Mechanics Lien Act Amended

Attorneys: Schoumacher, Bruce H.

Mechanics Lien Act Amended

Spring 2013

On February 13, 2013, Governor Quinn signed into law Public Act 097-1165, which amends Section 16 of the Illinois Mechanics Lien Act. The Act was supported by contractors and sets aside the result of the decision of the Illinois Supreme Court in the Cypress Creek case. LaSalle Bank, NA vs. Cypress Creek 1, LP, 242 Ill.2d 231, 950 NE 2d 1109 (20011).

In the Cypress Creek suit, mortgage holder and mechanic lien claimants filed to foreclose on property for sums they were owed for improvements to the property. The proceeds of the foreclosure sale were insufficient to cover both the claims of the mortgage holder and mechanics lien claimants.
In its opinion, the Illinois Supreme Court addressed two issues. First, whether the mortgage and mechanics lien claims applied to all the improvements to the property, not just improvements paid for by the mortgage or the mechanics lien claims. Second, whether the mortgage lien was superior to the mechanics lien claims to the extent the funds from the construction loan were used to pay for improvements constructed by other contractors. The Supreme Court held:
1) that neither the mortgage lien nor mechanics lien claims encumbered all the improvements, but were limited to liens on improvements for which they paid, and

2) the mortgage lien was superior to the mechanics lien claims on improvements for which the proceeds of the construction loan were used to pay the contractors who performed the work for those improvements.

In Public Act 097-1165, the General Assembly set aside the Supreme Court ruling and adopted the arguments of the contractors. First, the amendment states that the lien creditors shall have a lien on the value of all improvements erected on the property at the time of the making of the contract with the owner and general contractor, even if the lien creditors did not provide the improvements. Further, the Act clarified the priority between the mortgage lien holders and mechanics lien creditors to state when the proceeds of the sale of the property are insufficient to satisfy all liens, “the proceeds of the sale shall be distributed as follows: (i) any previous encumbrances shall have a paramount lien in the portion of the proceeds attributable to the value of the land at the time of making the contract for improvements; and (ii) any lien creditor shall have a paramount lien in the portion of the proceeds attributable to the value of all subsequent improvements made to the property.”

HommeBest jordan Sneakers | Nike Releases, Launch Links & Raffles