Illinois Mechanic’s Liens: Chicken And Waffles Case Ensures Protection to Subcontractors

The great state of Illinois has run through its share problems with its mechanic’s lien laws. Recently, the state has met persistent attempts at giving a facelift to the lien laws, at least as far as those protections for owner-occupied residences.

The law firm of Foran, Glennon, Palandech & Ponzi PC has a wonderful blog entitled the Illinois Construction Law Blog. Recently, the blog has produced several articles commenting on the congressionally proposed amendments to the state’s lien laws.

The blog’s authors have raised concerns about the vague and often redundant nature of the proposed changes. In fact, the authors find that the bill’s purpose could simply be served “if Section 32 [of the bill] were just removed.”

Regardless, the bill’s final change actually seems to have some teeth. The end-all-be-all would be to eliminate subcontractor liens against owner-occupied residences unless their is a provision in the general contract providing for such a lien. The law also adds the following penalty:

"(iv) The failure of a contractor to include the statement contained in paragraph (i) on the face of the contract relieves the owner of the property of any legalobligation to pay any subcontractors under this Act."

It certainly seems that Illinois is taking a step towards restraint of contractor rights, but another one of the firm’s posts gives an indication that the courts are still with the contractors, in the good fight to get paid.

The interesting case of Springfield Heating v. 39477-55 King Drive at Oakwood, LLC, et al (1st Dist., Doc. No. 1-07-2987), provides a snapshot of judicial interpretation of the state’s fraudulent claim restrictions.

In Springfield, a subcontractor entered into a contract to do substantial remodeling of the Chicago’s Home of Chicken and Waffles. The Illinois Construction Law Blog has a great synopsis of the case which can be found on their blog.

After terminating their contract, the sub brought  suit to foreclose two liens it had filed against the two buildings it worked on, and to bring equitable claims for unjust enrichment and quantum meruit (for unjustified enrichment of the Defendant). The liens sole issue was that each lien contained the full amount of the project debt, essentially meaning that the sub had claimed double the amount due. Because of this error, the trial court found that the liens were fraudulently brought and must be dismissed, as opposed to amended. Furthermore, the judge dismissed the equitable actions.

On Appeal, the court found that the statute which provides for the cancellation of fraudulent liens, requires the defendant to show an intent to defraud. Certainly, in this scenario, there had been no such attempt, but rather a last ditch effort to protect the sub’s sole means of recovery against the owner, where there was confusion about how to file the lien and sever the amount due.

As the blog’s author states:

“While no one is going to recommend filing a lien that hasn’t been proofed and double-proofed, it’s nice to see the intent of the law given form here to help people get paid even if a small technical error arises.”

The court’s ruling just goes to show that the subcontractor’s one friend left is the construction lien – many times, its sole source of recovery against an owner.

Illinois Contemplating Amendment to Mechanics Lien Statute

It appears that the Illinois legislature is contemplating an amendment to its mechanic’s lien statute, as reported last week by the informative Illinois Construction Law Blog.  According to that blog post, the guts of the amendment would require contractors (non-subs) to given written notice on owner-occupied single family residences prior to filing a lien.

According to the blog, this requirement already exists for subcontractors, and the purpose of the amendment would be to extend the requirement to contractors who contract directly with the property owner.

The Illinois Construction Law Blog does weigh the pros and cons of the bill.

In their discussion, they mention that the bill makes sense because homeowners cannot be considered as sophisticated as commercial property developers.

On the other hand, however, since the bill would only require notice before filing the lien, the blog states that notice could be given the day before the lien is filed.  Of this timeframe, the author asks "what protection does that afford the home-owner?"

A similar requirement exists in Louisiana, according to Wolfe Law Group’s Construction Law Monitor. They describe the requirement as follows:

Notice is required whenever you are working on a residential project, and you contract directly with the owner of the property, who also lives in the residence.

The type of notice required is called the “Notice of Lien Rights.”

The Notice of Lien Rights to be sent to owners in residential projects is very important, because the law requires that it be provided before work begins, and not as a condition to your construction contract.

Read full article here.

The difference between the Louisiana requirement and the requiremnet in Illinois, however, is that in Louisiana notice is required before work begins, and in Illinois, its required only before filing the lien.  Perhaps the goals of the Illinois legislature would be better achieved by a rule similar to that of Louisiana’s?

Nevertheless, for the time being, the requirement does not exist at all for contractors in Illinois, and is only a twinkle in the legislature’s eye.  You can track the progress of the bill at this link.