Ohio

Construction Lending State Compliance Library

State statute reference
Last updated June 28, 2023

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Ohio

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Ohio Construction Lien Law

Lien Law Overview

Ohio has strict construction lien requirements that must be closely followed. In Ohio, mechanics liens can have priority over mortgage liens if filed earlier than the mortgage. The inception of a lien is before any visible work or labor is performed or furnished, so it is not uncommon for lenders and owners to have a visible inspection of the property to ascertain when the construction actually began.

In Ohio, separate requirements for residential construction and home purchase contracts are contained within the general mechanics lien statute, but are listed in Ohio Rev. Code Ann. §1311.011.

Claimants are not entitled to a mechanics lien for work performed or materials furnished in connection with a home construction contract if:

the owner paid the original contractor in full, or the purchaser has paid the amount of the home construction or purchase contract in full, and
the payment was made before receiving an affidavit of mechanics lien from the contractor. Ohio Rev. Code Ann. § 1311.011.

Note in Ohio, public improvement projects have specific requirements (Ohio Rev. Code Ann. §§ 1311.25 to 1311.32) with the timing of filing liens based on property type. The affidavit for lien must be filed within 60 days on 1 to 4-family residential projects and 75 days on commercial projects after the last day of work was performed or materials provided.

Lien Waivers

Lien Waiver Summary

Ohio does not regulate lien waivers, but there is case law supporting that lien waivers should be exchanged for actual payment of a mechanics lien claim.

A contractor, subcontractor, or supplier of materials can waive their lien rights through express agreement supported by consideration. The lender and owner should require that the contractor obtain lien waivers from all laborers, subcontractors, and/or materialmen before making payment to the contractor.

Additionally, for construction loans in Ohio, lenders are required to obtain an Original Contractors Affidavit at each payment that affirms that no claims exist other than those claims set forth and identified in the affidavit required under ORC 1131.011(B)(4)(b).

When making any payment under the home construction contract or on behalf of the owner or part owner under a home purchase contract, the lending institution may accept the affidavit of the original contractor and act in reliance upon it, unless it appears to be fraudulent on its face. The lending institution is not financially liable to the owner, part owner, purchaser, lessee, or any other person for any payments, except for gross negligence or fraud committed by the lending institution in making any payment to the original contractor.

After receipt of a written notice of a claim of a right to a mechanics lien by a lending institution, failure of the lending institution to obtain a lien release from the subcontractor, material supplier, or laborer who serves notice of such claim is prima-facie evidence of gross negligence.

Statutory Form
Not Required*

Notary
Not Required

Electronic Signature
Acceptable

* Ohio does not have statutory lien waivers, however, it is important to note that Ohio does have statutory requirements for lending institutions making payments to an original contractor using what is called an Original Contractor Affidavit. The lender is obligated to collect from the original contractor, an Original Contractors Affidavit, at each payment. The lender can rely upon this affidavit when making a disbursement from the construction loan. The affidavit requires specific language that should not be altered. ORC 1311.011(B)(4)

Are title companies required by law to manage construction loan disbursements?

No, but title companies are insurance companies that may require -in exchange for insurance coverage – some level of control over how loan proceeds are disbursed. If they do, the lender either must comply with the title company’s demands or risk not having coverage for the loan (or try another title company, but they tend to share best practices by location/region).

Can a mechanics lien have priority over a pre-existing mortgage in Ohio?

To obtain priority, the mortgage must be recorded in the office of the recorder of the county where the mortgaged property is located before “the first visible work or labor is performed or the first materials are furnished” and Notice of Commencement is recorded by the owner in the recorder’s office (ORC 1311.13(A)(1) and 2322.04). A mechanics lien filed by a contractor, laborer, or supplier dates back for priority purposes to the earlier of the date of the commencement of construction or the date of the filing of the Notice of Commencement.

Generally for commercial construction projects, an Affidavit for Mechanics Lien should be filed with the recorder within 75 days from the date on which the last of the labor or work was performed or material was furnished by the person claiming the lien (ORC ⸹ 1311.06(B)(3) and within 60 days from the date on which the last of labor or work was performed or material furnished for a 1- or 2-family dwelling or a residential condominium unit (ORC ⸹ 1311.06(B)(1).

