Illinois Legislative Amendment May Save Mechanic Lien Rights For Home Remodelers

The Home Repair and Remodeling Act in Illinois has been the subject of some controversy lately.

The Act requires any person “engaging in the business of home repair and remodeling…to provide its customers a copy of the ‘Home Repair: Know Your Consumer Rights’ pamphlet prior” to the start of any work, if the contract exceeded $1000.00.  (Download PDF here:  Home Repair: Know Your Consumer Rights)

Clearly, this applies to a lot of folks.    The controversy in Illinois didn’t necessarily concern the pamphlet requirement itself, but the punishment levied against those who failed to provide the pamphlet.   According to the way the law was previously written (and / or interpreted by the courts), contracts were being invalidated as a whole and mechanic liens were disallowed.

In an article written by Illinois real estate attorney for the Illinois State Bar Association, Adam Whiteman summarized the Act’s problem with this:

The Home Repair Act was not intended to automatically invalidate contracts and mechanic’s liens in the face of any technical violation. Such a result would have the effect of ignoring over 100 years of interpretation and application of the Mechanic’s Lien Act (770 ILCS 60/.01 et seq.). The Mechanic’s Lien act permits a lien based on an oral contract. As it is presently interpreted, the Home Repair Act forbids oral contracts in connection with home repair and remodeling projects.

So, the Home Repair and Remodeling Act is reportedly “fixed,” as per an act through the Illinois General Assembly and effective July 12, 2010.   Instead of the non-compliance resulting in invalid contracts and mechanics liens, the new law allows homeowners to pursue a remedy by suing the contractor under the consumer fraud act (a serious remedy, but not as severe).

This appears to be good news for Illinois remodelers and repair workers.   However, the pamphlet is still important.

Alert: Virginia General Assembly Tweaks Mechanic’s Lien Notice Requirements

We’re pleased to welcome Christopher Hill back to the Construction Lien Blog for this guest post, bringing information about important changes to mechanic lien statutes in Virgina.  Christopher G. Hill is lawyer and owner of the Richmond, VA firm, The Law Office of Christopher G. Hill, PC, a LEED AP, and member of Virginia’s Legal Elite in Construction Law. He specializes in mechanic’s liens, contract review and consulting, occupational safety issues (VOSH and OSHA), and risk management for construction professionals. Mr. Hill authors the Construction Law Musings blog where he discusses legal and policy issues relevant to construction professionals.

I want to thank Scott for, once again, letting me guest post here at the Construction and Mechanic’s Lien blog.

I have discussed the picky nature of Virginia mechanic’s liens often over at my Construction Law Musings blog. Not only are the requirements and details strictly enforced, but the Virginia General Assembly seems to feel the need to tweak them in each of its sessions.

The latest change involves the use of a mechanic’s lien agent on residential projects. Beginning at the start of this month, July 1, 2010, a contractor can no longer depend on the failure of the owner to list a mechanic’s lien agent on the posted building permit. The new statute requires that a contractor go beyond merely reading the building permit and make a reasonable inquiry with the local building authority to determine the identity of the mechanic’s lien agent.

Another key change to this provision allows an owner to amend a building permit to add a mechanic’s lien agent at a date sometime after the beginning of construction. Based on this change to the statute, contractors must be constantly vigilant to any lien agent changes to assure that their required 30 day notices to the agent are properly filed because the owner is likely to bring a defense of failure to give notice by a contractor or subcontractor (regardless of if the trade is finished or not) should such notices remain un-filed or un-amended.

Aside from the obvious need to keep abreast of the changes to the mechanic’s lien statutes in Virginia, contractors and other construction professionals must also update their long standing policies for notices on residential projects. Consultation with an experienced construction attorney is key in assuring that you are both up to speed on legislative and judicial changes and that your business procedures take such changes into account.

Three Ways We’ve Improved Commenting on the Construction Lien Blog

Here at the Construction Lien Blog, we love to talk about mechanic liens.    If you’re a reader, you likely have an interest in mechanic liens and mechanic lien laws too.   As such, we want to hear from you.

This is a WordPress blog, and since it’s launch we’ve done very little to make commenting easy or efficient.   We know.    Things have changed here in three important ways:

1. We’ve installed CommentLuv.   Not only is it easier to post comments, but CommentLuv will find the most recent posts to your blog and add them to your comment…thus, increasing traffic to your blog or website.

2. Our blog “follows” comments.    You may or may not know this, but the default settings on most blogs instructs search engines to “nofollow” comment links, meaning your comment does 0 for your search engine value.   We appreciate those who comment on our blog posts and participate in the conversation – and so we’ve turned this off, asking the search engines to index any links within our comments.

