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Construction Terms Glossary with Missouri References

This is a basic glossary of commonly used terms in the construction world. The descriptions and definitions were not meant to be comprehensive but rather a summation of a number of fairly complex terms and concepts.

The Missouri law cited throughout this article may not be the most up-to-date information available. It is always advised to consult with an attorney or keycite the referenced case(s) or laws to confirm that the law is in fact authoritative.

This article was strictly intended to be a resource for Missouri contractors and the general public who are interested in learning more about construction law in Missouri.

1.     All-Risk Builders’ Risk Insurance

All-Risk Builders’ Risk Insurance is a type of insurance that is designed to account for a number of occurrences that cause damage to the building, usually including machinery, equipment, materials, supplies, and fixtures that are appurtenant to the structure. This usually does not include insurance coverage defective work (but oftentimes will for ensuing damages).

When referring to all-risk insurance, there’s a “general understanding…that ‘recovery under an ‘all-risk’ policy will, as a rule, be allowed for all fortuitous losses not resulting from misconduct or fraud, unless the policy contains a specific provision expressly excluding the loss from coverage.’” Missouri Commercial Inv. Co. v. Employers Mut. Cas. Co., 680 S.W.2d 397, 400 (Mo. Ct. App. 1984)(citing 13A G. Couch, Cyclopedia of Insurance Law § 48:141 at 139 (R. Anderson 2d ed. 1982). See also : Annot., 88 A.L.R.2d 1122, 1125 (1963)).

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2.     Arbitration

A form of alternative dispute resolution that is used as a vehicle for resolving disputes on a construction project or with a construction contract (though not specifically limited to construction disputes), in which an arbitrator is chosen and decides the matter. Often times the evidentiary and procedural standards are more lenient in an arbitration as compared to a case that is litigated through the court system. This also typically saves the parties money as the case is expedited and does not typically demand the heavy motion and discovery process involved in a formal court proceeding.

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3.      Architect

An architect is a person who is licensed by the Missouri Division of Professional registration (in Missouri) to practice architecture. Typically, to qualify for the licensing application, an architect must have a degree in Architecture from a school or university that is accredited by the National Architecture Accrediting Board.

The architect usually facilitates the completion of the project by performing an evaluation of the project requirements and communicating with the general contractor to ensure that the work is performed in compliance with the specifications.

The architect is also usually in the best position to communicate with the general contractor regarding such matters as the architect is often responsible for preparing the specifications and designs.

On certain projects the architect will also be involved with evaluating pay applications or working with the owner or its representative to ensure that proper payment is made.

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4.     At-Will Employment

A type of employment in which an employer can terminate the employee at any time. The employer does not have to have reason for the termination.  Equally, the employee does not have an obligation to stay with the company and can leave at any time.

In most cases, when engaged in an employment-at-will relationship, the employer can terminate the employee for virtually any reason.

However, in Missouri there are certain safeguards. The Missouri Human Rights Act, section 213.055, states: It shall be an unlawful employment practice: “For an employer, because of the race, color, religion, national origin, sex, ancestry, age or disability of any individual: (a) To fail or refuse to hire or to discharge any individual…” R.S.Mo. § 213.055.

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5.     Bid

A formal offer to a general contractor or the owner to perform certain work set forth in the contract, its terms and conditions, specifications, and any other documents incorporated therein.

On a construction project, the bid would typically require the bidder to furnish all labor, materials, and other necessaries on the project and reach substantial completion in the time prescribed in the contract documents.

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6.     Bid Bond

A bid bond is a type of bond the ensures that the contractor will perform the specified work at the bid price. Once the contractor secures the job by entering into a contract with the owner, the contractor and surety are absolved from duties to satisfy the contractor’s inability to carry out the bid. At that time, the contractor is typically required to purchase a payment and performance bond, which would be the party responsible for making payment in the event of any subsequent failure to carry out the terms and conditions of the contract.

Bid bonds are required on a number of public projects in Missouri. For example, in Missouri the statute requires 10% down or requires a bid bond “[w]henever it shall be ordered by the county commission, township board or district commissioner, as the case may be, that any road, bridge or culvert in the county be constructed, reconstructed or improved or repaired by contract, and the engineer’s estimated cost thereof exceeds the sum of five hundred dollars…”

The specific statute is R.S.Mo. § 229.050, and with respect to the aforedescribed requirements of 10% or a bid bond, states the following, in pertinent part:

“All bids shall be accompanied by a certified check equal to ten percent of the engineer’s estimate of cost, payable to the county treasurer, to the use of the county, township or road district, as the case may be, or a bidder’s bond executed by some surety company authorized to do business in this state or other good and sufficient surety in a like sum shall be given, as a guarantee on the part of the bidder that if his bid be accepted he will, within ten days after receipt of notice of such acceptance, enter into contract and bond to do the work advertised, and in case of default forfeit and pay sum of ten percent of the engineer’s estimate of cost.” R.S.Mo. § 229.050.3

In the State ex rel. Missouri State Highway Comm’n v. Hensel Phelps Const. Co., the Missouri Supreme Court case cited a California case to express its rationale in determining that a contractor can rescind a bid and be relieved from the obligation to perform on the project:

There is a difference between mere mechanical or clerical errors made in tabulating or transposing figures and errors in judgment, as, for example, underestimating the cost of labor and materials. (Emphasis added) The distinction between the two types of errors is recognized in the cases allowing rescission and in the procedures provided by the state and federal governments for relieving contractors from mistakes in bids on public work. (Citations omitted) Generally, relief is refused for error in judgment and allowed only for clerical or mathematical mistakes. (Citations omitted) Where a person is denied relief because of an error in judgment, the agreement which is enforced is the one he intended to make, whereas if he is denied relief from a clerical error, he is forced to perform an agreement he had no intention of making. State ex rel. Missouri State Highway Comm’n v. Hensel Phelps Const. Co., 634 S.W.2d 168, 171 (Mo. 1982)(citing M. F. Kemper Construction Co. v. City of Los Angeles, 37 Cal.2d 696, 235 P.2d 7 (1951).

The Court in State ex rel. Missouri State Highway Comm’n v. Hensel Phelps Const. Co. stating that “[i]f a contractor is allowed to rescind its bid, the bid bond would be cancelled. Certainly, the state may not require forfeiture of the bid bond either as a penalty or liquidated damages if the contractor has no legal obligation to fulfill its bid.” State ex rel. Missouri State Highway Comm’n v. Hensel Phelps Const. Co., 634 S.W.2d 168, 171 (Mo. 1982).

The Court went on to perform an analysis to determine whether the contractor had a right to rescind its bid. The Missouri Supreme Court ultimately deferred to the decision reached by the jury, which was in favor of the Missouri commission.  The ultimate legal holding by the Missouri Supreme Court was that the contractor could not rescind the contract based on a unilateral mistake and therefore could not avoid forfeiting the bid bond to the Commission.

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7.     Bid Documents

The bid documents is a general term used to describe the bid package prepared by a contractor in an effort to secure a construction contract.

Some of the documents that may be included in the bid documents include, but are not limited to:

  • An invitation to bid
  • Bid sheets
  • Bidder’s Questionnaire regarding experience
  • Proof of Financial Responsibility or ability to obtain adequate insurance/bonding
  • Bid instructions
  • Bid Schedule
  • Contract
  • Specifications incorporated into the contract
  • Addenda
  • Any documentation incorporated into the contract
  • Any documentation that would modify amount of time or price of project

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8.    Bid Peddling

Bid peddling is when a subcontractor, who was not the lowest bidder after the first round of bidding, offers a lower bid price to secure the award of the contract from the general contractor.

Bid peddling is when subcontractors will offer to perform the work for a lower amount contractor a lower amount than their original bid to secure the award of the contract from the general contractor. Usually the general contractor may entertain these subsequent bids to create cost savings for the general contractor, but bid peddling, in some cases, can also save the general contractor money.

Bid peddling is a practice that is not encouraged and could subject those implementing such practices to potential liability. Accordingly, it is good practice to simply move onto the next project and avoid interference or some type of tortious interference claim against you.

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9.    Bid Rigging

Bid rigging occurs when contractors conspire by submitting their bids in a manner aimed at driving up or rigging the bid to increase the amount that the lowest bidder submits and is thereby awarded. This type of behavior is unethical in that it is conspiring with other contractors to manipulate the system.

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10.  Bid Shopping

Bid Shopping is when the general contractor receives the first round of bids and takes those bids to the other bidding subcontractors to leverage lower bids from those subcontractors. In extreme circumstances, a contractor or subcontractor may try to create a bidding war between the other bidders to drive down the price by creating a competitive dynamic between them.

