100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
HB5201

 

Introduced , by Rep. La Shawn K. Ford

 

SYNOPSIS AS INTRODUCED:
 
See Index

    Amends the Counties Code. Creates a mechanics lien demand and referral pilot program. Provides that in counties with a code hearing unit, a recorder may adopt rules establishing a mechanics lien demand and referral process for residential property after a public hearing. Provides that if a recorder determines that a mechanics lien recorded in the grantor's index or the grantee's index is a defective lien, the recorder shall serve a Notice of Defective Lien by certified mail to the last known address of the owner. Provides that if the owner or legal representative of the owner of the residential property confirms in writing that the lien is not involved in pending litigation, the owner may request that the recorder refer the defective mechanics lien to the county's code hearing department for adjudication or serve a Demand to Commence Suit forcing the lienholder to either file suit, respond to the Demand, or forfeit the lien. Provides how the recorder is to serve a Demand to Commence Suit or file a Notice of Referral with the code hearing unit. Provides that if the mechanics lien is referred to the code hearing unit, the code hearing unit will set a hearing and notify the applicable parties. Provides if the recorder shows by clear and convincing evidence that the lien in question is a defective lien, the administrative law judge shall rule the lien is forfeited and that the lien no longer affects the chain of title of the property in any way. Limits liability. Includes other provisions. Repeals the provisions on January 1, 2022. Further amends the Counties Code making conforming changes in county code hearing unit provisions. Amends the Mechanics Lien Act making conforming changes.


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FISCAL NOTE ACT MAY APPLY
HOUSING AFFORDABILITY IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB5201LRB100 18632 AWJ 33857 b

1    AN ACT concerning local government.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Counties Code is amended by adding Sections
53-5010.8, 5-41065, and 5-43043 as follows:
 
6    (55 ILCS 5/3-5010.8 new)
7    Sec. 3-5010.8. Mechanics lien demand and referral pilot
8program.
9    (a) Legislative findings. The General Assembly finds that
10invalid and expired mechanics liens on residential property,
11which cloud title to property, are a rapidly growing problem
12throughout the State. In order to address the increase in
13invalid and expired mechanics liens, and more specifically,
14those that have not been released by the lienholder, a recorder
15may establish a process to demand and refer mechanics liens
16that have been recorded but not litigated or released in
17accordance with the Mechanics Lien Act to an administrative law
18judge for resolution or demand that the lienholder commence
19suit or forfeit the lien.
20    (b) Definitions. As used in this Section:
21    "Demand to Commence Suit" means the written demand
22specified in Section 34 of the Mechanics Lien Act.
23    "Mechanics lien", "contractor's lien", and "lien" are used

 

 

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1interchangeably in this Section.
2    "Notice of Defective Mechanics Lien" means the notice a
3recorder gives to a property owner under subsection (d)
4informing the property owner of a defective lien.
5    "Notice of Referral" means the document referring a
6mechanics lien to a county's code hearing unit.
7    "Referral" or "refer" means a recorder's referral of a
8mechanics lien to a county's code hearing unit to obtain a
9determination as to whether a recorded mechanics lien is valid.
10    "Recording" and "filing" are used interchangeably in this
11Section.
12    "Subcontractor" has the meaning given to that term in
13subsection (a) of Section 21 of the Mechanics Lien Act.
14    (c) Establishment of a mechanics lien demand and referral
15process. After a public hearing, a recorder in a county with a
16code hearing unit may adopt rules establishing a mechanics lien
17demand and referral process for residential property. A
18recorder shall provide public notice 90 days before the public
19hearing. The notice shall include a statement of the recorder's
20intent to create a mechanics lien demand and referral process
21and shall be published in a newspaper of general circulation in
22the county and, if feasible, be posted on the recorder's
23website and at the recorder's office or offices.
24    (d) Notice of Defective Lien. If a recorder determines,
25after review by legal staff or counsel, that a mechanics lien
26recorded in the grantor's index or the grantee's index is a