3. Add your Twitter username to your comments.   Whenever anyone is viewing your post, they can click on your twitter information and follow you.

As you can see, these three improvements make commenting at the Construction Lien Blog a better experience…and a more beneficial experience for you.  Go ahead, give it a try.   Tell us what you think, or how we can make commenting even better and easier.

Mid-Week Review: Great Articles About Mechanic Liens

Believe it or not, the Internet is full of really great news and information about mechanics liens…and it gets fuller by the hour.  Literally.

Here at the Construction Lien Blog we try our best to write posts concerning important updates to mechanic lien laws, or to point out relevant news stories out there that offer lessons about mechanic liens…but it’s so difficult to relay everything!   As such, we’re going to start a new segment here called the “Mid-Week Review.”  Each Wednesday, we’ll post links and short commentary on the law changes, news articles, cases and commentary out there that relate to mechanic liens, preliminary notices, bond claims or miller act claims.

It’s Wednesday now…so here goes:

New Jersey Construction Lien Law Revisions Clear First Hurdle (read)
Thanks to New Jersey’s Cole Scholtz for posting an article on their JD Supra page concerning progress on the state’s consideration of changes to the New Jersey Construction Lien Law (N.J.S.A. 2A:44A-1, et seq.).   It recently passed the NJ Assembly unanimously, and is now moving along to the Senate.   We previously wrote about these pending changes.

Missouri Lien Law Changes Signed Into Law – Effective Nov 1 (read)
Home Builders Association of St. Louis and Eastern Missouri posted an update on their blog that Missouri’s Governor Nixon has signed the Lien Law Changes bill into law this week.    We previously wrote about this bill on our blog here.   The changes take effect on November 1st.

Minnesota Contract Provision Created Lien Waiver – Which Is Invalid (read)
Kraus-Anderson Construction v. Superior Vista LLC was decided by the Minn. Court of Appeals last week, considering a contract provision that impacted a general contractor’s lien rights.   The court found that where the general contractor entered into an agreement with a project’s owner and lenders stating that the contractor agreed “not to . . . assert or file any mechanics’ or materialmans’ lien now or hereafter existing or to sue upon or collect or receive payment of,” until a lender’s claim has been paid in full, the provision created a “de facto” mechanic’s lien waiver, which is a violation of  Minn. Stat. sec. 337.10, subd. 2.  Read the full case opinion here.

What Is The Last Day of Substantial Work in Idaho? (read)
One of our favorite websites – Avvo.com – lets consumers and businesses ask questions to licensed attorneys…for free.   Someone in Idaho just posed this question, which is an important question in determining when a lien is or is not timely.  This question was answered for Idaho specially on Avvo.com, and you can read the question and answer here.

Fewer Mechanic Lien Filings in 2010 – Good or Bad News for Economy? (read)
Louisville, KY’s business journal is reporting that a specific county there has seen a pretty drastic reduction in mechanic lien filings.  Not sure what this says about the rest of the country’s filing stats, but it begs the question in this article – is fewer mechanic liens a good or bad sign for the construction industry?

Massachusetts Mechanic Lien Digest (read)
The Massachusetts Real Estate Blog (operated by Vetstein Law Group) just posted a great primer on mechanic lien law in that state.    You can find more information on Massachusetts mechanic liens and preliminary notices right here on our blog, too, at the Massachusetts tag.

Beauty and Aggravation of the Mechanics Lien (read)
Ned Pelger, P.E. runs an excellent and informative website at ConstructionKnowledget.net, and he recently posted on his blog about this blog and the importance of mechanic liens in general.   First, a big thanks to Ned for the mention.  Second, Ned’s post (and site) contains some great overview information about why liens are important.

Express Lien Changes Name To Zlien

Express Lien, a leader in mechanics lien management and filing, today announced its new company name, Zlien.

Zlien prepares and files construction notices, mechanics liens and bond claims for those in the construction industry across the nation. Zlien is also a leader in mechanic lien management, offering clients a web-based application that manages mechanic lien and preliminary notice deadlines and requirements.

The new name reflects the company’s unique collection of services, and its position as a leader in filing and managing mechanic liens.

Scott Wolfe Jr., Chief Executive Officer for Zlien explains:

Today’s unveiling of Zlien marks a significant milestone for our company.  The Zlien name embodies our ability and our commitment to continue helping those in the construction industry Lien Smarter.

In conjunction with the name change, the company also announced two new websites beta launching in the next two weeks:

— LienPilot.com is an independent home for our web-based mechanics lien deadline calculator and management software, previously housed within the expresslien.com website.

— MechanicLien.com is an independent home for our huge (and growing) database of mechanic lien laws, forms and digests. Not only does this site provide users a wealth of mechanic lien law information free, but it’s also extremely easy to navigate and use.

