Landlord’s Liens in Ohio: A Tenant’s Perspective
Relationships can be difficult. Especially when one sours and your stuff ends up on the wrong side of a locked door. What if thousands of dollars in office equipment, business inventory or merchandise is sold at auction to pay delinquencies under your lease? That would not be ideal for any business owner trying to maintain or grow their business.
Some states give landlords the automatic right to do just that. These states have created a statutory landlord’s lien, also called a distress lien. The statutory landlord’s lien gives a landlord a secured interest in the personal property of a tenant in certain circumstances, such as if the tenant fails to pay rent owed under its lease. When this happens, the landlord may enforce its lien by repossessing the tenant’s property and selling it to pay debts owed under the lease.
Ohio law doesn’t support the statutory landlord’s lien. But tenants shouldn’t breathe too easily. While there is no statutory landlord’s lien available in Ohio, the courts will enforce a consensual landlord’s lien. This means landlords can include a provision in the lease that will give them a secured interest in a tenant’s personal property. A consensual landlord’s lien functions similarly to a statutory landlord’s lien. If a tenant agrees to such a provision in their lease and fails to pay rent owed under the lease, the landlord can enforce its lien by repossessing the property and selling it to pay debts owed under the lease.
Under such a scenario, the outcome for the tenant could be bad, particularly if the tenant financed the property subject to the landlord’s lien. The good news is that in Ohio a consensual landlord’s lien is typically negotiable. The strength of a tenant’s bargaining power to negotiate such a provision will depend on various factors, such as the strength of the tenant’s business operations and reputation in the industry, whether the landlord is investing any money in the space to help the tenant get started, and the relative sophistication of both parties.
When reviewing a lease in Ohio, pay attention to language that claims a lien in favor of the landlord on a tenant’s personal property. If it’s in there, consider what property would be subject to that lien and whether there’s an alternative means to providing the security the landlord wants. And, be sure to consult with an attorney to ensure the best possible outcome.