New laws in Illinois for 2017

 

Introduction

Approximately 200 new laws go into effect in Illinois in the new year. Here is a link to a complete list of the new laws and changes for 2017.

http://abc7chicago.com/politics/new-laws-2017-illinois-laws-that-take-effect-january-1/1665227/

Of particular interest to Illinois small businesses as well as our firm’s clients are the following (excerpted from article above):

Illinois Public Construction Bond Act (HB 5660/PA 99-0673): Amendment provides that verified notice of claim from a subcontractor shall be deemed filed on the date personal services occurs or the date when the verified notice is mailed.

Employee Sick Leave Act (HB 6162/PA 99-0841): Allows employees to use personal sick leave benefits for absences due to an illness, injury, or medical appointment of an employee’s direct family members (including employee’s child, spouse, sibling, parent, mother-in-law, father-in-law, grandchild, grandparent, or stepparent) on the same terms as for the employee’s own illness or injury.

Illinois Freedom to Work Act (SB 3163/ PA 99-0860): New act prohibits employers from requiring non-compete clauses for low-wage employees. Under the act, “Low-wage employee” means an employee who earns the greater of (1) the hourly rate equal to the minimum wage required by the applicable federal, State, or local minimum wage law or (2) $13.00 per hour.

Illinois Plumbing License Law (HB 5913/PA 99-0504): Requires licensed plumbers to complete 4 hours of continuing education each year in order to renew their license.  Course might be supervised by an Illinois licensed plumber.

Illinois Criminal Code.  (SB 1120/PA 99-0534): New expands on theft to include failure to return equipment in excess of $500 within 3 days after the rental period has expired.

Illinois Condominium Property Act (SB 2359/PA 99-0849): Prevents a condominium instrument such as bylaws or a declaration of condominium from changing the ability of the board of managers to execute bank documents by a majority vote.

Illinois Wage Assignment Act (PA 99-0903): Allows employees to revoke a wage assignment at any time by submitting written notice to a creditor.

Please call us at 847-920-7286 or email us at mark@grzymalalaw.com should you have any questions or wish to discuss the impact of these changes on your business.

All the best to everyone in 2017!

Mark B. Grzymala, Attorney and Principal

mark@grzymalalaw.com

Determining the Last Date of Work or Furnishing on a Construction Project

New House Building

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.

Debt Collection Strategy Seminar on September 28, 2016

Pen on the contract papersGrzymala Law Offices, P.C. is pleased and honored to announce that attorney Mark B. Grzymala will be presenting on Debt Collection Strategies to local organization Polish Women in Business at their next member meeting on September 28, 2016 at 7:00pm at the Sheridan Shore Yacht Club, 20 Harbor Drive, in Wilmette, Illinois.

We will cover the following topics:
  • Contract terms and customer/client intake
  • Industry specific creditor rights
  • In-house collection procedures
  • When to hire an attorney
  • Steps to file a lawsuit and collect judgment
For more information about Polish Women in Business and the event please visit them at http://www.polishwomeninbusiness.org/

New Illinois Laws for 2016

Introduction

Over 237 new laws go into effect in Illinois in the new year 2016.

We look forward to the new provision of the Illinois Mechanics Lien Act allowing a party to bond over a lien claim which we recently reviewed here:

Illinois adds bond substitution provision to the Mechanics Lien Act

The Changes

Of particular interest to Illinois small businesses as well as our firm’s clients are the following:

Duplicative or Burdensome Small Business Regulations (HB 3887/PA 99-0370): Requires state agencies to examine their rules, administrative regulations, and permitting processes as they pertain to small businesses in order to identify those rules, regulations, and processes that are unreasonable, unduly burdensome, duplicative, or onerous to small businesses.

Elevator Safety (SB 718/PA 99-0022): Provides that the Office of the State Fire Marshall shall authorize the issuance of elevator contractor’s licenses, elevator mechanic’s licenses, inspector’s licenses, and inspection company licenses. The Elevator Safety Review Board no longer has the power to establish fee schedules for inspections of conveyances. Requires that all injuries caused by a malfunctioning conveyance be reported to the Office of the State Fire Marshal within two business days.

