by W. Matthew Bryant and James T. Rohlfing
This was published as a Feature Story in the June 2016 edition of SubStance Magazine, which is distributed by the Illinois Mechanical & Specialty Contractors Association.
IMSCA drafted, promoted and successfully passed an amendment to section 34 of the Illinois Mechanics Lien Act that became effective in 2013. Section 34 of the Act permits property owners to make a written demand on lien claimants to either file suit to enforce within 30 days or, alternatively, release their mechanics lien claims. In common parlance – “put up or shut up.” The amendment that passed in 2013 tightened up the notice provision so a lien claimant would know what needed to be done so as not to lose lien rights. The amendment was a big help for contractors who, in the past, could easily overlook the notice and lose their rights.This appeared as the Feature Story in SubStance Magazine’s June 2016 issue. SubStance Magazine is published by the Illinois Mechanical & Specialty Contractors Association.
The new requirement provides: (b) A written demand under this Section must contain the following language in at least 10 point bold face type: “Failure to respond to this notice within 30 days after receipt, as required by Section 34 of the Mechanics Lien Act, shall result in the forfeiture of the referenced lien.”
Unfortunately, a recent case demonstrates that lien claimants must still be wary of section 34 and carefully preserve their mechanics lien Matthew is a partner in the Chicago office of Arnstein & Lehr LLP. Mr. Bryant focuses his practice on construction and commercial litigation and dispute resolution. He has represented owners, architects, engineers, contractors, and subcontractors in lawsuits relating to construction defects, mechanics liens, bond claims, delay claims, change order disputes and fraud. firstname.lastname@example.org rights, even with the new protection. The federal district court in Chicago pointed out the need to observe state lien law requirements even when suing to enforce a lien in federal court. In Faith Technologies, Inc. v. Arlington Downs Residential, LLC, no. 15 C 7903 slip op. (U.S.D.C. – N.D.Ill., Feb. 26, 2016), an electrical contractor and the owner disputed whether the contractor was entitled to payment for its work because of delays in completion of the electrical work. The contractor recorded a lien against the property for the amount it claimed it was due for its work. The owner won the “race to the courthouse” and filed its complaint against the contractor in federal court on September 8, 2015. The owner alleged among other things that the court should declare the lien invalid because the electrical contractor was not entitled to payment.
Two days after filing its suit, the owner sent the contractor a separate notice under Section 34 of the Illinois Mechanics Lien Act. The notice required the electrical contractor to file suit to enforce its lien within thirty days or else forfeit the lien. The owner sent this notice with a copy of the complaint it had filed two days before, and the notice complied with the new stricter requirements contained in section 34.
Under federal court pleading rules, a defendant can have up to sixty days (instead of thirty days) to file an answer and counterclaim to a complaint if it waives formal “service of summons”. The electrical contractor agreed to waive service of summons. A little more than fifty days after the contractor received the demand to file suit, it filed a denial of the owner’s claim, and also for the first time filed Modified Law Not Enough to Protect Lien Rights its own counterclaim for the court to enforce the lien.
In the absence of the demand to commence suit, the electrical subcontractor’s counterclaim to enforce its lien would have been timely. However, the extension of time to file an answer and counterclaim under the federal court rule did not extend the separate state-law requirement to commence suit within thirty days. The court held that the contractor had forfeited its lien for failure to commence its suit within thirty days of the state-law demand under section 34 to commence suit, even though the answer and counterclaim had been timely under the federal rules. The court dismissed the electrical contractor’s lien claim.
Where a contractor seeks to use the remedy of a mechanics lien, it must pay particular attention to the requirements of the Illinois Mechanics Lien Act, including amended section 34. Failure to meet those requirements may result in the lien being unenforceable, even if the action might otherwise be timely under federal procedural rules.
W. Matthew Bryant is a partner in the Chicago office of Arnstein & Lehr LLP. Mr. Bryant focuses his practice on construction and commercial litigation and dispute resolution. He has represented owners, architects, engineers, contractors, and subcontractors in lawsuits relating to construction defects, mechanics liens, bond claims, delay claims, change order disputes and fraud. To contact Mr. Bryant, please email email@example.com.
James T. Rohlfing is a partner in the Chicago based law firm of Arnstein & Lehr LLP. He serves as chair of the firm’s Construction Practice Group. Mr. Rohlfing is a Martindale-Hubbell AV rated attorney, whose practice is focused in the areas of construction law and business litigation. He is the editor and a chapter author of the West Publication Illinois Construction Law Manual. To contact Mr. Rohlfing, please email firstname.lastname@example.org.