What is a Mechanic’s Lien

A Contractor Mechanic’s Lien is available to the contractor who has been directly contracted with an owner of a property or his/her agent to complete work. The best documentation would be an executed and valid contract such as a purchase order or accepted bid/quote sheet with signature for material and/or labor. If the property is owned by more than one individual, only one owner’s agreement to contract is enough, if the other owner(s) is aware and fails to protest.  Verbal agreements can also be enforced and may need additional supporting documents and/or the involvement of an attorney if a dispute arises as to the scope and cost of the project.

A Subcontractor Mechanic’s Lien is available for those workers who have been contracted by someone other than the agent or owner of the property, such as a general contractor who brings in a sub-contractor to complete a part of the property enhancement project.  It is important to note that if your company supplies materials without labor, that you would still be entitled to a Subcontractor Mechanics Lien.

A number of liens can be placed on a property, so the contract date determines the effective date of the Mechanic’s Lien and the priority of the lien.  A lien placed on the property prior to the date of the contract will have priority over your lien, but you will have priority over the liens placed after your effective date. Mechanic’s Liens also hold priority over earlier recorded mortgages to the amount of the property value’s increase from the improvement project.

There are strict deadlines to record a lien. When it involves general contractors and subcontractors, a lien must be filed with the county Recorder’s office no later than four (4) months after the completion of work. The claim must include:

1. Statement of work performed
2. Completion date
3. Balance due to the contractor after any credits
4. A property description and PIN (Property Identification Number)
5. Names of Owners of Record, name of one owner/agent you contracted with
6. List of any mortgages on the property

Subcontractors have an extra step to complete in addition to the four-month filing deadline. Within 90 days of the last date the subcontractor worked on the property, a 60-day notice of the Subcontractors Mechanic’s Lien claim must be served to the owner of the property. This notice must include information similar to the information required to file the lien.  This step may be skipped if the general contractor has a signed agreement with the owner/agent specifically listing your company for a segment of the project (Section 24 of Mechanics Lien Act). The time to file suit to foreclose on the lien may be advanced if the owner issues a written notice to commence suit under Section 34 of the Act. The suit must be commenced within 30 days of receiving the notice or else the matter may be forfeited.

Once you file a Mechanic’s or Subcontractor’s Lien, in order to preserve your rights, you will need to file suit to foreclose on the property within two (2) years of the last day you worked on the job. The suit must include the owner and any parties with interest in the property, such as mortgagees and Mechanics Lien holders. The suit will request a court order for the sale of the property in order to satisfy the lien(s). Mechanic’s Lien holders are entitled, by law, to 10% interest per annum on unpaid work/material and attorney fees for enforcing the lien.

The Law Offices of Edward P. Graham is here to here to answer your questions.  Feel free to contact our offices in Naperville, IL at (630) 357-2333 and in Chesterton, IN (219) 797-7820.