Ohio's Mechanic's Lien Law - Public Improvements

In a prior blog, I discussed the use of mechanic's liens and the statutory requirements prior to the recording and perfection of such a lien. That blog discussed the use of mechanic's liens for private improvements - improvements on property owned by non-public individuals and entities. The purpose of this blog is to discuss the requirements when perfecting a "lien on public improvements.

A “Public Improvement” means any construction, reconstruction, improvement, enlargement, alteration, demolition, or repair of a building,..., and any other structure or work of any nature by a “public authority.” A “Public Authority”includes the state, and a county, township, municipal corporation, school district, or other political subdivision of the state, and any public agency, authority, board, commission, instrumentality, or special district of or in the state or a county, township, municipal corporation, school district, or other political subdivision of the state, and any officer or agent thereof.

In applying the law to Public Improvements, the language is really a misnomer as the law does not permit a subcontractor to record a lien upon land owned by a public authority (see definition above). What the law does permit is the right of the subcontractor to place what is termed a “lien upon the fund.” As a result, the prerequisites are somewhat different.

The law is the same when it comes to an owner’s obligation to prepare and have readily available, a Notice of Commencement. Unlike a private improvement, the Notice of Commencement need only be retained by the general contractor (known under this section of the statute as the "original contractor"). It need not be posted or recorded.

While the subcontractor is required to prepare and serve a Notice of Furnishing, the law requires service upon the principal contractor only - not the owner - within 21 days of the of the material being furnished and/or the subcontractor commencing work on the job. Not withstanding this difference, I recommend my clients serve not only the original contractor, but the owner and surety (see my discussion of surety liability in a prior blog).

Having properly served the Notice of Furnishing, the subcontractor may serve an “affidavit” upon the public authority within 120 days of completion of its work, setting forth certain information required. Upon receipt of the affidavit, the public authority must set aside sufficient funds to pay the subcontractor. The public authority is then required to serve a copy of the affidavit upon the principal contractor who must dispute the claim within 20 days. If the claim is undisputed after 20 days, the public authority must pay the subcontractor. Any public authority, principal contractor or subcontractor may dispute the claim and send the claimant a “Notice to Commence Suit” which must be filed within 60 days of receipt of the notice. Once again, proof of service of the documents set forth in these statutes is critical to ensure proof of service and protection of a contractor's rights

Ohio's Mechanic's Lien Law - Private Improvements

Ohio's Mechanic's Lien Law can be a valuable tool to ensure payment to the subcontractor. But, Ohio law obligates those taking advantage of the law to strictly comply with the requirements of the law. Failure to comply with any of the obligations under the law will render any lien invalid.

Ohio’s Mechanics’ Lien Law is governed by various statutes, O.R.C. §1311.01, et seq. The law, which was totally rewritten some years ago, basically divides the law into two categories - private improvements and public improvements. The laws are acutely different depending upon the entity who owns the property upon which the improvement is being made. A “Public Improvement” means any construction, reconstruction, improvement, enlargement, alteration, demolition, or repair of a building,..., and any other structure or work of any nature by a “public authority.” A “Public Authority”includes the state, and a county, township, municipal corporation, school district, or other political subdivision of the state, and any public agency, authority, board, commission, instrumentality, or special district of or in the state or a county, township, municipal corporation, school district, or other political subdivision of the state, and any officer or agent thereof. Any other type of construction or improvement is a private improvement. Private improvements are further broken down into commercial construction and home construction. In this blog I will discuss "private improvements." Subsequent blogs will discuss "public improvements" and "Home Construction Contracts."

The statutes relating to private improvements first require that the owner prepare a Notice of Commencement containing certain information. This notice must be posted on the job site, recorded with the county recorder and be readily available to any subcontractor. A subcontractor is then required to serve upon the owner a Notice of Furnishing which also contains information sufficient to put the owner on notice that the subcontractor is working on that job. This notice MUST be served upon the owner within 21 days of the material being furnished and/or the subcontractor commencing work on the job. While the statutes permit various forms of service, I recommend the owner be served by certified mail, return receipt requested or other like service to ensure the subcontractor has proof that the owner received the required notice. I also recommend the notice be sent to other parties set forth in the Notice of Commencement. Assuming the Notice of Furnishing is completed correctly and served upon the owner, the subcontractor has now perfected its right to file a mechanics’ lien.

If a lien is to be filed due to non payment by the original contractor, the statutes call for strict compliance with the completion, recordation and service of the lien. First, the statutes call for certain detailed information be contained in the lien document. Then, the lien must be recorded in the county recorder’s office within seventy-five days of the last work performed or material furnished. Note, this time period can not be expanded by the use of “repair” work. The time begins to run after the subcontractor has completed substantial work on the premises. Also, note it does take time to obtain the information required in the lien document. Therefore, it is strongly recommended that the decision to place a lien be completed by the forty-fifth (45th) day to give your attorney sufficient time to gather the required information.

After lien is recorded you must serve the owner within thirty days of the recordation date of the lien. Again, the statute calls for various forms of service, but it is recommended the owner be served by certified mail, return receipt requested or other like service to ensure the subcontractor has proof the owner received the required notice and that the various other entities set forth in the Notice of Commencement were served with a copy. In the event the owner refuses to accept service of the lien, the law does provide for others means of service.

There are two important nuances in the law. First, if you are in direct privity with the owner, you need not provide a notice of furnishing. Second, if this improvement is for the private home of the owner, you need not provide a notice of furnishing.