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In this webinar, presented by SunRay Construction Solutions, Jake Blake, Partner, Calfee, Halter & Griswold LLP, we'll break down what a lien is, how it works, and the key rules you need to follow in Ohio. We'll also cover what happens after you file a lien and the steps you can take to improve your chances of getting paid.
What is a Lien?
The term "lien" gets thrown around a lot in construction, but what does it actually do? A lien is a legal claim placed on a property due to unpaid work or materials. It encumbers the title, creating a "cloud" that can prevent the property from being sold or refinanced until the issue is resolved. Because of this, liens often trigger a default under most mortgages, prompting banks to push for their resolution quickly.
Most construction contracts also include clauses requiring the property to remain free of liens. So, when a lien is filed, the property owner typically pressures the general contractor (GC) to resolve the issue. If a GC files a lien against an owner, it usually signals a more serious financial dispute.
Basic Lien Rules in Ohio
Ohio has strict lien filing requirements that contractors and suppliers must follow to maintain their claim:
- Notice to Owner – You must provide a Notice of Furnishing within 21 days of your first work or material delivery. This step is critical, even if the owner hasn’t properly filed a Notice of Commencement.
- Recording Your Lien – Liens must be recorded within 75 days for commercial projects and 60 days for residential projects after your last work.
- Defining "Last Work" – Work that qualifies as "last work" varies, but warranty work and minor touch-ups (punch list items) generally do not restart the lien filing clock.
- Responding to a Notice to Commence Suit – If the owner or GC disputes your lien, they may serve a Notice to Commence Suit, giving you 60 days to file a lawsuit to enforce your lien. If you miss this deadline, your lien becomes void.
- Lien Expiration – A lien remains valid for six years unless discharged earlier. However, enforcement actions must be taken within this period.
Avoiding Common Lien Mistakes
Many liens are ineffective because of errors in filing. Ohio has strict requirements for properly identifying the property, owner, and lien amount. If a lien is improperly filed, it could lead to legal repercussions, such as slander of title claims. Overstating the lien amount or filing with incorrect information can weaken your legal standing and give the other party leverage against you.
What Happens After You File a Lien?
Once a lien is filed, there’s no guarantee of immediate action. In some cases, owners and lenders will push for resolution, especially if the property is under a mortgage or financing agreement. However, if the owner has no immediate need to sell or refinance, they may simply ignore the lien.
If a lien doesn’t prompt payment, the next step is to file a foreclosure lawsuit to enforce the lien. This process is similar to a breach of contract lawsuit and can be time-consuming. Many contractors hope for a quick resolution, but litigation often takes months or even years.
The 60/60 Rule: A Practical Approach to Filing Liens in Ohio
Navigating Ohio’s lien laws can be complex, but a simple and effective way to streamline the process is by following the 60/60 Rule. This rule removes much of the guesswork and ensures that your lien rights are preserved.
The First 60 Days: Filing Your Lien
A good rule of thumb is to file your lien no later than 60 days after your last substantial work on the project. This helps eliminate the need for analyzing whether the project is residential or commercial since 60 days falls within both legal timelines. It also simplifies the distinction between warranty work or punch list items. If the work you completed was originally contemplated in your contract, then your last contribution marks the start of your 60-day filing window. If you file within this timeframe, you’re in the clear.
The Next 60 Days: Pursue Payment Aggressively
Once the lien is recorded, the next 60 days should be dedicated to actively seeking payment. The goal is to put pressure on the responsible parties—whether it’s the general contractor (GC), property owner, or lender—to resolve the lien. During this period, make yourself as persistent as possible:
- Send letters
- Make phone calls
- Follow up with emails
- Engage in direct negotiations
Liens create pressure because they cloud the title of the property, making it difficult for owners to secure financing or sell the property. This often forces the GC or owner into negotiations, increasing your chances of receiving payment.
If your primary goal is to recover any amount of money owed, this strategy works well. However, if your aim is to recover 100% of your claim, be prepared for negotiations. Rarely will a lien resolve for full payment unless legal action is involved.
What If You Still Haven’t Been Paid?
If, after 60 days of aggressive pursuit, you haven’t received payment, it's time to consult a construction attorney. At this stage, your options include:
- Filing a foreclosure action – This is the next step in enforcing your lien.
