Introduction

Under Illinois law, a contractor’s last date of work on a project triggers deadlines for lien claimants to file and perfect their mechanics lien claims for their unpaid work. This is one of the most import dates for purposes of the Illinois Mechanics Lien Act, 770 ILCS 60/1 et seq. (the “Act”).

A subcontractor must provide a notice of claim to the owner within ninety days of when it completed its work. All contractors must record their lien claims with the county recorder within four months of their last date of furnishing and labor or materials. Any failure by a contractor to provide timely notice or to make a timely filing can be fatal to his or her mechanics lien claim and the contractor could be left without any lien rights whatsoever.

In order to determine the last date of furnishing, a contractor will normally review his or her timesheets, job log, or delivery tickets and use the most recent date. However, not all work on or delivery to a project will qualify as work that can be used to calculate notice and recording deadlines under the Act. The Act makes a distinction between work that is needed as maintenance or repair of a completed job and work that is needed for completion of the job itself. Determining the last date of furnishing labor or materials becomes especially complicated in instances where there are change orders, ongoing punch list work, warranty or repair work, or the contractor is asked to perform new work under a separate agreement at the same project.

Warranty and Punch List Work

Generally, warranty work is considered remedial and does not extend mechanics lien notice and filing deadlines. For instance, if a contractor installs a new furnace and it later malfunctions or breaks down, the time spent repairing it does not extend the last furnishing date. Furthermore, punch list work or replacing defective materials – such as broken tiles or faulty shingles – usually does not extend the lien or filing deadlines. Similarly, maintenance work such as cleaning an HVAC system months after installation will also not extend mechanics lien deadlines. Furthermore, a contractor cannot extend the last date of furnishing by returning to a project after lien rights have expired with trivial or consequential touch up work or adjustments in hopes of extending lien and notice deadlines. The courts look very unfavorably upon this and will almost never extend lien and notice filing deadlines.

Change Orders

Work that is performed under approved change orders can extend the lien notice and filing deadlines under the Act. The change orders must be for additional substantive work and relate to the original contract. For example, if the contractor has installed a stair case, and the owner issues a change order stating an ornamental rail is to be installed and that rail is the last work the contractor performed, the last date of furnishing is then calculated from the date the railing is installed. Furthermore, if an electrician was originally hired to install 10 light fixtures for a project and after delivery the owner issues a change order for one more fixture, the last date of furnishing will most likely be the date of installation of the final single fixture even though most of the other work is already completed.

New contract at the same project

Sometimes an owner or general contractor will ask a contractor or subcontractor to perform new work that is not related to the original contract. In most cases this new work will not be a change order and will result in a new contract being formed. The work performed under the new contract does not affect or extend the last date of furnishing under the original contract. For example, a carpenter is asked by a homeowner to install kitchen cabinets at her home. Later, the same home owner asks the carpenter to build out a deck in her backyard. If the contractor is not paid for the kitchen cabinets wishes to file a lien claim, the last date of furnishing would be the date he completed the cabinet work and not the deck work. Incidentally if the contractor is not paid for either job he or she would need to assert a separate lien clam for each contract.

There is a fine line between whether additional work constitutes a change order or a new contract and the contractor should review his or her scopes of work, among other factors, to determine how the new work is classified.

Conclusion

In many cases it is never entirely clear whether additional work performed is trivial or not or related to the original contractor or creates a new one. Some work, such as warranty work, is a little more obvious. This is a very complicated issue that could result in a loss of your lien rights if your notice and filing deadlines are calculated by using an incorrect date. It is recommended that you consult an attorney for assistance if you do not know when your last date of work on project was or have any of the above situations.

About the Firm and Author

Grzymala Law Offices, P.C. is an Illinois construction law, mechanics lien, collection, and commercial litigation firm serving the entire Chicagoland area and surrounding counties including Cook, Lake, McHenry, Kane, and Will. The Firm addresses the needs of small businesses with a focus on construction and related industries.

We deliver quality customer service and aggressive representation of our clients while offering competitive hourly rates and alternative billing arrangements. The firm is conveniently located in Skokie near Old Orchard Shopping Center. The firm offers free initial consultations and always accommodates our clients’ busy schedules.

Attorney Mark B. Grzymala is the Firm’s president and founder.

