Bill Text: IL SB1564 | 2011-2012 | 97th General Assembly | Introduced

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Bill Title: Amends the Mechanics Lien Act. Provides that if questions arise between incumbrancers and lien creditors, all previous incumbrances shall be preferred to the extent of the value of the land at the time of making of the contract plus (instead of at the time of making of the contract, and the lien creditor shall be preferred to the value of the improvements erected on the premises) the value of the improvements paid for pursuant to the Act by said incumbrancer for the building erected, or materials furnished, and the lien creditor shall be preferred to the value of its share of the unpaid improvements erected on said premises. Adds provisions pertaining to surety bonds over: a recorded mechanics lien claim; a claim on funds in the hands of the owner; and on public construction funds. Provides procedures and requirements for filing surety bonds. Provides that a corporate surety bond for the purposes of these provisions shall meet specified requirements. Provides that a surety bond shall be in an amount equal to 1 1/2 times the amount of the mechanics lien or claim, plus costs, and include additional documents and information. Provides that for a condominium, the current owners and lenders of the condominium may be represented by the condominium association. Includes other provisions.

Sponsorship: Partisan Bill (Republican 1)

Status: (Failed) 2013-01-08 - Session Sine Die [SB1564 Detail]

Download: Illinois-2011-SB1564-Introduced.html

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97TH GENERAL ASSEMBLY State of Illinois 2011 and 2012 SB1564 Introduced 2/9/2011, by Sen. Kirk W. Dillard SYNOPSIS AS INTRODUCED:
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Amends the Mechanics Lien Act. Provides that if questions arise between incumbrancers and lien creditors, all previous incumbrances shall be preferred to the extent of the value of the land at the time of making of the contract plus (instead of at the time of making of the contract, and the lien creditor shall be preferred to the value of the improvements erected on the premises) the value of the improvements paid for pursuant to the Act by said incumbrancer for the building erected, or materials furnished, and the lien creditor shall be preferred to the value of its share of the unpaid improvements erected on said premises. Adds provisions pertaining to surety bonds over: a recorded mechanics lien claim; a claim on funds in the hands of the owner; and on public construction funds. Provides procedures and requirements for filing surety bonds. Provides that a corporate surety bond for the purposes of these provisions shall meet specified requirements. Provides that a surety bond shall be in an amount equal to 1 1/2 times the amount of the mechanics lien or claim, plus costs, and include additional documents and information. Provides that for a condominium, the current owners and lenders of the condominium may be represented by the condominium association. Includes other provisions.
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A BILL FOR
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AN ACT concerning civil law.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Mechanics Lien Act is amended by changing
Section 16 and by adding Section 38.5 as follows:
(770 ILCS 60/16) (from Ch. 82, par. 16)
Sec. 16. No incumbrance upon land, created before or after
the making of the contract under the provisions of this act,
shall operate upon the building erected, or materials furnished
until a lien in favor of the persons having done work or
furnished material shall have been satisfied, and upon
questions arising between incumbrancers and lien creditors,
all previous incumbrances shall be preferred to the extent of
the value of the land at the time of making of the contract
plus , and the lien creditor shall be preferred to the value of
the improvements paid for pursuant to the requirements of this
Act by said incumbrancer for the building erected, or materials
furnished, and the lien creditor shall be preferred to the
value of its share of the unpaid improvements erected on said
premises, and the court shall ascertain by jury or otherwise,
as the case may require, what proportion of the proceeds of any
sale shall be paid to the several parties in interest. All
incumbrances, whether by mortgage, judgment or otherwise,

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charged and shown to be fraudulent, in respect to creditors,
may be set aside by the court, and the premises freed and
discharged from such fraudulent incumbrance.
(Source: Laws 1903, p. 230.)
(770 ILCS 60/38.5 new)
Sec. 38.5. Bonds.
(a) Surety bond.
(i) Whenever a mechanic's lien has been filed in
accordance with this Act, the owner or former owner,
whether legal or beneficial, of any interest in the
property subject to the lien or the lender having a lien on
said property or a contractor or subcontractor through whom
the mechanics lien claimant is claiming, may, at any time,
file with the circuit clerk of the county wherein the
property is situated a corporate surety bond as provided in
subsection (b).
(ii) Whenever an owner, whether legal or beneficial, of
any interest in property, has received notice from a
subcontractor or material supplier pursuant to Section 24
that constitutes a lien on funds in the hands of the owner
due the contractor, the contractor or a subcontractor
through whom the claimant is claiming may, at any time,
file with the circuit clerk of the county wherein the
property is situated a corporate surety bond as set forth
in subsection (b).