 

 

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1defective lien, the recorder shall serve a Notice of Defective
2Lien by certified mail to the last known address of the owner.
3The owner or legal representative of the owner of the
4residential property shall confirm in writing his or her belief
5that the lien is not involved in pending litigation and, if
6there is no pending litigation, as verified and confirmed by
7county court records, the owner may request that the recorder
8proceed with a referral or serve a Demand to Commence Suit.
9    For the purposes of this Section, a recorder shall
10determine a lien is a defective lien if the lien fits into one
11of the following classifications:
12        (1) forfeited (if the property owner or parties were
13    served written notice and demand as required by Section 34
14    of the Mechanics Lien Act and there is a failure to
15    institute a suit to enforce a lien and a release of lien
16    has not been filed by the lienholder as provided in Section
17    35 of the Mechanics Lien Act);
18        (2) unenforced (if a suit to enforce the lien has not
19    been commenced by the lienholder or a counterclaim has not
20    been filed (within 2 years after the completion date of the
21    contract as specified in the recorded mechanics lien, the
22    completion of extra or additional work, or furnishing of
23    extra or additional material under Section 9 of the
24    Mechanics Lien Act); if a completion date is not specified
25    in the recorded lien, then, as provided under Section 6 of
26    the Mechanics Lien Act: (A) if the work is done or material

 

 

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1    is furnished within 3 years from the commencement of the
2    work or the commencement of furnishing the material in the
3    case of work done or material furnished as to residential
4    property; or (B) if no later than 5 years from the
5    commencement of the work or the commencement of furnishing
6    the material in the case of work done or material furnished
7    as to any other type of property);
8        (3) flawed claim for lien (if the lien was recorded in
9    accordance with the requirements of subsection (a) of
10    Section 7 of the Mechanics Lien Act);
11        (4) 10-day notice not provided (if the lienholder
12    failed to provide the necessary notice to an
13    owner-occupied, single-family residence as required by
14    subsection (d) of Section 7 of the Mechanics Lien Act);
15        (5) flawed subcontractor's claim for lien (if the
16    lienholder is a subcontractor and has failed to comply with
17    the requirements of subsections (c), (d), or (e) of Section
18    21 of the Mechanics Lien Act);
19        (6) flawed subcontractor notice (if the lienholder is a
20    subcontractor and has failed to comply with the
21    requirements of subsection (a) of Section 24 of the
22    Mechanics Lien Act);
23        (7) failure to record a satisfaction or release (if the
24    lienholder has failed to fulfill the requirements of
25    subsection (a) of Section 35 of the Mechanics Lien Act);
26        (8) improperly named parties (if the lienholder has

 

 

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1    filed the lien against an improper party as provided by
2    Section 3 of the Mechanics Lien Act); or
3        (9) improper statement of persons furnishing labor,
4    services, material, fixtures, apparatus or machinery,
5    forms, or form work notice waiver owner of waiver (if the
6    lienholder has failed to fulfill the requirements of
7    subsection (b) of Section 5 of the Mechanics Lien Act).
8    (e) Demand to Commence Suit. Upon receipt of an owner's
9confirmation that the lien is not involved in pending
10litigation and a request for the recorder to serve a Demand to
11Commence Suit, the recorder shall serve a Demand to Commence
12Suit on the lienholder of the defective lien as provided in
13Section 34 of the Mechanics Lien Act. A recorder may request
14that the Secretary of State assist in providing registered
15agent information or obtain information from the Secretary of
16State's registered business database when the recorder seeks to
17serve a Demand to Commence suit on the lienholder. Upon
18request, the Secretary of State, or his or her designee, shall
19provide the last known address or registered agent information
20for a lienholder who is incorporated or doing business in the
21State. The recorder must record a copy of the Demand to
22Commence suit in the grantor's index or the grantee's index
23identifying the mechanics lien and include the corresponding
24document number and the date of demand. The recorder may, at
25his or her discretion, notify the Secretary of State regarding
26a Demand to Commence suit determined to involve a company,

