HB5201eng 100TH GENERAL ASSEMBLY

HB5201 Engrossed LRB100 18632 AWJ 33857 b

AN ACT concerning local government.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Counties Code is amended by adding Sections 3-5010.8, 5-41065, and 5-43043 as follows:

(55 ILCS 5/3-5010.8 new)

Sec. 3-5010.8. Mechanics lien demand and referral pilot program.

(a) Legislative findings. The General Assembly finds that invalid and expired mechanics liens on residential property, which cloud title to property, are a rapidly growing problem throughout the State. In order to address the increase in invalid and expired mechanics liens, and more specifically, those that have not been released by the lienholder, a recorder may establish a process to demand and refer mechanics liens that have been recorded but not litigated or released in accordance with the Mechanics Lien Act to an administrative law judge for resolution or demand that the lienholder commence suit or forfeit the lien.

(b) Definitions. As used in this Section:

"Demand to Commence Suit" means the written demand specified in Section 34 of the Mechanics Lien Act.

"Mechanics lien", "contractor's lien", and "lien" are used interchangeably in this Section.

"Notice of Defective Mechanics Lien" means the notice a recorder gives to a property owner under subsection (d) informing the property owner of a defective lien.

"Notice of Referral" means the document referring a mechanics lien to a county's code hearing unit.

"Referral" or "refer" means a recorder's referral of a mechanics lien to a county's code hearing unit to obtain a determination as to whether a recorded mechanics lien is valid.

"Recording" and "filing" are used interchangeably in this Section.

"Subcontractor" has the meaning given to that term in subsection (a) of Section 21 of the Mechanics Lien Act.

(c) Establishment of a mechanics lien demand and referral process. After a public hearing, a recorder in a county with a code hearing unit may adopt rules establishing a mechanics lien demand and referral process for residential property. A recorder shall provide public notice 90 days before the public hearing. The notice shall include a statement of the recorder's intent to create a mechanics lien demand and referral process and shall be published in a newspaper of general circulation in the county and, if feasible, be posted on the recorder's website and at the recorder's office or offices.

(d) Notice of Defective Lien. If a recorder determines, after review by legal staff or counsel, 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. The owner or legal representative of the owner of the residential property shall confirm in writing his or her belief that the lien is not involved in pending litigation and, if there is no pending litigation, as verified and confirmed by county court records, the owner may request that the recorder proceed with a referral or serve a Demand to Commence Suit.

For the purposes of this Section, a recorder shall determine a lien is a defective lien if the lien fits into one of the following classifications:

(1) forfeited (if the property owner or parties were served written notice and demand as required by Section 34 of the Mechanics Lien Act and there is a failure to institute a suit to enforce a lien and a release of lien has not been filed by the lienholder as provided in Section 35 of the Mechanics Lien Act);

(2) unenforced (if a suit to enforce the lien has not been commenced by the lienholder or a counterclaim has not been filed (within 2 years after the completion date of the contract as specified in the recorded mechanics lien, the completion of extra or additional work, or furnishing of extra or additional material under Section 9 of the Mechanics Lien Act); if a completion date is not specified in the recorded lien, then, as provided under Section 6 of the Mechanics Lien Act: (A) if the work is done or material is furnished within 3 years from the commencement of the work or the commencement of furnishing the material in the case of work done or material furnished as to residential property; or (B) if no later than 5 years from the commencement of the work or the commencement of furnishing the material in the case of work done or material furnished as to any other type of property);

(3) flawed claim for lien (if the lien was recorded in accordance with the requirements of subsection (a) of Section 7 of the Mechanics Lien Act);

(4) 10-day notice not provided (if the lienholder failed to provide the necessary notice to an owner-occupied, single-family residence as required by subsection (d) of Section 7 of the Mechanics Lien Act);

(5) flawed subcontractor's claim for lien (if the lienholder is a subcontractor and has failed to comply with the requirements of subsections (c), (d), or (e) of Section 21 of the Mechanics Lien Act);

