Construction Lien Corporation

Note: This summary is not intended to be an all inclusive summary of the law of construction liens in Ohio, but does contain basic and other provisions. Definitions relative to Ohio Mechanics’ Liens: As used in sections 1311.01 to 1311.22 of the Revised Code: (A) “Owner,” “part owner,” or “lessee” includes all the interests either legal or equitable, which such person may have in the real estate upon which the improvements are made, including the interests held by any person under contracts of purchase, whether in writing or otherwise. (B) “Materialman” includes any person by whom any materials are furnished in furtherance of an improvement. (C) “Laborer” includes any mechanic, workman, artisan, or other individual who performs labor or work in furtherance of any improvement. (D) “Subcontractor” includes any person who undertakes to construct, alter, erect, improve, repair, demolish, remove, dig, or drill any part of any improvement under a contract with any person other than the owner, part owner, or lessee. (E) “Original contractor,” except as otherwise provided in section 1311.011 [1311.01.1] of the Revised Code, includes a construction manager and any person who undertakes to construct, alter, erect, improve, repair, demolish, remove, dig, or drill any part of any improvement under a contract with an owner, part owner, or lessee. (F) “Construction manager” means a person with substantial discretion and authority to manage or direct an improvement, provided that the person is in direct privity of contract with the owner, part owner, or lessee of the improvement. (G) “Notice of commencement” means the notice specified in section 1311.04 of the Revised Code. (H) “Notice of furnishing” means the notice specified in section 1311.05 of the Revised Code. (I) “Materials” means all products and substances including, without limitation, any gasoline, lubricating oil, petroleum products, powder, dynamite, blasting supplies and other explosives, tools, equipment, or machinery furnished in furtherance of an improvement. (J) “Improvement” means constructing, erecting, altering, repairing, demolishing, or removing any building or appurtenance thereto, fixture, bridge, or other structure, and any gas pipeline or well including, but not limited to, a well drilled or constructed for the production of oil or gas; the furnishing of tile for the drainage of any lot or land; the enhancement or embellishment of real property by seeding, sodding, or the planting thereon of any shrubs, trees, plants, vines, small fruits, flowers, or nursery stock of any kind; and the grading or filling to establish a grade. (K) “Wages” means the basic hourly rate of pay and all other contractually owed benefits. (L) “Home construction contract” means a contract entered into between an original contractor and an owner, part owner, or lessee for the improvement of any single- or double family dwelling or portion of the dwelling or a residential unit of any condominium property that has been submitted to the provisions of Chapter 5311. of the Revised Code; an addition to any land; or the improvement of driveways, sidewalks, swimming pools, porches, garages, carports, landscaping, fences, fallout shelters, siding, roofing, storm windows, awnings, and other improvements that are adjacent to single- or double family dwellings or upon lands that are adjacent to single- or double family dwellings or residential units of condominium property, if the dwelling, residential unit of condominium property, or land is used or is intended to be used as a personal residence by the owner, part owner, or lessee. (M) “Home purchase contract” means a contract for the purchase of any single- or double family dwelling or residential unit of a condominium property that has been subjected to the provisions of Chapter 5311. of the Revised Code if the purchaser uses or intends to use the dwelling, a unit of a double dwelling, or the condominium unit as his personal residence. (N) “Lending institution” means any person that enters into a contract with the owner, part owner, purchaser, or lessee to provide financing for a home construction contract or a home purchase contract, which financing is secured, in whole or in part, by a mortgage on the real estate upon which the improvements contemplated by the home construction contract are to be made or upon the property that is the subject of the home purchase contract, and that makes direct disbursements under the contract to any original contractor or the owner, part owner, purchaser, or lessee. (O) “Original contractor” includes any person with whom the owner, part owner, lessee, or purchaser under a home purchase contract or a home construction contract has directly contracted. Summary of Ohio law regarding construction liens Who My File a Lien? Pursuant to Ohio statutes, a contractor, subcontractor, or materialman who has provided labor or materials to a construction project may file a lien against the property for the value of the labor performed or materials supplied by filing a Affidavit of Mechanic’s Lien. A lien may not be obtained against property when the party claiming the lien has been paid in full before the property owner has received a copy of the lien claimant’s Affidavit of Mechanic’s Lien. O.R.C. 1311.01(B). How Long Does a Lien Claimant Have to File a Lien? An Affidavit for a Mechanic’s Lien must be filed within sixty days from the last day of work performed by the party claiming the lien, if the project is a one or two family residential dwelling. Otherwise, the lien claimant has seventy-five (75) days to file for a lien. An exception is liens involving oil and gas leases, which may be filed within one hundred and twenty (120) days. O.R.C.1311.06(B). What is a Notice of Commencement? Prior to beginning work on a project which may give rise to a mechanic’s lien, the property owner should file a Notice of Commencement with the county recorder in the county where the property is located. A Notice of Commencement is an affidavit which describes the improvements to be made to the property, the legal description of the property, and names and addresses of all parties involved in the contract, along with some statutory notices, that potential buyers or lenders on notice that improvements that may cause a lien to be filed are being made. O.R.C. 1311.04(A)(1). A subcontractor, materialman, or laborer, may make a written request for a copy of the Notice of Commencement, to which the owner is obligated to respond within ten days. O.R.C. 1311.04(D). What is a Notice of Furnishing? As a counterpart to the owner’s Notice of Commencement is the Notice of Furnishing that must be served by a subcontractor or materialsman on the property owner. A Notice of Furnishing serves to put the owner on notice that the party furnishing labor and materials may be entitled to a lien against the property. O.R.C. 1311.05(A) If the Notice to Commencement has been filed, a party who wants to preserve their right to file a lien must file their Notice of Furnishing within twenty-one days of the Notice of Commencement being served. O.R.C. 1311.04(I). How is a Lien Released? When a Affidavit has been filed and the lien claimant has subsequently been paid, the property owner may file an affidavit attesting to the fact that the lien has been satisfied. The lienholder has thirty days from receipt of this affidavit to file a lien release or be subject to pay the property owner damages as a result. O.R.C. 1311.01(B)(3). Lending institutions may not release funds to a contractor until that contractor has filed an affidavit stating that the contractor has paid all subcontractors, laborers, and materialmen in full, and that there are no further claims pending against the project. A property owner may issue written demand that the contractor issue this affidavit and may withhold payment until the affidavit is received. O.R.C. 1311.01(B)(4). If there is a dispute between subcontractors and the principal contractor regarding payment, such that the subcontractor will not release his lien, under Ohio statutes the property owner is entitled to withhold payment to the principal contractor in the amount of the lien. In response, the principal contractor and lending institution may demand that lien holder provide them with information regarding the amount of the lien and the dates upon which work was performed. The owner or lending institution may only release payment to the original contractor when, the lien holder has given notice that he has been paid, or the subcontractor issues a lien release, or the original contractor provides a bond, or the time under which a lien may be filed has expired. O.R.C. 1311.01(B)(8). How Else May a Property Owner Respond to a Lien? After a lien has been filed, a property owner may serve a Notice to the Lien holder to Commence Suit. Within thirty days of serving the notice the property owner must file the notice with an affidavit indicating how service was accomplished. The lien holder has sixty days after being served to file suit or his lien will be rendered void. O.R.C. 1311.11(B)(3)