Mechanics’ Liens laws in Ohio, applicable to contractors, subcontractors and suppliers, were drastically changed by the enactment of Ohio’s “Prompt Payment Act” more than seven years ago. More recent amendments, in the form of the Fairness in Construction Contracting Act (Am.Sub. S.B.71), effective 9/30/98, have proven even more productive in implementing prompt payment to subcontractors and suppliers as potential lienholders and claimants.
The major provisions of the earlier enactment require that all contractors, subcontractors and materials suppliers must pay their subcontractors, suppliers and laborers within 10 days after receipt of funds. After 10 days, improperly withheld funds begin to earn interest at the rate of 18% per annum; Section 4113.61(A)(1)(b) Revised Code of Ohio.
Among the most important changes in the Prompt Payment Act, are provisions that require the filing (recording) of Notice of Commencement (“NOC”) by the Owner, and a Notice of Furnishing (“NOF”) by each contractor, subcontractor or materialman (materialperson) who first performs work or supplied materials.
Service of the Notice of Furnishing is a mandatory prerequisite to the ability to obtain a valid mechanic’s lien.
Under the Prompt Payment Act provisions, an affidavit to obtain a mechanic’s lien must be filed within 75 days after the contractor or materialman (materialperson) last furnished or provided services or materials. After 30 days, the lower tier contractor may file suit and, if he/she/it prevails, may also obtain attorney’s fees. Importantly, this right to interest and for attorney’s fees cannot be waived, by contract or otherwise, under these new provisions!
Service of Affidavit (Notice of Furnishing), per Sect. 1311.19 R.C., may be made by Certified Mail, Registered Mail, Overnight/Express Mail, Hand Delivery/Messenger or (even) FAX. Caution: Whatever method of delivery is used, written evidence of receipt must be obtained and preserved. Service upon the addressee of a Notice of Commencement (“NOC”) is now complete, even if returned, “Refused” or “Unclaimed”.
CONCLUSION. Where perfection of mechanic’s lien rights are necessary to protect valid business interests, in the chain of commerce, and to obtain priority for payment from the Owner and/or lender, each of the prescribed procedures must be followed and implemented, carefully and timely. The guidance of experienced legal counsel may be a prudent and valuable business decision.
Mechanics’ Liens -To be continued in a future edition. Ed.
BUSINESS – LEGAL CHECKUP
All businesses must avail themselves of some regular evaluation and appraisal, to assure orientation of targeted goals.
Some specific topics should include: