Illinois

Lien Law Overview

The Illinois Mechanics Lien Act has several provisions that require additional notice requirements for single-family owner-occupied property, but not commercial property.

In Illinois, a lien is created by contract with the property owner (or upon the authorization and knowing approval of the property owner) for the improvement of a lot or a tract of land. See 770 ILCS 60/1. Under the statute, an improvement is a broad definition that includes furnishing labor, services, materials, fixtures, professional engineering, architecture, structural engineering, property management, and interior design.

A mechanics lien attaches on the contract date for the dollar amount stated in the contract. The priority of the lien is established as of the contract date.

In order to obtain full lien rights, the lien must be perfected by following the strict requirements of the Illinois statutes, which include several timing deadlines and notices for general contractors and subcontractor claimants.

Are title companies required by law to manage construction loan disbursements?

No

Can a mechanics lien have priority over a pre-existing mortgage in Illinois?

Yes, if the mechanics lien contract for materials or services was executed before the mortgage was recorded and the mechanics lien is property perfected by following the strict requirements of the Illinois Mechanics Lien Law. See 770 ILCS 60/0.01. If a mechanics lien attaches after a mortgage and there are insufficient funds to pay all parties in full, the mortgagee a.k.a. lender’s recovery is limited to the land value when the contract was made. Lien claimants, however, can recover their claim amounts out of the value of all improvements later made to the property, not just their own improvements, before the lender recovers anything further on the mortgage. See 770 ILCS 60/16.

Preliminary Lien Notifications

Preliminary notices in Illinois are required to be delivered to the owner. Contractors must deliver an affidavit to the owner of the names and addresses of all parties furnishing labor, services, material, fixtures, apparatus or machinery, forms or form work, and of the amounts due or to become due to each. ILCS 770 60/5(a).

Single Family Owner Occupied Residences (ILCS 770 60/5(b))

To preserve a lien on a single-family owner-occupied residence, contractors must provide the owner – either as part of the contract or as a separate printed statement – given before the owner or his agent makes the first payment for labor, materials, fixtures, apparatus or machinery, the following:

“THE LAW REQUIRES THAT THE CONTRACTOR SHALL SUBMIT A SWORN STATEMENT OF PERSONS FURNISHING LABOR, SERVICES, MATERIAL, FIXTURES, APPARATUS OR MACHINERY, FORMS OR FORM WORK BEFORE ANY PAYMENTS ARE REQUIRED TO BE MADE TO THE CONTRACTOR.”

Subcontractors who furnish labor, services, material, fixtures, apparatus, or machinery, forms or form work (“Work”) must notify the property owner/occupant of the subcontractor’s agreement to perform the Work. The notice must be delivered either personally or by certified mail, return receipt requested, addressed to the owner/occupant or his agent at the residence within 60 days from when the Work was first furnished. ILCS 770 60/5(b)(ii). The notice must contain the name and address of the subcontractor, the date he started to work or to deliver materials, the type of work done and to be done or the type of labor, services, material, fixtures, apparatus or machinery, forms or form work delivered and to be delivered, and the name of the contractor requesting the work. The notice must also contain the following warning:

“NOTICE TO OWNER”

The subcontractor providing this notice has performed work for or delivered material to your home improvement contractor. These services or materials are being used in the improvements to your residence and entitle the subcontractor to file a lien against your residence if the labor, services, material, fixtures, apparatus or machinery, forms or form work are not paid for by your home improvement contractor. A lien waiver will be provided to your contractor when the subcontractor is paid, and you are urged to request this waiver from your contractor when paying for your home improvements.”

Both statements must be in at least 10-point boldface type.

Notice of Completion

Not applicable.

Title

Illinois uses ALTA title commitments that allow for the Construction Loan Update Endorsement, which is used when the lender requests endorsements as additional disbursements are made. It gives coverage up-to the new outstanding mortgage balance and shows whether any other instruments have been filed and recorded since the last title update.  The endorsement also ensures the priority of the insured mortgage over instruments that are not specifically listed in the endorsement.  Like title companies in other states, since the title company has a stake in the disbursements, you may find that they exercise some due diligence relating to construction draws which will vary based on the title company.

Contractor Licensing

Contractor Requirement: No state contractor license, locally regulated.

Subcontractor Requirement: Locally regulated. Plumbers registered with state.

Contractor Warranties: Implied warranty of habitability, 10 statute of limitation from time of act or omission that caused defect, or 4 years from discovery. However, this implied warranty can be waived by contract.

Contractor License Lookup – Locally Regulated

Contractor Requirements Lookup

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