Articles Posted in Mechanics Liens

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Christopher B. Burke Engineering, Ltd. vs. Heritage Bank of Central IL

Docket No. 118955 Opinion Filed November 19, 2015

In this Opinion the Illinois Supreme Court comes down on the side of common sense when it comes to lienable improvements under §1 of the Illinois Mechanics Lien Act 770 ILCS 60/1. After reversing the lower Courts however, the case was sent back down to the Circuit Court to determine whether the owner of the property “knowingly permitted” improvements to be made.

Facts

In 2006 Carol and Glen Harkins (collectively, the “Harkins”) offered to buy property from Carol Shenck (“Shenck”) for the purpose of subdividing it and developing a subdivision. Burke Engineering (“Burke”) was hired by the Harkins to perform necessary prep work related to the development of the property. So while the work performed by Burke was integral to, and resulted in, improvements to the property (plat of subdivision, etc.), at the time that the work was done under a contract with Harkins, the property was still owned by Shenck. Eventually, the Harkins closed and development began according to the work done by Burke.

Heritage Bank of Central Illinois (“Heritage”) financed the purchase of the property in 2007 and held a Mortgage Lien. But thanks to the Great Recession, work stopped in 2008 and the Harkins failed to pay Burke (or anyone else). As 2008 dragged on however, Burke had still not been paid and eventually the company filed a Mechanics Lien against property – which by this time was owned by the Harkins (the “Lien”). In response, the Harkins filed Bankruptcy. This left Burke to foreclose its lien or not get paid at all.

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This post provides a brief snapshot of Mechanics Liens in Illinois. While I recommend this short post for those involved in the construction industry (Contractors, Subcontractors, Suppliers, etc.) as well as for Attorneys that represent such parties, I strongly suggest that anyone facing a potential lien claim or seeking to enforce one find an experienced practitioner. As you will see below, there are more ways to fail at enforcing a Mechanics Lien than to succeed. For still more information, see our Mechanics Lien Primer.

General Considerations

Under Illinois law a “mechanic” – usually a General Contractor, Subcontractor, Supplier, or Architect – is one that improves real property and is entitled to a lien in the property until paid. That inchoate lien may be perfected by the filing of notice and enforced through the filing of suit to foreclose. This is what we know as a Mechanics Lien.

The right to bring a Mechanics Lien is granted exclusively by statute – no such right exists at common law. With respect to improvements on private property, the Illinois Mechanics Lien Act controls; while the Liens Against Public Funds Act applies to liens on public property. Since Mechanics Liens arise only from statute, the law must be strictly construed in all respects – the most important being the absolute deadlines specified in Illinois law. Failure to adhere to the statutory deadlines is fatal to the right of the complaining party

Change Orders

When changes are made in the process of a construction project, those changes should be documented as “Change Orders.” Illinois law requires the following five (5) factors in order for a Change Order to be enforceable:

1.The extra must be outside the scope of the original contract;
2.The extra must have been ordered by the property owner;
3.The owner must agree to pay for the extra by word or deed;
4.The extra must not have been volunteered by the contractor; and
5.Extras cannot be charged to correct faulty or incomplete work.

Failure to meet these criteria will bar any claim for that extra. In short, while it is not necessary to obtain change orders in writing, it is obviously a good idea to do so and to prominently display how much the work and materials will cost, as well as the anticipated effect on the overall construction schedule.

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