“Bid shopping occurs when a general contractor solicits estimates from specialty contractors to compute his lump sum bid and then, after being awarded the contract, again canvasses the specialty contractors in an effort to obtain prices lower than those previously given. This practice may deprive the specialty contractors who strove to be the first round low bidders from receiving the work after the wheeling and dealing in the second round. Moreover, the general contractor realizes savings rather than the owner, unless the general contractor lowered his initial bid anticipating that he could procure the specialty work at less than the estimated prices. Further, fierce competition in the second round may result in underbidding by the specialty contractors and consequent shoddy work as they attempt to keep costs within their bid.” Nash, Jr. and Love, Jr., Innovations in Federal Construction Contracting, 45 Geo. Wash. L. Rev. 309, 315 (1977).

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11. Boilerplate Provisions

Boilerplate provisions are what the average person might refer to as the fine print. Boilerplate provisions are those provisions which appear to be “form” provisions that are typical in most contracts.  Oftentimes boilerplate provisions are found at the end of the project.

If you’d like to learn more about boilerplate provisions, you should read this short article discussing terms that should be in every contract.

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12. Breach of Contract

“To recover for breach of contract [in Missouri], a plaintiff must plead the following elements: (1) the existence of an enforceable contract between the parties to the action; (2) mutual obligations arising under its terms; (3) the party being sued failed to perform obligations imposed by the contract; and (4) the party seeking recovery was thereby damaged.” Jackson v. Williams, Robinson, White & Rigler, P.C., 230 S.W.3d 345, 348 (Mo. Ct. App. 2007) (citing Superior Ins. Co. v. Universal Underwriters Ins. Co., 62 S.W.3d 110, 118 (Mo.App. S.D.2001)).

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13. Certificate of Inspection

In the vast majority of municipalities in St. Louis, Missouri a certificate of inspection must be obtained prior to occupying or renting a structure.

The St. Louis municipal code makes it an ordinance violation if a certificate of inspection is not obtained prior to occupying or renting:

“It shall be unlawful for any person, firm, partnership, corporation, or any other legal entity to occupy or permit the occupancy for any purpose or collect the rent of any occupied dwelling unit when a complete change of occupancy has occurred without first securing a Certificate of Inspection for said dwelling unit.”

Who is responsible for obtaining the certificate of inspection in St. Louis City?

“It is the responsibility of the owner or grantee to secure a Certificate of Inspection. It shall be the responsibility of the owner or the owner’s agent and/or the tenant to provide access to all applicable areas subject to inspections as provided in this chapter.”

St. Louis City Municipal Code – 25.56.040 – Certificate of Inspection requirements.

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14. Certificate of Occupancy

A certificate of occupancy is issued by a building inspector when the structure satisfies the necessary code requirements for the locality. The certificate of occupancy is typically required prior to allowing individuals to legally reside or utilize such structure.

In Creve Coeur, Missouri, there are a number of requirements prior to obtaining a temporary certificate of occupancy. The City of Creve Coeur as well as the fire department are required to issue the partial certificate of occupancy, requiring the following to be satisfied:

  • St. Louis County mechanical, electrical, plumbing and heath inspections or specific approval of each of these inspectors to allow temporary occupancy
  • Emergency egress lights and exit signs
  • Emergency operation of elevators
  • Egress doors on hold open devices
  • Egress doors utilizing special locking arrangements and/or access-control devices
  • Any atrium smoke-control or removal system
  • Fire protective signaling system
  • Smoke and HVAC detectors
  • Fire sprinkler system
  • Any other fire suppression system
  • All fire resistance rated fire separation assemblies
  • All components comprising of means of egress
  • All other building construction per all building permits
  • Emergency generators

The above requirements are merely the requirements necessary to qualify for a temporary in certificate of occupancy in the Creve Coeur area. Each municipality has its own requirements to qualify for such certificate.

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15. Certificate of Substantial Completion

A certificate of substantial completion is a certificate issued by the architect designating the project as substantially complete. Substantial completion can assume a wide array of meanings depending on the contractual language and the nature of the project being performed.

However, the typically accepted, case law definition of substantial completion in Missouri is the following:

“[A] building is substantially complete so as to entitle the contractor to the full contract price when it has reached the state of its construction so that it can be put to the use for which it was intended.” L.L. Lewis Const., L.L.C. v. Adrian, 142 S.W.3d 255, 260 (Mo. Ct. App. 2004).

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16. Code of Federal Regulations (CFR)

The Code of Federal Regulations often assists in fleshing out the specifics of many federal statutes as well as its own standalone rules.

The Code of Federal Regulations are divided into 50 general titles which are each broad categories. Each of these broad categories are updated once a year on a staggered basis.

A number of OSHA regulations are set forth in the Code of Federal Regulations. Additionally, the Code of Federal Regulations has a vast number of regulations governing the Housing and Urban Development as well as the construction of manufactured homes and the safety standards related thereto.

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17. Code of State Regulations (CSR)

The Missouri Code of State Regulations contain a number of regulations that articulate many Missouri statutes and establish a framework of rules to assist in the administration of various matters within the state.

One specific example of a regulation that is commonplace in many government funded construction projects is Division 30 of the Rule of the Office of Administration. Chapter 5 of said Division creates Minority Business Enterprises (MBEs) and Women Business Enterprises (WBEs). Various governmental funding programs use tax credits and other incentives to promote the use of MBEs and WBEs on publicly funded projects.

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18. Change Order

A change order is a modification to the contract. Typically a change order is written and signed by the owner and architect (if an architect is on the project).  However, in Missouri, an oral change order is typically enforceable so long as the contractor and owner have mutually agreed upon the terms.  In the event that they did not, then the contractor may still have recourse by virtue of its equitable remedies such as quantum meruit and unjust enrichment.

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19. Clean Air Act

The Clean Air Act regulates air emissions and is set forth under

42 U.S.C. §7401 et seq. “The Clean Air Act (the Act) was enacted by the United States Congress on December 17, 1963. With the Clean Air Amendments of 1970, Congress enacted a comprehensive national program that made the federal government partners with the states in the fight against air pollution, requiring the Environmental Protection Agency (the EPA) Administrator to promulgate national ambient air quality standards (NAAQS) for certain pollutants.” Friends of Agric. for Reform of Missouri Envtl. Regulations v. Zimmerman, 51 S.W.3d 64, 66 (Mo. Ct. App. 2001)(citing General Motors Corp. v. U.S., 496 U.S. 530, 532–33, 110 S.Ct. 2528, 2530, 110 L.Ed.2d 480 (1990)).

Generally, the Federal Clean Air Act preempts the Missouri air conservation commission from enacting laws that have already been covered by U.S. Congress in the Federal Clean Air Act. “The Commission continues to have rulemaking authority to regulate Missouri air quality in all ways, and in all areas, not covered by the federal Clean Air Act.” Friends of Agric. for Reform of Missouri Envtl. Regulations v. Zimmerman, 51 S.W.3d 64, 80 (Mo. Ct. App. 2001).

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20. Clean Water Act

The Clean Water Act regulates the discharge of contaminants and pollutants into stormwater and wastewater systems in the United States. The Clean Water Act is set forth under 33 U.S.C.A. §§ 1251 et seq. (1981).

Missouri has its own parallel law called the Missouri Clean Water Law, which is set forth under R.S.Mo. § 644.006 et seq.

The policy of the Missouri Clean Water Act is set forth under R.S.Mo. § 644.011 and states the following, in pertinent part:

“it is hereby declared to be the public policy of this state to conserve the waters of the state and to protect, maintain, and improve the quality thereof for public water supplies and for domestic, agricultural, industrial, recreational and other legitimate beneficial uses and for the propagation of wildlife, fish and aquatic life; to provide that no waste be discharged into any waters of the state without first receiving the necessary treatment or other corrective action to protect the legitimate beneficial uses of such waters and meet the requirements of the Federal Water Pollution Control Act…” R.S.Mo. § 644.011

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21. Commercial General Liability Insurance (CGL)

Commercial General Liability Insurance is a type of insurance that typically covers bodily injury and damage caused to property. The Missouri Court of Appeals describes the intent of Commercial General Liability Insurance policies: “to protect against the unpredictable and potentially unlimited liability that can result from accidentally causing injury to other persons or their property.” Am. States Ins. Co. v. Mathis, 974 S.W.2d 647, 649 (Mo. Ct. App. 1998)(citing Columbia Mut. Ins. Co. v. Schauf, 967 S.W.2d 74, 78 (Mo. banc 1998)).

