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.

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.

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.

Lien Law Changes Approved in Missouri and Effective August 2010

The St. Louis and Eastern Missouri Home Builders Association Blog alerted us to a change in the Missouri Mechanics Lien Law starting August 28, 2010.    The Missouri General Assembly passed House Bill 2058, which “establishes procedures for asserting a mechanic’s lien against certain residential real property.” (Read Bill Summary) (Read Full Text).

What has changed?

Most of the changes affect a claimant’s lien rights on residential property that is being sold.  Presumably, the state legislatures were concerned about innocent purchasers of residential property getting stuck with mechanics liens that weren’t filed at the time of closing, or were filed too near the closing date to get picked up in the title search.   To address this issue, they added the following procedure:

Step 1:   The property owner intended to sell the residential property is to file (and post at the job site) a Notice of Intended Sale, which identifies the closing date for the residential property.

Step 2:   All claimants (subs, contractors, suppliers) who have lien rights must file a “Notice of Rights” at least 5 days before the posted sale date.

Claimants must keep in mind two tricky features of the new rule:  (1)  If the closing date changes, it doesn’t affect when the Notice is due – it’s still due at least 5 days before the posted closing date; and (2) This does not effect the claimant’s lien deadline, before or after filing the Notice of Rights (depending on timing), the lien is still due and must still be separately filed.

The new bill makes other changes as well, which we may post about in the future.   This law goes into effect on August 28, 2010, if it is signed by the governor.   Express Lien’s forms and deadline database has already been updated to accommodate these law changes.

Washington Appeals Case Confirms Lien Requirements Are Technical, But Fighting Liens Risky

Alan Middleton of the Washington Construction Law Blog published a pithy update to its site last week concerning mechanic liens in Washington State.   In “Battle of the Lien Forms:  Claims of Lien Must Strictly Comply with the Lien Statute,” Alan reports on a recent Division II appeal decision that “underscores the need…to comply with the lien statute.”   The case is Williams v. Athletic Field Inc.

Alan’s right.   This decision really accentuates just how technical lien statutes are in Washington.  More interesting to me, however, was the decision to award the loser of the suit attorneys fees, which accentuates how risky it is to litigate the validity of a Washington construction lien.

Form, Form, Form – How to Sign A Lien

RCW 60.04.091 requires all mechanics liens to be “signed by the claimant or some person authorized to act on his or her behalf…”  The statute itself has an example form for the lien (see here), and a specific form for the claimant’s or agent’s signature.

The Division II decision released just last month (March 2010) was actually a re-consideration of the original decision.  On the matter’s first hearing, the appeals court ruled that a lien filing corporation could sign on behalf of the claimant, as the statute allows an authorized agent to sign the lien.   The court was then urged to reconsider its decision, and specifically consider the manner that the lien filing corporation signed the document.

The lien filing corporation was a corporation, and they signed the lien for the claimant using the general form provided by the legislature.   The property owner argued that the lien corporation was required to sign the lien using the corporate form for authenticated signatures in Washington.

The form used by the lien filing company stated as follows:

I am the claimant (or attorney of the claimant, or administrator, representative, or agent of the trustees of an employee benefit plan) above named; I have read or heard the foregoing claim, read and know the contents thereof and believe the same to be true and correct and that the claim of lien is not frivolous and is made with reasonable cause, and is not clearly excessive under penalty of perjury.

However, the Court held that 60.04.091(2) requires the notice of claim be acknowledged pursuant to Chapter RCW 64.08.   Therefore, despite the “lien form” in the statute having the above attestation clause, since a corporation was signing the attestation clause should have complied with RCW 64.08.070, and have the following form for corporate acknowledgement:

On this ___ day of _____, 20___, before me personally appeared ________, to me known to be the (president, vice president, secretary, treasurer, or other authorized officer or agent, as the case may be) of the corporation that executed the within and foregoing instrument, and acknowledged said instrument to be the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned, and on oath stated that he was authorized to execute said instrument and that the seal affixed is the corporate seal of said corporation.

The attestation was not sufficient, and because of this technical defect, the lien was declared null and void.

Lien Declared Invalid, but Lien Claimant Wins Attorneys Fees

Earlier this year, I wrote a blog post about the risks of litigating a construction line in Washington.    This Athletic Field decision really underlines the risks of litigating a construction lien.

According to RCW § 60.04.081(4), if someone files suit to have a construction lien removed from property records, someone is going home with attorneys fees.    If the lien is declared “frivolous and made without reasonable cause, or clearly excessive,” the property owner or interested party gets attorneys fees.  If the lien is not declared “frivolous,” the lien claimant gets attorneys fees.

There’s just one wild card:  “Although all frivolous liens are invalid, not all invalid liens are frivolous.”   Intermountain Elec., Inc. v. G-A-T Bros. Constr., Inc., 115 Wn. App. 384, 394 (2003).

So, what happens when a lien is declared invalid, but not frivolous?    That’s exactly what happened in Athletic Field.

The Court in Athletic Field held that while the lien was invalid because of the erroneous attestation clause, it was not frivolous because construction of §60.04.091 presented a debatable issue of law.    The result:  Athletic Field, the lien claimant, lost its lien right but was awarded all of its attorneys fees in defending the action to declare the lien invalid.

So, the loser was awarded attorneys fees.

What This Means

This decision largely means three things:

1. Make sure your lien meets the technical requirements of the lien statutes
2. Washington liens are very powerful, because even invalid liens are risky to litigate and invalidate
3. If you want to challenge a Washington construction lien, tread carefully

Illinois Makes One Small Change to Lien Statute that affects General Contractors

Effective on the first of this year (Jan 1 2010), reports are abound that the Illinois Mechanics Lien Act contains an amendment that changes the notice requirements for contractors on owner-occupied single family residences.

