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The current economic downturn has made the effective use of lien rights more important than ever. The problem with lien rights (on private work) is that they only provide security to the extent there is “equity” in the property – a real concern in a time of declining real estate values.

Ohio has a mechanic’s lien statute – Ohio Revised Code §1311.16 – that allows the recovery of legal fees by a lien claimant from the fund created for lien claimants. Fees are rarely recovered under this provision in that there rarely is a fund created for lien claimants when a distressed property is sold in foreclosure. Yet a different situation can exist when the lien is “bonded off.”

When a lien is bonded off, a bond (or cash) must be posted in 150% of the lien amount. The difference between the lien amount and the bond amount is available to pay interest and attorney’s fees.

A subcontractor (whom we represented) utilized this provision to recover significant legal fees incurred over a protracted multi-year legal battle. The Fifth District Court of Appeals awarded legal fees under both the mechanic’s lien statute and the frivolous conduct statute (for “causing unnecessary delay or a needless increase in the cost of litigation”) to the victorious subcontractor lien claimant. Mid-Ohio Mechanical, Inc. v. Eisenmann Corporation, Case Nos. 07-CA-35 and 08-CA-12 (November 2, 2009).

Contractors, subcontractors and suppliers can utilize these statutes and the Mid-Ohio case to leverage their recovery on mechanic’s liens, particularly when a lien has been “bonded off.” Those that inappropriately threaten lien claimants with needless litigation, or delay efforts of lien claimants to recover, do so at their peril.