The Court of Appeals goes further to make a distinction, indicating what commercial general liability insurance policies are not:

A commercial general liability policy is not intended to protect business owners against every risk of operating a business. Columbia Mut. Ins. Co. v. Schauf, 967 S.W.2d 74, 78 (Mo. banc 1998)).

“Business risks are those risks that are the ‘normal, frequent, or predictable consequences of doing business, and which business management can and should control and manage.’ ” Columbia Mut. Ins. Co. v. Schauf, 967 S.W.2d 74, 78 (Mo. banc 1998)(quoting James T. Hendrick & James P. Wiezel, The New Commercial General Liability Forms—An Introduction and Critique, 36 F ed’n Ins. & Corp. Couns. Q. 319, 322 (Summer 1986)).

“It is not the function of the CGL policy to guarantee the technical competence and integrity of business management. The CGL policy does not serve as a performance bond, nor does it serve as a warranty of goods or services. It does not ordinarily contemplate coverage for losses which are a normal, frequent or predictable consequence of the business operations. Nor does it contemplate ordinary business expense, or injury and damage to others which results by intent or indifference.” Hendrick & Wiezel, supra, at 322 n. 6 (quoting George H. Tinker, Comprehensive General Liability Insurance—Perspective and Overview, 25 Fed. Ins. Couns. Q. 217, 224 ((Spring 1975)). Am. States Ins. Co. v. Mathis, 974 S.W.2d 647, 649 (Mo. Ct. App. 1998).

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22. Completed Operations Liability Insurance

Completed Operations Liability insurance is a type of insurance coverage for an employer or construction company that protects said entity from liability that arises out of injury or damage that occurs after the operations are completed. Typically operations are considered “completed” under completed operations liability insurance policies once the employer or construction company completes the work in accordance with that set out in the contract.

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23. Completion Bond

In Missouri a completion bond is used interchangeably with a performance bond. A performance bond is often required on construction projects to ensure the completion of the performance of the contractors.

For example, if a subcontractor hired by the general contractor goes bankrupt, the general contractor can call on the surety who issued the performance bond to pay for the new subcontractor to come in and complete the work.

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24. Contract

A contract is typically composed of an exchange of promises between parties which is supported by legal consideration. A contract usually contains a promise, offer, and acceptance. Consideration is sometimes referred to as a bargained-for exchange.

Contracts in Missouri are enforceable whether they are oral or written.

However, it is always good practice to reduce the terms of an agreement to writing. It helps to avoid future confusion and reflects the true terms of the contract.

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25. Corporation

A corporation is an entity that is created pursuant to statute that is recognized as a legal entity. Corporations are governed by Chapter 351 of the Missouri Revised Statutes. Corporations differ from limited liability companies in that corporations (when referring to c-corporations) are double-taxed.  Corporations usually act as a shell or veil for the shareholders and officers unless certain acts are employed which would be ultra vires (acts outside the scope of the authority granted to agents of the corporation).

In Missouri, a corporation is treated as a separate legal entity from the shareholders who make up the ownership of the corporation. Thus, a corporation’s actions will not typically subject the shareholders to civil liability unless those actions are criminal or ultra vires, as noted above.

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26. Cost Proposal

A cost proposal is a document that is submitted by a contractor or subcontractor to the owner or general contractor for approval or denial of a certain scope of work on the project.  The cost proposal contains the projected costs that the subcontractor or contractor is requesting for that portion of the work.

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27. Critical Path Method (CPM)

The United States Court of Claims defined the critical path method as:

Essentially, the critical path method is an efficient way of organizing and scheduling a complex project which consists of numerous interrelated separate small projects. Each subproject is identified and classified as to the duration and precedence of the work. (E.g., one could not carpet an area until the flooring is down and the flooring cannot be completed until the underlying electrical and telephone conduits are installed.) The data is then analyzed, usually by computer, to determine the most efficient schedule for the entire project. Many subprojects may be performed at any time within a given period without any effect on the completion of the entire project. However, some items of work are given no leeway and must be performed on schedule; otherwise, the entire project will be delayed. These latter items of work are on the “critical path.” A delay, or acceleration, of work along the critical path will affect the entire project.

Haney v. United States, 676 F.2d 584, 595 (Ct. Cl. 1982).

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28. Davis-Bacon Act

The Davis-Bacon Act is a federal law that governs construction projects that are federally funded or assisted and requires the local prevailing wage to be paid to the workers on the project.

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29. Design/Build Contract

A design/build contract is a contract where the owner hires a general contractor to provide a team of workers to carry out the entirety of the project. In order to carry out these projects, the general contractors are responsible for providing engineers, architects, and other construction professionals to carry out the various tasks required on the project.

In Missouri, pursuant to the Metropolitan sewer district statute, R.S.Mo. § 249.425, a design-build contract is defined as: “a contract between a sewer district and a designbuild contractor to furnish the architecture, engineering, and related design services, and the labor, materials, and other construction services required for a specific construction project.” . R.S.Mo. § 249.425 (2011).

Pursuant to R.S.Mo. § 67.5070, wastewater or water treatment projects, a design-build contract is defined as “any contract that furnishes architecture or engineering services and construction services either directly or through subcontracts.” R.S.Mo. § 67.5070 (2016).

Under Missouri Statutes, Chapter 327, Architects, Engineers, Land Surveyors and Landscape Architects, a design-build contract is defined as “a contract between the owner, owner’s agent, tenant, or other party and a design-build contractor to furnish the architecture, engineering, and related design services, and the labor, materials, and other construction services required for a specific public or private construction project.” R.S.Mo. § 327.465 (2002).

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St. Louis Business Litigation Lawyer

Business and Commercial Litigation

Litigating a business dispute can often get messy.

In many instances businesses or commercial entities litigate over disputes or issues that often arise from the obligations or duties set forth in the contract between the parties.

These contracts often involve a lot of money, and in many cases a number of parties could be involved, especially when the transaction involves commercial entities.

We have sorted through some incredibly complex cases, and our attorneys know the procedure and the caveats of trying commercial litigation cases.

Our litigation attorneys represent a number of participants in the commercial context, including:

  • borrowers,
  • lenders,
  • suppliers,
  • vendors,
  • purchasers
  • collection agencies,
  • other law firms,
  • manufacturers,
  • limited liability companies,
  • distributors,
  • corporations
  • other commercial entities.

Success in Litigation Comes from Preparation

So how do our attorneys obtain a successful outcome for our clients?

While the outcome of a case can never be guaranteed, we understand the importance of preparing for trial and the advantages of using every tool at our disposal.

Long before the jury is called in, lawyers are battling intensely in the trenches.  This includes discovery strategy, motion work, and any other litigation tactics you can implement into the case.

The attorney who prepares the most and dominates the discovery and motion phases of the case lays the groundwork for success at trial.

Success in the motion phase of the litigation gives the attorney and his client the opportunity to better proceed with their case because they will be able to introduce evidence without a problem or even win the case summarily in some instances.

Regardless, the discovery phase and motion work allow the attorneys to create leverage for their client or require the opposing side to produce evidence or admissions that can change the posture of the case.

Discovery documents and information are used as evidence. 

The important and relevant information (and documentation) obtained during the discovery phase of the litigation is used at the trial.

Without conducting discovery, the parties may be left with some unwanted surprises at trial.  For that reason, it is important to leave no stone unturned by thoroughly propounding discovery on the opposing party.

Motion Practice

Motions give the attorney the ability to limit the other side’s ability to present evidence or to limit the issues the opposition plans to argue.

There are thousands of types of motions that can be filed throughout the course of a case. A good attorney will learn the background and preferences of the judge to determine whether a motion is worth filing and whether that motion will be fruitful.

In circumstances where the motion will merely annoy the judge or will not accomplish any real objective, the attorney is best advised to refrain from preparing and filing such a motion—for several reasons, it saves the client money, and the attorney does not go into the courtroom to argue a losing motion.

Some lawyers have the philosophy that if you lose one motion, you are now associated as a loser in the eyes of the judge.

Those same attorneys believe you should only proceed with a motion if you believe there is a high probability for success. Otherwise, you are setting yourself up for failure in several other aspects of your case.

Conclusion

There are obvious advantages that accompany a knowledgeable and well-prepared attorney. As discussed above, adequate preparation and an aggressive, thought-out pre-trial strategy can be critical to the client’s success.

Our attorneys know how to prepare, and we’ll be intimately familiar with the facts and legal issues surrounding your case, and we’ll employ vigorous litigation techniques to defend the rights of your business.

