Ohio Legislation Update: Design Professional Payment Assurance Bill
Ohio Senate Bill 49, also known as the Payment Assurance Bill, was signed into law July 12, 2021, and took effect on Oct. 4, 2021. It established a payment assurance program for registered Design Professionals thus allowing them to file a lien for unpaid fees on projects located within Ohio. The bill creates three new statues to allow the Design Professionals to a file a lien; Architects, Revised Code 4703.20 to 4703.206; Landscape Architects, Revised Code 4703.54 to 4703.546; and Professional Engineers and Surveyors, Revised Code 4733.30 to 4733.306.
- It does require a written contract between the Design Professional and an entity owning an interest in commercial real estate, privity of contract is required.
- The lien is not available for public or residential real estate projects.
- Only the Design Professional named in the contract has the lien rights, no employee, agent, or sub-consultant of the Design Professional can claim the lien.
- All mechanics’ liens take precedence for payment by foreclosing upon the secured real estate value.
- Design Professional must sign a Lien Affidavit with the County Recorder where the real estate is located, there is no deadline when the Design Professional must record a Lien Affidavit after payment is due but must serve the affidavit within 30 days of filing upon all parties named in the affidavit. The Lien Affidavit must include:
- Name of Design Professional
- The name of the owner of the commercial real estate
- Legal description of the commercial real estate
- Amount of Design Professional’s claim
- Design Professional must initiate litigation on the claim within two years of after date of recordation, or the lien is extinguished; initiating litigation allows the Design Professional to reduce the claim to a judgement.
The Design Professional needs to adhere strictly to the requirements of the statute to perfect its lien. Careful consideration should be given before initiating litigation on the lien and we strongly recommend that you consult with your legal counsel and professional liability insurance broker since litigation can almost always result in a counterclaim for damages that exceed the amount of fees owed. Whether the counterclaim has merit or not, you will be required to retain legal counsel to defend you against it.
With the passage of the law, we have seen some owners asking Design Professionals to sign lien waivers. There is no legal requirement that the Design Professional sign the lien waiver; however we expect many Design Professionals will do so to avoid push back from their clients. The lien waivers that are going to be asked to be signed may very well be ones that were drafted for contractors. Design Professionals are not contractors and therefore the language will need to be revised. Instead of reviewing and marking up each of the various lien waivers, we suggest Design Professionals send to their client their own form. The release should be clearly drafted and state in its simplest form that once payment is received the Design Professional will waive and release any lien rights as to the paid invoice. We can provide possible samples to you if you wish to consider them.
Ohio was one of a few states that did not have lien rights for Design Professionals prior to the passage of this legislation. The act is not perfect; it does not give lien rights on residential properties nor public projects, other liens take priority, but it is a step in the right direction and a win for the Design Professional community.
For more information visit our Design and Construction page or contact us direct.
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