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.
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
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.
Dates to Observe: General Contractor Lien on Private Property
When work is done on private property, a GC:
1.Should file notice of his lien rights within 4 months of nonpayment and, if not paid
2.Should foreclose his lien interest within 2 years of non-payment, or lose all rights.
When a General Contractor performs work on private property, the primary contract runs between the General Contractor and the owner of the private property (“Owner) or the agent for the Owner, such as a tenant or lessee. The law of contract and Private Lien Act control the General Contractor’s right to payment. To begin preserving its mechanics lien rights, the General Contractor must file a General Contractor’s Notice of Mechanics Lien Claim (“Mechanics Lien”) with the Recorder of Deeds of the County in which the subject property is located.
4-Month Period: This period applies to either filing of a Mechanics Lien by the General Contractor or commencement of an action by the General Contractor to enforce its Mechanics Lien rights. The General Contractor has four (4) months after the Completion Date to file its Mechanics Lien or file suit against the Owner to enforce its lien rights. By doing so, the General Contractor assures superiority of its claim over all other parties who may claim an interest in the subject property, including mortgagee institutions, creditors of the owner, subsequent lien claimants and subsequent purchasers of the property. Note that filing the Mechanics Lien is preferable to simply bringing suit, since filing will preserve the rights of the General Contractor in case of a mortgage foreclosure.
2-Year Period: This period applies to both the filing of a Mechanics Lien and the filing of suit to enforce that Mechanics Lien. To be entitled to any recovery under the Private Lien Act, the General Contractor must file its Mechanics Lien and bring a suit to foreclose within two (2) years of the completion of the project (“Completion Date”). Note that the Completion Date is the one on which the General Contractor rendered its final services at the subject property.
In the alternative, the General Contractor may choose not to file its Mechanics Lien at all and instead simply bring suit within the 2-Year Period. While doing so will still allow the General Contractor to proceed against the Owner for payment, it will not give the General Contractor’s claim superiority over the rights of mortgagee institutions, subsequent buyers of the property or other parties having a claim against the property, even if they have actual notice of the General Contractor’s claim.
Work Done on Public Property
When a GC works on public property the contract runs between it and the political subdivision that administers the property for the public. There is no “owner” per se, but rather an obligation that runs from that government entity to the General Contractor. Under these circumstances, the General Contractor is entitled to payment out of monies set aside for the project (“Bond”). The law of contract applies to the General Contractor’s right to payment. The Illinois Liens Against Public Funds Act (“Act”) does not permit the General Contractor to file a Mechanics Lien against the public property. Instead, the General Contractor will bring suit for an accounting and for the value of its Bond due to the default of the government entity.
Dates to Observe: The Subcontractor Lien on Private Property
When a Subcontractor performs work for a General Contractor engaged in improvements to private property, the primary contract runs between the Subcontractor and the General Contractor, with the underlying contract for the work running from the General Contractor to the Owner. The law of contract and the Private Lien Act apply to the Subcontractor’s right to payment. To enforce its lien rights, the Subcontractor must give written notice to the Owner indicating that the Subcontractor has been working at the Property and is unpaid. The Subcontractor may then file a Subcontractor’s Notice of Mechanics Lien Claim (“Mechanics Lien”) with the Recorder of Deeds of the County in which the subject property is located.
90-Day Notice: This form of notice must be given no matter what kind of private property the Subcontractor is working on. The Subcontractor must give written notice to the Owner, the Owner’s agent or the Architect, as well as any known lenders, within ninety (90) days of the Completion Date, setting forth: (i) the amount due or to become due for unpaid work; (ii) name of the Owner(s) and the lender, if known; (iii) name of the General Contractor; (iv) name of the Subcontractor; (v) what the contract was for; (vi) what was done or to be done, or what the claim is for; and (vii) a description of the premises, such as by legal description.
60-Day Notice: This form of notice must be given, in addition to 90-Day Notice, by the Subcontractor who performs work at an existing single family, owner occupied residence. The Subcontractor must give written notice to the Owner within sixty (60) days of starting work setting forth: (i) the name and address of the Subcontractor; (ii) the date on which the Subcontractor began work; (iii) the type of work done or to be done; (iv) the name of the General Contractor who requested the work; and (v) the following warning, in at least 10-point, bold face type:
Notice to Property Owner
The subcontractor providing this notice has performed work for or delivered material to your home improvement contractor. These services or materials are being used in the improvements to your residence and entitle the subcontractor to file a lien against your residence if the services or materials are not paid for by your home improvement contractor. A lien waiver will be provided to your contractor when the subcontractor is paid, and you are urged to request this waiver from your contractor when paying for your home improvements.
The 60-Day Notice must be served on the Owner(s) personally or by certified mail, return receipt requested, and if a husband and wife occupy the premises then the 60-Day Notice must be served on both. Notice by Certified Mail is deemed to be complete as of the time of mailing. The 60-Day Notice need not be signed, dated or be made under oath.
Elements of a Mechanic’s Lien Claim
A general contractor mechanic’s lien claimant must establish:
1.A valid contract;
2.With the owner of the property or someone authorized to contract on behalf of the owner;
3.For the furnishing of services or materials; and
4.Performance of the contract or a valid excuse for non-performance.
A contractor can enforce a mechanic’s lien by proving that he substantially performed the contract in a workmanlike manner.
Recording lien will benefit a contractor by blemishing the owner’s title and making it difficult to sell or refinance the property. However, to property exert all his/her rights, the contractor must file suit to foreclose his lien. The lawsuit sets in motion an eventual judicial sale of the property and provide sales proceeds from which to compensate the lien claimant.
A contractor suing to foreclose his lien must allege:
1.A brief statement of the contract,
2.The date of the contract,
3.The date of last performance under the contract,
4.The amount unpaid,
5.A description of the premises, and
6.Any other necessary facts.
770 ILCS 60/11(a)
Venue is proper in the county in which the property is located. The contractor should name as defendants the owner, general, all other lien claimants and mortgage lenders on the property. While many mechanic’s lien cases end up settling, the end-game is a foreclosure sale of the property with the court divvying up the sale proceeds among the various competing claimants.
Thanks for your time today. Do you have a situation that may call for Mechanics Lien or Construction Law expertise? Contact us at mhedayat[at]mha-law.com for a confidential consultation.