Section 7 of the Illinois Mechanics Lien Act has been amended to include the following language:

(d) A contractor for improvements of an owner-occupied single-family residence must give the owner written notice within 10 days after recording a lien against any property of the owner.   The notice is served when it is sent or personally delivered.  If timely notice is not given and, as a result, the owner has suffered damages before notice is given, the lien is extinguished to the extent of the damages.  The mere recording of the lien claim is not considered damages.  This subsection does not apply to subcontractors, and it applies only to contracts entered into after the effective date of this amendment [January 1, 2010].

Read the full text of the Public Act on the Illinois General Assembly website.

So, starting January 1, 2010, all original contractors on owner-occupied single family residences must give this notice to the owner post-filing a lien.

If you order your lien through Express Lien, sit back and relax, because we always send notice to the owner, certified mail.

Related articles by Zemanta

• Lien Law Online eLert for 1/13/2010 – Illinois (lienlawonline.blogspot.com)
• Can a Sub Still Have a Valid Lien Without Supplying an Owner The Required 60-Day Notice?… An Exception to Weather-Tite? – Crawford Supply Co. v. Schwartz, et al. (illinoisconstructionlawblog.com)

Michigan Lien Recovery Fund Raises White Flag

Cavanaugh & Quesada, PLC’s Michigan Construction Law Update posted an troubling blog post just before the end of the year concerning the Michigan Lien Recovery Fund.

In plain language, the Michigan Lien Recovery Fund is a self-sustaining fund that steps in and pays lien claims on residential properties.   A homeowner can avoid paying for work twice by dumping claimants to the fund, and claimants can recover money owed by seeking judgment against the fund (as opposed to the homeowner).

There are some rules, restrictions and limitations, of course (such as a $75k cap per residential structure)…but in theory, the whole thing works out.

As the turbulent 2009 comes to a close, however, there is trouble with the Michigan Lien Recovery Fund:  it’s completely out of money.

Earlier in December, the Department of Engery, Labor and Economic Growth posted this update about the status of the Fund on their website:

At the present time, the Fund has become essentially insolvent, with a declining balance and an ineffective funding source to cover pending claims. The Department is seeking to repeal the Fund through legislative action.

According to the DELEG and Michigan Construction Law Update, the lack of money is fact, and not fiction:

The Fund is currently involved in over 250 pending lawsuits involving more than 350 claims against it that total more than $18 million. In 2009, Judgments against the Fund have averaged $123,800 per month. By mid-October, there was only $524,000 remaining in Fund coffers.  (from Mich. Construction Law Update)

The Fund sought a judicial remedy to the situation, but they received an adverse ruling in court.   For the time being, everyone involved is really stuck between a rock and a hard place (homeowners are exposed, claimants don’t know where to turn, the Fund is a lame duck, etc.).

This doesn’t / won’t necessarily affect a Michigan contractor or supplier’s lien and claim rights, but it certainly implicates the method of foreclosing upon claims.  Stay tuned.

California Lien Law Forms, Procedures and Laws Changing on January 1, 2011

The California legislature just passed an act to amend California Code § 3084 and 3146, relating to construction liens, and the new regulatory scheme is set to take effect on January 1, 2011.   While the effective date is still more than a year away, it’s important for potential claimants to understand and prepare for the changes.

You can read the Act amending the mechanics lien laws by clicking here.

Here are some key changes to the California lien laws:

Service of the Lien Upon Owner

Previously, there were no specific provisions requiring service of a recorded lien upon the property owner.   As Porter Law Group reported on a website bulletin, “[p]roperty owners have long complained that until they receive the foreclosure lawsuit they are often entirely unaware that a mechanics lien had even been recorded on their property.”

To address the concern, California Civil Code § 3084 will be amended to provide a specific statement titled “NOTICE OF MECHANICS LIEN.”  This identical statement must be printed in at-least 10-point boldface type on the lien itself….and it must be served upon the property owner contemporaneously with the filing of the lien.

Along with the printing of this text onto the lien, § 3084 (a)(6) also states that a “proof of service affidavit” must be completed and signed, and included with the lien, by the person serving the Notice of Mechanics Lien to the owner.

If the lien is not served, § 3084(d) provides that the “mechanic’s lien [shall be] unenforceable as a matter of law.”

Additional Changes

§3146 adds the requirement of recording a “notice of pendency of proceedings” within 20 days after the filing of the mechanic’s lien foreclosure action.  §3084 also adds that reference to the user of the term “mechanics lien,” when it previously only referred to a “claim of lien.”

Express Lien is Prepared

Express Lien is prepared for the upcoming changes to California’s lien laws.  Starting January 1, 2009, the Claim of Lien document will be updated to include the new Notice of Mechanics Lien language, and service of the property owner will be made as required by the statute.

Express Lien can help your company manage the sending of these notices, record delivery and sending notifications, and record affidavits of service.

Subscribe to our blog to stay tuned to lien law changes across the country.  An alert will be posted to our blog before the change takes effect in 2011.

The New Georgia Lien Laws are Effective Today. Will Your Lien Comply?

As previously reported, Georgia Senate Bill 374 with proposed changes to the state’s lien laws has been passed and becomes effective today, March 31, 2009.    The new rules consist of substantive changes to the Georgia lien laws that affects contractors, subcontractors, suppliers, homebuilders and property owners.

We discussed the changes on the Construction Lien Blog back in December 2008  – click here.

Is your company prepared for these changes?   Will your Georgia construction lien meet the new requirements?

Express Lien files your lien and send the new required Notice of Lien to the interested parties.  Express Lien can also prepare Notices to Contractor, Notice of Contest, and suits to perfect your lien.

Get Started now with the Lien Wizard.