Nick J. Pieczonka | Taft Stettinius & Hollister | April 1, 2019
The construction industry is facing a relatively novel issue—how mechanics’ lien statutes relate to a contractor’s work on an optical network. An optical network—a data communication network built with fiber optic technology—uses a series of optical fiber cables, placed on properties typically owned by someone other than the network provider and spread out over a large geographic area. An operator connects and operates this network from real property known as an exchange, which the provider typically owns or leases. Below are two of the issues commonly encountered during this process.
1. Can a lien attach to property owned or leased by the network provider, even though the contractor performed no physical labor at that property?
The end user, not the optical network provider, generally performs work on optical networks on property it owns. So can a lien attach to the optical network provider’s real property—which houses the network’s exchange—even though no work took place on that property? The answer appears to be yes. For example, Ohio’s Revised Code §1311.08 provides, in pertinent part:
[W]here work or labor has been performed or material has been furnished for improvements which are located on separate tracts or parcels of land but operated as an entire plant or concern, and erected under one general contract, the lien for the labor or work performed or material furnished attaches to all such improvements, together with the land upon, around, or in front of which such labor or work is performed or material is furnished, the same as provided in §1311.02 and §1311.03 and of the Revised Code in case of a single improvement, and it is not necessary to file a separate lien for each improvement.
As a result, because the contractor’s work benefits the entire network and the provider operates the network at an exchange it owns or leases, the lien may attach to the entire improvement, including the exchange itself. See also In re Desert Village Ltd. Partnership, 321 B.R. 443, 448 (Bankr. N.D. Ohio 2004) (work to residential tracts surrounding a golf course under one contract was enough to create a lien on the golf course). See also R.C. §1311.22 (“§1311.01 to §1311.22 of the Revised Code are to be construed liberally to secure the beneficial results, intents, and purposes thereof”). Indeed, the network provider’s lease, ownership documents, or master contract with the contractor may describe the network and the land being improved (i.e., the entire network or the exchange), which would also support the proposition that the lien can attach to the network provider’s exchange. R.C. §1311.02 (explaining that a contractor “has a lien to secure the payment therefor upon the improvement”). (Emphasis added).
2. How are work orders treated and what impact does that have?
Many network providers direct contractors to perform work by issuing work orders under a Master Services Contract. Are these work orders treated as separate contracts or are they considered part of the master contract? The answers are important to determine the last day of work. For instance, if the work orders are separate contracts, then the last day of work begins when the contractor last performed work under that work order. If, however, the Master Services Contract contains the work orders, then the last day of work begins when the contractor last performed work under the Master Services Contract.
The case law on this issue is pretty clear: work orders issued under a master contract fall within the scope of the master contract. Guernsey Bank v. Milano Sports Enters., LLC, 177 Ohio App.3d 314, 2008-Ohio-2420, 849 N.E.2d 715 (10th Dist.) (when work is performed or materials are delivered “under a continuous transaction reasonably under the general arrangement between the parties, it may be found that a lien could be properly filed within the period of the last labor performed or material delivered”). See also J& F. Harig Co. v. Fountain Square Bldg., Inc., 46 Ohio App. 157, 187 N.E. 872 (1st Dist. 1933). As a result, even though 75 days or more may have passed since a contractor performed work under one work order, it still has lien rights for that work so long as it performed other work for the provider within 75 days of a separate work order.