As an owner of a construction project, preparing and filing a notice of commencement is an important step to take to keep tabs on the project, as well as to protect you or your company from mechanic’s liens. If you think about the mechanic’s lien as a protection for contractors to help in getting paid, you can think about the notice of commencement as a protection for owners to avoid improper liens.
The notice of commencement acts to set up an additional requirement for any subcontractor working on the project. After the notice of commencement is recorded, all subcontractors and suppliers must first serve you, the owner, with a notice of furnishing. The notice of commencement is basically an announcement to the world, “I am here. I own this property. I am performing construction, and if you want to protect your lien rights, you must serve me with a notice of furnishing.”
Then the notice of furnishing acts as an announcement from the subcontractor’s perspective. “I am here. I am a subcontractor. I am performing this scope of work on the owner’s project.”
The notice of commencement/notice of furnishing process is a simple one for both sides, but it offers protection for the owner. The owner now has a complete record of all subcontractors working on the project that may be able to file a lien on the project. The owner can now make certain that those subcontractors are paid by the general contractor after every payment is made from the owner to general contractor.
In Ohio, notices of commencement are spelled out in R.C. 1311.04.
The first step to recording a notice of commencement is to gather the necessary information, including the legal description of the property, to include in the notice of commencement affidavit. This information includes:
– The legal description
– A description of the improvements
– Name and address of the owner or lessee
– Name and address of the owner’s designee, if any
– Name and address of all original contractors (same as general contractor, basically anyone who is under contract directly with the owner)
– Date of the contract between owner and original contractor
– Name and address of any lending institution financing the improvements
– Name and address of any bonding companies issuing bonds guaranteeing payment for the improvements
– The notice statement required by R.C. 1311.04(B)(10)
– The name and address of the person preparing the notice, and
– An affidavit of the owner that verifies the notice of commencement
After completing the notice commencement, the notice must be recorded, along with the legal description, with the county recorder in the county where the project/property is located.
While the notice of commencement may seem burdensome, it is a crucial piece to protecting the owner’s interest in the property. Fortney Law can assist with all steps of construction projects, including preparing and recording notices of commencement, in order to help owners have success on their construction projects.