Those pesky mechanics lien claims

It’s January, two degrees below zero, your boiler begins to fail and even your best employees are complaining about their inability to work efficiently because of the mittens which they are forced to wear. You call a contractor to repair or replace the boiler, heat is restored and life is good until you receive a notice of a mechanics lien claim from a subcontractor who claims that he is owed $3,000. The general contractor tells you not to worry and that he will resolve the matter with the subcontractor. Months pass, the lien claim is not resolved, the subcontractor files a lawsuit to foreclose the lien and your lender is calling you daily—at home—asking you for an update.

Although the Riot Act has not yet become law in the State of Illinois, a law (Public Act 99-0178) was passed, which became effective January 1, 2016, that provides an alternative remedy to the benefit of property owners who are beset with a mechanics lien claim.

The new law provides a mechanism whereby the real estate, which is the subject matter of the lien, is released from the lien and the lien is transferred to a surety bond. When a contractor or subcontractor has not been paid after recording a lien claim, the contractor/subcontractor will, most likely, file a lawsuit to foreclose the lien which, if the contractor/subcontractor is successful, may result in the sale of the real estate.

The new law now allows a party having an interest in the real estate to petition the court to allow a substitution of a surety bond for the real estate. Upon approval by the court of the surety bond, the real estate will be released from the lien and the parties to the lawsuit can continue their dispute without risking the possible sale of the real estate to satisfy the lien and, most importantly, your loan officer will stop calling you at home.

In construction projects where we have represented the owner, we have prepared riders to protect the rights and interests of property owners. We have revised our rider to encompass the benefits of the new law. We would be pleased to discuss this newly enacted statute or any other issue, which you may have regarding any existing or proposed construction project, at your convenience.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.

Client Alert authored by: Arnold E. Karolewski, Principal