Posted In: Real Estate & Construction
RE&C In Review: Design Professionals Will Be Granted Lien Rights on Commercial Projects Under Senate Bill 49
By James T. Dixon & Hanne-Lore M. Gambrell on August 31, 2021
Beginning September 30, 2021, architects, landscape architects, professional engineers, and professional surveyors will be granted lien rights on commercial projects, a right that has long been available to prime contractors, subcontractors, laborers, and material suppliers. A lien is a powerful collection tool, and designers now have much more leverage when they have not been paid.
The design professional’s lien right will be included not in Ohio’s mechanic’s lien statute, but instead in the statutes that govern professions; in particular, Section 4703, which governs design professionals. A design professional’s lien, compared to a mechanic’s lien, is a much more limited remedy. It is only available on commercial projects where there is a written contract. Only the design professional named in the contract, whether it is a corporation, partnership, individual or association, will have a lien right. The design professional’s employees and sub-designers will not. The lien will also be limited to the extent of the project owner’s interest in the property. Because of the latter limitation, design professionals should understand the extent of their client’s interest before they sign the contract.
For design professionals to perfect the lien, they must file a notarized affidavit with the county recorder where the project is located, with content like that set forth in a mechanic’s lien. Once the lien affidavit is recorded, the design professional will have thirty days to serve it upon the owner and the design professional will have 2 years to initiate foreclosure proceedings. Conspicuously absent from the statute is any limitation on when the lien affidavit must be recorded in relation to the last date of work performed by that design professional. That absence will certainly cause confusion, litigation, and perhaps further legislation.
The design professionals’ lien rights will be junior in priority to any other valid lien, for example mechanics’ liens, mortgages, etc., regardless of the date the lien is recorded. Also, any party with an interest in commercial real estate subject to the lien may substitute financial security in place of the lien. The owner may also issue a Notice to Commence Suit, which forces the design professional to either initiate foreclosure litigation within sixty days or surrender its lien right.
Design professionals should keep in mind that these lien rights are in addition to other rights or actions, including suits for breach of contract. They should also understand that the attorneys they typically work with on contracting or negligence issues may not have experience with what is a very complicated area of law. The attorneys working within Brouse McDowell’s Construction Group have years of experience perfecting lien rights for contractors and are available to assist design professionals with the pursuit of this new remedy.
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