Contractors, subcontractors, laborers, and material suppliers who perform work or labor upon or furnish materials in furtherance of any improvement undertaken by virtue of a contract with an owner, part owner, or lessee have mechanic’s lien rights to secure payment in full for their completed work.
[1]
Ohio’s lien law provides that a given owner’s, part owner’s, or lessee’s interests include all ownership interests, either legal or equitable, which such person may have in the real estate upon which the improvements are made.
[2] Ohio’s condo statute also explicitly grants lien rights against the entire condo property to anyone who performs work on the common elements of a condominium.
[3]
Mechanic’s Lien Basics
To properly exercise one’s mechanic’s lien rights, Ohio law requires, among other things, the claimant: (1) record an affidavit, within 60 days after the last date of performing work, labor or furnishing materials on the improvement for residential property (75 days for commercial); and (2) serve a copy of the recorded affidavit on the owner, part owner, or lessee of the improved property, or his designee, within 30 days after recording.
[4] How to comply with these standard requirements is not clear when the lien is for an improvement to common elements of a condominium – namely, who is the owner?
Condo Law – Common Elements
Ohio’s Condominium Property statute provides that the common elements of a condominium property are owned by the unit owners as tenants in common, and the ownership shall remain undivided.
[5] It further states that unless otherwise addressed in a condominium’s declaration, damage to or destruction of all or any part of the common elements of a condominium property shall be promptly repaired and restored by the board of directors of the unit owners association.
[6]
The conflict between these provisions creates an issue unique to a claimant exercising its mechanic’s lien rights for an improvement to a condominium’s common elements. A mechanic’s lien claimant will likely have contracted with a unit owners association for an improvement to common elements of a condominium. The association arguably owns an equitable interest in the common elements. However, all unit owners of a condominium own an undivided legal interest in the common elements and the improvement thereon. This distinction creates uncertainty if the unit owners association is an owner or part owner under Ohio’s lien law. In the time since both Ohio’s condo and lien law took effect, only two Ohio Courts have endeavored to resolve this ambiguity. These Courts ultimately issued conflicting opinions.
Conflicting Court Decisions
In 2009, a Cuyahoga County Court of Common Pleas judge first addressed this issue and ultimately held that the unit owners association of condominium is an owner under Ohio’s lien law as it owns an equitable interest in the common elements by virtue of being authorized to contract for repairs and restoration to common elements.
[7] This case involved a mechanic’s lien naming the unit owners association as the owner and concerned repairs to the roof of a condominium pursuant to a contract between a contractor and unit owners association.
[8] The Court reasoned that the explicit inclusion of the terms “any interest” and “including both legal and equitable interests” in Ohio’s lien law’s definition of who constitutes an owner, part owner, or lessee includes the unit owners association’s equitable ownership interest in the common elements arising from its contract with the contractor for improvements thereto.
[9]
Four years later, a Franklin County Court of Common Pleas judge decided a unit owners association is not an “owner” under Ohio’s lien law.
[10] This case involved a mechanic’s lien recorded by a material supplier and naming 15 unit owners of a condominium and the common elements and the association with whom it contracted.
[11] The Court held the unit owners association merely represent the unit owners’ ownership interests, both legal and equitable, and the unit owners’ ownership interests are not transferred the unit owners association when it contracts on their behalf.
[12]
Options for Liens on Common Elements
Since 2013, no other Ohio Courts have addressed these conflicting opinions and ambiguity on the status of a unit owners association under Ohio’s lien law remains to this day. The implications of this continuing uncertainty can result in a claimant recording an invalid and unenforceable lien. This results in a mechanic’s lien claimant having three options to consider: (1) name and serve only the association as the owner in the affidavit; (2) name and serve all the unit owners in the affidavit; or (3) name and serve both the association and all the unit owners.
The third option, despite being the most conservative way to ensure the validity of a mechanic’s lien, may be impracticable in situations where a condominium has hundreds of unit owners. Ultimately, the ambiguity under Ohio law necessitates a case-by-case analysis for any mechanic’s lien claim for an improvement to a common element of a condominium. Until the Ohio Legislature or Ohio Courts directly address this, a mechanic’s lien claimant is best served to engage counsel on how best to secure a valid and enforceable mechanic’s lien far ahead of their statutory deadline to record.
[1] R.C. §1311 et. seq.
[2] R.C. §1311.01(A).
[3] R.C. 5311.13(C)
[4] R.C. §1311.06(A), R.C. §1311.06(B)(1), and R.C. §1311.07.
[5] R.C. 5311.04(A).
[6] R.C. 5311.14(A).
[7]
R.P.W. Constr., Inc. v. Royal Park Condo. Owners Ass'n, 2009 Ohio Misc. LEXIS 530, *5.
[8]
Id. at *1.
[9]
Id. at *5.
[10]
ABC Supply Co. v. Commons, 2013 Ohio Misc. LEXIS 16571, *4 (Ohio C.P. June 12, 2013).
[11]
Id. at *2.
[12]
Id. at *7-8.