 

 

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1corporation, or business registered with that office.
2    When the lienholder commences a suit or files an answer
3within 30 days or the mechanics lien is forfeited because no
4suit or answer is filed under subsection (a) of Section 34 of
5the Mechanics Lien Act, then the demand and lien process is
6completed for the recorder for that property.
7    (f) Referral. Upon receipt of an owner's confirmation that
8the lien is not involved in pending litigation and a request
9for a the recorder to proceed with a referral, the recorder
10shall: (i) file the Notice of Referral with the county's code
11hearing unit; (ii) identify and notify the lienholder by
12telephone, if available, of the referral and send a copy of the
13Notice of Referral by certified mail to the lienholder using
14information included in the recorded mechanics lien or the last
15known address or registered agent received from the Secretary
16of State or obtained from the Secretary of State's registered
17business database; (iii) send a copy of the Notice of Referral
18by mail to the physical address of the property owner
19associated with the lien; and (iv) record a copy of the Notice
20of Referral in the grantor's index or the grantee's index
21identifying the mechanics lien and include the corresponding
22document number. The Notice of Referral shall clearly identify
23the person, persons, or entity believed to be the owner,
24assignee, successor, or beneficiary of the lien. The recorder
25may, at his or her discretion, notify the Secretary of State
26regarding a referral determined to involve a company,

 

 

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1corporation, or business registered with that office.
2    No later than 30 business days after receipt of the Notice
3of Referral, the code hearing unit shall schedule a hearing to
4occur no later than 30 days after receiving the referral.
5Notice of the hearing shall be provided by the administrative
6law judge to the filer, or the party represented by the filer,
7of the defective lien, the legal representative of the recorder
8of deeds who referred the case, and the last owner of record,
9as identified in the Notice of Referral.
10    If the recorder shows by clear and convincing evidence that
11the lien in question is a defective lien, the administrative
12law judge shall rule the lien is forfeited under Section 34.5
13of the Mechanics Lien Act and that the lien no longer affects
14the chain of title of the property in any way. The judgment
15shall be forwarded to all parties identified in this
16subsection. Upon receiving judgment of a forfeited lien, the
17recorder shall, within 5 business days, record a copy of the
18judgment in the grantor's index or the grantee's index.
19    If the administrative law judge finds the lien to be valid
20and still within the statutorily prescribed period of time to
21remain as an active lien in the property's chain of title, the
22recorder shall, no later than 5 business days after receiving
23notice of the decision of the administrative law judge, record
24a copy of the judgment in the grantor's index or the grantee's
25index.
26    A decision by an administrative law judge does not preclude

 

 

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1a property owner or lienholder from proceeding with a civil
2action to resolve questions concerning a mechanics lien.
3Additionally, if a lienholder or property owner desires to
4remove the action from the code hearing unit to the circuit
5court of the county that the property is located, either party
6may remove the action at any time before the final judgment of
7the administrative law judge.
8    (g) Final administrative decision. The recorder's decision
9to refer a mechanics lien or serve a Demand to Commence Suit is
10a final administrative decision that is subject to review under
11the Administrative Review Law by the circuit court of the
12county where the real property is located. The standard of
13review by the circuit court shall be de novo.
14    (h) Liability. A recorder and his or her employees or
15agents are not subject to personal liability by reason of any
16error or omission in the performance of any duty under this
17Section, except in the case of willful or wanton conduct. The
18recorder and his or her employees or agents are not liable for
19the decision to refer a lien or serve a Demand to Commence
20Suit, or failure to refer or serve a Demand to Commence Suit,
21of a lien under this Section.
22    (i) Private actions; use of demand and referral process.
23Nothing in this Section precludes a private right of action by
24any party with an interest in the property affected by the
25mechanics lien or a decision by the code hearing unit. Nothing
26in this Section requires a person or entity who may have a

 

 

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1mechanics lien recorded against his or her property to use the
2mechanics lien demand and referral process created by this
3Section.
4    (j) Repeal. This Section is repealed on January 1, 2022.
 