If you have a dispute that arises out of a commercial transaction, and you need legal assistance, our attorneys are more than happy to advise or litigate, whatever the situation necessitates.

Please contact us today to discuss how to proceed.

Missouri Mechanic’s Liens: Determining the Last Day Work was Performed

A mechanic’s lien must be filed within the time prescribed by statute, or it will not be valid.

So, how long does a contractor performing work in Missouri have to file a mechanic’s lien?

R.S.Mo. § 429.080 governs the time in which a mechanic lien must be filed and states, in pertinent part, that it must be filed: “[w]ithin six months after the indebtedness shall have accrued …” R.S.Mo. § 429.080 (2014) (emphasis added).

Thus, the next logical question is, when does the indebtedness accrue?

“The date the ‘indebtedness has accrue[s’] is the last day work was performed…When a job is finished and indebtedness has accrued is a question of fact.” Midwest Floor Co. v. Miceli Dev. Co., 304 S.W.3d at 247.

When is Work Lienable?

It is important to recognize the rigidity of the deadline as a contractor could be precluded from filing a mechanic’s lien if it is not timely filed.  The right and power to file a mechanic’s lien is created by statute, and thus the “lien claimant must substantially comply with statutory requirements.Midwest Floor Co. v. Miceli Dev. Co., 304 S.W.3d 243, 246 (Mo. Ct. App. 2009.

Accordingly, a contractor should know exactly what Missouri uses as the last day that work is performed. “If labor is performed after it is accepted as substantially complete under the contract, the work will not be lienable. See S & R, 610 S.W.2d at 694 (holding that if labor is done after the owner accepts the work as substantially complete under the contract, the work will not be lienable).” Brown v. Davis, 249 S.W. 696, 698 (Mo.App.St.L.1923).

“A subcontractor cannot, after the termination of an account, extend the mechanic’s lien filing time by rectifying some fault of his in performing the contract.” S & R Builders & Suppliers, Inc. v. Marler, 610 S.W.2d 690, 693 (Mo. Ct. App. 1980).

Last Day Work was Performed Case Summaries

The following is directly quoted from Manning Const. Co. v. MCI Partners, LLC, 419 S.W.3d 134, 139 (Mo. Ct. App. 2013) regarding that last day work is performed and is organized to facilitate legibility:

  • See, e.g., United Petroleum, 218 S.W.3d at 482 (“work performed by a subcontractor that is not intended to simply extend the mechanic’s lien account filing time but is necessary to complete the project in a workmanlike manner operates to extend the lien deadline if it is reasonably within the purview of the original contract” (emphasis added));
  • E. Birk & Son Plumbing & Heating, Inc. v. Malan Constr. Co., 548 S.W.2d 611, 616 (Mo.App.1977) (finding that later work extended lien-filing deadline where “[i]t cannot be denied that this work was essential for the completion of the project, and was not performed for the mere purpose of preserving a mechanic’s lien, but, rather, was reasonably within the purview of the original contract”);
  • Brown v. Davis, 249 S.W. 696, 697–98 (Mo.App.1923) (“It could not be said as a matter of law that the plaintiff performed the [later] work … merely for the purpose of extending the time for filing his lien …”);
  • Badger Lumber Co. v. W.F. Lyons Ice & Power Co., 174 Mo.App. 414, 160 S.W. 49, 53 (1913) (affirming trial court’s holding that later supply of materials to construction project extended deadline for lien filing as to earlier-supplied materials, where “the court, in its findings of fact, states that these items were not charged to the account by appellant for the purpose of extending the time for filing its lien, but were sold in good faith for the purpose of being used, and the same were used, in the construction of the building in question”);
  • Fire Extinguisher, 65 S.W. at 323 (noting evidence that “the [later] work done by the plaintiff … was not a mere scheme on its part to extend the period for filing the lien,” and that owner’s knowledge of, and acquiescence in, later work was “not [intended] as making a new contract for extending the period of limitations”);
  • see also School Dist. of Univ. City ex rel. H & M Mech. Corp. v. Reliance Ins. Co., 904 S.W.2d 253, 256 (Mo.App.E.D.1995) (applying mechanic’s-lien principles to suit on construction performance bond; “Where the reason for the furnishing of small additional items is only to circumvent the notice provision, the time for filing will not be extended.”).

Manning Const. Co. v. MCI Partners, LLC, 419 S.W.3d 134, 139 (Mo. Ct. App. 2013).

Can a Tenant Subject a Landlord’s Property to a Mechanic’s Lien in Missouri?

In the late 70’s and 80’s, there were a number of cases that came down addressing and analyzing a situation where tenants entered into a contract for improvements to the real property and subjected, or almost subjected (depending on how the court ruled), the landlord’s property to a mechanic’s lien.

The analysis at that time hinged greatly upon whether an agency relationship existed and whether the landlord bestowed sufficient authority upon the tenant for the tenant to be able to subject the property to a mechanic’s lien.

Several cases articulated various principles, essentially holding that such a determination required more than just a landlord-tenant relationship:

“[t]he fundamental principle is that the ‘mere relation(ship) of landlord and tenant does not in itself create an agency in the tenant within the meaning of the statutes covering mechanic’s liens.’” Paul A. Medley, Inc. v. Money Town, Inc., 581 S.W.2d 46, 49 (Mo. Ct. App. 1979)(quoting Sol Abrahams & Son Const. Co. v. Osterholm, 136 S.W.2d 86, 92 (Mo.App.1940); Ward v. Nolde, 259 Mo. 285, 168 S.W. 596, 600 (1914); McGuinn v. Federated Mines and Milling Co., 160 Mo.App. 28, 141 S.W. 467, 468 (1911)).

“A corollary principle is that the mere fact that the landlord or lessor consented to the lessee’s making of alterations for the Lessee’s convenience does not create an agency for purposes of the lien.” Paul A. Medley, Inc. v. Money Town, Inc., 581 S.W.2d at 49 (citing Ward v. Nolde, 259 Mo. 285, 168 S.W. 596, 600 (1914); Curtin-Clark Hardware Co. v. Churchill, 126 Mo.App. 462, 104 S.W. 476, 477 (1907); Winslow Bros. Co. v. McCully Stone Mason Co., 169 Mo. 236, 69 S.W. 304, 305 (1902)).

The cases point to the importance of the contractual language between the landlord and the tenant.  “For an agency to exist that would allow the tenant to encumber the interest of the landlord in the property, a right ‘must spring from (the) contract, express or implied, between the tenant and landlord.’” Paul A. Medley, Inc. v. Money Town, Inc., 581 S.W.2d at 49 (citing Powell v. Reidinger, 234 S.W. 850, 852 (Mo.App.1921)).

However, in order for a contractor to have a lien, the Court of Appeals, in the Paul A. Medley case held that the landlord must have some intent in requiring that the tenant make some alterations which amount to a “permanent and substantial benefit to the leasehold.” Id.

“In Messina,…the court summarized certain principles that have developed in determining whether a lessee is the agent of the lessor so as to impress the lessor’s interest with a lien. Those principles are as follows:

(a) mere relationship of lessor lessee does not create agency;

(b) at the time of the execution of the lease the lessee must be obligated to make the changes or improvements;

(c) the improvements must be of substantial and permanent benefit to the leasehold;

(d) mere consent by lessor allowing change or improvements is insufficient; and

(e) in ascertaining the requisite intent, both the lease instrument and the whole of the circumstances may be considered.” Bates v. McKay, 724 S.W.2d 565, 571 (Mo. Ct. App. 1986)(citing Messina Brothers Construction Co. v. Williford,630 S.W.2d 201, 210 (Mo.App.1982)).

“In determining whether the improvements were of permanent and substantial benefit to the leasehold, it is appropriate to consider the improvement in question in relation to the size of the building, whether the improvements substantially altered the character of the premises, and the value to the lessor.” Bates v. McKay, 724 S.W.2d 565, 572 (Mo. Ct. App. 1986)

(citing Paul A. Medley, Inc. v. Money Town, Inc., 581 S.W.2d 46, 49 (Mo.App.1979)).

These factors are important because they weigh the interests of the general contractor and the owner of the property in an attempt to arrive at the most equitable outcome. The underlying principle is that Missouri courts seek to determine whether the burden of payment (or loss of payment) should fall on the owner or general contractor in an effort to reduce or prevent any unjust enrichment to the parties involved.