(6) flawed subcontractor notice (if the lienholder is a subcontractor and has failed to comply with the requirements of subsection (a) of Section 24 of the Mechanics Lien Act);

(7) failure to record a satisfaction or release (if the lienholder has failed to fulfill the requirements of subsection (a) of Section 35 of the Mechanics Lien Act);

(8) improperly named parties (if the lienholder has filed the lien against an improper party as provided by Section 3 of the Mechanics Lien Act); or

(9) improper statement of persons furnishing labor, services, material, fixtures, apparatus or machinery, forms, or form work notice waiver owner of waiver (if the lienholder has failed to fulfill the requirements of subsection (b) of Section 5 of the Mechanics Lien Act).

(e) Demand to Commence Suit. Upon receipt of an owner's confirmation that the lien is not involved in pending litigation and a request for the recorder to serve a Demand to Commence Suit, the recorder shall serve a Demand to Commence Suit on the lienholder of the defective lien as provided in Section 34 of the Mechanics Lien Act. A recorder may request that the Secretary of State assist in providing registered agent information or obtain information from the Secretary of State's registered business database when the recorder seeks to serve a Demand to Commence suit on the lienholder. Upon request, the Secretary of State, or his or her designee, shall provide the last known address or registered agent information for a lienholder who is incorporated or doing business in the State. The recorder must record a copy of the Demand to Commence suit in the grantor's index or the grantee's index identifying the mechanics lien and include the corresponding document number and the date of demand. The recorder may, at his or her discretion, notify the Secretary of State regarding a Demand to Commence suit determined to involve a company, corporation, or business registered with that office.

When the lienholder commences a suit or files an answer within 30 days or the mechanics lien is forfeited because no suit or answer is filed under subsection (a) of Section 34 of the Mechanics Lien Act, then the demand and lien process is completed for the recorder for that property.

(f) Referral. Upon receipt of an owner's confirmation that the lien is not involved in pending litigation and a request for a the recorder to proceed with a referral, the recorder shall: (i) file the Notice of Referral with the county's code hearing unit; (ii) identify and notify the lienholder by telephone, if available, of the referral and send a copy of the Notice of Referral by certified mail to the lienholder using information included in the recorded mechanics lien or the last known address or registered agent received from the Secretary of State or obtained from the Secretary of State's registered business database; (iii) send a copy of the Notice of Referral by mail to the physical address of the property owner associated with the lien; and (iv) record a copy of the Notice of Referral in the grantor's index or the grantee's index identifying the mechanics lien and include the corresponding document number. The Notice of Referral shall clearly identify the person, persons, or entity believed to be the owner, assignee, successor, or beneficiary of the lien. The recorder may, at his or her discretion, notify the Secretary of State regarding a referral determined to involve a company, corporation, or business registered with that office.

No later than 30 business days after receipt of the Notice of Referral, the code hearing unit shall schedule a hearing to occur no later than 30 days after receiving the referral. Notice of the hearing shall be provided by the administrative law judge to the filer, or the party represented by the filer, of the defective lien, the legal representative of the recorder of deeds who referred the case, and the last owner of record, as identified in the Notice of Referral.

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 under Section 34.5 of the Mechanics Lien Act and that the lien no longer affects the chain of title of the property in any way. The judgment shall be forwarded to all parties identified in this subsection. Upon receiving judgment of a forfeited lien, the recorder shall, within 5 business days, record a copy of the judgment in the grantor's index or the grantee's index.

If the administrative law judge finds the lien to be valid and still within the statutorily prescribed period of time to remain as an active lien in the property's chain of title, the recorder shall, no later than 5 business days after receiving notice of the decision of the administrative law judge, record a copy of the judgment in the grantor's index or the grantee's index.

A decision by an administrative law judge does not preclude a property owner or lienholder from proceeding with a civil action to resolve questions concerning a mechanics lien. Additionally, if a lienholder or property owner desires to remove the action from the code hearing unit to the circuit court of the county that the property is located, either party may remove the action at any time before the final judgment of the administrative law judge.

