Mechanic's Lien

What's a Mechanic's Lien, and why would you care? You can read all the legalese details below. Have questions? Just let us know.

The Illinois Mechanic's Lien Act provides a powerful collection tool to general contractors, subcontractors, and material suppliers who provide labor or materials for the construction of improvements on private projects. It allows a contractor or material supplier to attach a lien to the improved property and ultimately have the property sold to pay the balance due under the lien claim. Absent a mechanic's lien, a general contractor is limited to a breach of contract action or unjust enrichment claim against the property owner, and a subcontractor or material supplier is limited to an action against the party it contracted with, usually a general or other subcontractor. On the other hand, the Act forces an owner to deal with a balance due to a contractor or a material supplier even though the owner did not directly contract with either party.

The Act is very specific about when liens can be used, and because the mechanic's lien is a powerful legal tool, the lien must comply exactly with the Act’s requirements. A general contractor — the party contracting directly with the owner — must record its claim for lien with the Recorder of Deeds in the county where the property is located within four months of the last day of providing labor or materials for the property. In addition, the general contractor must file suit within two years of the last day of supplying labor or materials to the property. If the general contractor fails to record its claim for lien within the four-month period, it may enforce its lien claim against the owner. However, the lien claim would not take priority over other parties with an interest in the property, such as lenders and other lien claimants.

Because subcontractors and material suppliers do not have a direct contractual relationship with the owner, the Act imposes an additional burden for these parties to perfect their lien claim. The subcontractor or material supplier must serve the owner and owner's lender with a 60-day notice of its intent to lien the property on single-family owner-occupied property. If a subcontractor or material supplier has not been paid within 10 days of service of its notice of intent to lien, it may record its claim for lien with the Recorder of Deeds in the county where the property is located. This claim for lien must be recorded within four months of the last day of supplying labor or materials on the property.

Similar to the general contractor, a subcontractor or material supplier must file suit within two years of last supplying labor or materials to the property. Failure to file suit within this two-year period renders the lien claim null and void. If a subcontractor or material supplier fails to serve its 60-day notice, it may still enforce its lien claim but only in an amount listed as being due on a sworn statement provided by the general contractor to the property owner.

CEFCU will place a hold on 1½ times the amount of the lien, and prevent these funds from being disbursed until the lien issue is resolved.

Mechanic’s Lien Notice

Because CEFCU has a mortgage recorded on the property, the mechanic’s lien notice will list CEFCU as one of the defendants along with you, the borrower.

A registered letter with a 30-day notice of a pending lien is sent to one of CEFCU’s Officers then forwarded to the First Mortgage Department. You may want to verify the we have received the notice.

Mechanic’s Liens and Disbursements

Once a contractor or material supplier records a claim for lien against the property, the lien claim needs to be addressed because it affects the lender's security position in the property. Until a lien is released, a delay in the disbursement schedule will occur because CEFCU will not allow any disbursements to be made.

Lien Waiver Exam

As your new home is being built, with each Construction Loan disbursement CEFCU collects signed lien waivers and final lien waivers from your contractor, subcontractors, and material providers. The signed waivers document the payment or final payment. These lien waivers and final lien waivers are submitted to the title company or attorney’s office when your home is complete so CEFCU can be issued a Final Title Policy. The title company or attorney’s office reviews the documentation to verify all contractors, subcontractors, and material providers have been paid in full.

Partial Lien Waiver Form Final Lien Waiver Form

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