Mechanic’s liens protect the interests of contractors, subcontractors, material suppliers, and laborers on construction jobs when work goes unpaid. In Ohio, a mechanic’s lien is a right provided under the state Constitution. Liens are available against both private and public jobs in Ohio. Find the mechanic’s lien law in Chapter 1311 of the Ohio Revised Code. Because another goal of the mechanic’s lien statutes is to protect owners from double payment (to those he or she contracted with as well as to lower-tiered unpaid contractors or material suppliers), the law demands strict compliance to secure and enforce a lien.
A mechanic’s lien must be filed on a single or multi-family dwelling or condominium within 60 days of the last work. A copy of the lien must also be served on the owner within 30 days of the lien filing. Ohio Rev. Code. §1311.06. On all other construction jobs (commercial and industrial), the lien must be filed within 75 days of the last work and the owner must be served within 30 days of its filing. Service should be made by certified mail but other permissible methods include posting a copy of the lien notice at the jobsite if the owner cannot be found in the county.
To prevent problems that require an owner to pay twice, and to inform all interested parties of who is involved in the construction job, a notice of commencement must be filed by the owner or the owner’s agent. Ohio Rev. Code. §1311.04. But, if a notice of commencement is not filed within 10 days after the work begins, the general contractor may file it. The notice is required in any construction projects except those purely for home improvement. The notice of commencement must include the full legal description of the property, name and address of the owner, owner’s designee (if any), name and address of the general contractor, lender’s name and address, and any surety’s name and address. The notice is then served by the owner or owner’s agent.
Only one notice needs to be filed but it can be amended. If amended, the notice relates back to the time of the original notice filing. The notice of commencement must be recorded, although actual notice is typically provided by posting it at the jobsite. Copies of the notice must be given to anyone under a direct contract with the owner. The owner is required to provide the copies within 10 days of any request from a subcontractor, supplier, or laborer.
Before filing a mechanic’s lien, record the required prelien notice and serve it on interested parties under state law. Prelien notice in Ohio is known as a notice of furnishing. The notice of furnishing is a document used by all contractors, subcontractors, laborers, and material or equipment suppliers without a direct contract with the owner or his or her agent. Ohio Rev. Code. §1311.05. The notice is required on all commercial projects where a notice of commencement has been filed and served, for work on residential subdivisions, condos, or multi-unit dwellings, and on jobs involving residences consisting of 3 or more structures if a notice of commencement was filed and served. Note, however, that the notice is not required on any residential or home improvement projects, or by laborers only, or on commercial projects if a notice of commencement was not filed or served.
File the notice of furnishing no later than 21 days after the date on which the subcontractor or supplier first furnished labor or materials to the jobsite. It can be served later, but it will only be effective for a lien that covers unpaid work that occurred within 21 days of actual service and all later work. The notice is not required, however, unless and until the owner files his notice of commencement. Thus, if the notice of commencement is filed late, the 21-day clock doesn’t start ticking until it is filed. If the owner fails to serve a copy of the commencement notice within 10 days of its request in writing from a subcontractor or supplier, the notice of furnishing is not due until 21 days after receipt of the notice of commencement.
Always request a copy of the notice of commencement from the owner. Do not file too early, as Ohio caselaw supports the assertion that deadlines are heavily enforced; one case indicated that even a one-day early notice of furnishing will cause a lien to be declared invalid. Send the notice of furnishing via certified mail with a return receipt requested. This is usually the quickest, least expensive, and most effective method of service.
If the contract is with a prime contractor, only serve the notice on the owner. If there is no contract with the prime contractor, then serve the general contractor and owner. The notice of furnishing must be in writing but does not need to be verified or notarized. Serve the owner or the owner’s designee as he or she is stated in the notice of commencement. If multiple owners are listed in the notice of commencement, serve the first owner listed.
Mechanic’s liens can be filed by general contractors, subcontractors, laborers, and equipment suppliers for unpaid labor, materials, equipment, and any accumulated interest. Construction managers may also file such a lien if under a direct contract with the owner. Companies providing equipment are also entitled to a mechanic’s lien for any unpaid amounts. For material suppliers to obtain a lien, however, the material must be delivered to the jobsite, but suppliers delivering to other suppliers are not entitled to a lien unless the supplier receiving the delivery is a subcontractor.
When filing a mechanic’s lien, include the amount of the lien, a description of the property, the owner’s name, and the claimant’s signature. The lien must be notarized and verified. To obtain a mechanic’s lien on any residential job, file an affidavit of lien within 60 days of the final furnishing of work or materials. For subcontractors and suppliers, the 60-day period is measured by the last day materials or labor are furnished. For the general contractor, the time begins on the last day that anyone in the chain under them furnished work or materials on the job. This time extends to 75 days for commercial or industrial projects.
The affidavit must be filed and served on the owner or other individual designated in the notice of commencement within 30 days of recording the lien affidavit. If there is no address for service, post the lien notice to the job site. In this case, post the notice between days 31 and 41 following the recording of the mechanic’s lien. Under Ohio law, serve all owners, including tenants, partial-owners, and spouses of these parties since Ohio recognizes the dower doctrine.
Lien releases and lien priority:
Once a claimant obtains a mechanic’s lien for an unpaid amount that the owner eventually pays, the owner may send a request to release the lien. If the claimant receives this after the payment has cleared, they must release the lien within 30 days of its receipt. Failure to release the lien can lead to liability for any damages, including court costs and attorney’s fees. Ohio Rev. Code. §1311.20.
The last issue to discuss involves lien priority. Sometimes multiple mechanic’s liens may be filed on a project. If the property is foreclosed upon, there may be a limited pool of funds to pay everyone with a valid lien claim. Therefore, the rules of priority are set up to ensure those first in time, are first in right to their claims. The only exception occurs when a notice of commencement is recorded on the same day as a construction mortgage. In that case, the mortgage will win priority.
Each case is unique, and the lien law is complicated so contact an attorney familiar with Ohio mechanic’s lien law with any specific questions or for complex situations.