Mechanics Lien in Illinois. Pre-Lien Notice For Residential Projects
Filing a mechanic’s lien in Illinois takes more than marching down to the Recorder of Deeds’ Office and filing your document. If you are a subcontractor on a residential project, you must also serve a pre-lien notice near the beginning of the project. Unfortunately, this notice is a condition precedent to later filing an Illinois mechanic’s lien. So for this reason, let us analyze the necessity of this notice.
First, it is only required for residential projects. This is defined as owner-occupied single family residences. Obviously, commercial and industrial projects would be excluded. But there is a misconception as to apartment and condominium projects. If they are built from scratch, by definition no one has occupied them yet and are therefore considered commercial for Illinois lien purposes. The only exception would be if you are working on existing units owner occupied.
The notice is called: Subcontractors Notice to Owner (60-Day Notice).
Who must use this notice? All contractors, subcontractors, and material suppliers who do not have a direct verbal or written contract with the owner or owner’s agent. Illinois mechanics lien law defines an agent as either the spouse of an owner or a construction manager. Logically, this means a prime contractor having a direct contract with the owner need not serve the notice. Everyone else must serve the notice and are termed subcontractors, regardless of their tier and license status.
When is the notice served? First realize the notice is sent out even if there is not a current delinquency. You have 60 days from first furnishing labor or materials. But there is simply no reason to wait this long. The possibility of losing an Illinois mechanic’s lien is too great. The best idea is to send it out as soon as your contract is signed. Why?
The answer is because the owner is only required to pay the amount left on the contract between owner and general contractor at the time the notice is served. As soon as the owner makes the dispersal to the prime, there is by definition less money in the coffers to pay you. The state has a prohibition to double payment by the owner (under Illinois mechanics lien law, this means paying twice). In other words, the owner does that does not have to pay the general and you for the same portion of work. This also means it is only when the owner receives the notice that money is to be withheld for your benefit. And the Illinois mechanics lien is preserved.
Here is an example. Assuming the overall contract is for $100,000.00. You serve your notice late and by the time it has received by the owner, there is only $50,000 left to be dispersed. Your Illinois lien is for $20,000 but there are also three other claimants with total claims of 50,000. The fund to pay-off the subs is no longer 70,000 but a proportional division of the remaining 50,000.
How to serve. Serve by certified mail. Service is deemed completed the time of its mailing. You must also notarize the notice.
So be careful with answering the question of how to file an Illinois mechanic’s lien. Take all the steps necessary to make sure your ultimate Illinois lien is fully protected.