Working in the construction sector, unfortunately, means dealing with the occasional payment disputes and delays. Whenever construction professionals face this tough situation, their best course of action is to file a mechanics lien.
A mechanics lien is the most powerful tool that you can use to recover payment from delinquent clients. A lien is recorded against a property so potential buyers can see if there are any outstanding payments related to the property. A mechanics lien, therefore, limits a property’s value in the market, which in effect encourages property owners to pay their outstanding bills.
Filing a mechanics lien, however, is a tricky process. Illinois has its own rules and requirements regarding what counts as a valid mechanics lien, and failing to adhere to these rules could cost you your right to receive proper payment.
This guide walks you through the rules and regulations surrounding an Illinois mechanics lien, from protecting your lien rights to ensuring that you follow the best practices when recording a mechanics lien in Illinois.
Who can file a mechanics lien in Illinois?
Construction participants who have a contract with either the property owner or the general contractor are allowed to file an Illinois mechanics lien. The contract does not have to be formal and official – it can be an oral or an implied agreement, so long as you have sufficient documentation to prove that you have conducted or have been conducting work on a project.
There are no restrictions on what type of construction role you have to take in order for you to file an enforceable mechanics lien. Contractors, subcontractors, and material suppliers all have lien rights in Illinois as long as they have a contract with the general contractor or with at least one of the property owners.
Pre-lien notices in Illinois
Like most states, Illinois requires the submission of pre-lien notices before a valid mechanics lien may be filed. This implies that failing to serve the required pre-lien notices can result in the revocation of your lien rights.
There are three important pre-lien notices in Illinois: the general contractor sworn statement, the preliminary notice, and the notice of intent to lien.
General Contractor Sworn Statement
All general contractors must furnish the property owner with a sworn statement that lists all subcontractors and material suppliers working in the project. The sworn statement must include the names of the construction parties and contract amounts for each of them.
This sworn statement is required before payments can be made. If you are a general contractor in Illinois, you are expected to complete this list as diligently as possible. Failing to include a subcontractor, for example, could result in the revocation of that subcontractor’s lien rights.
If there are multiple owners, you are expected to serve a sworn statement to at least one of the owners. Otherwise, there are no specific methods on how to serve this sworn statement.
Preliminary Notice
The preliminary notice in Illinois is required only for parties who are working on single-family owner-occupied residential projects and who do not have a direct contract with the property owner.
If you are a subcontractor or a material supplier working for a general contractor in this specific type of project, you must serve a preliminary notice within 60 days of your first day of work.
The Illinois preliminary notice must also contain the following warning statement in 10-point bold font:
“NOTICE TO OWNER
The subcontractor providing this notice has performed work for or delivered material to your home improvement contractor. These services or materials are being used in the improvements to your residence and entitle the subcontractor to file a lien against your residence if the services or materials are not paid for by your home improvement contractor. A lien waiver will be provided to your contractor when the subcontractor is paid, and you are urged to request this waiver from your contractor when paying for your home improvements.”
The notice must also be served on the property owner via certified mail with return receipt requested AND with restricted delivery to the addressee only. Be aware that the return receipt and the delivery restriction are statutory requirements that you must strictly follow.
Notice of Intent to Lien
The Illinois Notice of Intent to Lien must be served by all parties who do not have a direct contract with the property owner. It must be sent within 90 days after their last day of work. This notice implies that a payment dispute has already come up and you are already planning to file a mechanics lien.
The Illinois laws recommend that the notice be in the following form:
To (name of owner):
You are hereby notified that I have been employed by (the name of contractor) to (state here what was the contract or what was done, or to be done, or what the claim is for) under his or her contract with you, on your property at (here give substantial description of the property) and that there was due to me, or is to become due (as the case may be) therefore, the sum of $…..
Dated at ………. this ………. day of ……….…..
(Signature)……….
Like the preliminary notice, the Illinois Notice of Intent to Lien must be also be sent via certified mail with return receipt requested and with restricted delivery to addressee only. The addressee must be the property owner and the mortgagee.
Note that for both preliminary notice and notice of intent to lien, the notices are considered served on the date of mailing.
How to file a mechanics lien in Illinois
1. Prepare your mechanics lien form
There are three types of forms for Illinois mechanics liens: one for general contractors, one for subcontractors and material suppliers who do not have a direct contract with the property owner, and one for construction parties who were directly hired by a tenant.
All these forms have the same legal effect and require the same information:
1. Your name and address
2. The name and address of the property owner(s)
3. The name and address of the person that hired you, if not the property owner(s)
4. A brief description of the labor and/or materials that you furnished to the project
5. A sufficient property description
6. The amount you are claiming
7. The date when you signed the contract
8. The date when you last worked on the property
9. Other information on the contract (e.g. contract type, full contract price)
10. Your signature
Note that an Illinois mechanics lien must be notarized so you must sign your document in the presence of an authorized notary officer.
