The Mechanics Lien Minefield

     With the housing market still being depressed, and the uptick in construction projects being relatively slow in the private sector, many contractors and subcontractors are looking to public improvement projects to survive these trying times in the construction industry.   Irrespective of whether a contractor is performing public or private sector work, it is important that the contractor provide certain statutory notices and follow proscribed procedures so as to protect its lien rights, either against the real property that is being improved, or in the instance of a public project, preserving its rights for a claim against the public fund.

             Focusing on commercial projects, it is important for a subcontractor to provide a Notice of Furnishing on both the principal contractor and the owner of the project, so as to preserve lien rights against all work and materials in performance of such work.  Ideally, the Notice of Furnishing would be provided prior to the commencement of any work, however, Ohio Revised Code, Section 1311.261 requires all subcontractors and material suppliers on public improvement projects to provide the principal contractor a Notice of Furnishing within twenty-one days of the first date they performed labor or work, or furnished materials to or on the site of the public improvement project.  It should also be noted that Section 153.56(c), similarly requires that a subcontractor or material supplier, whose claim exceeds $30,000 serves a Notice of Furnishing in accordance with 1311.261 in order for said entity to have a valid bond claim against a surety.  Should a subcontractor or material supplier fail to comply with the provisions of 1311.261, in such instances, the lien rights could be limited to work and materials provided twenty-one days prior to filing the lien claim, presuming that a valid Notice of Furnishing was provided.

The importance of providing the Notice of Furnishing also impacts the public authority as Ohio Revised Code, Section 1311.28 proscribes the public authority shall not detain any amount requested by a lien claimant unless such claimant has provided a copy of the Notice of Furnishing and a sworn statement as to the date the Notice of Furnishing was served to the principal contractor, such notice and statement being sent to the public authority.

The above is just one example of the complex statutory scheme that contractors, both principal and sub, must be aware of in performing work or supplying materials for a public sector project.  In addition to the above, there are a variety of statutory time lines and procedures which must be followed to adequately protect a lien claimant’s rights and interests.  Should you have any questions regarding lien rights, please do not hesitate to contact Dave Montgomery, a Shareholder in the Firm’s Business and Real Estate, Construction Law, and Public Sector practice groups.

AUTHOR: David Montgomery