Mechanic’s Liens Lend Hammer For Payment

(Originally published in The Business Journal)

Mechanic’s lien law is a valuable legal tool that every construction contractor, subcontractor and property owner should consider.

If you are a construction contractor or subcontractor, the time to consider mechanic’s liens is long before you begin to fear you may not get paid for your work.  If you are a property owner, being informed about mechanic’s lien law can save you a lot of frustration, anger and the risk of having to pay twice for work on your property.   

Generally, Ohio mechanic’s lien law gives someone who provides labor or materials to improve real property the ability to put a lien on the property if they are not paid for their work.

Many property owners erroneously believe that if they pay their general contractor, they are protected from lawsuits and liens.

This is not necessarily true.   Under Ohio law, a property owner, particularly an owner of commercial property, may have an obligation to ensure that a general contractor pays all material suppliers and labor subcontractors who have done work to improve the property. 

If a property owner is aware that subcontractors have worked at the property but completely ignores the protections and requirements of mechanic’s lien law, those material suppliers and labor subcontractors may be able to claim a lien on the property even if the property owner fully paid the general contractor.

An informed property owner can use mechanic’s lien law to his or her advantage.  Mechanic’s lien law provides a mechanism for property owners to keep track of who has done work at their property and to ensure they are paid or, even if they are not paid, to protect against their ability to lien the property.

For contractors and subcontractors, mechanic’s liens are incredibly effective compared to typical collection lawsuits because they give the contractor or subcontractor a secured interest in property for the amount owed to them.

This property interest gives the contractor or subcontractor the ability to foreclose and obtain payment from the sale of the property.  Further, a mechanic’s lien is an encumbrance on the title to the property which, as a practical matter, can cause all kinds of problems for the property owner such as the inability to sell or refinance the property.

These problems and the threat of foreclosure usually motivate the property owner to become proactive and resolve the problem of nonpayment that gave rise to the lien. 

Unfortunately, despite their advantages, mechanic’s lien laws are frequently ignored and often misunderstood by property owners and construction companies alike. 

Some degree of confusion about mechanic’s lien law is understandable, as it contains many detailed and intertwined deadlines and requirements that demand strict compliance. 

Although mechanic’s lien law requirements vary depending upon whether the construction is for a commercial project, a private residence or a public project, there are a few warning signs that let you know it may be time to talk to an attorney about a mechanic’s lien.

Here are five such signs:

1. You are a subcontractor and you receive or become aware that the property owner has filed a “Notice of Commencement” that gives you official notice of when the project started.

2. You are a subcontractor who is dealing with a contractor who you know might try not to pay you for your work.

3. You are subcontractor or contractor and your work at the jobsite was finished about forty-five days ago but you have not yet been paid and/or you are presented with a document which asks you to waive your lien rights.

4. You are a contractor or property owner and a subcontractor sends you a request for a Notice of Commencement.

5. You are a property owner and you receive a “Notice of Furnishing” or “Affidavit of Lien” from someone who has done work on, or furnished material for, construction on your property.

The points listed above outline some of the “red flags” indicating that it is time to speak with an attorney. 

However, construction contractors, subcontractors and property owners can almost always benefit from being proactive and speaking with an attorney about mechanic’s lien law long before the red flags start waving.

Baronzzi can be reached at cbaronzzi@hhmlaw.com or at (330) 337-6586