Ohio Mechanic's Liens: Preserving and perfecting a lien
By Michael L. Fortney
- The basics: strict compliance is required.
- Who is entitled to file a mechanic's lien?
- How can a contractor protect its statutory rights?
- What is the notice of commencement?
- What is the notice of furnishing?
- What are the requirements for filing the Affidavit of mechanic's lien?
- How do you serve the Affidavit of mechanic's lien?
Ohio's mechanics’ lien law is designed to provide protection to contractors, subcontractors, material suppliers, and laborers on construction projects in the event of non-payment. Liens can be placed on property that the lien claimant worked on or supplied materials for. Therefore, the mechanics’ lien law allows a person to reach beyond his contract, and to make a claim against another.
It is a very real possibility, because of the mechanics’ lien laws, that an owner (or a contractor pursuant to an indemnification clause in the contract with the owner) be required to pay for improvements to property twice – once by contract to those he contracted with, and once by statute to those lower tier subcontractors or material suppliers that didn't get paid in the process. Courts do not like to do this (because of the inherent unfairness to the owner or contractor); thus, strict compliance with the mechanics’ lien laws is of utmost importance.
Any person who satisfies the following standards has a lien right on the property:
(a) performs work or labor upon or furnishes material in furtherance of any improvement undertaken by virtue of an express or implied contract with the owner, part owner, or lessee; and
(b) any subcontractor, laborer, or material supplier that performs any labor or work or furnishes any material to an original contractor or any subcontractor in carrying forward 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.
Ohio courts have determined that an architect that solely provides services in drawing plans and specifications, separate and apart from superintendence of construction, is not entitled to a mechanics’ lien. Robert V. Clapp Co. v. Fox (1931), 124 Ohio St. 331; compare Sears & Roebuck Co. v. J-Z Realty Co. (Nov. 2, 1986), Franklin App. No. 76AP-256 (an engineering firm could file a mechanics’ lien for its on-sight field work, but not its off-site office work).
The Ohio mechanic's lien act provides for notice, first by owners to any potential lien claimants (Notice of Commencement), and then by all potential lien claimants to owners (Notice of Furnishing). In the event that a lien is filed, additional notice must be provided to the owner (affidavit of mechanics’ lien). Each of these notices is regulated by statute, both in content and timing.
In order to protect the owner and mandate notice to the owner of potential lien claimants, the Notice of Commencement must be prepared and filed before the project commences.
The Notice of Commencement must be in affidavit form and include:
(a) The legal description of the real property on which the improvement is to be made. For purposes of a Notice of Commencement, a description sufficient to describe the real property for the purpose of conveyance, or contained in the instrument by which the owner, part owner, or lessee took title, is a legal description;
(b) A brief description of the improvement to be performed on the property containing sufficient specificity to permit lien claimants to identify the improvements;
(c) The name, address, and capacity of the owner, part owner, or lessee of the real property contracting for the improvement;
(d) The name and address of the fee owner of the real property, if the person contracting for the improvement is a land contract vendee or lessee;
(e) The name and address of the owner's, part owner's, or lessee's designee, if any;
(f) The name and address of all original contractors,
(g) The date the owner, part owner, or lessee first executed a contract with an original contractor for the improvement;
(h) The name and address of all lending institutions which provide financing for the improvements, if any;
(i) The name and address of all sureties on any bond which guarantee payment of the original contractor's obligations under the contract for the improvement, if any;
(j) The following statement:
"To Lien Claimants and Subsequent Purchasers:
Take notice that labor or work is about to begin on or materials are about to be furnished for an improvement to the real property described in this instrument. A person having a mechanics' lien may preserve the lien by providing a Notice of Furnishing to the above-named designee and his original contractor, if any, and by timely recording an affidavit pursuant to section 1311.06 of the Revised Code.
A copy of this notice may be obtained upon making a written request by certified mail to the above-named owner, part owner, lessee, designee, or the person with whom you have contracted.
(k) The name and address of the person preparing the notice;
(l) An affidavit of the owner, part owner, or lessee or the agent of the owner, part owner, or lessee which verifies the notice.