5    (55 ILCS 5/5-41065 new)
6    Sec. 5-41065. Mechanics lien demand and referral
7adjudication.
8    (a) Notwithstanding any other provision in this Division, a
9county's code hearing unit must adjudicate a defective
10mechanics lien referred to the unit under Section 3-5010.8.
11    (b) If a county does not have an administrative law judge
12in its code hearing unit that specializes in public records,
13one shall be appointed no later than 3 months after the
14effective date of this amendatory Act of the 100th General
15Assembly to adjudicate all referrals concerning mechanics
16liens under Section 3-5010.8.
17    (c) If an administrative law judge that specializes in
18public records has not been appointed as provided subsection
19(b) when a mechanics lien is referred under Section 3-5010.8 to
20the code hearing unit, the case shall be removed to the proper
21circuit court with jurisdiction.
22    (d) This Section is repealed on January 1, 2022.
 
23    (55 ILCS 5/5-43043 new)
24    Sec. 5-43043. Mechanics lien demand and referral

 

 

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1adjudication.
2    (a) Notwithstanding any other provision in this Division, a
3county's code hearing unit must adjudicate a defective
4mechanics lien referred to the unit under Section 3-5010.8.
5    (b) If a county does not have an administrative law judge
6in its code hearing unit that specializes in public records,
7one shall be appointed no later than 3 months after the
8effective date of this amendatory Act of the 100th General
9Assembly to adjudicate all referrals concerning mechanics
10liens under Section 3-5010.8.
11    (c) If an administrative law judge that specializes in
12public records has not been appointed as provided subsection
13(b) when a mechanics lien is referred under Section 3-5010.8 to
14the code hearing unit, the case shall be removed to the proper
15circuit court with jurisdiction.
16    (d) This Section is repealed on January 1, 2022.
 
17    Section 10. The Mechanics Lien Act is amended by changing
18Section 34 and adding Section 34.5 as follows:
 
19    (770 ILCS 60/34)  (from Ch. 82, par. 34)
20    Sec. 34. Notice to commence suit.
21    (a) Upon written demand of the owner, lienor, a recorder
22under Section 3-5010.8 of the Counties Code, or any person
23interested in the real estate, or their agent or attorney,
24served on the person claiming the lien, or his agent or

 

 

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1attorney, requiring suit to be commenced to enforce the lien or
2answer to be filed in a pending suit, suit shall be commenced
3or answer filed within 30 days thereafter, or the lien shall be
4forfeited. Such service may be by registered or certified mail,
5return receipt requested, or by personal service.
6    (b) A written demand under this Section must contain the
7following language in at least 10 point bold face type:
8"Failure to respond to this notice within 30 days after
9receipt, as required by Section 34 of the Mechanics Lien Act,
10shall result in the forfeiture of the referenced lien."
11(Source: P.A. 97-1165, eff. 2-11-13.)
 
12    (770 ILCS 60/34.5 new)
13    Sec. 34.5. Mechanics lien administrative adjudication.
14    (a) Notwithstanding any other provision in this Act, a
15county's code hearing unit may adjudicate the validity of a
16mechanics lien under Section 3-5010.8 of the Counties Code. If
17the recorder shows by clear and convincing evidence that the
18lien being adjudicated is a defective lien, the administrative
19law judge shall rule the lien is forfeited under this Act and
20that the lien no longer affects the chain of title of the
21property in any way.
22    (b) This Section is repealed on January 1, 2022.

 

 

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1 INDEX
2 Statutes amended in order of appearance
3    55 ILCS 5/3-5010.8 new
4    55 ILCS 5/5-41065 new
5    55 ILCS 5/5-43043 new
6    770 ILCS 60/34from Ch. 82, par. 34
7    770 ILCS 60/34.5 new