Illinois Mechanics Lien Law Change Proposed To Nullify Recent Court Decision

Illinois Mechanics Lien Law Change Proposed To Nullify Recent Court DecisionReaders of our blog interested in Illinois’ mechanics lien laws likely know about the dreadful “Cypress Creek” decision handed down last year by the Illinois Supreme Court in LaSalle Bank National Association v. Cypress Creek I, LP. The case greatly impacted the Lien Priority given to mechanics lien claimants and construction lenders, tipping the scales in favor of lenders. While I think it was a dramatic proclamation, the decision inspired one member of the Illinois Bar Association to inquire: Is the Mechanic’s Lien Dead in Illinois?

Now that the dust has settled on the Cypress Creek decision, the construction industry is petitioning legislators to make changes that nullify or mitigate the decision’s effect. HB 3636 is now pending before the Illinois legislature, which seeks to amend the Illinois Mechanics Lien Act to restore — according to proponents — it’s original intent. A prominent supporter of the bill is the Mechanical Contractors Association of Chicago (MCA Chicago), who had this to say in a press release:

Since the 1840s…contractors have always been given consideration for the value of improvements made to the property as they supplied the labor and materials…New construction projects in Illinois hinge on contractors continuing to take risk…Restoration of their lien rights under the Act will go a long way in creating incentives to do so.”

The MCA published some interesting statistics on their website to encourage support of the bill, although it’s not clear where the data comes from. According to the publication, 85% of a mechanic lien’s value was paid to contractors prior to the Cypress Creek decision, while after the decision, only 31% of the value was paid.  This is a sharp, sharp difference, which, although I support the MCA’s cause and the bill, seems inaccurate. Nevertheless, the MCA’s brochure does make good points about why the construction industry needs mechanic liens more than construction lenders need priority.

You can take a look at the bill’s full text and status on the Illinois General Assembly website:  HB 3636. The synopsis of the bill is as follows:

Amends the Illinois Mechanics Lien Act. Adds, to the provisions concerning a written demand by an owner of real estate to a mechanics lienholder stating that the lienholder must file suit within 30 days or the lien is forfeited, the requirement that this express warning be included in the written demand: the failure to respond to the notice within 30 days after receipt of the notice results in forfeiture of the lien.

We will continue to track this legislation and let you know if there are any updates.

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Scott Wolfe Jr

About Scott Wolfe Jr

Scott Wolfe Jr. is the CEO of zlien, a company that provides software and services to help building material supply and construction companies reduce their credit risk and default receivables through the management of mechanics lien and bond claim compliance. He is also the founding author of The Lien and Credit Journal, a leading online publication about liens, security instruments and getting paid on every account. Scott is a licensed attorney in six states with extensive experience in corporate credit management and collections law, with a specific emphasis on utilizing mechanic liens, UCC filings and other security instruments to protect and manage receivables. You can connect with him via Twitter, LinkedIn and Google+.

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