Mechanics’ liens can be a powerful tool for unpaid contractors. Mechanics liens allow those who have supplied labor or materials to improve a property, but have not been paid, to file a lien against the property to secure payment. A lien can create obstacles to selling or re-financing a property, as mechanics’ liens often take priority over other interests (e.g., mortgages). As such, mechanics’ liens help ensure fair payment for rendered services.
However, a recent amendment to the Illinois Mechanics’ Lien Act will go into effect on January 1, 2016, providing a tool for owners to remove the lien encumbrance from a property’s title. The amendment – enacted as Public Act 99-0179 on July 29, 2015 – will permit owners (or others with an interest in the property subject to a mechanics’ lien) to “bond over” the lien – that is, to substitute the lien with a surety bond. For property owners with legitimate payment disputes, the new law provides a mechanism to clear title without lengthy litigation. By substituting a bond in place of the lien, the claim is separated from the property itself, permitting the property to be sold free and clear of the claim. As such, a mechanics’ lien claimant loses its interest in the property; its only claim is against the bond.
The amendment does provide, however, a number of requirements that must be met before a lien can be bonded over. These requirements are designed to ensure lien claimants are not prejudiced by the substitution. For instance, the amount of the surety bond must be equal to 175% of the lien claim and must be issued by a highly-rated issuer. In addition, the amendment imposes a mandatory attorneys’ fees provision. This provision should discourage bonding over of liens arising from unfounded payment disputes.
For a more in depth discussion of the requirements of the new amendment, see Laurie & Brennan’s Summer 2015 eNewsletter article.