Wolfe Jr. further explains:

The Express Lien name worked great when we started this company in 2006 – because we exclusively filed mechanics liens.  Today, we file mechanics liens, preliminary notices, bond claims and all types of documents for contractors and suppliers across the nation, and we also lead the industry in providing lien law information, and provide a premiere web-based lien management software that calculates mechanic lien deadlines and requirements. Our new name reflects these product advancements, and gives us room to grow more.

Effective immediately, all future business activity will be conducted under the new name. Beginning today, our website may be accessed at the new (http://www.zlienit.com) and the old domain (http://www.expresslien.com) during the transition period. There has been no change in the company’s management or ownership.

About Zlien (formerly Express Lien)

Zlien services help the construction industry Lien Smarter…and Get Paid. Zlien prepares and files mechanics liens, notices to owner, bond claims and other documents on construction projects across the nation. Zlien also offers a web-based mechanic lien deadline calculator and management application, the Lien Pilot.

Filing Mistake Invalidates $12.4 Million Mechanics Lien

Mechanic lien laws are highly technical, and they frequently change in unpredictable ways  (see recent controversial example from Washington).   We’ve expressed the sentiment a hundred times on this mechanics lien blog – it’s very easy to make a common lien mistake.

Unfortunately for JE Dunn Construction Co., it seems someone may have really dropped the ball filing its $12.4 Million mechanics lien.   The developer of a stalled West Edge project in Kansas City now claims the construction company’s mega-lien has a mistake that invalidates it.

When it comes to filing a mechanics lien, sometimes you only get one chance to get it right. Depending on the merit of  the developer’s claim, JE Dunn Construction Co. may have gotten a very frustrating and expensive lesson about the technical nature of mechanics liens.

From the press, it looks like the lien would have converted the debt from an unsecured claim into a secured claim in the bankruptcy proceedings pending on the West Edge project.   Without the lien, the claim falls to an unsecured one, making collection a lot less likely.  That makes this lien mistake one of the country’s most expensive.

What Could Have Went Wrong?

What could have went wrong with the mechanics lien, you ask?   What kind of mistake could invalidate such a big claim?

Funny enough, the biggest claims in the world can be invalidated by just the simplest and most technical oversight.  Here are examples of common filing errors that could have cost JE Dunn Construction Co. its secured claim:

• Poorly Identifying the Property: Most states require the use of a legal property description, and others require specific descriptions of the property.   In every state, the requirement is technical, and a lien can be invalidated because of an inadequate description.  (See article about describing properties on mechanic liens).
• Signing Mistakes: Mechanic liens must be signed in a particular way.   Some states require they be notarized, some states require a verification with specific and statutory language.  The smallest waiver from these requirements can result in the mechanics lien being invalidated.  (See article on Washington lien invalidated because of verification error)
• Not Sending Notice:   Some states require notice when you begin work.  Some states require notice immediately before filing a mechanics lien.  Some states require notice immediately after filing a lien.   Failing to deliver this notice, can forfeit your mechanic lien rights.  (See blog posts about preliminary and other notices)

Who is Filing Your Mechanics Lien?

Express Lien is not a law firm, and let us be the first to tell you that if you are about to file a $12.4 Million mechanics lien, you have no business filing it without the counsel of a qualified and experienced construction attorney.   That is big money, and it’s certainly worth spending a few thousand dollars on counseling.

However, there are occasions when it doesn’t make financial or practical sense to hire an attorney to file a mechanic’s lien.  That’s when we really shine.   And some law firms - like this one in Georgia – have even recommended using a lien service to file a construction lien in the right circumstances.

What’s great about our service?   Take a look at this page which explains why you trust choose us to file your mechanics lien.

Our service is licensed, insured, bonded and experienced.

Video Demo: Calculate Mechanic Lien Deadlines

The Lien Pilot’s Deadline Calculator is an industry leading mechanic lien and preliminary notice management tool.

Your company gives our system the “trigger dates,” and our system will calculate your preliminary notice and lien deadlines for your project’s state.  You’re notified of pending deadlines through your web login, by exporting the deadlines to your Outlook or iCal desktop calendar, via RSS or through email.

When it’s time to file or deliver your document, you can do it yourself or pay a low flat fee to zlien to take care of it for your company.

Use us or not…the Lien Pilot’s lien and notice deadline calculator is always free to use. Let us help your company Lien Smarter…and Get Paid.   Here is a video to demonstrate how it works.

Pardon our Dust at the Construction Lien Blog

Pardon our dust here at the Construction Lien Blog.   We are undergoing a face-lift and ran into a glitch – thus, this generic template.    We’ll be back up and running in no-time.

