A lien is a legal interest a creditor has in the assets or property of a debtor. It gives the creditor the right to seize and sell the debtor's property if the borrower does not meet their repayment obligations.
Before buying real property, it pays to check the record for any liens that may be on it. It doesn't hurt for a homeowner to check for liens on their own property, either. The procedure for checking varies from state to state.
To check for Ohio liens on a piece of real property, look in the public records of the Clerk of Courts or county recorder in the judicial district where the property is located. These liens are usually listed on the recorder office's website. Different types of Ohio liens, like Ohio mechanic's liens or Ohio construction liens, may be maintained at a different public office.
What Is a Lien?
Everybody knows what a debt is: owing money to an individual or a business. The person who owes the money is the debtor, and the individual or entity owed is the creditor. Most people incur daily debts as they buy things on credit cards. But debts can also be recurring, like the amount owed every month for a mortgage or for apartment rent.
Sometimes, like with a mortgage or a credit card, the debt is too large to pay at one time and the debtor pays it over time with interest.
While many debtors make good on their debts by paying them, some don't, won't or can't. When a debtor gets seriously behind, the creditor may wonder if they will ever see the money again. To prevent unpleasant surprises, creditors can take a security interest in an asset belonging to the debtor. These are called property liens.
Consensual vs. Involuntary Liens
Ohio lien laws recognize both consensual and involuntary liens. Creditors often retain a security interest in property when they lend money to someone to buy a house or a vehicle. The creditor does this in order to guarantee the underlying obligation. This security interest is generally a voluntary or consensual lien, since the debtor accepts the lien in order to get the purchase money loan.
But some liens in Ohio are involuntary. These are liens that are established by a creditor who did not lend purchase money to the debtor. For example, if someone fails to pay off their income tax debt to the IRS, the taxing authorities can place a tax lien on the person's bank accounts or real estate in Ohio, as in every state.
Since the debtor doesn't need to give an okay for this, it is not consensual, and the debtor might not even know about it, but the lien is just as effective. Other involuntary liens in Ohio include mechanic's liens, construction liens, and state and federal tax liens.
How Liens Work
The purpose of a lien is to give a creditor the right to sell assets or property that belong to the debtor in order to get money they are owed. This property serves as the collateral for the loan or debt. The debtor cannot dispose of the property that is the subject of the lien without paying off the lien holder or otherwise getting their permission.
In many cases, the lien holder/creditor can follow state procedures to arrange for the assets or property to be sold to pay off the lien.
While this often happens for vehicle purchase loan liens when the owner misses a payment or two, a creditor with a real property lien may record their lien to protect their interest and simply wait for the owner to sell the property – the lien holder gets paid through the escrow process.
Real Property Liens
Liens on real property are usually filed with a local government office, often termed the recorder's office. Recording a lien informs the public that a lien holder has an interest in the property, and the debtor cannot sell clear title with a lien.
Rather, any transfer of the property must include repayment of the lien amount to the creditor or include some other arrangement to release the lien.
Common types of real property liens include purchase money liens or mortgages, mechanic's liens, and judgment liens. A creditor with collateral rights from a mortgage loan can obtain a first-order property lien after the debtor misses payments. Filing a property lien indicates that the creditor intends to foreclose on and sell the property if the debt is not paid.
Mechanic's Liens for Contractors
A mechanic’s lien is a lien filed by a contractor who performed work on a home. If the debtor doesn't pay for the labor, the contractor gets the right to use the property as collateral by filing a mechanic's lien. If a creditor sues a debtor in court and wins a judgment against them, that creditor may also file a lien against the home to cover the unpaid bill.
Ohio Property Liens
There is not one national lien law; states enact their own laws and procedures regarding property liens, and these differ from state to state. Some states permit property liens on personal property like art work or jewelry, others restrict them only to real property.
That means that even if an individual understands how property liens work in one state, they will need to check before assuming another state has similar procedures.
So how do property liens work in Ohio? Different rules apply to different types of liens. Keep in mind that the Ohio lien is a legal claim on property for the payment of debt. It prevents the debtor from receiving money from the sale of the property until the obligation to the creditor is satisfied. The most common type of lien in Ohio is the judgment lien.
Judgment Liens in Ohio
In Ohio, a judgment lien is one way in which someone who wins a money judgment in court against an individual can collect it. The lien can only be attached to real estate, like a home, a house, a piece of commercial property or raw land. Other liens, however, can be attached to personal property.
Judgment liens in Ohio are governed by Ohio Revised Code, Title 23, Chapter 2329. The law provides that any court judgment in Ohio is a lien against the real property of the judgment debtor in any county of the state when a certificate of the judgment is filed in the office of the clerk of the court of common pleas of that county. The judgment certificate must provide:
- Name of court.