Conclusion Regarding Tenant’s Ability to Subject a Landlord’s Property to a Mechanic’s Lien in Missouri

The answer to whether a tenant can subject a landlord’s property to a mechanic’s lien is very fact intensive.  As explained above, there are a number of factors that are weighed before a court will make a determination regarding whether the tenant was deemed an agent for purposes of subjecting the landlord’s property to a valid mechanic’s lien. If you find yourself in a similar situation involving the filing or necessary removal of a mechanic’s lien, please contact one of our experienced attorneys to advise you of your rights.

Elements of the Missouri Merchandising Practices Act

Elements of the Missouri Merchandising Practices Act

Definitions of Unlawful Acts under the Missouri Merchandising Practices Act

Definitions of Unlawful Acts under the Missouri Merchandising Practices Act

Unlawful Act or Practice

Definition

Authority

Deception

“Deception is any method, act, use, practice, advertisement or solicitation that has the tendency or capacity to mislead, deceive or cheat, or that tends to create a false impression.–Reliance, actual deception, knowledge of deception, intent to mislead or deceive, or any other culpable mental state such as recklessness or negligence, are not elements of deception” 15 CSR 60-9.020

Fraud

“It is a misrepresentation for any person in connection with the advertisement or sale of merchandise to make any fraudulent assertion. — An assertion is fraudulent if the person intends his/her assertions to induce a consumer to purchase merchandise, and the person: (A) Knows or believes that the assertion is not in accord with the facts; or (B) Knows that he does not have a reasonable basis for his/her assertion” 15 CSR 60-9.100

False and Misleading Statements

“A seller shall not make a representation or statement of fact in an advertisement that is false or has the capacity to mislead prospective purchasers.” 15 CSR 60-7.020

False Pretense

“False pretense is any use of trick or deception, forgery, or false and fraudulent representation, statement, pretense, instrument or device with the intent to defraud–Reliance and injury are not elements of false pretense” 15 CSR 60-9.050

False Promise

“False promise is any statement or representation which is false or misleading as to the makerís intention or ability to perform a promise, or likelihood the promise will be performed.” 15 CSR 60-9.060

Half-Truth

“It is a misrepresentation for any person in connection with the advertisement or sale of merchandise to omit to state a material fact necessary in order to make statements made, in light of the circumstances under which they are made, not misleading.” 15 CSR 60-9.090

Misrepresentation

“A misrepresentation is an assertion that is
not in accord with the facts”
15 CSR 60-9.070; see Restatement,
Second, Contracts, section 159; Packard v. K
C One, Inc.
, 727 SW2d 435 (Mo.App.,
W.D. 1987).

Unfair Practice

“An unfair practice is any practice which—
(A) Either—1. Offends any public policy as it has been established by the Constitution, statutes or common law of this state, or by the Federal Trade Commission, or its interpretive decisions; or 2. Is unethical, oppressive or unscrupulous; and
(B) Presents a risk of, or causes, substantial
injury to consumers–Proof of deception, fraud, or misrepresentation is not required to prove unfair practices”
15 CSR 60-8.020

Concealment of Material Fact

“Concealment of a material fact is any method, act, use or practice which operates to hide or keep material facts from consumers.” 15 CSR 60-9.110 (1)

Suppression of Material Fact

“Suppression of a material fact is any method, act, use or practice which is likely to curtail or reduce the ability of consumers to take notice of material facts which are stated.” 15 CSR 60-9.110 (2)

Omission of Material Fact

“A seller shall not omit any material fact in an advertisement.” — “[A]ny failure by a person to disclose material facts known to him/her, or upon reasonable inquiry would be known to him/her.” 15 CSR 60-7.030; 15 CSR 60-9.110 (3)

Sources:

http://www.sos.mo.gov/cmsimages/adrules/csr/current/15csr/15c60-7.pdf

http://www.sos.mo.gov/cmsimages/adrules/csr/previous/15csr/15csr0611/15c60-8.pdf

http://www.sos.mo.gov/cmsimages/adrules/csr/current/15csr/15c60-9.pdf

Missouri Mechanic’s Lien Requirements [Infographic]

MO Mechanics Lien Requirements Infographic

TIMING

  • Must be filed within six months after the indebtedness accrues
  • Indebtedness accrues on the last day work is performed
  • “A subcontractor cannot, after the termination of an account, extend the mechanic’s lien filing time by rectifying some fault of his in performing the contract.” S & R Builders & Suppliers, Inc. v. Marler, 610 S.W.2d 690, 693 (Mo. Ct. App. 1980).

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NOTICE

1. General Contractor

NOTICE TO OWNER

FAILURE OF THIS CONTRACTOR TO PAY THOSE PERSONS SUPPLYING MATERIAL OR SERVICES TO COMPLETE THIS CONTRACT CAN RESULT IN THE FILING OF A MECHANIC’S LIEN ON THE PROPERTY WHICH IS THE SUBJECT OF THIS CONTRACT PURSUANT TO CHAPTER 429, RSMO. TO AVOID THIS RESULT YOU MAY ASK THIS CONTRACTOR FOR “LIEN WAIVERS” FROM ALL PERSONS SUPPLYING MATERIAL OR SERVICES FOR THE WORK DESCRIBED IN THIS CONTRACT. FAILURE TO SECURE LIEN WAIVERS MAY RESULT IN YOUR PAYING FOR LABOR AND MATERIAL TWICE. ~ R.S.Mo. § 429.012  

2. Subcontractor

A. Residential Owner Occupied Property of 4 Units or Less

  • Consent to Mechanic’s Lien must be in 10 point bold font signed writing, stating:

CONSENT OF OWNER

CONSENT IS HEREBY GIVEN FOR FILING OF MECHANIC’S LIENS BY ANY PERSON WHO SUPPLIES MATERIALS OR SERVICES FOR THE WORK DESCRIBED IN THIS CONTRACT ON THE PROPERTY ON WHICH IT IS LOCATED IF HE IS NOT PAID.” R.S.Mo. § 429.013.2

B. Other Real Property: 10 day Notice of Intent to File Mechanic’s Lien Statement

“Every person except the original contractor, who may wish to avail himself of the benefit of the provisions of sections 429.010to 429.340, shall give ten days’ notice before the filing of the lien, as herein required, to the owner, owners or agent, or either of them, that he holds a claim against such building or improvement, setting forth the amount and from whom the same is due.” ~ R.S.Mo. § 429.100

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MECHANIC’S LIEN STATEMENT CONTENTS

 (a) a just and true account of the demand;

-inaccuracies are unintentional and are the result of honest inadvertence, accident, or oversight, and do not result from deliberate intention or design;

-inclusion of a nonlienable item is the result of honest mistake or inadvertence without intent to defraud and if the nonlienable items can be separated from the lienable items

-no rigid definition of just and true– depends on the facts of each particular case

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General Contractors

“if [] lien statement simply states his account in a lump sum, without itemization.’ Commercial Openings, Inc. v. Mathews, 819 S.W.2d 347, 349–50 (Mo. 1991)(internal citations omitted).

Subcontractors

must  have “an itemized statement of the labor and materials furnished.’” Commercial Openings, Inc. v. Mathews, 819 S.W.2d 347, 349–50 (Mo. 1991)(internal citations omitted).

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(b) a true description of the property, or so near as to identify the same;

  • “need not be letter perfect…” Breckenridge Material Co. v. Byrnesville Const. Co., 842 S.W.2d 551, 552 (Mo. Ct. App. 1992).
  • only be sufficient to enable one familiar with the locality to identify the premises intended to be covered by the lien.” Breckenridge Material Co. v. Byrnesville Const. Co., 842 S.W.2d 551, 552 (Mo. Ct. App. 1992).

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(c) the name of the owner or contractor, or both if known to the person filing the lien; and

(d) verification by the oath of himself or some credible person for him

  • Must be Notarized ~ S.Mo. § 429.080

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EXAMPLES OF LIENABLE ITEMS

If used in improving the property:

  • lumber
  • paneling
  • sheet rock
  • tape
  • paint
  • paint brushes
  • sandpaper
  • saw blades

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LAWSUIT TO FORECLOSE MECHANIC’S LIEN

  • An action to foreclose a mechanic’s lien must be commenced within 6 months of filing the lien ~ S.Mo. § 429.170

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Illinois Construction Law FAQs


General Construction Law Questions

What is the required compliance with Illinois Contracts for the Construction of Buildings? Substantial or Strict Compliance?

