Chapter III Making a Lien Against Private Property Enforceable

• Library: Turner on Illinois Mechanics Liens (2016 Ed.)

CHAPTER III - MAKING A LIEN AGAINST PRIVATE PROPERTY ENFORCEABLE PART I - PRELIMINARY MATTERS

The Mechanics Lien Act is construed strictly in derogation of the common law. This means that even small mistakes can be fatal to a claim for lien. Not only does a lawyer have to know the law; but the lawyer must also pay attention to all relevant factual details. The lawyer must know how to gather the relevant facts and analyze the information received carefully and with rigor so that the necessary documents will be prepared, filed, and served in compliance with the law. Opportunities to commit malpractice abound. Among the mistakes that have led to liens being invalidated are (a) a typographical error in the last day of work; (b) an error in the name of the lien claimant, the contractor, or the owner of record; (c) the use of a legal description which, while accurate, was not based on the latest recorded plat of the property; and (d) addressing a notice of claim for lien to the beneficiary of a trust rather than to the title holding trustee or to a person who was a former owner of record rather than the owner of record at the time the notice is served.

The first step, therefore, is to gather the information necessary to properly prepare, serve, and file documents that strictly comply with the law so that the lien claim is enforceable.

A. Information from the Client

1. The Identity of the Owner of Record, Lender, Architect, and Construction Manager or Superintendent

Whether the client is an owner, lender, contractor, subcontractor, architect, or engineer, in most cases, the client will have copies of the plans and specifications for the project. These documents will probably identify the architect and may identify or provide clues as to the identity of the owner of record, the lender, the construction manager, and the superintendent. The written contract, payout applications, and waivers of lien required for payouts may also furnish this information. This information can save a lot of time.

2. Evidence of the Last Day of Work

Clients are often confused about what their last day of work really is. The last day of work is the date on which the last billable material or work was furnished for which recovery is being sought.¹ Repair of defective work does not count.² Many a lien has been defeated because it included an incorrect last date of work. The careful lawyer will review the actual delivery tickets, work records, and invoices to determine what is the last day of work. Also, the work included in the lien is only the work for which the lien claimant is seeking payment. If the actual last work has been paid for, the actual last work day is not the "last day of work" for purposes of the lien. The "last day of work" for purposes of the lien is the last day work was done that is included within the lien claimant's demand for payment.³

Determining the last date for rental equipment can be problematic. There are no Illinois cases determining whether the last date for rental is the last date the equipment was used on the job or simply the last date the equipment was on the job. The lawyer should take the conservative approach and obtain the best information from the client on both of these dates. The lawyer should assume the worst - that the court will find the last date of actual use to be the applicable date. However, if ninety days have passed from the last date of actual use, but not from the last date the equipment was on the job, the lawyer should allege the last date the equipment was on the job in the Notice in order to allege a last day of work within 90 days.

B. Information from the Public Records

A search should be made of the County Recorder of Deeds' records to: (1) obtain a legal description of the property; (2) determine who the owner of record is; and (3) determine who are the lenders who have recorded mortgages that are not released. If the property is a condominium development, the lawyer should also obtain the names of all of the owners of the individual units.

1. In Cook County

In Cook County, the County Assessor's records can be searched to obtain a PIN (Permanent Index Number) for the property by using the Post Office address of the property. With the PIN number, a search can be made of the Recorder's records to obtain an online tract search. The tract search will usually provide information about recorded documents that affect the property, including deeds and mortgages. Copies of these documents can be obtained from the Recorder's office which will give the attorney the legal description for the property, the identity of the owner of record, and the identity of mortgagees of unreleased mortgages.

Sometimes the Assessor's records will not have an entry for a particular address. This may occur for several reasons. One is that the address that the Assessor uses is different from the address that is most commonly used. Another is in the case of new construction, where the property has been divided for tax purposes, and separate addresses and/or PIN numbers are now given to the property. However, the Recorder of Deeds has a Map Department that is most helpful in locating the PIN for property where the PIN for a property cannot be easily obtained from the Assessor's online records.

Another way of accessing title information in Cook County is through the Recorder of Deeds' online system by choosing a method of search that uses the Grantor/Grantee index. The searcher can type in the name or part of the name of the party believed to be or to have been the owner of record. In the case of new developments, the tendency has been to have a limited liability company act as the owner of record. The limited liability company is often the developer, and its name is often disclosed either in the client's contract, the plans, or the payout documents.

2. In Other Counties

Most County Recorders have a digital online system that will provide some access to title records. The systems vary greatly as do the charges for their use. Most of them provide title information based upon PIN numbers. PIN numbers can usually be obtained from Township Assessors or the applicable building department. Some systems provide information if the lender or an entity who at one time was an owner is known.

C. Tract Searches from Title Companies and Services of Other Private Entities

A common approach to find owners of record and mortgagees is to hire the services of a title company either to do a tract search or provide minutes of foreclosure for a mechanics lien. Minutes of foreclosure are expensive, but should be considered if the claim is large.

Tract searches of title companies and other commercial companies that provide similar services are not always accurate. If they make a mistake, the lien may not only be invalid, but as the attorney who employed the company, the lawyer may be responsible for their errors if a court finds either (a) that the title searcher was the lawyer's agent, or (b) that the lawyer was guilty of negligent misrepresentation in recommending that the client use a particular company. The liability of a title company for a tract search is usually limited to a certain dollar amount. So whatever is obtained from such a company should be checked for accuracy.

D. Addresses of Owners and Mortgagees

The addresses of the owner of record, the architect, the construction manager, superintendent, and the mortgagees whose mortgages have not been released have to be verified. In the case of corporations, limited liability companies, and limited partnerships, the lawyer can check the Secretary of State's business record files. Owners and architects can usually be found that way. However, the addresses of other companies, especially lenders, must be checked in other ways such as through the use of the Internet. In any case, the party being searched should be contacted to verify that the actual address is the address the research indicates is correct. It is not necessary to obtain the addresses of individual condominium owners because they do not have to be served individually. They may be served through their condominium association.⁴

If the property is a condominium, the amount of the lien may have to be allocated among the individual units. First, the value of the work done on each individual unit needs to be calculated. Second, the value of the work on the common elements has to be calculated. This amount must be allocated to the individual units based upon their percentage interests in the common elements. This information should be available from the Declaration of Condominium. The value of the work done on an individual unit plus the unit's pro rata share of the value of the work on the common elements is the amount allocated to the individual unit.

The last date of work and the amount due should be stated separately for each unit. If a single last day of work is stated for all of the units, and the amount due on each separate unit is not separately stated, the lien on all of the units could be invalid. If the notice of claim for lien is not served within 90 days of the last work on some units, the lien may be invalid as to all units if the amount due for work on each separate unit is not separately stated. This would happen if the notice was served in time for some but not for all units.⁵ However, if the last day of work on the condominium is work on the common elements, it is arguable that the last day of work of all the units may be the last day of work on the common elements. This is because a portion of the amount due for work on the common elements is included in the claim for lien against each separate unit.⁶

PART II - PREPARING NOTICES UNDER SECTIONS 24, 21, AND 5

There are three types of notices that may be required to preserve and enforce a mechanics lien claim.

A subcontractor is required to serve a Notice of Claim for Lien under Section 24⁷ of the Act unless its contractor has properly listed the subcontractor on a...