While working on an Illinois construction project or job, a contractor or subcontractor is often required to provide a partial lien waiver at the time it submits its pay application or invoice. A partial lien waiver is a very important document that operates to waive a contractor’s lien rights under the Illinois Mechanics Lien Act (770 ILCS 60/1 et seq.)

There are generally two types of partial lien waivers: 1) money waivers, or waivers that waive lien rights to the extent of payment, and 2) date waivers, or waivers that waive lien rights for work performed through a certain date. It is important for a contractor to know the distinction between the two so the contractor is not waiving more rights than intended!

In Illinois, it is common for a property owner or a title company to require a date waiver from a general contractor and its subcontractors in return for any progress payments on the construction project. If a contractor is continuously working on a project and is asked to submit a lien waiver through a certain date and the contractor has performed work in the amount specified in the waiver through that date, then the contractor or subcontract can safely submit such a waiver.

For instance, if the contractor has completed work through June 30, 2015 totaling $20,000.00 and the title company is requesting a partial waiver for work completed as of that date in return for payment of $20,000.00, the submission of a partial date waiver should generally not cause problems.

However, in construction projects, matters are rarely that simple.

It is common for a contractor or subcontractor to submit an application for payment which asks for payment completed during a time period preceding the actual date on which the pay application was prepared and submitted. Special care must be taken to assure that the time period covered in the waiver coincides with the time period for which payment is requested and does not include any additional time up to and including the date on which the application for payment or the actual lien waiver was prepared. Thus, a partial lien waiver intended to cover the work done in August should specifically say so instead of generally saying the lien covers the “work performed between the date of the last waiver and the date of this waiver” The latter language can include much more time and work than the contractor ever intended.

Change orders can present another problem. If a contractor has performed a portion of the work covered by the date waiver pursuant to unapproved and unpaid change orders, the contractor must identify and exclude that work from the waiver if the contractor wants to preserve its lien rights on that work. A date waiver covers all work performed during the specified time-period unless the contractor takes steps to limit the scope of the waiver within the waiver document, itself.

Another issue arises when there is a dispute on the balance due, on the contract amount, or the contractor has completed its work and payments are trickling in the subsequent months. For example, if a contractor completed its work on a building in Chicago on January 31, 2015 and is still owed $50,000.00 but the owner has a payment of only $10,000.00 ready to be paid February 28, 2015, the contractor could waive its entire lien claim if it were to submit a date waiver waiving its lien rights through February 28, 2015 in exchange for the payment of $10,000.00. Such a waiver would give up all of its lien rights including as to the remaining $40,000.00 because the contractor has already completed all of its work as of February 28, 2015.

In this situation, it would be more appropriate for the contractor to tender a money waiver that states that it is waiving its lien rights only to the extent of the $10,000.00 received. Using such a waiver would then preserve the contractor’s lien rights to the remaining $40,000.00.

As a practical matter, title companies are very reluctant to accept money partial lien waivers since title insurance is typically written to cover a piece of realty against clouds on title arising during a specified period of time. Title companies often require partial time waivers through the date that the payment is actually tendered.

It is inherently unfair for an owner or a title company to force a contractor to waive more of its lien rights than it has to. However, there is no easy solution if faced with a reluctant title company. The contractor can wait for final payment, if the contract terms allow it, and tender a final waiver of lien once final payment is ready. Such a tactic might violate the terms of the general or subcontract. It will certainly create financing difficulties for the owner whose construction lender should be demanding proof that the general and subs are being paid as the construction project unfolds as a condition precedent to further funding of the project. Furthermore, most subcontractors cannot simply finance an entire project and wait for payment until they are finished.

Worse, if payments are slow, the contractor needs to be mindful of the expiring lien notice and claim recording deadlines imposed by the Illinois Mechanics Lien Act. Often times, the contractor may have no choice but to submit the waiver that the title company requests and in the form that the title company demands.

There is no simple solution to these problems. The various risks must be weighed when deciding whether to submit a time waiver or wait for final payment. If faced with such a situation, it is important that general contractor or subcontractor consult with an Illinois construction lawyer or law firm to make some other arrangement to preserve your lien rights as much as possible while continuing to receive progress payments.

By: Mark B. Grzymala

Attorney and Founder of Grzymala Law Offices, P.C.