Notice of Payment - Corporation
Note: This summary
is not intended to be an all inclusive summary of the law of construction liens in Ohio, but does
contain basic and other provisions.
Definitions relative to Ohio Mechanics' Liens as used in sections 1311.01 to 1311.22 of the Revised Code:
(A) "Owner," "part owner," or "lessee" includes all the
interests either legal or equitable, which such person may have in the
real estate upon which the improvements are made, including the interests
held by any person under contracts of purchase, whether in writing or otherwise.
(B) "Materialman" includes any person by whom any materials
are furnished in furtherance of an improvement.
(C) "Laborer" includes any mechanic, workman, artisan, or
other individual who performs labor or work in furtherance of any improvement.
(D) "Subcontractor" includes any person who undertakes to
construct, alter, erect, improve, repair, demolish, remove, dig, or drill
any part of any improvement under a contract with any person other than
the owner, part owner, or lessee.
(E) "Original contractor," except as otherwise provided
in section 1311.011 [1311.01.1] of the Revised Code, includes a construction
manager and any person who undertakes to construct, alter, erect, improve,
repair, demolish, remove, dig, or drill any part of any improvement under
a contract with an owner, part owner, or lessee.
(F) "Construction manager" means a person with substantial
discretion and authority to manage or direct an improvement, provided that
the person is in direct privity of contract with the owner, part owner,
or lessee of the improvement.
(I) "Materials" means all products and substances including,
without limitation, any gasoline, lubricating oil, petroleum products,
powder, dynamite, blasting supplies and other explosives, tools, equipment,
or machinery furnished in furtherance of an improvement.
(J) "Improvement" means constructing, erecting, altering,
repairing, demolishing, or removing any building or appurtenance thereto,
fixture, bridge, or other structure, and any gas pipeline or well including,
but not limited to, a well drilled or constructed for the production of
oil or gas; the furnishing of tile for the drainage of any lot or land;
the enhancement or embellishment of real property by seeding, sodding,
or the planting thereon of any shrubs, trees, plants, vines, small fruits,
flowers, or nursery stock of any kind; and the grading or filling to establish
a grade.
(L) "Home construction contract" means a contract entered
into between an original contractor and an owner, part owner, or lessee
for the improvement of any single- or double family dwelling or portion
of the dwelling or a residential unit of any condominium property that
has been submitted to the provisions of Chapter 5311. of the Revised Code;
an addition to any land; or the improvement of driveways, sidewalks, swimming
pools, porches, garages, carports, landscaping, fences, fallout shelters,
siding, roofing, storm windows, awnings, and other improvements that are
adjacent to single- or double family dwellings or upon lands that are adjacent
to single- or double family dwellings or residential units of condominium
property, if the dwelling, residential unit of condominium property, or
land is used or is intended to be used as a personal residence by the owner,
part owner, or lessee.
(M) "Home purchase contract" means a contract for the purchase
of any single- or double family dwelling or residential unit of a condominium
property that has been subjected to the provisions of Chapter 5311. of
the Revised Code if the purchaser uses or intends to use the dwelling,
a unit of a double dwelling, or the condominium unit as his personal residence.
(N) "Lending institution" means any person that enters into
a contract with the owner, part owner, purchaser, or lessee to provide
financing for a home construction contract or a home purchase contract,
which financing is secured, in whole or in part, by a mortgage on the real
estate upon which the improvements contemplated by the home construction
contract are to be made or upon the property that is the subject of the
home purchase contract, and that makes direct disbursements under the contract
to any original contractor or the owner, part owner, purchaser, or lessee.
(O) "Original contractor" includes any person with whom
the owner, part owner, lessee, or purchaser under a home purchase contract
or a home construction contract has directly contracted.
Who My File a Lien?
Pursuant to Ohio statutes, a contractor, subcontractor,
or materialman who has provided labor or materials to a construction project
may file a lien against the property for the value of the labor performed
or materials supplied by filing an Affidavit of Mechanic's Lien.
A lien may not be obtained against property when the party claiming the
lien has been paid in full before the property owner has received a copy
of the lien claimant's Affidavit of Mechanic's Lien. O.R.C. 1311.01(B).
How Long Does a Lien Claimant Have to File a Lien?
An Affidavit for a Mechanic's Lien must
be filed within sixty days from the last day of work performed by the party
claiming the lien, if the project is a one or two family residential dwelling.
Otherwise, the lien claimant has seventy-five (75) days to file for a lien.
An exception is liens involving oil and gas leases, which may be filed
within one hundred and twenty (120) days. O.R.C.1311.06(B).
What is a Notice of Commencement?
Prior to beginning work on a project which may
give rise to a mechanic's lien, the property owner should file a Notice
of Commencement with the county recorder in the county where the property
is located. A Notice of Commencement is an affidavit which describes
the improvements to be made to the property, the legal description of the
property, and the names and addresses of all parties involved in the
contract, along with some statutory notices, that put potential buyers or lenders
on notice that improvements that may cause a lien to be filed are being
made. O.R.C. 1311.04(A)(1).
A subcontractor, materialman, or laborer, may make
a written request for a copy of the Notice of Commencement, to which the
owner is obligated to respond within ten days. O.R.C. 1311.04(D).
What is a Notice of Furnishing?
As a counterpart to the owner's Notice of Commencement
is the Notice of Furnishing that must be served by a subcontractor or materialsman
on the property owner. A Notice of Furnishing serves to put the owner
on notice that the party furnishing labor and materials may be entitled
to a lien against the property. O.R.C. 1311.05(A)
If the Notice to Commencement has been filed,
a party who wants to preserve their right to file a lien must file their
Notice of Furnishing within twenty-one days of the Notice of Commencement
being served. O.R.C. 1311.04(I).
How is a Lien Released?
When an Affidavit has been filed and the lien
claimant has subsequently been paid, the property owner may file an affidavit
attesting to the fact that the lien has been satisfied. The lienholder
has thirty days from receipt of this affidavit to file a lien release or
be subject to pay the property owner damages as a result. O.R.C.
1311.01(B)(3).
Lending institutions may not release funds to
a contractor until that contractor has filed an affidavit stating that
the contractor has paid all subcontractors, laborers, and materialmen in
full, and that there are no further claims pending against the project.
A property owner may issue written demand that the contractor issue this
affidavit and may withhold payment until the affidavit is received.
O.R.C. 1311.01(B)(4).
If there is a dispute between subcontractors
and the principal contractor regarding payment, such that the subcontractor
will not release his lien, under Ohio statutes, the property owner
is entitled to withhold payment to the principal contractor in the amount
of the lien. In response, the principal contractor and lending institution
may demand that the lien holder provide them with information regarding the
amount of the lien and the dates upon which work was performed. The
owner or lending institution may only release payment to the original contractor
when the lien holder has given notice that he has been paid, the subcontractor
issues a lien release, the original contractor provides a bond, or the
time under which a lien may be filed has expired. O.R.C. 1311.01(B)(8).
How Else May a Property Owner Respond to a Lien?
After a lien has been filed, a property owner
may serve a Notice to the Lien holder to Commence Suit. Within thirty
days of serving the notice the property owner must file the notice with
an affidavit indicating how service was accomplished. The lien holder
has sixty days after being served to file suit or his lien will be rendered
void. O.R.C. 1311.11(B)(3)