- Title and number of court case.
- Names of judgment creditors and judgment debtors.
- Amount of judgment and costs.
- Rate of interest if judgment provides for interest.
- Date from which interest accrues.
- Date of court judgment.
- Volume and page of journal entry.
Filing the Judgment With the County Recorder
The affidavit or a certified copy of the judgment must be filed in the office of the county recorder of the county in which the land is situated. Judgment liens in Ohio remain attached to the debtor's property for five years, even if it changes hands during that period.
Note that nobody can get a judgment lien on a home without first getting a judgment against the homeowner. Since a homeowner likely would be aware of any court judgments against them, they would know whether they might be exposed to a judgment lien.
Mechanic's Liens in Ohio
Most Ohio homeowners will never encounter a mechanic's lien. This lien is a legal document that is filed against real property in an Ohio county clerk's office in the county where the property is located. Once a mechanic's lien is filed, it means that the title to the property is subject to the contractor's financial interest in it.
In Ohio, mechanic's liens are filed by contractors or subcontractors who perform work on real estate, but who have not been paid. Filing a mechanic's lien is a three-step process, which, for large projects, requires filing:
- Notice of commencement of the work.
- Notice of furnishing materials.
- Mechanic's lien.
For work on single-family homes, the contractor can skip the first two steps. They can file the lien directly with a government agency.
Notices Required for Mechanic's Liens in Ohio
- Notice of Commencement: Ohio requires that before a contractor begins to perform certain property improvements, the owner or the contractor must file a Notice of Commencement. Under Ohio Revised Code Section 1311.04, home construction contracts for single- and double-family homes are exempted from this requirement. When required, the notice must contain the company's name, the property owner's name, the location and financing details.
- Notice of Furnishing: Subcontractors on large projects must file a Notice of Furnishing with the same county clerk's office. This document describes the work or materials they are providing for the project on the property.
- Mechanic's Lien: If the property owner refuses to pay the contractor as agreed in the property improvement contract when the work is completed, the contractor can go to the clerk's office in the Ohio county where the property is located and file a lien.
Mechanic's Liens Are Valid for Six Years
Under Ohio law, mechanic's liens are valid only for six years. This is a significant deadline since, after this time period passes, the lien is no longer valid. The contractor has six years in which to either settle with the owner or else file a lawsuit to foreclose on the lien in an Ohio state court.
That means that if someone buys a home with a mechanic's lien on it, they might be liable for the prior owner's debt to the contractor.
Title Search for Ohio Property Liens
Anyone buying property in Ohio, or considering buying real estate, will want to check the property's records to be sure that they are aware of all liens against it. A buyer who closes their purchase without checking risks takes on responsibility for all lien debts.
However, when an individual is a potential buyer, most real estate agents will track down all encumbrances on the title. Title companies also do this when the house goes into escrow.
Generally, a property owner will know about a lien if the lien is voluntary. This includes common liens like mortgages. In this case, the owner is legally obligated to let the buyer know about the lien and usually does.
Finding Involuntary Liens
But sometimes an owner is not aware of a lien – liens like mechanic's liens and judgment liens are involuntary. The creditor can file the lien without the debtor's permission or even their knowledge. That's why buyers of real estate should get information about the title deed from a real estate agent who represents them or from an official source.
Ohio liens are usually recorded in county recorder's offices or Ohio auditor's offices. These records are public information and anyone can look them up at the recorder's office located in the county where the property at issue is located.
- Investopedia: Lien
- LienItNow: Ohio Property Lien Statutes
- Ohio State Records: Liens
- Ohio Codes: Chapter 1311 | Liens
- Luftman, Heck & Associates: Liens Against Property in Ohio
- Ohio Revised Code: Ch. 2329 Execution Against Property
- Investopedia: Property Lien
- Nolo: Mechanic's Liens in Ohio for Homeowners
Teo Spengler earned a JD from U.C. Berkeley Law School. As an Assistant Attorney General in Juneau, she practiced before the Alaska Supreme Court and the U.S. Supreme Court before opening a plaintiff's personal injury practice in San Francisco. She holds both an MA and an MFA in English/writing and enjoys writing legal blogs and articles. Her work has appeared in numerous online publications including USA Today, Legal Zoom, eHow Business, Livestrong, SF Gate, Go Banking Rates, Arizona Central, Houston Chronicle, Navy Federal Credit Union, Pearson, Quicken.com, TurboTax.com, and numerous attorney websites. Spengler splits her time between the French Basque Country and Northern California.