The owner must do the following with the prepared Notice of Commencement: (a) file the notice of commencement with the county recorder's office in the county where the project is located; (b) serve a copy of the Notice of Commencement to the original contractor(s); (c) post the Notice of Commencement at the project site; (d) amend the Notice of Commencement to add any additional original contractors during the project; and (e) provide copies of the Notice of Commencement to any potential lien claimant requesting a copy.
No Notice of Commencement is required for home construction contracts, unless required by a lender as part of the project financing. The lender’s requirement does not rise to an obligation to a lien claimant who has a contract with the original contractor to serve a Notice of Furnishing. R.C. 1311.04(O); 1311.05(I).
Notices of Commencement expire after six years unless the notice or an amendment to the notice states otherwise.
Potential lien claimants may be required to prepare and provide to 1) the owner, through its designee as noted on the Notice of Commencement, and 2) the original contractor a notice of furnishing in order to protect their lien rights. The Notice of Furnishing must be served within 21 days of the first supply of labor or materials to the project. R.C. 1311.05(A).
The Notice of Furnishing must contain the following information:
(a) the name of the owner or the owner's designee;
(b) the name and address of the original contractor under which the claimant is performing work or supplying materials;
(c) the name and address of the contractor the claimant has a contract with;
(d) a reasonable identification of the property;
(e) the date the labor or supplies were first provided; and
(f) the name and address of the claimant.
The Notice of Furnishing goes back 21 days only, to protect any labor or supplies provided 21 days before the service of the Notice of Furnishing forward. Failure to serve the Notice of Furnishing, when required, results in forfeiture of lien rights.
If a lien claimant is late to serve the Notice of Furnishing, but it is still working or has worked within the last 21 days, it can stile file a Notice of Furnishing. All work performed from 21 days before the service of the Notice of Furnishing forward will be protected.
If a lien claimant fails to file a Notice of Furnishing and its work is done and it is still within the time period for filing a lien, the claimant may make a formal request for a Notice of Commencement from the owner, by certified mail. If the owner does not respond within 10 days after receipt, the requirement to serve the Notice of Furnishing may be excused. R.C. 1311.04(J).
In the event that the contract is breached and payment is not received, an affidavit for mechanics’ lien may be filed to place a lien on the project.
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.
The lien must be filed with the county recorder's office where the project is located within 75 days of the date last worked on the project, unless the lien is for a residential dwelling (60 days) or an oil, gas, or injection well (120 days). 1311.06(B).
When is the last day for a material supplier or contractor?
A contractor's last day of work is when its job is complete. Therefore, punchlist work will qualify for extending the last day worked, whereas warranty work will not.
For material suppliers the general test is when the materials were delivered to the project.
Filing the lien is only half of what needs to be done to perfect the lien. After it is filed, the lien must be served on the owner within 30 days of filing with the county recorder. Service of the lien must be by some method whereby evidence of receipt by the owner may be established (overnight delivery, certified mail).
Service of the affidavit (and Notices of Furnishing and Commencement) can be made by: (a) sheriff, (b) any method which includes a written evidence of receipt (certified mail, overnight delivery, hand- delivery) and (c) upon corporations by delivery to its statutory agent. R.C. 1311.19(A)
Service of mechanics’ lien is deemed complete upon receipt. For Notice of Furnishing, service is deemed complete on the date of mailing. If service of the affidavit or Notice of Furnishing is attempted on the owner at the address listed in the Notice of Commencement and returned unclaimed or refused, service is complete when first attempted. R.C. 1311.19(B).
If service of the affidavit by these methods fails within the 30 day service period, the lien claimant has an additional 10 day period within which it can perfect service by physically posting a copy of the lien in a conspicuous place on the improvement.
If lien claimant does not comply with the statutorily authorized means of service, service is complete if either (a) the person served acknowledges receipt or (b) it can be proved by a preponderance of the evidence that the person being served actually received service. R.C. 1311.19(C).
Construction Law, Employment and Labor Law, Business Law, Litigation, Arbitration