Mechanic’s Lien “Clean-up Bill” Becomes Law

Kegler Brown Construction Newsletter

H.B. 487 has passed the Ohio General Assembly and becomes effective March 29, 2007. It primarily deals with mechanic's liens on residential work and provides that:

  • Lien claimants can be liable for attorney's fees when they fail to timely release their residential liens when a homeowner has submitted a "full payment" affidavit (that he has or will pay the homebuilder in full). Residential lien claimants in recent decades have not been able to force homeowners to "pay twice."
  • Allows a Notice of Commencement on residential construction, but does not require a notice of furnishing from the prospective lien claimant.
  • Provides that a Notice of Commencement generally expires six (6) years after its filing.
  • If the Notice of Commencement and Mortgage are recorded on the same day, the mortgage shall be considered recorded first, preserving the lender's priority over lien claimants.

These provisions primarily assist residential construction lenders and title companies. They will hopefully not be construed to adversely effect the lien rights of subs and suppliers on residential work. Those lien rights are already quite limited as a practical matter in view of the homeowner's "payment in full defense." Unlike residential work, lien claimants on commercial work will still maintain the leverage to force owners to "pay twice" to the unpaid sub or supplier even if the general contractor was paid.