Effective as of September 21, 2021 Architects, Landscape Architects, Surveyors and Engineers have been granted the right to file liens against commercial real estate to secure payment that may be owed to them. These lien rights have been added to Ohio Revised Code Chapter 4703 (for architects and landscape architects) and Chapter 4733 (for surveyors and engineers) and are very similar to the lien rights currently granted to contractors, subcontractors, laborers and material suppliers under the existing mechanics lien law (O.R.C. Chapter 1311) but are subject to some unique and slightly differing requirements.
Must be a written contract:
The listed design professionals will have lien rights if they have entered into a written contract with an “Owner” of commercial property to provide services with respect to a specific property. An “Owner” is defined as a party that has either a legal or “equitable” interest in the real property, so this would encompass both property owners, leasehold tenants, and parties that have entered into a contract to purchase real property, but do not yet own the property. The written contract must have been signed by both the design professional and the owner. Only the design professional named in the contract (individual or company) will have the lien rights, and the lien rights do not extend to any employee, agent, or independent contractor of the design professional.
Must be commercial property:
Lien rights extend only to “Commercial Real Estate” which is defined as being any real estate except property containing (or intended to contain) one to four residential units. Properties with five or more residential units will be considered “commercial” for purposes of these lien rights. Single family condominium units, townhomes, manufactured homes, and homes in a subdivision that are sold individually are also specifically excluded. Real estate owned by a “public authority” is also exempt from these lien rights. The lien rights extend only to the real property that is the subject of the written contract, not to other real property that may be owned by the same owner.
No time limit:
Unlike mechanics’ liens, there is no deadline after the date of last work of the design professional for them to file a lien affidavit.
Lien affidavit requirements:
To “perfect” a lien for design services, the design professional must file a lien affidavit with the county recorder for the county in which the subject real estate is located. The affidavit must include the name of the design professional and owner (and actual record owner, if the contracting “owner” does not actually own the real property), a legal description of the subject property (which can simply be a reference to the recorded deed by which the record owner took title and the county parcel number – a full metes and bounds description is not required), the names of the parties to the contract and the date of the contract, the amount of the lien claim, and a statement that the information in the affidavit is true and accurate to the knowledge of the design professional. This statement must be signed by the design professional and notarized. The design professional must deliver a copy of the recorded affidavit to the other parties listed in the affidavit within thirty days from the date of recording by a method that provides proof of service. Failure to provide such notice does not invalidate the lien, but a court may consider equitable remedies for such failure to provide notice.
Valid and recorded mechanics’ liens of contractors, laborers, and material suppliers filed pursuant to ORC Chapter 1311 will have priority over design professional liens regardless of when the mechanics’ liens were filed. So do the liens of previously recorded mortgages and judgement liens. If a design professional files a lien affidavit, they will stand in line behind all previous mortgage and judgement lien holders, and may be moved further back in the line of priority if future mechanics’ liens are filed on the same property. Also, while a mechanics’ lien priority will be effective as of the date the last work was provided to the property, a design professional’s lien priority is set by the date of recording the affidavit.
A design professional who has recorded a conforming affidavit may enforce the lien by filing a complaint in the common pleas court of the county where the real estate is located. The complaint does not have to, but may, initiate foreclosure proceedings. If a complaint is not filed within two years from the date the affidavit was recorded, the lien will be extinguished. If a design professional has not yet filed a complaint, any party with an interest in the real estate may file a notice demanding the design professional commence suit on the lien, and if the design professional does not commence suit within sixty days, the lien is extinguished. Similar to mechanics’ liens, an owner may request the court to approve a release of the lien if substitute financial security is provided, such as a surety bond or escrow account in the amount of the claim.
When the claim underlying the lien is satisfied, the design professional must record a release of the lien with the county recorder within thirty days. If a lien is extinguished by any of the reasons previously cited, any party with an interest in the real estate may also record an affidavit indicating such extinguishment, regardless of whether the design professional does so. Note that lien extinguishment does not invalidate any contractual claims of the design professional, it just means that the contract claims are no longer secured by a lien against real property.
The newly enacted right to a design professional lien brings Ohio into parity with the majority of other states in providing a legal mechanism to help ensure design professionals may get paid when projects falter. On the other hand, property owners need to be aware of these rights so they are not surprised by liens encumbering their property.