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We are in the tail end of summer with the kids going back to school. As you contemplate those home repair projects you procrastinated having done, be sure to protect yourself as an owner when having contractors perform work on your home. Whether you are having an addition put on to your house all the way down to small projects such as replacing a broken fence, the Illinois Mechanic’s Lien Act (“Mechanic’s Lien Act”) applies to your project. The Illinois Home Repair and Remodeling Act also applies to your project. However, this is a subject of separate newsletter articles that can be found on DiMonte and Lizak’s website at www.dimontelaw.com.
It has been said that the Mechanic’s Lien Act is a powerful tool for a contractor, subcontractor, or material supplier to force payment from an owner when the general contractor or subcontractor fails to pay. In certain instances, even if you have paid the general contractor, a subcontractor or material supplier can force you to pay its balance due if the general contractor failed to pay it. In order to avoid this apparent unjust result, the Mechanic’s Lien Act has a provision to safeguard you. However, if you don’t comply with the Act’s requirements, you can not rely on the Act’s protections.
Very few people and sometimes few contractors consider the requirements of the Mechanic’s Lien Act when performing home repair and remodeling work. I will give you this hypothetical in order to illustrate the problems that can occur. All winter you have stared out the window at the section of your fence which blew down during the winter storm. Now that summer is here, you are eager to get a new fence installed. You contract with Woody’s Wooden Fences for $3,000.00 to have your old fence removed and a new fence installed. Burch Woody of Woody’s Wooden Fences presents a proposal to you that identifies the project, has a brief description of the work to be performed, a proposal price of $3,000.00, a line for you to sign and a line for someone to sign on behalf of Woody’s Wooden Fences. Once signed, the proposal becomes a binding written contract between the parties. This contract does not specifically reference the Mechanic’s Lien Act. However, the Mechanic’s Lien Act is read into every construction contract in Illinois regardless if it is specifically identified.
Burch Woody and his crew do a fantastic job, and in less than a week your old fence is torn down, hauled away and a new fence erected. Happy as a nine year old in line at the ice cream truck after baseball practice, you pay Woody’s Wooden Fences in full and receive a receipt in return. You do not ask Mr. Woody for a contractor’s sworn statement or waivers of lien required under the Mechanic’s Lien Act and he doesn’t offer them to you. Everyone is happily oblivious, that is until one month later when you receive a notice from Stiffed Lumber Company serving you with a Subcontractor’s Claim for Lien providing that it sold $2,000.00 worth of lumber to Woody’s Wooden Fences and delivered this material to your home for the construction of your new fence. It also provides that Woody’s Wooden Fences failed to pay any money to Stiffed Lumber Company in return.
Of course, you have recourse directly against Woody’s Wooden Fences and so does Stiffed Lumber Company. In the ensuing investigation, you both come to realize that Burch Woody and his company are in financial ruin and Mr. Woody has left the country to live as a nomadic bush man in the northern Canadian wilderness. He closed Woody’s Wooden Fences for good with no assets to cover this debt.
The Mechanic’s Lien Act requires the owner to ask for, and requires the contractor to supply, a contractor’s affidavit and sworn statement and Lien Waivers from the general contractor and all subcontractors and material suppliers. Stated differently, if the owner doesn’t ask for these documents, he or she is not afforded the protection of the Mechanic’s Lien Act. If the owner asks for these documents and the contractor doesn’t provide them, the contractor is not entitled to get paid.
So lets review what documents we are talking about. The contractors sworn statement and affidavit which should accompany every request for payment identifies that contract price, any extras or credits, the revised contract price, payments made to date, the amount of the current payment or draw request, and the remaining balance due. It also identifies the same information for each subcontractor or material supplier working on your project. Also accompanying each payment should be either a partial or a final waiver of lien from all subcontractors or material suppliers which identifies the amount being paid and the amount due on its contract.
If you obtain these documents with each draw payment you have a defense to any Mechanic’s Lien Claim by the general contractor, subcontractor or material supplier to the extent of the lien waivers received. In addition, if the general contractor fails to identify a subcontractor or material supplier on the contractor sworn statement and affidavit and you did not have prior knowledge of the subcontractor or material supplier working on your project, you can only be compelled to pay that subcontractor or material supplier any balance due from you to the general contractor remaining on the contract. As such, you can not be forced to pay more for your project than your contract price. The unpaid subcontractor or material supplier’s only recourse is against the insolvent general contractor.
As a homeowner, you need to protect yourself from claims of an unpaid subcontractor or material supplier whether you knew they were working on your project or not. The Mechanic’s Lien Act provides a statutory remedy to these unpaid subcontractors or material suppliers which could ultimately result in the sale of your home to satisfy the debt even if you have already paid the general contractor the full contract price. The only way to avoid this problem is to be aware of and force the general contractor’s compliance with the Mechanic’s Lien Act requirements whether you’re project is $2,000.00 or $2 million dollars.
Of course, everybody wants to be frugal and save money. However, if you do not understand the obligations and requirements of the Mechanic’s Lien Act, it may save you a lot of headaches and money in the future to retain an attorney to advise you in advance in negotiating a contract and requiring performance under the Mechanic’s Lien Act throughout the project. Please give me a call if I can assist you, your family or friends in this process. I hope you are having a wonderful summer.
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