Illinois Courts have held that: “persons contracting for the construction and erection of monuments to perpetuate the memory and mark the resting place of their dead are entitled to insist upon a strict compliance with the specifications as to design and character of workmanship.” Oakes v. Barbre, 127 Ill. App. 208, 210 (Ill. App. Ct. 1906)

However, contracts for the construction of a building typically only require substantial compliance.  See generally Oakes v. Barbre, 127 Ill. App. 208, 210 (Ill. App. Ct. 1906); Fitzgerald v. Neville, 210 Ill. App. 659, 659 (Ill. App. Ct. 1918).

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Can a General Contractor bind a Subcontractor to perform the Work at the Bid Price?

Yes if the general contractor relies on the subcontractor’s bid, then the general contractor can estop the subcontractor from backing out of such bid on the basis of promissory estoppel.  Illinois Valley Asphalt, Inc. v. J.F. Edward Construction Co., 413 N.E.2d 209 (3d Dist. 1980).

“The elements of promissory estoppel [in Illinois] are: (1) a promise unambiguous in terms; (2) reliance on such promise by the party to whom it is made; (3) this reliance is expected and foreseeable by the party making the promise; and (4) the one to whom the promise is made must rely on the promise to his injury.” Illinois Valley Asphalt, Inc. v. J. F. Edwards Const. Co., 90 Ill. App. 3d 768, 770, 413 N.E.2d 209, 211 (1980).

Another way of defining the elements of promissory estoppel is the following: “a plaintiff must show (1) that the defendant made a promise unambiguous in its terms, (2) that the plaintiff relied on the promise, (3) that this reliance was expected and foreseeable from the defendant’s position, and (4) that the plaintiff’s reliance on the promise was detrimental.” Pickus Const. & Equip. v. Am. Overhead Door, 326 Ill. App. 3d 518, 523, 761 N.E.2d 356, 361 (2001).

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What does a Contractor have to Prove to be entitled to Additional Compensation on a Construction Project?

“[A] contractor must prove the following elements by clear and convincing evidence to recover additional compensation for extra work on a construction contract: (1) the work was outside the scope of the construction contract; (2) the extra items were ordered by the owner; (3) the owner agreed to pay extra, either by his words or conduct; (4) the extras were not furnished by the contractor as his voluntary act; and (5) the extra items were not rendered necessary by any fault of the contractor.” 209 N. Walnut, L.L.C. v. Origin Fire Prot., Inc., 2013 IL App (2d) 120831-U, ¶ 29(citing A.W. Wendell & Sons, Inc. v. Qazi, 254 Ill.App.3d 97, 104 (1993)).

“The contractor sustains this burden by proving that the extra work was requested by the owner, and there is no evidence indicating that the work was necessary or voluntarily performed due to fault by the contractor.” 209 N. Walnut, L.L.C. v. Origin Fire Prot., Inc., 2013 IL App (2d) 120831-U, ¶ 29(citing A.W. Wendell & Sons, Inc. v. Qazi, 254 Ill.App.3d 97, 104 (1993)).

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What is a Pay-If-Paid Clause in Illinois Construction Law?

“[A] pay-if-paid clause, as the name suggests, provides that a subcontractor will be paid only if the contractor is paid and thus ensures that each contracting party bears the risk of loss only for its own work. A typical clause of this type might say: ‘Contractor’s receipt of payment from the owner is a condition precedent to contractor’s obligation to make payment to the subcontractor; the subcontractor expressly assumes the risk of the owner’s nonpayment and the subcontract price includes the risk.’” Beal Bank Nevada v. Northshore Ctr. THC, LLC, 2016 IL App (1st) 151697, ¶ 24, 64 N.E.3d 201, 209, appeal denied sub nom. Beal Bank Nevada v. FCL Inv’rs, Inc., No. 121523, 2017 WL 598624 (Ill. Jan. 25, 2017).

What is a Pay-When-Paid Clause in Illinois Construction Law?

“A pay-when-paid clause governs the timing of a contractor’s payment obligation to the subcontractor, usually by indicating that the subcontractor will be paid within some fixed time period after the contractor itself is paid by the property owner.” Beal Bank Nevada v. Northshore Ctr. THC, LLC, 2016 IL App (1st) 151697, ¶ 24, 64 N.E.3d 201, 209, appeal denied sub nom. Beal Bank Nevada v. FCL Inv’rs, Inc., No. 121523, 2017 WL 598624 (Ill. Jan. 25, 2017).

“A typical clause of this type might say: ‘Contractor shall pay subcontractor within seven days of contractor’s receipt of payment from the owner.’” Id. (citing Robert F. Carney & Adam Cizek, Payment Provisions in Construction Contracts and Construction Trust Fund Statutes, 24 CONSTRUCTION LAW, Fall 2004, at 5, 5.).

“These clauses address the timing of payment, not the obligation to pay. They do not excuse a contractor’s ultimate liability if it does not receive payment by the property owner, so they do not transfer the risk of ‘upstream’ insolvency from contractor to subcontractor and on down the chain.” Beal Bank Nevada v. Northshore Ctr. THC, LLC, 2016 IL App (1st) 151697, ¶ 24, 64 N.E.3d 201, 209, appeal denied sub nom. Beal Bank Nevada v. FCL Inv’rs, Inc., No. 121523, 2017 WL 598624 (Ill. Jan. 25, 2017).

Illinois Prompt Payment Act

What is the Illinois Prompt Payment Act?

The Illinois Contractor Prompt Payment Act states that if a contractor performs work in accordance with that required of him/it under the contract, and payment for the same is undisputed, the owner must pay said contractor within 15 days.

Contractors are required to pay subcontractors within 15 days as well.  The date the 15 days begins to run is the date that a pay application is completed, submitted, and accepted.  The Prompt Payment Act also allows the claimant to collect 10% interest.

If proper notice is provided (7 days written), the unpaid contractor may cease performance of work until payment is made by the obligated party.

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When did the Prompt Payment Act become part of Illinois law?

In 2007, the Illinois Contractor Prompt Payment Act, which was denominated House Bill 743, passed both houses and was sent to Rod Blagojevich, the governor at the time, for signature.  The Contractor Prompt Payment Act is officially set forth under 815 ILCS 603/1 et seq.

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Home Repair and Remodeling Act

What is the Home Repair and Remodeling Act?

The Home Repair and Remodeling Act is governed by (815 ILCS 513/1 through 999 (West 2006)).  “The Act requires that for any repair or remodeling work over $1,000, ‘a person engaged in the business of home repair or remodeling shall furnish to the customer for signature a written contract or work order.’” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1085, 920 N.E.2d 665, 670 (2009) (citing 815 ILCS 513/15 (West 2006)).

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What are some of the Requirements for Individuals or Contractors governed by the Home Repair and Remodeling Act?

The policy behind the Home Repair and Remodeling Act is to protect customers from unfair or deceptive practices.  Thus, the Act demands that individuals or contractors performing repair or remodeling work in Illinois follow certain statutory requirements.

One of these requirements deals with the contract. The contract that is furnished to the customer must include certain disclosure requirements, such as the cost and contact information for the company performing the work as well as its address. See Behl v. Gingerich, 396 Ill. App. 3d 1078, 1085, 920 N.E.2d 665, 670 (2009); (815 ILCS 513/15 (West 2006)).

Construction companies or individuals performing work that is governed by the Act are also required to “provide to [] customers a copy of the ‘Home Repair: Know Your Consumer Rights’ pamphlet prior to the execution of any home repair and remodeling contract.” See Behl v. Gingerich, 396 Ill. App. 3d 1078, 1085, 920 N.E.2d 665, 670 (2009); (815 ILCS 513/20 (West 2006)).

In addition to providing a copy of the pamphlet, the Act makes it “unlawful for any person engaged in the business of home repairs and remodeling to remodel or make repairs before obtaining a signed contract or work order [when the amount of the work is] over $1,000.” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1085, 920 N.E.2d 665, 670 (2009)(citing 815 ILCS 513/30 (West 2006)).

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What is the Purpose of the Home Repair and Remodeling Act?

The purpose of the Home Repair and Remodeling Act is “to improve communication between consumers and persons engaged in the business of home repairs or remodeling in order to ‘increase consumer confidence, reduce the likelihood of disputes, and promote fair and honest practices in [the repair and remodeling] business in this State.’” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1085, 920 N.E.2d 665, 672 (2009) (Quoting 815 ILCS 513/5 (West 2006)).

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What happens if the Individual or Contractor fails to Substantially Comply with the Home Repair and Remodeling Act?

The contractor or individual could potentially forfeit their right to collect on the Project.  For example, in Smith v. Bogard, the Illinois Court of Appeals, of the Fourth District, “held that the contractor’s failure to provide a written contract or work order and the consumer-rights brochure prior to beginning construction defeated his legal and equitable claims for recovery.” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1088, 920 N.E.2d 665, 673 (2009).

