Analysis: Ohio court ruling means subs must be wary of "flow-down" provisions

09/18/2013 | Crain's Cleveland Business

A recent Ohio appeals court decision highlights the potential impact of "flow-down" clauses, which increase risk for subcontractors by holding them to a similar obligation that exists between the general contractor and the owner, writes lawyer Michael Zaverton. The court's ruling broadly construed a construction contract's flow-down clause, subordinating mechanic's liens filed by subcontractors to claims of the lender for a foreclosed project. Zaverton recommends subcontractors carefully review their contracts, attempt to contractually lower their risk of nonpayment and require the project lender to promptly inform them if funding is in question.

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