s claim for money due.  Essentially both lien types require:

1.  The name and address of the claimant;

2.  The name of the party with whom the claimant has contracted;

3.  The first and last date services and/or material were provided on the project;

4.  The amount due, including all credits and set-offs (an itemized statement is required for liens on public projects).

On commercial projects the lien must be recorded within 75 days of the last date of providing services or materials. The lien must then be served on the owner within 30 days after filing.

On public projects, the lien must be filed with the public owner within 120 days of the last date of providing services or material. The lien can also be recorded in the county recorder’s office where the project is located within 30 days of filing the lien with the owner.  By recording the lien, the claimant has a senior priority position over other claimants that fail to record their liens.  The statute creates two classes of lien holders that share in pro-rata distribution in the event the public authority does not have sufficient funds remaining to pay all claimants.  Those that record their liens have priority for payment over those that failed to record.

 It is recommended to serve the public lien on all contracting parties, if known, within the claimant’s contracting line, so as to put all parties on notice of the claim and trigger the time running within which the lien must be disputed. On public projects, the principal contractor must also provide a notice of dispute to the owner within 20 days of the lien service date, or the lien is determined valid and public authority is required to pay the money due directly to the claimant.

Conclusion-  Form, notice and timing are everything.  Strict compliance and timing are crucial for a valid mechanic’s lien.  Companies should have procedures in place for gathering the information necessary to provide the proper notices and liens.  These procedures must be created in light of the strict timing requirements.  If a claimant fails to comply with the strict form, notice, and timing requirements of the statutes, then an important payment guarantee will be lost.  Of course, the claimant would still have its contractual rights (and possibly bond claim rights); however, a valid mechanic’s lien not only provides security, but also brings to bear other pressures which frequently facilitate payment of amounts due.