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(iii) Whenever an official of a public body has
received a notice from a subcontractor or material supplier
that constitutes a lien on public funds pursuant to Section
23, the contractor or a subcontractor through whom the
claimant is claiming may, at any time, file with the
circuit clerk of the county wherein the public improvement
being constructed is situated a corporate surety bond as
provided in subsection (b).
(b) Bond requirements.
(i) The bond shall be from a surety (a) authorized to
do business in this State (b) having at least an A rating
from A.M. Best, (c) authorized to issue bonds per the
United States Department of the Treasury's Listing of
Approved Sureties, and (d) authorized in the Treasury's
Listing of Approved Sureties to issue a bond to federal
agencies in an amount equal to or in excess of the amount
of the specific bond issued pursuant to this Section. The
bond shall be in an amount equal to 1 1/2 times the amount
of the mechanics lien or claim plus costs allowed to date.
The bond shall have a copy of the filed mechanics lien
claim or notice to the owner of a private project or to the
clerk or secretary of the public body described in Section
23(b) attached and set forth the names and addresses of the
record owner or the name and address of the clerk or
secretary of the public body described in Section 23(b) who
is disbursing the funds, the construction lender, if any,

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and any other parties who are to be protected by the bond.
If a condominium is involved, for the purposes of this
Section, the current owners and lenders of the condominium
may be represented by the condominium association, whose
address shall also be furnished. A single bond may cover
both a mechanics lien claim and a claim of funds in the
hands of the owner due the subcontractor or material
supplier if said mechanics lien claim and claim on funds in
the hands of the owner are based upon the same claim by the
subcontractor or material supplier. The bond shall be
conditioned that, if the lien claimant shall be finally
adjudged to be entitled to recover upon the claim upon
which his or her lien or claim for funds is based, the
principal or his or her sureties shall pay to such claimant
the amount of his or her judgment, together with any
interest, costs, and other sums which such claimant would
be entitled to recover upon the foreclosure of the
mechanics lien claim or upon any claim that it may have as
to funds in the hands of the owner or any public official,
or upon any other bond posted by any other party.
(ii) Upon receipt of a bond complying with the
requirements of subsection (b)(i), the circuit clerk shall
(1) send a copy of said bond by certified mail to the
claimant at the claimant's address set forth on the lien
claim or notice together with the parties whose names and
addresses are set forth on the bond by certified mail,

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return receipt requested. The claimant and the parties
listed on the bond may contest either the form or amount of
the bond or the sufficiency of the surety by requesting a
hearing on the sufficiency of the bond before a judge of
the circuit court. (2) If no hearing is requested within 15
days after the mailing by the clerk or if the judge
confirms the sufficiency of the bond, the clerk shall
record a Certificate of Release of Lien of any filed
mechanic's lien claim with a copy of said bond attached,
whereupon the mechanics lien claimant shall have no rights
or remedies against the property, and (3) mail a copy of
said Certificate of Release by certified mail to the owner
holding funds due the contractor or to the public official
set forth in any claim for funds pursuant to Section 23,
which mailing shall constitute a release of the claim of
the lien claimant to funds in the possession of the owner
or the public official. If the bond does not comply with
the requirements of subsection (b)(i), the clerk shall
return the bond to the party posting the bond indicating
the deficiencies of the bond.
(c) Priorities. The bond shall not modify any aspect of (1)
the priority of the claimant's interest at the time of the
filing of the bond, (2) any requirements to perfect or prove up
the claimant's claim, or (3) any defenses or priorities that
the owner, the lender, or the contractor may have at the time
of the filing of the bond.
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INDEX
Statutes amended in order of appearance