Notice of intent to lien can be a powerful tool to induce payment. We at Levelset actually recommend sending them on every project, in every state. However, there are a handful of states, including Illinois, that specifically require a Notice of Intent to Lien in order to mechanics lien rights to secure payment. Here are a few of the most common mistakes subcontractors can make when preparing and sending an Illinois Notice of Intent to Lien.
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Illinois Notice of Intent to Lien overview
An Illinois Notice of Intent to Lien, can be considered as a “quasi-preliminary notice.” Anyone who didn’t contract directly with the property owner must send this notice before filing a valid mechanics lien in the state of Illinois. Once the property owner has received a Notice of Intent to Lien, they are required to retain an amount of payment sufficient to pay the subcontractor what they are owed. If the owner fails to retain these payments and pays the GC in full, those payments are made illegally and can make the owner liable for double payment.
The regulations governing the Illinois Notice of Intent to Lien on private projects are found in 770 ILCS §§60/24 and 60/25. Let’s take a look at some common mistakes to avoid when filling out and sending these notices.
Relying on the general contractor’s sworn statement
One unique aspect of the notice scheme for Illinois construction projects is the “sworn statement.” This statement should be provided by the general contractor to the property owner. The statute states that:
“It shall be the duty of the contractor to give the owner, and the duty of the owner to require a sworn statement before the owner shall pay or cause to pay.”
Although the owner has some duty imposed, the responsibility will typically fall on the general contractor to provide the statement. The way this works is if the GC has properly listed a subcontractor, and the amount owed or to be owed, then the Notice of Intent to Lien isn’t required. But, this is your money on the line. Relying on the GC to (a) list you as a subcontractor, and (b) provide the proper amounts owed, can be a risky proposition.
Think of these two scenarios when a subcontractor fails to send a Notice of Intent to Lien. (1) The subcontractor was listed on the sworn statement, but the amount provided in the statement is far less than what they were owed. In this case, the subcontractor will still have lien rights, but it will be limited to the amount the GC provided. (2) The sworn statement doesn’t list the subcontractor, or the general contractor failed to provide a sworn statement in the first place. The subcontractor will no longer be able to rely on mechanics lien rights to recover payment.
When it comes to your business’ money, don’t rely on someone else to secure your rights. Send a Notice of Intent to Lien on every Illinois private construction project.
Improper service of a Notice of Intent to Lien
Once you are ready to send this notice out, be sure that the service is completed properly. Service of this notice must be accomplished in one of two ways. The first is by sending through either registered or certified mail, with return receipt, requested and the delivery limited to the addressee only. The other option is to personally serve the owner of record through a process server. As for the required parties, the statute requires that the notice must be served on the owner of record or his agent or architect or the superintendent having charge of the building or improvement and to the lending agency, if known.
How the courts handle improper service
The Illinois courts have enforced these service requirements to various degrees of strictness. For example, in two notable cases, the courts declared that “service of a section 24 notice other than by one of the methods listed in that section does not invalidate an otherwise sufficient notice that is actually received by the owner.” In those two cases, one notice was sent regular mail (instead of certified or registered), and the other notice was sent registered mail, but failed to limit the delivery to “addressee only.” Although challenged, the courts upheld the service as valid. They reasoned that invalidating lien rights over minor technical errors would defeat the purpose of the statute’s protection.
Contract those decisions with Seasons-4, Inc. v. Hertz. In that case, the court tackled the scenario of a notice sent by fax that was, not only actually received by the owner, but was subsequently discussed with the subcontractor as well. However, the courts drew a line, stating that the previously mentioned cases used one of the “two designated methods,” (mail or personal-service). Thus, deficiencies were acceptable, as opposed to using a fax transmission which is not a designated means of service. Don’t mess with the rules, strict adherence is the best way to ensure that you secure your mechanics lien rights
Here’s an interesting scenario that came up in our Ask an Expert Center: What if the customer refuses to answer their door to sign the certified notice?
Not sending notice to the lender
If you may have noticed, an Illinois Notice of Intent to Lien is required to be sent to the owner, their agent, architect, or superintendent of the building, and to the lending agency, if known. That means that there are essentially two required parties that need to be served; the owner (or the substitutes provided) and the lender or mortgagee.
According to the Illinois courts, “if known” doesn’t mean that they are an optional party to receive notice.”If known” means that after conducting a search of title records, the lender is non-existent or unknown.
The whole point of sending notice is to inform all interested parties that there is a potential claim on the property. This includes a lender or mortgagee. However, if the subcontractor is listed (and hopefully properly accounted for) in the sworn statement, then the 90-day notice isn’t required to be sent to either the owner or the lender and the owner. The courts have taken the stance that since the owner received the sworn statement. The owner has a duty to share that knowledge with all interested parties.
Enforcing a mechanics lien against a property that has a lender can limit the amount recoverable according to priority. The courts have stated that failure to serve the lender, makes the claim unenforceable against them. But the claim will still be enforceable against the property owner. This could even further reduce the amount recoverable, as failure to do so means the contractor loses their cause of action against the lender.
Lesson learned here? Follow the statutory rules as strictly as possible. There’s too much on the line. Losing valid mechanics lien rights because the notice was sent in the wrong manner can be devastating.
Missing the notice deadline
This one seems fairly obvious, but it’s worth stating anyway. According to the statute, the Notice of Intent to Lien can be provided at any time after the execution of the contract. But, the notice must be provided, no later than 90 days after completion of the work and at least 10 days before filing a lien claim. There is one exception to this deadline. For owner-occupied residential projects, this deadline is 60 days from the first date of furnishing.
Just to clarify, completion of the work doesn’t mean completion of all contract work. But rather, the completion of work for which the contractor is seeking to enforce through a mechanics lien. Furthermore, minor tasks such as punch list items, warranty work, or other repairs don’t constitute final work. Therefore, that type of work does not extend the deadline to send notice before filing the mechanics lien.
Section 25 adds another layer to this notice process. This is used if the required parties live in a different county or can’t be found. A subcontractor may file the notice with the office of the county recorder where the property is located. But this is only if a party can’t be located after reasonable diligence, or if they are in another county.
Failing to properly fill out an Illinois Notice of Intent to Lien
This is another common mistake that could be easily avoided. There aren’t any overly complicated form requirements such as font size or margin requirements. The statute provides sample language that should be included in the notice.
To, (name of owner): You are hereby notified that I have been employed by (the name of contractor) to (state here what the contract or what was done, or to be done, or what the claim is for) under his or her contract with you, on your property at (here give substantial description of the property) and that there was due to me, or is to become due t(as the case may be) therefor, the sum of $…
Again, there are no particular form requirements. Yet the notice must contain the pertinent information in order to establish a valid claim. The notice should include a brief statement of the contract or demand, the outstanding balance due, and a description sufficient to identify the property. Also, it’s important to note that, if the notice is being filed in the recorder’s office, then the notice should include notarization as well.
One specific piece of information that can be challenging is the property description. The statute is rather vague in stating what type of description needs to be included. A simple street address will likely not suffice. But remember, there is no penalty for adding too much information, only one for insufficient information. Best bet? Provide as much information as possible, which could entail a full legal property description. Or something close to it. Here’s a helpful resource to get you started: Legal Property Description Cheat Sheet.
Mechanics liens provide valuable leverage to recover unpaid balances on construction projects. Subcontractors should look to protect their lien rights on every project. Sending a Notice of Intent to Lien is an important step in that process. Even if the general contractor has sent a sworn statement, prudent subcontractors will be proactive to secure their rights. Avoid these common mistakes to make sure you get paid what you’ve earned.