An unpaid contractor’s best friend is often the mechanic’s lien statutes, which provide an avenue for the unpaid contractor to apply pressure to the owner or higher-tier contractor for payment. A mechanic’s lien will likely attract attention from the owner’s lenders and potentially motivate the owner to pay the contractor’s unpaid balance. Additionally, in Illinois, a mechanic’s lien can even allow the contractor to foreclose on the property if the lien is left unsatisfied.
This powerful remedy, however, can be lost if proper care is not taken to provide the appropriate notices and meet the required deadlines. Illinois courts strictly construe the requirements for perfecting a mechanic’s lien, and in some instances, a seemingly harmless mistake or omission can render a mechanic’s lien invalid and unenforceable. This article focuses on the most common notice requirements and deadlines applicable to contractors and subcontractors on private commercial construction projects. This is not a comprehensive list of all the requirements for every situation, however, and consultation with an attorney is highly recommended to ensure preservation of mechanic’s lien rights.
Deadline to File a Statement of Mechanic’s Lien
The deadline for contractors and subcontractors to file their statement of mechanic’s lien is four months (not 120 days) from the last date of work (exclusive of warranty work or other work performed free of charge), or from the last date that materials were supplied to the project. The mechanic’s lien must be filed in the office of the recorder of the county in which the project is located. Failure to file within four months’ time will render the lien ineffective against any lenders, future owners or other third parties. The mechanic’s lien will still be effective against the owner’s interest if filed within two years after the last date of work, but the lien may be subordinated to other claims against the owner.
As discussed below, there are certain notices that must be provided to the owner before a mechanic’s lien is filed.
Sworn Statement Required of Original Contractors
Contractors having a direct contract with the owner are required to provide a sworn, written statement listing the names and addresses of all subcontractors and the subcontract amount for each. This sworn list must be submitted to the owner prior to the contractor’s receipt of its first payment.
Subcontractors’ 90-Day Notice
If not yet paid in full, subcontractors must provide the owner a separate written notice within 90 days’ of the subcontractors’ last date of work. The subcontractor’s written notice must state the amount due or to become due, and the notice should be provided to the owner of record and each known lender holding a mortgage on the property. The suggested content of the notice is provided by the applicable statute:
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 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) therefor, the sum of $ __________________.
Dated at ______ this _____ day of _______
The subcontractor’s 90-day notice must be provided to the owner at least 10 days prior to filing the mechanic’s lien.
Note that, if the original contractor has provided the sworn statement discussed above, and has properly listed the subcontractor’s name and the correct amount that will be due to the subcontractor, and there is no defect in the contractor’s sworn statement, then a subcontractor may be excused from failing to provide this 90-day notice. Practically, however, subcontractors will rarely have this assurance. For this reason, it is best practice to provide this 90-day notice to ensure that the subcontractor’s mechanic’s lien will not be invalidated in part or in full.
Note that Illinois has additional notice requirements for work involving owner-occupied single family residences. In addition, mechanics liens asserted against condominium units have unique requirements that may necessitate special considerations.
Filing Suit to Enforce a Mechanic’s Lien
Contractors and subcontractors must file suit to enforce a mechanic’s lien within two years of the last date of work.
Note that the owner has the option to accelerate this deadline if the owner disputes the contractor’s or subcontractor’s entitlement to additional payment. Under the applicable statute, the owner has the option to demand that suit be filed on the mechanic’s lien within 30 days of the owner’s demand.