In other situations, however, the Illinois Court of Appeals has found that failure to substantially comply does not bar recovery.

The Illinois Court of Appeals for the First District did not follow the Smith decision and instead permitted the contractor to recover under a quantum meruit theory.

While the court held that the agreement was not enforceable because of the writing requirement,  “the court [also] concluded that the writing requirement of the Act did not foreclose an equitable theory of recovery between, in that particular case, an honest contractor and a ‘sophisticated’ consumer.” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1089, 920 N.E.2d 665, 673 (2009)(citing K. Miller Construction, 394 Ill.App.3d at 250, 332 Ill.Dec. 857, 913 N.E.2d at 1149–50).

“[T]he Second District considered whether a contractor’s failure to provide the homeowners with the consumer-rights brochure in violation of section 20 of the Act (815 ILCS 513/20 (West 2006)) forfeited his legal and equitable causes of action.” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1089, 920 N.E.2d 665, 673 (2009).

“The court concluded that a contractor’s failure to provide the brochure may provide a homeowner with a cause of action under the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 through 12 (West 2006)) but does not ‘vitiate the contractor’s right to recover either in equity or in law.’” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1089, 920 N.E.2d 665, 674 (2009)(quoting Artisan Design, 397 Ill.App.3d at 328, 337 Ill.Dec. at 247, 922 N.E.2d at 370).

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Quantum Meruit

What is Quantum Meruit in the Illinois Construction Law Context?

Quantum meruit is a quasi-contract claim based on principles of equity (fairness).  When work is performed and Illinois courts deem that there was not a valid, legally binding contract, then out of principles of fairness, the courts will consider whether the person or entity performing the work should be entitled to payment.

The courts describe the conferring of a benefit on another, and whether an award is warranted: “‘[O]nly if the circumstances of its receipt or retention are such that, as between the two persons, it is unjust for him to retain it. The mere fact that a person benefits another is not of itself sufficient to require the other to make restitution therefor.’”  Housewright v. Vinyard, 2013 IL App (3d) 120666-U, ¶ 37 (quoting Rutledge v. Housing Authority of the City of East St. Louis, 88 Ill.App.3d 1064, 1069 (1980) (quoting Restatement of Restitution § 1, Comment c (1937))).

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How can Quantum Meruit be established on an Illinois Construction Project?

A party can establish a claim for quantum meruit through evidence of actual expenditures on labor, including time sheets and testimony, as to actual labor used and amounts paid for materials. BRL Carpenters, Ltd. v. American National Bank & Trust Co., 126 Ill.App.3d 137 (1984). However, “[p]roof of a bill for a particular amount, without more, is not evidence of the value of services rendered or materials furnished.” Keno & Sons Construction Co. v. La Salle National Bank, 214 Ill.App.3d 310, 312 (1991). Absent a detailed breakdown of costs, there is no way to determine the extent of recovery to which the claimant is entitled. Id. Housewright v. Vinyard, 2013 IL App (3d) 120666-U, ¶ 37.

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Illinois Mechanic’s Liens FAQs

This article was intended to answer frequently asked questions about Mechanic’s liens in the state of Illinois. The questions contained herein range from the basic essentials of lien filing to a fairly complex discussion of Illinois case law.  In preparing this article, numerous sources have been used, all of which have been cited throughout the text.

In the event a question arises regarding an issue on your construction project, or if you have a question about liens or something related to collecting payment on a project, please contact one of our attorneys for assistance with your case.

General Mechanic’s Lien Questions

The purpose of this section is to inform the reader of the basic principles surrounding Illinois Mechanic’s Liens using statutes and cases to show how Illinois courts have construed the law regarding such subject matter.

The purpose is not only to give a general overview on the basics of mechanic’s liens, but also to provide more in-depth law to educate readers in order to allow companies and individuals in the construction industry to fully exercise their legal rights to collect money that is lawfully due and owing.

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What is a Mechanic’s Lien?

A mechanic’s lien is a tool that contractors and subcontractors can use to create a security interest in property for performing labor or providing materials to improve said property.

While the contractor or individual performing the work can make a claim on the basis of the contract or on the basis of equity, there are certain occasions when the owner is insolvent or unable to pay for the work performed.  In such situations, the contractor’s or individual’s only form of recovery may be through the assertion of a mechanic’s lien.  Ultimately, the recovery potential may be based on priority of the lien if there is limited or no equity in the property.  However, the mechanic’s lien is a mechanism through which the contractor has a direct route to taking the owner’s property and making said property security for the amount owed on the project, which includes the improvements performed thereon.

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What is the Authority for a Mechanic’s Liens in Illinois?

Illinois statutes are the basis for mechanic’s liens.  They do not exist in common law or in equity. Courts are responsible for interpreting the validity of the liens, but the Courts have some flexibility in construing the same.  However, case law dictates that Courts must construe the entire Mechanic’s Lien Act liberally to effectuate its remedial purpose, but before doing so, the lien claimant must have strictly adhered to the statutory requirements to create the lien.  The actual verbiage from Illinois cases is set forth below in this article.

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What Illinois Statute Creates a Mechanic’s Lien?

The statute that creates Illinois mechanic’s liens is 770 ILCS 60/1. However, 770 ILCS 60/7 defines the requirements, statute of limitations, and other relevant details relating to liens. The remainder of the Illinois statutes under chapter 770 set forth the additional rules governing mechanic’s liens.

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What Illinois Law Governs Mechanic’s Liens?

The Illinois Mechanic’s Lien Act falls under 770 ILCS 60/0.01 et seq. and defines a party’s rights with respect to collecting on a construction project by way of a mechanic’s lien. In addition to the Act, there are thousands of cases that interpret the statutes and elaborate on the definitions set forth therein.  The case law cited throughout these frequently asked questions section is aimed at explaining how Illinois courts have construed some of the gray areas in the lien law realm.

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What is the Purpose of a Mechanic’s Lien?

“[The] purpose [of mechanic’s liens] is to protect, through imposition of an enforceable lien, a party who improves the value or condition of property by furnishing labor or materials.” Seasons-4, Inc. v. Hertz Corp., 338 Ill. App. 3d 565, 570, 788 N.E.2d 179, 183 (2003).

To further describe a mechanic’s lien’s purpose, the Illinois Court of Appeals, First District, states: “the underlying theory of the mechanics’ lien laws is that the owner of the fee is benefited by buildings and improvements erected on his premises as they became part of the realty and that he, having received that benefit, should in right and justice pay for such benefit when it was induced or encouraged by his act.” Rasmussen v. Harper, 287 Ill. App. 404, 410, 5 N.E.2d 257, 260 (Ill. App. Ct. 1936).

“[The] purpose of such a statute is to permit a lien upon premises where a benefit has been received by the owner and where the value or condition of the property has been increased or improved by reason of the furnishing of labor and materials.” Colp v. First Baptist Church of Murphysboro, 341 Ill. 73, 76–77, 173 N.E. 67, 68 (1930).

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When Does a Lien Provide a Right to Recovery?

“Mechanics Lien Act provides a method of recovery where a landowner received beneficial improvements to his property or his property value was increased because of a contractor’s labor and materials.” Matanky Realty Grp., Inc. v. Katris, 367 Ill. App. 3d 839, 841, 856 N.E.2d 579, 582 (2006) (citing Gateway Concrete Forming Systems, Inc. v. Dynaprop XVIII: State Street LLC, 356 Ill.App.3d 806, 809, 292 Ill.Dec. 615, 826 N.E.2d 1051 (2005)).

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Who has the Right to file a Mechanic’s Lien?

Any person who has a contract with the owner of property or a person who provides material or labor on a lot or tract of land has the right to file a mechanic’s lien.  These “persons” are described as contractors and subcontractors, the definition of which is set forth in this article. In addition to the foregoing prerequisites, there are numerous statutory conditions that are also discussed in this FAQs article, which must be satisfied to file a valid mechanic’s lien. 770 ILCS 60/1 & 770 ILCS 60/21

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How long does a Contractor have to file a Mechanic’s Lien in Illinois?

4 Months after last work is completed. However, the 4 months’ time period is more than just a statute of limitations, it is the only window in which lien rights may be asserted by the contractor.  “It goes to the existence of the right itself.” N. Side Sash & Door Co. v. Hecht, 295 Ill. 515, 519–20, 129 N.E. 273, 274 (1920).

