Mechanic’s lien rights in Florida and Ohio were featured via our social channels this week.
In Construction Liens in Florida — The Timing and Manner of Perfection are Critical, author Christopher Staine takes readers on a detailed tour of the intricacies of Florida mechanic’s lien statute. In So You Think You Are Protected: Following Ohio’s Mechanic’s Lien Statute May Not Provide the Security You Need, author James D. Abrams addresses liens on tenant improvements.
Staine’s explanation & detail of lien perfection in Florida is quite thorough! He discusses more than simple documents and deadlines, including the importance of the Notice of Commencement as well as the Notice of Termination of the Notice of Commencement.
The role of the Notice of Commencement:
“For lienors not in direct privity with the owner, the Notice of Commencement serves as an invaluable resource for information for such lienors to prepare critical Lien Law documents, such as the Notice to Owner and Claim of Lien, and should be lienors’ starting point for preparing all required Lien Law documents. However, since not all owners fulfill their Lien Law obligations, including properly posting and recording the Notice of Commencement, lienors should be prepared to have a back-up plan. Specifically, in the event the owner has failed to record a Notice of Commencement, lienors may use the information provided by the owner in the permit application for preparation of Lien Law documents. Lienors would be advised not to rely on the information provided in the actual permit since the permit is prepared by someone other than the owner.”
The role of the Notice of Termination of the Notice of Commencement:
“[W]here a lienor has been served with either of the owner’s affidavit of intent to recommence or notice of termination of the notice of commencement, such lienor must record its lien claim within 30 days of service in order to maintain “relation back priority” to the original notice of commencement (which is necessary to maintain the lienor’s priority position). The lienor’s failure to timely record its lien claim within this 30-day period does not impact the enforceability of the lien claim (provided it is recorded within the 90-day recordation period), but rather only impacts the priority of the lienor’s claim. For this reason, lienors that have yet to be paid for their services should err on the side of caution and record their lien claims immediately upon receipt of the affidavit of intention to recommence construction or notice of termination of the notice of commencement.”
So You Think You Are Protected: Following Ohio’s Mechanic’s Lien Statute May Not Provide the Security You Need
Lien on leasehold situations can be tricky. Abrams reminds readers to never assume they have lien rights against the property owner, when the tenant is the one who contracted for the improvement.
“’The Ohio Supreme Court has said that the work related to the mechanic’s lien must be furnished under a contract with the ‘owner, part owner or lessee of an interest in real estate.’ Thus, consistent with a previous holding of that court, ‘a mechanic’s lien attaches only to the interest of the person for whom the improvement is contracted to be made.’ As a result of this analysis, the Ohio Supreme Court later held that a contractor’s lien extends only to the leasehold interest of the party who ordered the work done where that party was the lessee, not the owner. Under that scenario, if the landlord has terminated the lease or the tenant’s interest has reverted to the landlord by other means, the contractor is likely foreclosed from asserting any lien rights as to the property on which the tenant improvements have been made.”
So, what can a potential claimant do? Abrams mentions the alternative of unjust enrichment. Essentially stating the property owner is/was aware and benefiting from the improvement and is therefore liable for the costs.
“An example of how this concept works might be useful: Assume that the tenant was responsible for the installation of HVAC equipment in the leased premises pursuant to the lease. Obviously, the landlord would have knowledge that an HVAC contractor installed the HVAC equipment and expected to be paid for such work. It would be unfair to permit the landlord to benefit from the new HVAC equipment in the retail space without making payment. Therefore, permitting the landlord to retain the benefit without paying the fair value would be unjust.”
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