Getting Paid in a Tough Economy—The Value of Mechanic’s Liens By: Glenn Osborne The law of mechanic’s liens in Ohio has very little to do with the traditional definition of “mechanic”, though historically this term has been used to describe liens filed against real estate where the lien holder has provided services or materials in the process of improving the property. More accurate terms might include “construction lien” and “contractor’s lien”, and indeed many states employ these terms in their statutory schemes for the filing of such liens. The right to file a lien exists by virtue of legislative enactment. In Ohio, mechanic’s liens may be filed by any person who performs work or labor or furnishes material in furtherance of any improvement undertaken by virtue of a contract, either expressed or implied, with the owner or lessee of real estate, the general contractor or another subcontractor working for the owner. A mechanic’s lien extends to both residential and commercial construction work, though the rules differ somewhat between the two. Generally, the lien may be filed for services provided to the building itself, the structures adjacent to the building, the driveway and in some cases to landscaping work. The lien also extends to material suppliers, who provide materials of virtually any description that are incorporated into the real estate. The mechanic’s lien statute is intended to provide a means for persons or companies who participate in the improvement of real property to be paid for their materials and services. Ohio courts liberally construe the mechanic’s lien statutes in order achieve this purpose. However, the lien claimant must strictly follow the rules with regard to preliminary notices, the form of the affidavit to be filed, the proper names of the parties, and other procedural requirements. As a result, it is very important to be familiar with mechanic’s lien laws in order to properly perfect these interests. Once a lien is properly perfected, it becomes a cloud on the title to the property until such time as it is either paid by the owner and released by the lien claimant, or ordered removed by a court. Because the lien is recorded in the county property records, it is disclosed in any title search conducted prior to selling or refinancing the property, or borrowing against the equity of the property. As a result, this gives owners a powerful incentive to remove liens from their properties and often results in the lien claimant receiving payment where he would not otherwise be paid. Mechanic’s liens are a much more effective means of securing payment than a traditional collection lawsuit. In this economy, it is also worth mentioning that having a properly perfected mechanic’s lien against real property provides certain benefits to lien claimants over general creditors when the property owner files bankruptcy. In conclusion, all contractors, subcontractors, and material suppliers should develop and maintain a general program of filing mechanic’s liens in order to protect their right to payment. Planning is important in this process because in certain cases it is necessary to file a preliminary notice at or before the commencement of work. For more information about mechanic’s liens, or to develop a program of mechanic’s lien practice for your company, contact Atty. Osborne at gosborne@fandrlaw.com.
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