Webinar on Current Issues in Illinois Mechanics Lien Law

Experienced construction attorneys Mark B. Grzymala of Grzymala Law Offices, P.C. and Beata Bukranova of A Law Team are pleased to announce they will be conducting a webinar on Current Issues in Illinois Mechanics Lien Law in cooperation with Lorman Education Services.

In this webinar, the attorneys will provide a brief overview of what a lien is and its requirements along with the benefits of asserting a lien claim. They will then shift their focus to identifying the pitfalls in asserting a mechanics lien claim and present the best practices to minimize the risks in order to maximize recovery.

The live webinar will be broadcast on February 22, 2018 from 1:00pm to 2:30pm CST.  For more information about this valuable and informative seminar and to register, please click on the link below:
 
 
 

Illinois Home Repair and Remodeling Act – Requirements for Contractors on Residential Projects

home repair and remodeling act

Introduction

Working on construction projects can be challenging to ensure a smooth process from the negotiating of the terms and scope of work to managing the trades to completion.  One of the best tools that a contractor can have is a well drafted contract that clearly lays out what the contractor is to do, the costs, and how and when the contractor will be paid.  This is most important when working on residential projects which contracts are governed by the Illinois Home Repair and Remodeling Act (815 ILCS 513/1, et seq.) (the “HRRA”). 

Enacted in 2000, the HRRA is an attempt by the Illinois legislature to promote fair and honest practices in the construction, remodeling and repair businesses.  The HRRA contains numerous requirements which are specific to work on residential projects. These conditions affect all contractors whether they are remodeling a kitchen or rehabilitating an entire home and failure to follow them can be disastrous for the contractor’s bottom line. Contractors must be familiar with the HRRA requirements before entering into any such agreements.

What kind of construction work does the Home Repair and Remodeling Act govern?

The HRRA applies to any residential repair or remodeling work in excess of $500.00. The phrase “Repair and remodeling” is broadly defined and includes fixing, replacing, altering, converting, modernizing, improving or making of an addition to a real property primarily designed or used as a residence. Of particular importance, however, is the word “residence” which is defined as “a single-family home or dwelling or a multiple-family home or dwelling containing six or fewer apartments, condominiums, town houses, or dwelling units.”  The HRRA governs contractors who have direct contracts with owners whether the contractor is an individual, partnership corporation or limited liability company.

In most cases, the Home Repair and Remodeling Act does not apply to subcontractors, or those that have contracts with a general contractor. However, if a party is typically a subcontractor on other projects, such as a masonry worker or plumber but has a contract with the homeowner, the HRRA will govern that agreement.  Furthermore, the HRRA does not govern new construction of single family homes.  The HRRA also does not apply to contracts for carpet cleaning or repair or installation of appliances such as refrigerators, washing machines or hot water heaters if the person performing the repair or installation is an agent of the party who sold said items to the consumer.

What should a written contract include under the HRRA?

The Home Repair and Remodeling Act requires a written contract for all residential repair or remodeling work in excess of $1,000.00. The contract must be provided to the customer for signature prior to initiating the home repair or remodeling work at the residence. Two of the main contract provisions required by the HRRA are (1) the total cost of the project, including parts and materials as well as any charge for estimate; and (2) the business name and address of the person engaged in the business of home repair or remodeling.  If the contractor uses a post office box for mailing, then it should provide the address of his or her residence. The contract should also include the start and completion dates along with a clause permitting the customer to terminate the contract within three business days and instructions on how to do so if the contract is entered at the residence.  The HRRA also requires that the contractor maintain public damage and general liability insurance for the duration of the project.

Furthermore, if the contract contains provisions that require the consumer to either (a) submit all contract disputes to binding arbitration in place of hearing in court; or (b) waive consumer’s right to a trial by jury, then contractor must advise the consumer of such provisions before accepting and executing the contract. Otherwise, the binding arbitration clause or the jury trial waiver clause is void.

