Mechanics Liens in Illinois are governed by the Illinois Mechanics LIen Act (770 ILCS 60/0.01, et seq.).
The purpose of the Mechanics Lien Act is to ensure that contractors and subcontractors who provide labor, materials, fixtures, or machinery to improve real estate receive payment for their services and materials.
The Mechanics Lien Act provides a mechanism whereby contractors and subcontractors can place a lien on property that they work to improve in the amount of the value of their services and materials. The lien prevents the owner of the property from transferring the property without first paying the contractor or subcontractor who holds the lien. A Mechanics Lien also allows the contractor or subcontractor who holds the lien to foreclose on the property and have it sold in order to satisfy the lien.
Mechanics Liens are available to subcontractors on public construction projects as well as private projects. Mechanics Liens on public projects are governed by 770 ILCS 60/23. While a lien on private property is placed on the real estate itself, a lien on a public project is placed on the amounts due to the general contractor from the governmental organization in question. Mechanics Liens are not available to general contractors on public projects.
The primary difference between a Contractor’s Mechanics Lien and a Subcontractor’s Mechanic’s Lien is that additional notice (described below) is required to perfect and enforce a Subcontractor’s Lien. A “contractor” is defined as someone who has directly contracted with the owner of the property or an agent of the owner who was knowingly permitted by the owner to contract for construction of improvements.
A “subcontractor” is defined as anyone who does not contract directly with the owner, but instead contracts with the contractor or another subcontractor. Material suppliers to contractors and subcontractors are included in this definition.
Contractor Mechanics Liens and Subcontractor Mechanics Liens have the same legal effect.
In order for either a Contractor or Subcontractor Mechanics Lien to be valid, there must be a valid contract between the general contractor and the owner or an agent of the owner. An oral contract is sufficient to satisfy this requirement. If the property is jointly owned and the contract is with only one owner, the lien will be effective against all of the co-owners if the other owners knowingly permitted the improvements to the property. Similarly, if a tenant contracts with the contractor, the lien will attach to the real estate if the landlord knowingly permitted the tenant to make the improvements in question. An owner is presumed to have “knowingly permitted” improvements if he knew of the improvement and failed to protest or accepted the benefits of the improvement.
Mechanics Liens have priority over later encumbrances to the property such as mortgages and later liens. According to the “relation-back” doctrine, the effective date of the Mechanics Lien for the purpose of determining priority is the date of the contract. This means that the Mechanics Lien will have priority over encumbrances to the property that are recorded between the date of the contract and the date that the Mechanics Lien is recorded.
Mechanics Liens have priority of mortgages that were recorded prior to the date of the contract to the extent that the value of the property was increased based on the work in question.
A series of steps must be followed by the holder of a Mechanics Lien by strict deadlines in order to prevent the holder from losing his or her lien rights. This is called “perfecting” a Mechanics Lien. In addition to the recording and enforcement deadlines required of general contractors, subcontractors are required to send additional notices in order to perfect their Mechanics Liens.
Both general contractors and subcontractors are required to file a claim for lien with the recorder of deeds office within 4 months of the last day of work. The claim must include the following information:
If the lien is against an owner-occupied residence, the contractor must serve a recorded copy of the lien upon the owner within 10 days of the date of recording.
If the contractor or subcontractor fails to timely record the lien claim, or if the lien claim that is filed is defective, the lien will not be effective against lenders, future owners and other third parties, but may still be effective against the original owner.
In order to preserve their lien rights, the contractor or subcontractor must file suit to foreclose the lien within 2 years of the last day of work.
In addition to the 4 month recording requirement and the 2 year deadline to file suit, which apply to both general contractors and subcontractors, subcontractors are required to provide certain additional notices to preserve their lien rights.
Section 24 of the Mechanics Lien Act requires that within 90 days of the last date that the subcontractor worked on the project, the subcontractor must deliver notice of its claim to the owner by certified mail with return receipt requested or by personal service. The information required to be included in the notice is substantially similar to the information included in the recorded lien claim.
The 90-Day Notice may not be required if the general contractor has provided a sworn statement that includes the subcontractor. However, it is good practice to serve the 90-Day Notice even if you believe that a sworn statement exists.
In addition to the Subcontractor’s 90-Day Notice, subcontractors working on single family owner-occupied residences must deliver notice to the owner within 60 days of the first day of work containing:
NOTICE TO 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 labor, services, material, fixtures, apparatus or machinery, forms or form work 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 notice must be delivered to the owner by certified mail, return receipt requested and a copy must be sent to the general contractor.
In order to foreclose on a Mechanics Lien, a contractor or subcontractor may file suit in the county that contains the real estate within 2 years of the last day of work. The suit must include the owner and any other entities with an interest in or encumbrance on the property, such as mortgagees and other Mechanics Lien claimants. If a subcontractor is enforcing, the general contractor and anyone else in the chain of contract between the general and the subcontractor must be named as a party.
The lawsuit requests that the court order the property to be sold in order to satisfy your Mechanics Lien and other encumbrances on the property.
A successful Mechanics Lien claimant is entitled to the amount due under the contract plus interest at a rate of 10% per annum and attorney fees required to enforce the lien.
Section 34 of the Mechanics Lien Act permits owners to serve notice on a lien claimant requiring the lien claimant to file suit to foreclose the lien within 30 days of the notice. If the lien claimant fails to do so, he or she will forfeit any lien rights.