In Ohio, a properly perfected mechanics lien has priority over a mortgage, unless the mortgage involves a refinance that was filed before the mechanics lien or a construction mortgage to finance the improvements. Ohio Rev. Code Ann. § 1311.13. If a mortgage securing financing and a mechanics lien Notice of Commencement are filed on the same day, the mortgage is considered recorded before the Notice of Commencement. Ohio Rev. Code Ann. § 1311.13(G).

In a construction mortgage, if a mortgagee wishes to obtain priority of the mortgage over the mechanics lien, it must pay off prior incumbrances, including any liens filed prior to the mortgage. Ohio Rev. Code Ann. § 1311.14; see also APCO Indus. v. Braun Constr. Grp., Inc., 2020-Ohio-4762 (Ct. App.).

If work has started before the consummation of the construction loan –
To obtain priority, the mortgage must be recorded in the office of the recorder of the county where the mortgaged property is located before “the first visible work or labor is performed or the first materials are furnished” and Notice of Commencement is recorded by the owner in the recorder’s office (ORC ⸹⸹ 1311.13(A)(1) and 2322.04). A mechanics lien filed by a contractor, laborer, or supplier dates back for priority purposes to the earlier of the date of the commencement of construction or the date of the filing of the Notice of Commencement.

If the work is started after the construction loan is consummated –
To obtain priority, the mortgage must be recorded in the office of the recorder of the county where the mortgaged property is located before “the first visible work or labor is performed or the first materials are furnished” and Notice of Commencement is recorded by the owner in the recorder’s office (ORC 1311.13(A)(1) and 2322.04).

Notices

Notice of Commencement (or similar like event)

Yes. Prior to the performance of any labor or work or the furnishing of any materials for an improvement on real property which may give rise to a mechanics lien

An owner who fails to record and post the Notice of Commencement pursuant to Ohio Rev. Code Ann. § 1311.04 becomes liable to the lien claimant for all actual expenses incurred by the claimant in obtaining information that would otherwise have been provided in the Notice of Commencement.

Duration of Notice of Commencement
The Notice of Commencement is valid for six years after recordation, at which time the Notice of Commencement expires. Ohio Rev. Code Ann. § 1311.04(S). The owner can specify an expiration date shorter than six years in the Notice of Commencement. There is no affirmative requirement to remove the Notice of Commencement after the project is complete.

Contents of Notice of Commencement
The Notice of Commencement must include:

A legal description of the real property where project is located
A description of the improvement
The name, address, and capacity of the owner, part owner, or lessee contracting for the improvement
The name and address of the fee owner of the real property
The name and address of the owner’s designee, if any
The name and address of all original contractors under agreements with the owner
The date the owner first executed contract with an original contractor
The name and address of all lending institutions providing financing
The names and address of all payment bond sureties
The statutorily required statement
The name and address of the person who prepared the Notice of Commencement, and
An affidavit of owner verifying the notice was served on original contractor

Ohio Rev. Code Ann. § 1311.04(B).
When preparing the Notice of Commencement, the owner should strictly adhere to these requirements and ensure the information included in the Notice of Commencement is accurate. If the Notice of Commencement contains incorrect information, the owner will be liable to subsequent lien claimants for any resulting loss of lien rights and any actual expenses of preserving those rights, including attorney’s fees if the loss and expenses incurred are a direct result of the lien claimant’s reliance on the incorrect information.

Recording and Notice Requirements for the Notice of Commencement
The Notice of Commencement must:

be recorded by the owner in the county where the project is located before construction begins.
The owner must serve a copy of the Notice of Commencement to the original contractor. Ohio Rev. Code Ann. § 1311.04(H). The “original contractor” includes any person under a contract with an owner. Failure to serve the original contractor will result in the owner becoming liable to the original contractor.
The Notice of Commencement must be “conspicuously” posted on the project site, consider posting multiple copies of the notice. Failure of compliance makes the owner liable to subcontractors, suppliers, and laborers. (Special Note. Ohio Rev. Code Ann. § 1311.04(G)(2) the posting is not required for a home purchase contract)
The owner is required to provide a copy of the notice to all parties within 10 days of a request.

