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:
• Basic Business Formations: Partnerships, Joint Ventures, Corporations.
• Business Purchases, Sales, Agreements
• Credit and Collections
• Franchising, Financing, Credit Lines
• Insurance, Bonding, Risk Assessment
• Facility Management; Purchase, Sale, Lease, Improvements.
• Mergers and Acquisitions; Evaluation, Negotiation, Agreements
• Business Real Estate; Evaluations, Purchase, Sale, Lease, Options,
• Contracts and Business / Trade Agreements; National, International
• Trade Secrets, Confidentiality Agreements, Non-Compete Agreements
• Employment Law; Discrimination, Defamation, Termination, RIF
• Pensions and Benefits, ERISA, Health Care
• Worker’s Compensation Claims, Defenses, Risk Assessment
• Federal, State, Regional Tax Review and Planning; Forensic Accounting.