Windmill Tower Not Lienable

Windmill Tower Not Lienable

Nicholas Johnson - Querrey & Harrow, Ltd. – Waukegan, Illinois

In the recent case of AUI Construction Group LLC v. Vaessen, 2016 IL App (2d) 160009, the Appellate Court of Illinois reviewed what constituted a permanent improvement to property which would give rise to a lienable work under the Illinois Mechanics Lien Act.  In AUI Construction, the issue before the court was whether a wind energy system placed on property pursuant to a lease was a lienable improvement.  The trial court found that it was not a lienable project and the appellate court affirmed. 

Under the Mechanics Lien Act, once materials, fixtures, services, and labor are furnished to improve or to make a permanent improvement upon property, the unpaid portion of the project is lienable and the holder of the lien can move for foreclosure of the lien to satisfy any outstanding debt.  However, although constructing an improvement upon property is the basis for a valid and enforceable lien, not all improvements on the property may be permanent.  Moreover, even if the improvement is permanent, it may not give rise to a lienable project, if it is a non-lienable trade fixture.

Whether improvements on property are non-lienable trade fixtures is determined by weighing several factors that determine the nature of the improvement.  Those factors include the nature of the equipment’s attachment to the realty, the equipment’s adaptation and necessity for the purposes to which the premises are devoted, and whether it was intended that the equipment should be considered part of the real estate.  Although no single factor is determinative, the nature of the relationship between the parties is essential to the determination of whether the item placed on the property becomes lienable.

In AUI Construction the owners of the property entered into a contract with a developer to construct a tower on the property for a wind energy system.  The developer subcontracted our portions of the work to different subcontractors. AUI Construction was one of the subcontractors.  Eventually AUI Construction was not paid in an amount in excess of $3,000,000.00 and filed a lien and subsequently moved to foreclose that lien for nonpayment.  The essential issue in determination by the court related to the nature of the agreement between the owners of the property and developer’s contract.

 In weighing above-mentioned factors, the court noted that the developer retained ownership of the wind energy system according to the unambiguous terms of the agreement and that AUI Construction had notice of the terms of the easement through a recorded memorandum.  Given that the nature of the Mechanics Lien Act was to protect those who, in good faith, furnish material and labor for the improvement of real property, the court found that AUI Construction had notice of the contractual terms given that its contract incorporated the developer’s contract with the owner along with the language contained in the filed easement.

In reaching its conclusion, the appellate court recognized that the base of the tower and the road leading to it created an improvement to the property; however, the court found that those improvements were ancillary to the tower itself which was unambiguously retained by the developer and the developer retained the option to remove the equipment upon notice of the property owners.  Moreover, although the property itself would receive a benefit from the wind energy system, the intended benefit of the wind generated power would go to other property and was not solely for the use of the premises at issue.

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