The owner should keep track of all parties that provide a Notice of Furnishing. The Notice of Furnishing puts owners and contractors on notice of a subcontractor’s involvement in a project and preserves lien rights for the subcontractor.

Who files the Notice of Commencement?

The owner is responsible for filing a Notice of Commencement; however, if the owner fails to do so, any mortgagee or borrower may file it. If not timely filed by the owner, a general contractor working on the project may file a Notice of Commencement within 10 days after the project begins or three days after demanding that the owner do so.

When must it be filed?

Before improvements begin on the property.

Notice of Commencement (Notice of Commencement)
Under Ohio Rev. Code Ann. § 1311.04(A)(1), a Notice of Commencement must be recorded “[p]rior to the performance of any labor or work or the furnishing of any materials for an improvement on real property which may give rise to a mechanic’s lien . . . .” The Notice of Commencement identifies the project owner and original contractor(s) to parties not in privity of contract with the owner.

Recording by Mortgagee or Original Contractor
If an owner fails to timely record the Notice of Commencement, any mortgagee of the property may do so on the owner’s behalf. An original contractor may also record the Notice of Commencement on the owner’s behalf within 10 days after the project begins or three days after demanding that the owner do so.

Is a Designee required?

Yes

Is it required to be posted on the Job Site

Yes, an exception is made to the posting on the job site when the subject is a home purchase contract.

Preliminary Lien Notifications

Yes, to perfect lien rights a party must serve a “notice of furnishing” upon the owner and contractor (Oh. Rev. Code Sec. 1311.05). Additional steps are needed to perfect a lien.

Notice of Completion

Ohio does not have a Notice of Completion, however, they do have an Owner’s Affidavit of Full Payment. In Ohio, an original contractor, subcontractor, materialman, or laborer is not entitled to a mechanic’s lien on amounts due on a home construction contract or dwelling or residential unit of condominium that is subject of a home purchase contract where payment is made in full prior to the filing of an affidavit of mechanic’s lien.

Title

Ohio uses ALTA title commitments that allow for the Construction Loan Update Endorsement, which is used when the lender requests endorsements as additional disbursements are made. It gives coverage up to the new outstanding mortgage balance and shows whether any other instruments have been filed and recorded since the last title update. The endorsement also ensures the priority of the insured mortgage over instruments that are not specifically listed in the endorsement. Since the title company has a stake in the disbursements, you may find that they exercise some due diligence relating to construction draws.

Contractor Licensing

General Contractors
No, Ohio does not require general contractors to be licensed at the state level, but local city or county governments typically impose general contractor licensing requirements. Under Ohio Rev. Code Ann. § 4740.01, Ohio does require certain trades, including plumbers, electricians, HVAC (heating, ventilating, and air-conditioning) contractors, hydronic technicians, and refrigeration contractors to be licensed. These trades are licensed by the Construction Industry Licensing Board.

Subcontractors
Yes, Ohio requires various trades to be licensed, and those trades could be subcontractors under a general construction project. For example, under Ohio Rev. Code Ann. § 4740.01, Ohio requires plumbers, electricians, HVAC (heating, ventilating, and air-conditioning) contractors, hydronic technicians, and refrigeration contractors to be licensed.

Licensees must carry a minimum of $500,000 contractor liability coverage.

Contractor License Search

Ohio Construction Lending Documents Kit

Download the Ohio documents kit by filling out the form. The documents included are listed below.

Disclaimer: These forms are provided for informational purposes only and are not intended to be legal advice or establish an attorney-client relationship. They are posted ‘as is’ and we do not warrant that they are the most current version. Users of these forms should consult their legal counsel before using for their particular transaction.

Notice of Commencement ORC 1311.04
Original Contractor’s Affidavit ORC 1311.011(B)(4)
Owner’s Affidavit of Full Payment ORC 1311.011(B)(1)