Equal Pay Act Changes (HB 3619/PA 99-0418): Provides that the Act applies to all employers (currently only employers with four or more employees). Provides that any violation of the Act will subject employers to a civil penalties. Sets different penalty structures for employees with fewer than four employees and those with four or more employees. Committing public policy violations will subject the employer to a civil penalty not to exceed $5,000.

Equity Crowdfunding (HB 3429/PA 99-0182): Allows companies, particularly start-ups, to build capital by soliciting small amounts of money from many investors over the internet for the purchase and sale of securities. Investors may be accredited or non-accredited. The Secretary of State is allowed to establish rules pertaining to issuance of securities, fees, and notice requirements.

Residential Mortgage License Act Changes (HB 3369/PA 99-0015 ): Amends the Illinois Residential Mortgage License Act 205 ILCS 635/1-1 et seq. to improve the efficiency and include modern best practices in the regulation of the Act.

Consumer Ticket Purchase Protections (HB 3103/PA 99-0431): Attempts to strengthen protection for consumers who purchase tickets from brokers or resellers. Requires ticket brokers and resellers to disclose the registered name and city of the event venue; that the brokers is not the box or office or a licensed agent; that lost and stolen tickets may only be reissued by the brokers or resellers; whether it is registered under this act; it’s refund policy, name and contact information. Additionally, the broker or reseller must guarantee a full refund if the ticket does not grant admission or if the event is canceled and not rescheduled.

Landlords Accumulated Interest (HB 1319/PA 99-0253): Provides that the lessor shall, within 30 days after the end of each 12-month rental period, pay to the lessee any interest that has accumulated to an amount of $5 or more, unless the lessee is in default under the terms of the lease. All accumulated interest that remains unpaid, regardless of the amount, must be paid over to the lessee upon termination of the tenancy.

Mechanics Liens: Substitution of Bond (HB 2635/PA 99-0178): Amends the Mechanic’s Lien Act to establish a process for a property owner to substitute a surety bond for a mechanic’s lien on the property, thus enabling the property owner to sell or refinance the property.

Property Tax Fraud Alert (HB 3672/PA 99-0075): Standardizes the process for property owners to sign up for Cook County’s property fraud alert system. Requires real estate professionals to register with the recorder’s office before filing on behalf of property owners. Preempts home rule.

Power of Attorney (SB 159/PA 99-0328): Makes technical changes to the Illinois Power of Attorney Act relative to health-care powers of attorney.

Property Tax Complaints (HB 2554/PA 99-0098): Amends the Property Tax Code to provide more detailed instruction for all parties involved during the Property Tax Board of Review complaint procedure, outside of Cook County.

Reverse Mortgage Act (SB 1440/PA 99-0331): Creates the Reverse Mortgage Act by rewriting the entire reverse mortgage law. Consolidates duplicative and sometime conflicting state laws regarding reverse mortgages.

Here is a link to more new laws and changes for 2016.

http://www.fox32chicago.com/news/local/59636451-story

All the best to everyone in 2016!

Mark B. Grzymala, President

mark@grzymalalaw.com

Illinois adds bond substitution provision to the Mechanics Lien Act

project of construction and renovation houseIntroduction

On July 30, 2015, Illinois Governor Bruce Rauner signed H.B. 2635 into law. This bill amends the Illinois Mechanics Lien Act  (770 ILCS 60/1 et seq.) and significantly changes Illinois construction law by adding section 38.1 which allows substitution of a bond for an Illinois mechanics lien claim.

Illinois is the last state in the United States to enact such a provision.

Before this amendment, owners or general contractors had the ability to purchase bonds to cover disputed lien claims at a title company.  The title company would then litigate the lien claim if a claimant tried to enforce it. However, the lien claim remained as a cloud on title and there still was a risk of foreclosure. HB 2635 sets forth a formal process for substituting a bond and removes the cloud on title. The amendment does not eliminate mechanics lien rights and a lien will still be a cloud on title until a bond is furnished.

