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Where to Lien and Whom to Lien in a large multi state project.

IllinoisLien DeadlinesMechanics LienPayment Disputes

We installed retail displays in 64 locations throughout the Midwest for an IL display manufacturing company. The displays were installed and client is refusing payment, trying to negotiate it down to a small percentage, as we have found them to do with others in the past. Question is... Do we assign lien to Display Manufacturer, Retailer or Both? All 3 of us are based in different states.

1 reply

Oct 3, 2017
The first thing to note is that the rules regarding mechanics liens for certain projects are dependent on the location of the project. Projects in Illinois are subject to Illinois mechanics lien law, projects in Indiana are subject to Indiana mechanics lien law, and so forth. This is because the mechanics lien encumbers real property - and each individual state has an interest in regulating how that happens. This means that there are likely multiple rules, timing requirements, notice requirements, and form requirements that would need to be dealt with if the work was done all over the Midwest (even if the work was done for one landowner, hiring party, or even pursuant to a single contract.

Accordingly, if you had projects in multiple states, there will need to be multiple liens filed. Further, since mechanics liens generally attach to the property itself, that means the property owner is ultimately obligated to pay. The lien is "against" the property - not against any of the interested parties directly (though they are obligated to pay). The information included on the lien (i.e. whether the hiring party, tenant, GC, or other parties must be included) can vary from state to state, so this will depend on the states in which the work was performed.

If the work was done pursuant to a tenant improvement, the lien may or may not be able to attach to the property itself, and may instead attach t the leasehold interest. But, again, that is dependent on the particular states in which the work was performed, and subject to facts like whether or not the owner knew of the improvement (or the improvement was for the benefit of the owner), or the tenant was acting as the owner's agent.

Finally, there can be a question of whether the work performed gives rise to lien rights in the first place. Occasionally, work must be a "permanent" improvement to the property in order to trigger lien rights - if the installation of the retain displays were to be temporary there may be some argument that lien rights did not arise.
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