Although not required under the HRRA, a contractor can and should include terms to protect itself such as a payment schedule as well as default provisions that provide for interest or attorneys’ fees in the event the customer fails to pay.  Changes are often requested on residential projects so it is also good practice to require all change order be written and signed by all parties to avoid confusion and aggravation later.

The Consumer Rights Brochure

Illinois lawmakers recognize that most consumers have only a rudimentary understanding of construction agreements and construction work. Unfortunately, some contractors are also exploitative. In order to address these issues, the Home Repair and Remodeling Act also requires that, prior to the execution of any home repair and remodeling contract, the owner should be provided with a copy of a pamphlet entitled – “Home Repair: Know Your Consumer Rights”.

This short brochure, published by Illinois Attorney General’s office, contains basic information on what the contract should include and offers other tips for homeowners.  This brochure must be provided to the customer before the contract is signed and the customer should also sign and return the acknowledgment of receipt in the pamphlet for the contractor to keep in its files.  The HRRA only requires the receipt for contracts over $1,000 but it is good practice for contractors to make this a routine for all residential work.

The brochure is available for download here – Know Your Rights Brochure.

Other Statutory Requirements

In addition to the HRRA, the Illinois Mechanics Lien Act (770 ILCS 60/1, et seq.) (the “Lien Act”), also contains protections for consumers where the subject project is a single-family owner-occupied home.  Section 5 of the Lien Act requires that the contractor give the homeowner the following statement before the first payment is made:

“THE LAW REQUIRES THAT THE CONTRACTOR SHALL SUBMIT A SWORN STATEMENT OF PERSONS FURNISHING LABOR, SERVICES, MATERIAL, FIXTURES, APPARATUS OR MACHINERY, FORMS OR FORM WORK BEFORE ANY PAYMENTS ARE REQUIRED TO BE MADE TO THE CONTRACTOR.”

It is good business practice to include this provision in all residential construction agreements and to provide a sworn statement in exchange for the first payment.

What if the Home Repair and Remodeling Act is violated?

An aggrieved homeowner can report the contractor to the Illinois Attorney General’s Office or State’s Attorney for violation of the HRRA and they may bring an action against the contractor in order to restrain and prevent any pattern or practice violation.  The contractor could face fines or potentially a suspension of business. 

Furthermore, the homeowner can also file a civil action against the contractor under the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq.) and seek money damages as well as attorney’s fees and court costs from the contractor.  These types of claims are often asserted as a counterclaim against contractors who file lawsuits or mechanics lien foreclosure actions against non-paying customers. 

However, even if the contractor did not completely follow the requirements of the HRRA, the owner still needs to prove actual damages as result of any alleged violations.  In fact in interpreting the HRRA, Illinois courts have been reluctant to excuse an owner from paying its contractor on an otherwise successful project just because an agreement was not in writing. However, to avoid any possible exposure, contractors should take the necessary steps to comply with the HRRA.

Furthermore, contractors need to be especially careful in light of the fact that some municipalities have the ability to levy fines of their own against contractors who violate the HRRA, such as through Section 2-25-090 of the City of Chicago Municipal Code.  A contractor who works on a small project and does not provide the brochure or a written contract could be fined and have its entire profit and possibly more wiped out.

Forewarned is Forearmed

In conclusion, contractors who work on residential projects need to be aware of the requirements of the HRRA and its pitfalls. Contractors should always have a written agreement for all of their projects, not only residential projects, so the parties are clear on what the terms are and what is expected from the other.  However, a violation of the HRRA can be costly for a contractor (as well as a consumer who deals with an unscrupulous builder).  It is always good practice to review your contracts and procedures on residential projects with an experienced Illinois construction law attorney to avoid headache and non-payment as you work on a project.

By:  Mark B. Grzymala, Attorney and President and

Paulina Grunwald, Paralegal

Grzymala Law Offices, P.C.

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/