2. Record your mechanics lien
After preparing your form, you must record the mechanics lien in the local recorder’s office in the county where the property in question is located. The specific requirements and fees differ in every office; calling ahead and asking your local recorder’s about the fees is a good first step for this.
Note that certain counties in Illinois allow you to file a mechanics lien electronically. Again, this is something that you must first verify with your local county recorder’s office before going ahead and doing it.
When must you record an Illinois mechanics lien?
If you want your mechanics lien to be enforced against the current property owner and possibly the succeeding property owners if the property gets sold, you must record your lien within 4 months of the completion of the project.
Otherwise you have 2 years after the project completion date to record a mechanics lien. However, this mechanics lien will only be enforceable against the current property owner. If the property gets turned over to a different owner after the 4-month time frame, you may no longer enforce your lien against the new owner.
Are you required to serve a copy of the mechanics lien after recording it?
Yes, but only if you are a general contractor on an owner-occupied single-family residential property. You must serve a copy of your mechanics lien on the owner within 10 days of the recordation date, and you may do so via certified mail or personal delivery.
Failing to comply with this rule could result in your having to pay some damages to the owner, so make sure that you serve a copy of the lien on time if this rule applies to you.
3. Enforce/release the mechanics lien
After filing a mechanics lien and you still have not received your payment, you must initiate a foreclosure action. A foreclosure action requires you to file a lawsuit and recover payment from the proceeds of the sale or auction of the property.
Before filing a lawsuit, you may first want to consider sending the property owner a Notice of Intent to Foreclose. While this isn’t a requirement in Illinois, it can be enough to trigger the property owner(s) to produce payment.
If you successfully got paid after filing a mechanics lien, your next course of action is to release or cancel your lien. Note that a mechanics lien is attached to a property and it may affect the property’s market value; property owners will appreciate it if you cancel your mechanics lien as soon as you receive your payment.
In Illinois, cancelling a mechanics lien is required only if the property owner(s) sent you an official request to have the lien released. Once you receive a formal notice, you are required to release the mechanics lien within 10 days of receiving the request. You must visit the county recorder’s office where you filed your lien and consequently have it marked cancelled.
You are not required to cancel a lien without a formal notice; however, you are still encouraged to cancel a lien that has already been satisfied as an act of goodwill. If the property owner(s) have done their due diligence of settling their outstanding debt, you can also return the favor by releasing your lien against their property.
Best practices when filing an Illinois mechanics lien
1. Serve the Notice of Intent to Lien on time.
Serving the Notice of Intent to Lien is required so you can protect your lien rights. This extends not only as far as securing your right to file a valid mechanics lien; filing a Notice of Intent to Lien also protects you in the event that the general contractor wrote an incorrect amount in their sworn statement.
The sworn statement that the general contractor furnishes to the property owner is the primary basis for all payments in the project. If the general contract, for example, writes an amount that is less than your contract amount, your lien rights will only cover that inaccurate amount.
This clerical error may be rectified if you served a valid Notice of Intent to Lien in Illinois. The Notice of Intent to Lien ensures that your rights are protected for the full amount, even if there is a prior misappropriation on the side of the general contractor.
Furthermore, filing a Notice of Intent to Lien can also get you paid without having to go through the entire mechanics lien process. It may be enough to trigger the property owner(s) to release the full payment.
2. File your mechanics lien within 4 months of the project completion date.
While you are allowed in Illinois to file a mechanics lien within 2 years of project completion, it is considered a best practice to file your lien within the 4-month time window instead.
This is because the property can be sold within that 4-month span. If you do not have a mechanics lien attached to that property by that time, then you lose your right to enforce your mechanics lien against the new property owner.
In general, you must be ready to file a mechanics lien as soon as you do not get the payment for your invoices on time. You must start prepping your Illinois mechanics lien forms and gathering the required information way before the two-year expiration date.
3. Release a mechanics lien upon satisfaction.
Cancelling or releasing a mechanics lien in Illinois is not a hard-and-fast requirement unless the property owners have sent a formal written request. However, doing your due diligence in releasing a lien upon payment is the best step forward.
Once you get paid for the work that you have done, it means that your mechanics lien has already served its purpose. The property owner(s) have already fulfilled their end of the deal, and it is only rightful that you also do yours by cancelling the lien.
The mechanics lien is the single most powerful weapon that can get you paid. As soon as you get paid, you may now release it to free the property of any claims that have already been satisfied.
Further reading