If I Have Been Subcontracted, Do I Need to Send a Notice?
Many sub-contractors in Illinois are often confused by the notice requirements of the mechanics’ lien provisions of the Illinois Code. While Illinois courts will recognize the rights of contractors and subcontractors to receive payment for their hard work, the code’s provisions regarding liens must be followed to ensure payment by the property owner hiring the work. The key point for subcontractors to always remember is that the best business practice for ensuring timely payment is to take charge of filing any required notices promptly when work is completed and never to rely upon the notice of the general contractor to the owner for securing payment.
Mechanics’ liens in Illinois are designed to prevent the property owner from paying twice for the same work, provided the owner takes the appropriate measures to protect his interest. The mechanics’ lien system balances the need for contractors and subcontractors to be paid and for owners to be able to secure the clear title and pay only the amount they owe for work done.
Illinois resolves these two conflicting interests by the application of the unpaid balance theory for mechanics’ liens. In practice, the mechanism for the rule is set out in 770 ILCS 60/5.
Under the terms of the statute, the owner may demand a sworn statement from the prime contractor listing the balance owed on a construction contract and the amounts due and paid its subcontractors. If the owner demands this statement, the contractor must provide it before any balances due and owing on the contract must be paid. The sworn statement must also include the names and addresses, together with the amounts owed to any subcontractor or material supplier.
The sworn statement provision of the law creates two burdens. The owner must demand the statement, and the prime contractor must then provide a statement if demanded.
If the contractor does furnish the sworn statement as requested, and if the balance listed for each subcontractor is correct, the owner ought to withhold enough money to pay the subcontractors. The owner pays the contractor, and the subcontractors, the amount each is owed.
Problems arise if the owner neglects to request a statement, the contractor fails to furnish one, or the contractor lists the amount owed to a subcontractor incorrectly. When a mistake is made, if a dispute over payment arises, or if some other aspect of the business arrangement goes wrong, the subcontractor’s remedy is the subcontractor notice of intention to file a lien.
The provisions for the subcontractor notice of intention to file a lien, sometimes called the notice of lien or notice of intent to file lien, are contained in 770 ILCS 60/24. Under that statute, a subcontractor or material provider may, at any time after entering into an agreement with the general contractor, file a notice of the amount due and owing and assert notice of an intention to file a lien if the amount is unpaid.
The law thus gives subcontractors a second mechanism to protect their interest in being paid. In lieu of relying upon the sworn statement of the general contractor, which may or may not be given and which may or may not be correct, the subcontractor has a separate right to give notice to the owner of the amount owed and their intention to file a lien.
If an owner receives a subcontractor’s notice, Illinois law requires them to withhold the amount demanded in the notice. If the owner complies with the statute, the interest of the subcontractor should be adequately protected. If the owner ignores the notice and instead makes full payment to the contractor, the owner remains liable for the amount demanded by the subcontractor.
If a subcontractor fails to send a notice, they may end up unpaid and without recourse if things go badly. The best practice is to always ensure the owner has a notice of intent to file a lien as soon as the amount owed for work can be ascertained with precision, and in any event, not later than 90 days after the completion of the work, whether the contractor files a sworn statement or not.
The provisions of the Illinois mechanics’ lien law may seem complex, and they do require careful adherence. If any doubt about your situation as a subcontractor arises, you may wish to consult a mechanic lien attorney promptly to secure your rights.
Grzymala Law Offices, P.C. has helped many contractors and subcontractors in payment disputes with owners, agents, lenders, and title companies. Our team is well-versed in the requirements and intricacies of public and private construction contract law and can assist in the filing of mechanics’ liens in Chicago and Illinois. If you need the help of an Illinois mechanics lien lawyer, contact us today for a consultation.