Ohio Senate Bill 49 – Ohio Expands Lien Rights for Design ProfessionalsClient Alert
Ohio Grants Long Awaited Lien Rights to Design Professionals
Effective September 30, 2021, Ohio granted limited lien rights to design professionals, including architects, landscape architects, engineers, and surveyors.
Ohio Governor Mike DeWine signed Senate Bill 49 into law on July 1, 2021. This new law established a statutory right to lien commercial real estate by Ohio design professionals who, until now, could not file a lien for non-payment of professional services.
Senator Vernon Sykes, a primary sponsor of Senate Bill 49, stated that the “legislation ensures that architects, engineers and other designers will get paid for their work, regardless of the outcome of their projects . . . It will support hardworking Ohioans by protecting the value of their labor . . ..”
In What Circumstances Does a Design Professional Have Lien Rights?
Design professional lien rights only apply to private, commercial real estate projects. Single family residential projects and public projects are specifically excluded in Senate Bill 49. To be eligible for lien protection, the design professional must have a written contract with the commercial owner of the property interest that is signed by both parties. Lien protection is not available for the design professional’s employees, agents, or independent contractors. The lien amount is limited to the amount due to the design professional under the written contract. Therefore, it will be important to obtain signed, written authorization for additional and supplemental services, as well as base contract services.
How Do I Perfect My Lien?
To perfect the lien, the design professional must record a signed and notarized affidavit in the county where the commercial real estate is located. The affidavit must list:
- the name of the design professional;
- the name of the owner of interest in the commercial real estate;
- the name of the record owner of the commercial real estate if different than the owner of interest;
- a legal description of the commercial real estate sufficient to reference the instrument by which the record owner took title and permanent parcel number, if any;
- the parties to and date of the contract;
- the amount of the design professional’s claim under the contract; and
- a statement that the information is true and accurate to the knowledge of the design professional.
Within 30 days after recording the lien, the affidavit must be served upon all parties listed on the affidavit by a delivery method that provides proof of receipt. Although failure to serve will not invalidate the lien, it does allow the court to consider equitable remedies for such failure.
How Do I Enforce My Lien?
The design professional holding a perfected lien on commercial real estate may commence proceedings to enforce the lien by filing a complaint in the county where the commercial real estate is located naming all parties with an interest in the commercial real estate. The design professional’s lien is subordinate to any other valid liens, regardless of recordation date, and all previously recorded mortgages and liens. Because all other valid liens take priority over the design professional lien, collection on the lien may be challenging if there is limited equity possessed by the Owner. The design professional must commence proceedings to enforce the lien within two years, or within 60 days of receiving a Demand to Commence Suit. Otherwise, the lien is extinguished by operation of law.
Satisfying the Lien
Any person with an interest in commercial real estate that was subject to the lien or named in the affidavit may record an affidavit stating that the underlying lien was satisfied or that it was released by operation of law. The release of a lien does not affect the ability of the design professional to assert any other claim or appropriate action, including a claim for breach of contract. The lien may also be removed by filing a request to substitute financial security for the lien with the Court of Common Pleas in the county where the lien was recorded. The substitute security must be an amount equal to the design professional’s claim in a form such as an escrow account or surety bond held by the Clerk of Courts or other party determined adequate by the court. On approving such, the court shall direct the lien to be released.
Although not as robust as the lien rights of mechanic’s lien or judgment lien claimants, Senate Bill 49 provides design professionals with a relatively simple way to assert a lien against commercial real estate in order to compel payment of past due amounts for services rendered. It is expected that these lien rights would only be used as a last resort after all other reasonable efforts to secure payment have been exhausted.