I filed a lien on a project and it was recorded on 10/12/2018. Another company that has gone unpaid has filed a lien on 8/24/2018 and filed for a foreclosure on this claim. Being that they filed a lien claim before us would they get paid first?
1 reply
Feb 15, 2019
This is a great question. Figuring out the chain of recovery can be crucially important in a foreclosure proceeding when there is not enough money to go around. With respect to mechanics liens and other encumbrances to the property (like a mortgage, or a deed of trust) this is called determining the priority of the security.
Generally, with respect to mechanics liens all mechanics liens on the project are equal in priority provided the liens were timely recorded and were otherwise valid. This holds true in Illinois, specifically, as well with one exception. Illinois law provides that:
"Upon all questions arising between different contractors having liens under this act, no preference shall be given to him whose contract was made first, except the claim of any person for wages by him personally performed, shall be a preferred lien."
Accordingly, the liens of mechanics lien claimants are not given priority over each other, except that wage laborers are preferred.
Additionally, Illinois provides mechanics lien claimants with some priority over even encumbrances, like a mortgage, that arose prior to the mechanics liens. If the mechanics lien attached (date of attachment is the date of the contract between the owner and original contractor) prior to the date a mortgage was recorded, the mechanics lien has priority over the subsequent mortgage. If the mechanics lien attached after the mortgage – and funds are insufficient to pay both – the lien claimant has priority in the portion of the proceeds attributable to the value of all improvements made to the property subsequent to the perfection of the previous encumbrances.
There are also requirements and abilities of additional claimants when one claimant files suit to enforce its lien. Illinois statute § 60/9 states, in part, that:
"Any two or more persons having liens on the same property may join in bringing such suit, setting forth their respective rights in their complaint; all lien claimants not made parties thereto may upon filing a petition to intervene become defendants and enforce their liens by counterclaim against all the parties to the suit; and the complaint shall not thereafter be dismissed as to any lien claimant, or as to the owner or owners of the premises without the consent of such lien claimant."
This means that once another lien claimant files suit to enforce its lien, the other lien claimants can either join in the original filing of the suit, or, if they weren't originally joined, intervene in the suit in order to enforce their own lien.