Payment Assurance Legislation for Design Professionals
On Wednesday, March 31, 2021, the Senate Judiciary Committee invited Opponent Testimony on Senate Bill 49 at a third hearing, to create lien rights for Design Professionals. No opposition testimony was offered. We await a fourth hearing to vote the bill out of Committee, and onto the Senate Floor.
Organizations working with AIA Ohio in support of SB49 include:
- Ohio Chapter of the American Society of Landscape Architects (OCASLA)
- American Council of Engineering Companies (ACEC)
- Professional Land Surveyors of Ohio
Design Professionals in the construction industry have limited options when a commercial real estate owner does not pay for plans and specifications. Unlike construction contractors, the work of Architects, Landscape Architects, Engineers, and Surveyors does not improve the physical real estate, and therefore a Design Professional cannot file a mechanics’ lien. Ohio is the only state that offers no alternative payment protection.
The proposed Payment Assurance Program is modeled after the Brokers’ Lien codified in R.C. 1311.86 first effective in 2013. To avoid any conflict with the proposal, construction contractor mechanics’ liens always take precedence over a design professional’s lien, regardless of filing date. The Design Professional lien will apply only to commercial property, and not to residential property and not to public construction. The Design Professional lien will be subordinate to any real estate mortgage previously filed.
Indemnification for Design Professionals
Senator Louis Blessing III is sponsoring SB56, and AIA Ohio has sent a letter of support for the bill that would provide more equitable limits of indemnity clauses in design professional contracts for public improvements.
Passage of the bill would bring much needed relief to architects working on public improvement projects who are faced with the daunting risk of signing contracts that require architects to defend public entities against third-party claims before there is any determination that an error was committed by the architect providing the professional services.
Retired architects must carry “claims-made” malpractice insurance for the duration of the applicable statute of limitations.
Without passage of this bill, design professionals will continue to be asked to pay for and defend the public authority, its officers, and employees from third party claims that may be a result of issues well beyond the architect’s control and professional standard of care. The bill has been introduced by the sponsor to the Senate Judiciary Committee.
Regulatory Reduction Blocks Building Code
The Ohio Senate passed Senate Bill 9 on March 10, 2021, requiring removal of two regulations for every one enacted, thus blocking adoption of updated national model building codes. Introduced by Senator McColley (R, Napoleon) and Senator Roegner (R, Hudson), Senate Bill 9 now is assigned to the House Government Oversight Committee for three hearings.
Highly opposed by state agencies, on February 24th, representatives of the Ohio Building Officials Association and Fire Chiefs testified against the legislation.
As much of Ohio’s building and fire codes follow national or international codes for uniformity in materials and enforcement, editing the codes would have an unintended effect. The Ohio Building Officials Association is urging a legislative exception to the Ohio Board of Building Standards.
Contract Statute of Limitations Lowered
Ohio Governor Mike DeWine signed into law Senate Bill 13, to shorten the Statute of Limitations, requiring a person to allege a breach of contract claim in only 6 years, down from 8 years. Sponsored by Senator George Lang (R, West Chester), the new law is effective July 1, 2021.
Both chambers of the General Assembly passed the bill unanimously, bringing Ohio law into the mainstream of other states’ similar provisions.
This new law reduces exposure of lawsuits, of particular difficulty to retired design professionals who must carry claims-made liability insurance against personal malpractice claims during the statutory period.
The law does not impair the construction Statute of Repose barring any actions from even accruing after 10 years.
The General Assembly passed an amended Transportation Budget on March 25, 2021, sending the appropriation of $8 billion to the Governor for signature. House Bill 74 included a Senate amendment to increase the use of W-2 payroll workers employed by County Engineers. The Ohio Contractors Association opposed the increase in the “force account” threshold, as lessening available funding for independent construction contractors.
Unlike other legislation, the Governor enjoys a “line-item veto” power to delete appropriation items. It is not clear whether the Governor will delete any provision.
179d Tax Deduction Allocation Changes
The Ohio Senate concurred with House amendments in SB259 on December 22, 2020, approving language on the making the allocation of the 179d tax deductions simpler. Under the law established by SB259, a procedure is established which defines how the designer of a public building may request the allocation of a federal income tax deduction for designing energy efficient building systems in Ohio.
This new procedure, which takes effect on April 12th, requires public entities to grant allocations within 15 days of the request by qualified designers. The process also prohibits state or local entities, or its employees, from seeking fees, payment of other considerations for allocations deductions. This new language addresses long standing concerns of design professionals who have been required to provide additional services or fee reductions to be given the opportunity for the tax deduction allocation.