- Evaluating business considerations – If ongoing relationships exist with the GC or owner, sometimes delaying legal action is the best approach.
- Assessing external factors – If a bank has foreclosed on the property, you might recover payment without further action, as the bank may prioritize clearing subordinate liens.
If you decide to take legal action, filing a foreclosure lawsuit will significantly escalate the matter. Property owners and GCs are much more likely to respond when facing a court action, as this can delay their own financing and project progress.
Waiting: A Strategic Option
In some cases, simply recording the lien and waiting may be a viable strategy. Ohio law allows a lienholder up to six years to enforce their claim, and some contractors opt to let time work in their favor. For example, if a bank forecloses on the property for unrelated reasons, your lien might be paid out without further effort.
However, before choosing this route, consult a lawyer to ensure your lien remains valid and isn’t affected by external factors like bankruptcy filings or competing claims.
The Risk of Ignoring Deadlines
One critical warning: Once you receive a Notice to Commence Suit, you only have 60 days to act. If this deadline passes, your lien rights are permanently lost. While you may still have a breach of contract claim, the lien—your most powerful leverage tool—is gone. If you receive this notice, contact an attorney immediately.
What Happens When a Lien is Bonded Off?
A common tactic used by property owners or GCs is to bond off a lien. This means they obtain a surety bond (typically 150% of the lien amount) to replace the lien’s impact on the property title. Once this happens, the lien is discharged, but the bond becomes the new source of security for payment.
While this means the lien no longer affects the property, it’s not necessarily a bad thing. The surety bond ensures that if you prove your claim in court, you will get paid—regardless of whether the GC or owner faces financial trouble.
However, bonding off a lien often signals that the GC or owner intends to fight. They may be unwilling to negotiate and are preparing for litigation. If a bond is posted, it’s a sign that you should be ready for a legal battle.
Final Thoughts
Filing a lien is a powerful tool to protect your payment rights, but it must be done correctly and strategically. Understanding Ohio’s lien laws, filing deadlines, and potential pitfalls can help you avoid costly mistakes and increase your chances of getting paid. If you’re unsure about the lien process, consulting with a legal professional can help ensure you follow the proper procedures and strengthen your position in payment disputes.
Common Questions Contractors Ask
1. What happens if a subcontractor files a lien but the general contractor (GC) has already been paid?
It depends on the type of project. In many cases, when a subcontractor files a lien, the property owner may claim they have already paid the general contractor. If the owner can prove full payment to the GC, this could serve as a defense against the lien. In this scenario, the subcontractor may still have a claim against the GC but will likely not be able to place a lien on the property itself.
2. Can an architect or an engineer file a lien in Ohio?
Yes, architects and engineers can file a lien in Ohio. The same deadlines that apply to contractors and subcontractors also apply to design professionals. However, it is important to note that liens cannot be placed on public projects.
3. Can a lien be filed on a public project in Ohio?
No, public projects cannot be liened in Ohio. This is due to public policy concerns since a lien on a public project would essentially be a claim against taxpayer funds. Instead, claimants on public projects must follow a different process that involves making a claim on the project’s payment bond or funds held in trust by the public entity. This process is more complex, and it is highly recommended to consult with an attorney to navigate it effectively.
4. Can an out-of-state contractor file a lien against a property in Ohio?
Yes, there is no restriction preventing an out-of-state contractor from filing a lien in Ohio. However, if the lien needs to be foreclosed, an Ohio-licensed attorney will be required to handle the case.
Additionally, out-of-state contractors should be aware of filing requirements. Liens are typically recorded in the county where the project is located, and many rural county recorder offices in Ohio do not offer e-filing services. This means contractors may need to hire a filing service or local attorney to ensure proper submission.
5. What are some common pitfalls when filing a lien in Ohio?
Each county recorder's office in Ohio may have its own unique formatting and filing requirements. Even small details, such as margin spacing or document formatting, can lead to rejection. If a lien is rejected and refiled late, it may be considered invalid. To avoid this, it is crucial to verify filing requirements in advance and ensure that all documentation meets the necessary specifications.
6. What should I do if I have more questions about filing a lien in Ohio?
If you have additional questions about Ohio lien laws, deadlines, or filing procedures, it is recommended to consult with a qualified construction attorney. They can provide guidance tailored to your specific situation and help ensure that your lien rights are protected.
