NOF Not Required to Perfect Bond Claims on ODOT Work
Kegler Brown Construction Newsletter September 1, 2009
When the modern lien law was enacted almost 20 years ago, a Notice of Furnishing (“NOF”) was required to perfect lien rights, but not payment bond rights, when a subcontractor or supplier did not have a contract with the prime contractor. Subsequently, in an effort to prohibit “hidden bond claims,” the law was changed to require that same NOF to be utilized to protect payment bond rights (if the contract exceeded $30,000.00).
While the intention of this law change was to make all public work subject to a NOF requirement to perfect both lien and bond claims, this result was apparently not achieved with respect to Ohio Department of Transportation (“ODOT”) work. As Ohio Revised Code §153.56 (which mandates the NOF requirement) refers to “public improvement as provided in section 153.54,” which expressly excludes ODOT work, there is a good argument that ODOT work does not require a NOF to perfect a payment bond claim.
Therefore, contractors on ODOT work must carefully monitor payment of subtrades and effectively use joint check agreements and lien/bond waivers to avoid paying twice on “hidden bond claims.” Second-tier subcontractors and suppliers can exercise their payment bond rights on ODOT projects, even without a valid NOF that caused the loss of their lien rights.