What Happens After You File A Mechanics Lien

So, you fulfilled all of your notice requirements and you filed your mechanics lien on time.  The other party still hasn’t made payment, and you begin to wonder…now what?

Why Mechanics Liens Work

First, before discussing what happens after the lien is filed, let me first address why mechanics liens are effective ways to collect on non-paying projects.

This is an important point when discussing what happens after a mechanics lien is filed because it touches on why mechanics liens sometimes prompt payment without any further action after the filing itself.

Mechanics Liens are effective for the following reasons:

- Without a mechanics lien, you can only sue the party you contracted with.  With a lien, you can sue the property owner, those up the contracting chain from you, and the surety bonding the project.

- A mechanics lien can prevent a property from being sold, transferred or refinanced

- Without a mechanics lien, you have no security when you file suit on your breach of contract claim.  With a lien, your claim has the property has security.

This is a perfect storm of aggravation to the project and the parties working on the project, that frequently results in getting you paid without any action beyond filing the lien.   See how it worked on the MGM Project in Vegas here.

What Happens Next?

But what happens if your mechanics lien does not produce immediate payment?  See article on this topic here.

Most states require the lien be “enforced” or “foreclosed.”   This typically means that you bring a lawsuit against the person you contracted with and/or the other relevant parties (property owner, prime contractor, surety, etc.).    In most circumstances, the lien stays on the books while your action is pending, and if you win…you have the security of the property to ensure you get paid.

It is very important to recognize that you only have so long to enforce or foreclose on your lien.   If you fail to do this within the specified time frame…your mechanics lien will expire completely.

The time you have to enforce or foreclose on a mechanics lien varies depending on the state where the project is located.   We have Construction Lien Law Summaries, and specifically the time period to enforce mechanics liens from each state, available on our State-By-State Lien Law Summaries and Forms Page.

And don’t forget about Zlien’s Lien Pilot, which calculates your project’s deadlines for you (including your deadline to foreclose / enforce a mechanics lien).

What Happens When My Lien Expires?

Well, this is a pretty sensitive subject.   You can always bring your lawsuit against the party in your contract (if you are within the statute of limitations for your state).

But with respect to the mechanic lien’s viability, Kelly Davis has a great article published on her blog on this issue:   Didn’t Foreclose on your Mechanics Lien?  What Should You Do Now?

Changes to Lien Law Pending in New Jersey and Michigan Legislatures

Courts around the country are constantly construing the mechanic or construction lien laws, making compliance with these statutes sometimes feel like a moving target.    A recent case out of the Washington Court of Appeals confirms this theory, which overturned a previous decision three years after-the-fact, to completely change the way liens must be signed by corporations in Washington state.

But it isn’t just the courts that change mechanic lien laws.   State legislatures are constantly proposing bills that will alter the lien statutes completely.   Currently, two such bills are pending in New Jersey and Michigan.

The Michigan Mechanic Lien Legislation

The Michigan legislation is actually getting a great deal of coverage on Twitter (yes, twitter).   See twitter posts from the legislature, and a legislator, here and here.    This particular bill’s summary provides that it “would amend the Construction Lien Act to repeal provisions concerning the Homeowner Construction Lien Recovery Fund (HCLRF), which is essentially insolvent, and cannot meet the demand for claims from the fund.”    Read about House Bill 5830 at the Legislative Website here.

We actually wrote about the problems with the Lien Recovery Fund back in January (Michigan Lien Recovery Fund Raises White Flag).

While a good idea on paper, the Lien Recovery Fund just couldn’t make ends meet.   This legislation in Michigan is almost a foregone conclusion, as the fund itself is insolvent.   The bill is just formally closing the book on it.

The New Jersey Mechanic Lien Legislation

The legislation pending in New Jersey, in comparison to the Michigan legislation, may have a bit more of an effect on that state’s mechanic lien statutes if passed.   The bill doesn’t aim to make substantial change to the mechanic lien requirements, but many contractors and suppliers in New Jersey may be effected by the suggested changes.   Read about NJ Assembly Bill 410 at the Legislative website here.

Here is a quote of the bill’s summary:

This bill revises the “Construction Lien Law,” which was enacted in 1993, by:
(1) clarifying and adding certain defined terms, to conform to actual construction industry usage;
(2) clarifying procedures for the filing and amending of the lien claim and for the calculation, distribution and enforcement of the lien fund;
(3) providing more specific provisions for discharging a satisfied lien claim;
(4) further defining the arbitrator’s role;
(5) modifying time limits for filing and perfecting residential construction contract lien claims;
(6) specifying the application of lien claims to community association property; and
(7) addressing certain ambiguities as to mortgage priorities with respect to lien claims.

We’ll monitor these bills and keep you update.