Every state has a separate statute which dictates what qualifies as a valid mechanics lien. Some are very precise in requirements, while others can be vague and left up to the courts to fill in the blanks. Ohio’s mechanics lien statute is explicit when stating that a supplier must be furnishing materials used for an improvement in order to be entitled to a mechanics lien. Ohio courts remind us that the burden is on the supplier to show the use for an improvement in order to prove a valid mechanics lien.
The Case Background
Great Lakes Petroleum Co. (Great Lakes) was supplying diesel fuel to Jayco, Inc. (Jayco) allegedly to make improvements to a property owned by VF Holdings. Great Lakes claimed that Jayco used this diesel fuel towards the improvement through an alter ego, Bulldog Asset Recovery and Collection (Bulldog). Bulldog was in charge of excavating and leveling the property through a lease agreement it had with VF Holdings. Great Lakes supplied diesel fuel multiple times during the lease period. It submitted invoices to prove so. Great Lakes claimed an outstanding debt of over $95,000. On June 7, 2011, Great Lakes recorded an affidavit of mechanics lien against 48 acres of VF Holdings’ property. Only 20 acres was in the lease agreement. The trial court found that Great Lakes did not prove a valid mechanics lien and an appeal ensued.
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In Great Lakes Petroleum, Co. v. Jayco, Inc. 2015 Ohio 1034, the appellate court affirmed the trial court’s ruling that Great Lakes did not have a valid mechanics lien. Although the materials furnished satisfy the requirement for a valid mechanics lien, the question remained whether the lease agreement qualified as a contract for improvement. The court directly quoted the specific statutory provisions pertaining to this scenario:
An improvement is defined in R.C. 1311.01(J) to include
constructing, erecting, altering, repairing, demolishing, or removing any building or appurtenance thereto, fixture, bridge, or other structure, and any gas pipeline or well including, but not limited to, a well drilled or constructed for the production of oil or gas; the furnishing of tile for the drainage of any lot or land; the excavation, cleanup, or removal of hazardous material or waste from real property; the enhancement or embellishment of real property by seeding, sodding, or the planting thereon of any shrubs, trees, plants, vines, small fruits, flowers, or nursery stock of any kind; and the grading or filling to establish a grade.
The court reasoned that although some of the action required by the lease agreement could be seen as improvements, the agreement as a whole was never contemplated as much by Great Lakes, Bulldog, or VF Holdings. Great Lakes had a long existing relationship supplying diesel fuel to Jayco to extract steel mill slag from multiple locations. This does not qualify as an improvement. As for the other actions required by the lease, the level and grading to be completed at the end of the lease never occurred, and the mounds that were built were required the local municipality, not by the lease. Therefore, no improvement existed where Great Lakes furnished materials making the mechanics lien invalid.
Services rendered, materials furnished, labor provided… you name it. If you want a valid mechanics lien, the work you have done must be associated with a contract for improvement, especially in Ohio. States definitions of what an improvement is may vary. It is important to understand your state’s laws before even entering into a contract. Ignorance is only bliss until consequences arise. Know the law and review your contract before signing. You may save yourself from losing your lien rights or much worse.