Are Commercial Lien Filing Services Engaged in the Unauthorized Practice of Law?

By: William E. Kelley, Jr., LEED AP

In a recent opinion, the Supreme Court of Ohio declared that non-lawyers who prepare affidavits for mechanic’s liens may unwittingly engage in the unauthorized practice of law in the State of Ohio.  In Ohio State Bar Association v. Lienguard, Inc., 934 N.E.2d 337 (Ohio 2010), the Supreme Court of Ohio addressed whether a commercial lien filing service company that prepared and filed an Affidavit for Mechanic’s Lien on behalf of a contractor involved in an Ohio construction project had impermissibly engaged in the unauthorized practice of law.  The Supreme Court of Ohio stated that under Ohio law, “advising others of their legal rights and responsibilities is the practice of law, as is the preparation of legal pleadings and other legal papers without the supervision of an attorney licensed in Ohio.”  Consequently, when a commercial lien filing company prepared, signed, filed and pursued affidavits of mechanic’s liens for third-parties in the State of Ohio, that company impermissibly engaged in the unauthorized practice of law.  What is not addressed in the Lienguard decision is what effect, if any, this ruling may have on the validity of mechanic’s liens prepared and recorded by commercial lien filing services using non-lawyers.

A mechanic’s lien is a powerful payment remedy for the construction industry.  However, because mechanic’s liens result in a burden on the owner’s real estate title, mechanic’s lien statutes are strictly interpreted, and the failure to comply with the statutory requirements can render liens invalid and unenforceable.  For those entities in the construction industry that are engaged in projects in multiple states, it is essential to be familiar with the mechanic’s lien and payment remedy statutes in each of those states.    Prudent companies should not only be familiar with those laws, but also the state-by-state rules and restrictions that may apply to use of non-lawyers for preparation and filing of mechanic’s liens.  Failure to properly review those requirements and to strictly comply with the lien statutes may result in losing the right to secure otherwise valid claims for payment.

Other states, including Indiana, have rules similar to Ohio that prohibit the unauthorized practice of law by non-lawyers.  What remains to be seen is whether Indiana and other states will follow suit with Ohio by declaring the preparation of mechanic’s lien affidavits and related documents to constitute the “practice of law”, and what the resulting effect may be on commercial lien filing services engaged in preparation of affidavits and lien documents.