Emergency Tolling of Mechanics’ Lien Deadlines
Date: April 22, 2020
Emergency Tolling of Mechanics’ Lien Deadlines
The swiftly enacted Ohio Coronavirus Relief Bill (“HB 197”) ostensibly extends recording and other mechanic’s lien deadlines under the Ohio Revised Code. However, given uncertainty created by the bill, it is recommended that original deadlines be honored as if they had not been tolled.
HB 197 tolls any “criminal, civil, or administrative time limitation or deadline under the Revised Code” which “[is] set to expire between March 9, 2020, and July 30, 2020.”
- “Civil” deadlines appear to include the deadlines under the Revised Code’s mechanic’s lien statutes, including, for example, the deadlines by which someone must record a mechanic’s lien, serve a Notice of Furnishing, or commence suit on a lien. It is unclear, however, if the General Assembly anticipated all potential consequences of extending all of the various deadlines, which can impact the validity, amount and priority of liens.
- The only deadlines which are tolled are those which “are set to expire” between March 9, 2020, and July 30, 2020, while Section 22 of HB 197 is in effect.
- For example, if the date of last work on a commercial project is May 17, 2020, the 75-day deadline to record a lien would have been set to expire on July 31, 2020, and one would have to record the lien on or before July 31, 2020 – so the 75-day clock on the deadline is not tolled in May, June or July.
Length of Toll
HB 197 temporarily stops the clock for deadline expiration between March 9, 2020 and the earlier to occur of either July 30, 2020 or “the date the period of emergency ends.”
- There is no credit for time which has already lapsed before March 9, 2020 – credit is limited to any time that is left when the tolling period ends.
- For example, if the date of last work on a residential project was January 10, 2020, the clock on the 60-day deadline to record a lien (which would have been due March 10, 2020) would stop on March 9, 2020, and if the governor declared the emergency over on June 1, 2020, the resumed deadline would be June 2, 2020.
Some Reasons Not to Use Tolling
Apart from the uncertainty in how courts might apply and interpret HB 197, there are other practical reasons for not relying upon the temporary tolling permitted under the new law.
- Public Projects. A “lien” on a public project is actually a claim against the project funds. If, for example, a subcontractor postpones service of an affidavit of claim using the tolling relief under HB 197, it can lose the ability to encumber the project funds if the project owner pays the general contractor in the interim. Similarly, if the claim affidavit is recorded later by using the tolling relief under HB 197, the subcontractor might lose a preferential lien position as to funds that are encumbered.
- Residential Projects. If a subcontractor postpones recording a lien using the tolling relief under HB 197, it can lose the ability to encumber the property if the project owner pays the general contractor in the interim.
- Other Reasons. Recording sooner can increase pressure and incentive for the project owner or upstream contractors to resolve payment issues so that they can more easily transfer the property or borrow money. Recording sooner may also help to prevent the lien from being “avoided” in bankruptcy if the project owner later becomes insolvent.
County Recorders should still be open during the State of Emergency but may have scaled back operations. Section 21 of HB 197 requires them to remain open for certain things. Most should still accept documents for recording by mail. This can be verified by calling the Recorder’s Office or checking websites for information about the services provided or suspended.
HB 197 may help by preventing missed deadlines during the State of Emergency. However, to avoid the uncertainty and risk surrounding the effects of HB 197 on mechanic’s liens, it is best practice to try to continue to calculate and meet deadlines as if they were not tolled. For any specific questions or concerns regarding the application of HB 197, it is recommended that you consult legal counsel.
Read more about the Ohio Coronavirus Relief Bill here.
Find more information on Ohio’s Mechanic’s Lien Statutes here.
FOR MORE INFORMATION
For more information, please contact:
Jeffrey R. Appelbaum
John B. Kopf
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