Contractors in the Buckeye State should be aware of mechanic’s liens, an important legal tool that can allow them to seek recovery for nonpayment on construction or repair projects. Imagine, for example, that your company was hired to install new brickwork onto a homeowner’s patio. But at the end of the job, the homeowner fails to pay the amount due and owing. Placing a lien on the homeowner’s property—known as “liening the job”—can give contractors some leverage with which to secure payment.
Filing a mechanic’s lien should never be your first step. Most Ohioans are reasonable people, and you should do your best to negotiate with the property owner prior to filing a lien.
Of course, you should begin by mailing copies of your final invoice and/or statements. If that receives no response, telephone the owner. Send an email to create a paper trail. And then try writing a formal demand letter on your company’s letterhead.
Alternatively, hire a lawyer to write a demand letter on law firm letterhead, which will sometimes prompt a response more quickly.
These initial steps demonstrate to the property owner that you are serious about guarding your rights. You are clearly attuned to the breach of the agreement, and that the property owner owes you money. Strongly worded letters are often enough to save you the time, cost, and aggravation of a lien filing or lawsuit.
When calls, emails, and letters are not enough to force an owner to pay for your work, you may need to turn to the legal system. Ohio law allows you to sue a homeowner who has not paid you for simple breach of contract, or based on other related causes of action (such as quantum meruit). The same theories apply if you are a subcontractor or supplier suing a general contractor. But regardless of whether you are a general contractor, subcontractor, or supplier, the state also allows you to file a mechanic’s lien.
Liens must be publicly filed in the clerk’s office (also known as the “county recorder”) of the Ohio county in which the house or property on which you performed labor or services is located. (There are 88 counties in Ohio, so make sure you identify the correct one!)
The lien becomes a cloud on the owner’s home title, meaning that the title is subject to your company’s interest in it. This will make it difficult for the homeowner to sell the property or refinance it through a bank or other institutional lender. The result is that filing a lien can incentivize the homeowner to settle with you in order to get you to clear the title.
In Ohio, the formal title of the mechanic’s lien filing is a “Notice of Commencement.” You can see a model example of the Notice form here. The procedure for the filing of the notice is contained in Ohio Rev. Code Sec. 1311.04. It must, among other bits of information, include your company’s name, the homeowner’s name, the location of the property, and the amount of money still due. You must also describe the labor or material you provided (in other words, how did you improve the property?).
You will see that your signature needs to be notarized, meaning that this form is a sworn statement—the legal equivalent of swearing to the veracity of the contents in court.
Like with most states’ lien statutes, Ohio’s lien law is long and complex. It contains many rules and exceptions, depending on the type of property involved that the work performed. But there are some general important concepts to remember as you consider filing a lien:
As you can see from these short bullet points, the timing of lien filing is perhaps the most critical piece of the puzzle. Ohio’s legislature is clearly trying to incentivize potential lienors to make (or settle) their claims quickly, and not allow liens to be filed years after a construction project is completed. While this gives owners some comfort in knowing that lien periods have expired, it means that you must act quickly to ensure that you do not lose any lien rights.
Remember that filing a lien, in and of itself, will not force the owner to pay you, nor will it force the general contractor to pay you if you are a subcontractor. The lien is merely a point of leverage, which gives you the ability to file a lawsuit to foreclose on the property—essentially a direct suit against the homeowner.
However, filing a lien will send an aggressive message. If you take this step, it might put the homeowner on the defensive, and encourage the homeowner to get lawyers involved, or to retaliate by publicly claiming that you did shoddy work. Perhaps this is the direction that you need to take, unfortunately, if the homeowner is refusing to pay.
Finally, remember that liens and the laws surrounding them in Ohio can be highly technical. If you are owed a substantial sum of money, it might be worth your investment in a consultation meeting with an experienced construction attorney who can advise you of your rights.