Bond Petition

Generally, this new section (sometimes referred to as a “bonding over” provision) provides that an owner or anyone else with an interest in real estate (such as a lender, other lien claimant or even a condominium association) may file a verified petition with the clerk of the court in the county where the property is located requesting that a surety bond be substituted for a lien claim. The surety bond must be from an insurance company that is rated A or higher by AM Best and be size IX or larger, be in an amount equal to 175% of the lien claim, and must require that the surety and principal BOTH be jointly liable to the lien claimant. Upon granting the petition, the lien would be discharged and the parties would proceed with a lawsuit against the bond as well as any other causes of action such as for breach of contract, fraud, deceptive practices, account stated, conspiracy, enforcement of security interest, replevin, or quantum meruit, as applicable. These other causes of action are not covered by the bond and litigation as those counts would proceed as they normally do.

A petition for bond substitution can also be filed in a pending foreclosure action but must be done so within five months of the suit commencement.

However, the bill is unclear as to what happens when there multiple claimants in a single law suit and if some claims are bonded over and others are not. It also unclear as to what happens with blanket liens or liens against multiple parcels such as condominiums if one unit or lot owner bonds over his portion of the lien claim and another unit or lot owner does not.  If some parcels or some liens are protected by a bond and others are not in a foreclosure action, this could result in even more complicated and expensive litigation because property owners would then have to defend against both lien claims as well as any bond claims.

Advantages and Disadvantages

On the plus side, Section 38.1 will streamline litigation. There will be less parties which will save on court costs, service fees, and attorneys fees. Normally, in an action to enforce a mechanics lien claim, the lien claimant is required to name and serve all of the parties in the chain of contract between him or her and the owner plus anyone else with an interest in the property such as a lender, unknown owners and non-record claimants. With a bond in place, the only parties would be the principal and surety on the bond as well as the party the contractor had its agreement with.

This new provision also provides for an award of mandatory attorneys fees which adds liability to the general contractor or owner which did not previously exist.  If a lien claimant recovers at least 75% of its lien claim, it is gentled to recover its attorneys fees incurred. On the other hand, the owner is entitled to its attorneys fees if the claimant recovers less than 25% of its lien claim. This is a big change from Section 17 of the Illinois Mechanics Lien Act (770 ILCs 60/17) which provides for attorneys fees against the original owner (and no one else!) who fails to pay “without any just cause or right”. Section 17 also requires privity between the owner and contractor; Section 38.1 does not.  This change is a huge benefit for subcontractors and material suppliers.

Another major advantage is that there will be money to pay the claim.  Sometimes contractors go out of business or real estate ends up over-encumbered or “under water” by other loans leaving nothing to pay a subcontractor for his or her hard work. With a bond in place, the lien claimant should generally not have to worry about a judgment not being collectible.

A major disadvantage of this new provision is that it can reduce leverage for subcontractors and material suppliers because the threat and pressure of foreclosure would be diminished. However, filing a petition and purchasing a bond has its costs and some owners might still not bother to proceed.   Some owners or developers may also not want to automatically accept liability for any attorneys’ fees incurred by the lien claimant especially if the defenses for non-payment are weak.

The Illinois Mechanics Lien Act still provides a valuable method of recovery for unpaid subcontractors and material suppliers and should still be an important part of an overall collection plan and strategy. A bond still has its advantages as described above. However, in order for an owner to even consider a bond, the claimant still needs to have a valid and enforceable mechanics lien claim against the real estate at issue.

Public Projects

Section 38.1 only applies to private construction projects such as homes, office buildings, stores, condominiums, apartments, factories, etc. This amendment does not apply to public construction projects such as public schools, airports, city parts and municipal buildings.  Section 23 of the Illinois Mechanics Lien Act (770 ILCs 60/23) as well as the Illinois Public Construction Bond Act (30 ILCS 550/1 et seq.) remain unaffected by this new section.

Conclusion

This law goes into effect January 1, 2016 and it remains to be seen if property owners and developers will take immediately advantage of it and how the courts will eventually interpret it. In future articles, we will review the actual procedure on how to file the petition (and objection) to substitute a bond for an Illinois mechanics lien claim.

A complete copy of the new law can be found here:

http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=099-0178

I welcome any thoughts or discussion on it.

By:  Mark B. Grzymala, President and Founder

Grzymala Law Offices, P.C.