The Illinois construction industry has faced tough times since the Great Recession. With some owners trying to cut costs, contractors and subcontractors occasionally face the unfortunate scenario of being stiffed for their materials, labor, and services.
Imagine that your company does roof work on a big building in Chicago, but then the building’s owner who hired you refuses to pay all the monies owed at the end of the job. Fortunately, Illinois law gives you a powerful mechanism to put pressure on the owner and obtain the payment to which you are entitled: mechanic’s liens. What are mechanic’s liens, and how do they work in Illinois?
If a property owner fails to pay you, you will rightfully feel aggrieved. But before you run to file a mechanic’s lien or a lawsuit, remember that persistence and negotiation might actually be more cost-effective ways to approach the issue.
In addition to mailing additional copies of your final invoice and/or statements, telephone the owner. Send an email to the owner with a reminder about the contract balance. Try writing a formal demand letter on your company’s letterhead.
If that does not work, hire a lawyer to write a demand letter on law firm letterhead, which will sometimes prompt a response more quickly. A lawyer will typically be willing to write a demand letter for a reasonable amount of money, and it will show the owner that you are serious about guarding your rights. Strongly worded letters are often enough to save you the time, cost, and aggravation of a lien filing or lawsuit. For more on retaining a lawyer, check out Guide to Finding an Excellent Attorney.
While these strategies may work in many cases, there will still be situations where owners will refuse to pay your company what you believe they owe. Not surprisingly, Illinois law allows you to sue a homeowner who has not paid you for simple breach of contract, or based on another, related cause of action (such as quantum meruit).
But the state also allows you to file a mechanic’s lien, which can be a faster tool with which to pressure the owner to pay.
Why file a lien? A lien is publically filed in the county clerk’s office in the county in which the property is located. The lien becomes a cloud on the owner’s title, meaning that the title is subject to your company’s interest in it. In practical terms, if you put a lien on a home in the amount of $20,000, anyone who buys that property would buy it subject to owing you that $20,000. This will make it difficult for the homeowner to sell the property (or refinance it through a bank or other institutional lender), since no one would want to take property that is subject to your claim. In other words, the lien can incentivize the owner to settle with you in order to get you to clear the title.
A mechanic’s lien is a short document, generally just a few pages. Although there is no single required form in Illinois, you can find model forms pretty easily online, or by asking a local construction attorney.
Under the statute, the lien must include your company’s name, the owner’s name, the location of the property, and the amount of money still due, among other pieces of information. You must also describe the labor or material you provided (in other words, how did you improve the property?).
If you are a subcontractor or supplier and worked for a general contractor that failed to pay you, you must list the primary contractor's name and address too. You will see that your signature needs to be notarized.
Illinois does not require a full legal property description of the property that you improved. A simple address, with public tax lot information, is sufficient.
Liens are the product of a statute, known as the Illinois Mechanic’s Lien Act. You can read the full law at 770 I.L.C.S. 60, although you will find that the legislative language is somewhat dense. Like with most states’ lien statutes, Illinois’ lien law contains many rules and exceptions, depending on the type of property involved and the work performed. But there are some general important concepts to remember as you consider filing a lien:
As you can see from these short bullet points, the timing of the filing is perhaps the most critical aspect of a successful lien. Illinois’ legislature is clearly trying to incentivize potential lienors to make their claims quickly, and not allow liens to be filed years after a construction project is completed. While this gives owners some comfort in knowing that lien periods have expired, it means that you must act quickly to ensure that you do not lose any lien rights.
Two reminders. First, consider the message that it sends when you file a lien with an Illinois county clerk. Doing so is likely to be perceived as an aggressive act by property owners, especially homeowners. If you take this step, it might put the owner on the defensive, and encourage the homeowner to get lawyers involved, or to retaliate by publicly claiming that you did shoddy work.
Perhaps this is the adversarial direction that you need to take, unfortunately, if the owner is refusing to pay.
Second, remember that liens and the laws surrounding them in Illinois can be highly technical. If you are owed a substantial sum of money, it might be worth your investment in a consultation meeting with an experienced construction or real estate attorney who can advise you of your rights.