(g) Final administrative decision. The recorder's decision to refer a mechanics lien or serve a Demand to Commence Suit is a final administrative decision that is subject to review under the Administrative Review Law by the circuit court of the county where the real property is located. The standard of review by the circuit court shall be de novo.

(h) Liability. A recorder and his or her employees or agents are not subject to personal liability by reason of any error or omission in the performance of any duty under this Section, except in the case of willful or wanton conduct. The recorder and his or her employees or agents are not liable for the decision to refer a lien or serve a Demand to Commence Suit, or failure to refer or serve a Demand to Commence Suit, of a lien under this Section.

(i) Private actions; use of demand and referral process. Nothing in this Section precludes a private right of action by any party with an interest in the property affected by the mechanics lien or a decision by the code hearing unit. Nothing in this Section requires a person or entity who may have a mechanics lien recorded against his or her property to use the mechanics lien demand and referral process created by this Section.

(j) Repeal. This Section is repealed on January 1, 2022.

(55 ILCS 5/5-41065 new)

Sec. 5-41065. Mechanics lien demand and referral adjudication.

(a) Notwithstanding any other provision in this Division, a county's code hearing unit must adjudicate a defective mechanics lien referred to the unit under Section 3-5010.8.

(b) If a county does not have an administrative law judge in its code hearing unit that specializes in public records, one shall be appointed no later than 3 months after the effective date of this amendatory Act of the 100th General Assembly to adjudicate all referrals concerning mechanics liens under Section 3-5010.8.

(c) If an administrative law judge that specializes in public records has not been appointed as provided subsection (b) when a mechanics lien is referred under Section 3-5010.8 to the code hearing unit, the case shall be removed to the proper circuit court with jurisdiction.

(d) This Section is repealed on January 1, 2022.

(55 ILCS 5/5-43043 new)

Sec. 5-43043. Mechanics lien demand and referral adjudication.

(a) Notwithstanding any other provision in this Division, a county's code hearing unit must adjudicate a defective mechanics lien referred to the unit under Section 3-5010.8.

(b) If a county does not have an administrative law judge in its code hearing unit that specializes in public records, one shall be appointed no later than 3 months after the effective date of this amendatory Act of the 100th General Assembly to adjudicate all referrals concerning mechanics liens under Section 3-5010.8.

(c) If an administrative law judge that specializes in public records has not been appointed as provided subsection (b) when a mechanics lien is referred under Section 3-5010.8 to the code hearing unit, the case shall be removed to the proper circuit court with jurisdiction.

(d) This Section is repealed on January 1, 2022.

Section 10. The Mechanics Lien Act is amended by changing Section 34 and adding Section 34.5 as follows:

(770 ILCS 60/34) (from Ch. 82, par. 34)

Sec. 34. Notice to commence suit.

(a) Upon written demand of the owner, lienor, a recorder under Section 3-5010.8 of the Counties Code, or any person interested in the real estate, or their agent or attorney, served on the person claiming the lien, or his agent or attorney, requiring suit to be commenced to enforce the lien or answer to be filed in a pending suit, suit shall be commenced or answer filed within 30 days thereafter, or the lien shall be forfeited. Such service may be by registered or certified mail, return receipt requested, or by personal service.

(b) A written demand under this Section must contain the following language in at least 10 point bold face type: "Failure to respond to this notice within 30 days after receipt, as required by Section 34 of the Mechanics Lien Act, shall result in the forfeiture of the referenced lien."

(Source: P.A. 97-1165, eff. 2-11-13.)

(770 ILCS 60/34.5 new)

Sec. 34.5. Mechanics lien administrative adjudication.

(a) Notwithstanding any other provision in this Act, a county's code hearing unit may adjudicate the validity of a mechanics lien under Section 3-5010.8 of the Counties Code. If the recorder shows by clear and convincing evidence that the lien being adjudicated is a defective lien, the administrative law judge shall rule the lien is forfeited under this Act and that the lien no longer affects the chain of title of the property in any way.

(b) This Section is repealed on January 1, 2022.