No contractor shall be allowed to enforce such lien against or to the prejudice of any other creditor or incumbrancer or purchaser, unless within 4 months after completion, or if extra or additional work is done or labor, services, material, fixtures, apparatus or machinery, forms or form work is delivered therefor within 4 months after the completion of such extra or additional work or the final delivery of such extra or additional labor, services, material, fixtures, apparatus or machinery, forms or form work, he or she shall either bring an action to enforce his or her lien therefor or shall file in the office of the recorder of the county in which the building, erection or other improvement to be charged with the lien is situated… (770 ILCS 60/7)

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How long does a Claimant have to foreclose on a Mechanic’s Lien?

A lien claimant must foreclose on a mechanic’s lien “within two years after the completion of the contract, or completion of the extra or additional work, or furnishing of extra or additional material thereunder.” (770 ILCS 60/9)

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What is a Subcontractor Pursuant to the Illinois Mechanic’s Lien Act?

A subcontractor is defined under 770 ILCS 60/21 as “every mechanic, worker or other person who shall furnish any labor, services, material, fixtures, apparatus or machinery, forms or form work for the contractor, or shall furnish any material to be employed in the process of construction as a means for assisting in the erection of the building or improvement in what is commonly termed form or form work where concrete, cement or like material is used in whole or in part…”

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How do Illinois Courts Construe Mechanic’s Liens?

The interpretation of a mechanic’s lien could be referred to as oxymoronic in the sense that the Illinois courts interpret the Act liberally but they construe the satisfaction of the basic lien requirements stringently.

The Courts routinely state that the Mechanic’s Liens Act “is and shall be liberally construed as a remedial act.” (770 ILCS 60/39)

However, to the contrary, “[i]t is well established that the Act must be strictly construed with respect to all the statutory requirements upon which the right to a lien depends.” Cityline Const. Fire & Water Restoration, Inc. v. Roberts, 2014 IL App (1st) 130730, ¶ 10, 7 N.E.3d 235, 237 “The rights created under the Act are statutory and in derogation of the common law, and the technical and procedural requirements necessary for a party to invoke the benefits of the Act must be strictly construed.”

“While our supreme court has declined to establish filing requirements other than those expressly provided in the Act, not wishing to render validly perfected liens technically unenforceable, it remains the settled rule that ‘the lien is valid only if each of the statutory requirements is scrupulously observed.’” Aluma Sys., Inc. v. Frederick Quinn Corp., 206 Ill. App. 3d 828, 839, 564 N.E.2d 1280, 1287 (1990)(quoting First Federal Savings & Loan Association v. Connelly (1983), 97 Ill.2d 242, 246, 73 Ill.Dec. 454, 456, 454 N.E.2d 314, 316.)

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What are the Elements of a Prime Contractor’s Lien in Illinois?

There are a number of necessary elements when filing a mechanic’s lien in Illinois. The following are the general prerequisites:

“(1) a valid contract,

(2) with the owner of the property or his agent or someone who is knowingly permitted by the owner to contract for improvements,

(3) for the furnishing of services or materials, and

(4) performance of the contract or a valid excuse for nonperformance.” Tefco Const. Co. v. Cont’l Cmty. Bank & Trust Co., 357 Ill. App. 3d 714, 718, 829 N.E.2d 860, 863 (2005).

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What are the Requirements if a Lien Claimant wants to enforce the Lien against another Creditor?

If the lien claimant wishes to enforce the lien against a creditor, the claimant must: “(1) file its claim within four months after the completion of the work; (2) verify the lien by affidavit of the claimant or an agent or employee; (3) include a brief statement of the contract; (4) set forth the balance due; and (5) provide a sufficiently correct description of the lot, lots, or tracts of land to identify the same.” Young v. CES, Inc., 2014 IL App (2d) 131090-U, ¶ 79. (citing 770 ILCS 60/7(a) (West 2012); Tefco, 357 Ill.App.3d at 719. See generally First Federal Savings & Loan Ass’n v. Connelly, 97 Ill.2d 242, 249 (1983) (lien claim sufficient even though it pertained to a contract for work on four different buildings likely performed on different dates); Lyons Federal Trust & Savings Bank v. Moline National Bank, 193 Ill.App.3d 108, 112 (1990) (“a statement of mechanics lien does not necessarily require a contract date to be alleged”)).

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Can Attorney’s Fees be collected on a Mechanic’s Lien?

Under certain circumstances attorney’s fees may be collected on a mechanic’s lien. However, prior to the court awarding attorney’s fees, it would have to find that the owner failed to pay “without just cause or right.”

In this context, without just cause or right is defined under 770 ILCS 60/17 as “a defense asserted by the owner who contracted to have the improvements made, which is not well grounded in fact and warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law.”

The applicable statute that allows the lien claimant to recover attorney’s fees states the following, in pertinent part:

If the court specifically finds that the owner who contracted to have the improvements made failed to pay any lien claimant the full contract price, including extras, without just cause or right, the court may tax that owner, but not any other party, the reasonable attorney’s fees of the lien claimant who had perfected and proven his or her claim. 770 ILCS 60/17(b)

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What can a Subcontractor file a Mechanic’s Lien for in Illinois?

Any person who shall by any contract or contracts, express or implied, or partly expressed or implied, with the owner of a lot or tract of land…has a lien upon the whole of such lot or tract of land…for the amount due to him or her for the material, fixtures, apparatus, machinery, services or labor, and interest at the rate of 10% per annum from the date the same is due. 770 ILCS 60/1)

“Section 1 of the Mechanic’s Lien Act (Ill.Rev.Stat.1977, ch. 82, par. 1) specifically provides that a contractor shall have a lien for the amount due from the service, material and labor furnished ‘and interest from the date the same is due.’” Plepel v. Nied, 106 Ill. App. 3d 282, 290, 435 N.E.2d 1169, 1175 (1982).

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Can a Contractor file a Lien if the Owner Breaches the Contract?

Yes, but the owner’s breach must be proven.
“Normally under the Act, the contractor must completely perform the contract to enforce its lien for the value of what has been done. E.g., Contract Development Corp., 255 Ill.App.3d at 666, 194 Ill.Dec. 423, 627 N.E.2d 760.” Fieldcrest Builders, Inc. v. Antonucci, 311 Ill. App. 3d 597, 609–10, 724 N.E.2d 49, 59–60 (1999)
“Non performance on the part of the contractor, however, is excused where the owner breaches the contract and, therefore, the contractor would still be entitled to enforce its lien for the value of the services and material provided in performance of the contract.” Wilmette Partners, 230 Ill.App.3d at 261, 171 Ill.Dec. 657, 594 N.E.2d 1177 (and cases cited therein); 770 ILCS 60/4 (West 1994). Fieldcrest Builders, Inc. v. Antonucci, 311 Ill. App. 3d 597, 609–10, 724 N.E.2d 49, 59–60 (1999).

Can a Contractor have a Mechanic’s Lien on an Easement?

Yes. However, a lien will not extend to an easement if the work is solely performed on the easement.

“Although we recognize that a lien may be extended to ‘an estate in fee, or any right of redemption or other interest that the owner may have in the lot or tract of land’ (770 ILCS 60/1 (West 2004)), we determine that ‘other interest’ does not include easement rights when the improvements at issue were solely made on that easement and not in connection with any improvements to the principle property.” Matanky Realty Grp., Inc. v. Katris, 367 Ill. App. 3d 839, 843, 856 N.E.2d 579, 583 (2006).

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Will a Mechanic’s Lien be Invalid if the Amount Due is Incorrectly Stated?

Maybe. This depends, however, on the mental state/intentions of the contractor at the time the lien is prepared and filed.

“No [lien that has an erroneous amount stated] shall be defeated to the proper amount thereof because of an error or overcharging on the part of any person claiming a lien therefor under this Act, unless it shall be shown that such error or overcharge is made with intent to defraud” (770 ILCS 60/7); See http://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=077000600K7

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Does a Mechanic’s Lien have to contain different information (apportionment of claim) when covering multiple parcels of land?

No. Apportionment of each claim is not a well-defined rule in Illinois as it pertains to multiple parcels of land. Of course, if the lien claimant is able to break down the claim into each parcel, it may be well-advised to thoroughly describe the work for which the lien claim has been made.

The Illinois Court of Appeals states the following “Schmidt [v. Anderson (1911), 253 Ill. 29, 97 N.E. 291] did not lay down a per se rule that each time multiple properties are involved, allocation is required.” (Barker-Lubin Co. v. Unknown Heirs or Devisees (1982), 106 Ill.App.3d 89, 92, 61 Ill.Dec. 796, 435 N.E.2d 493.)

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What if the Lien Statute Changes over the Course of my Contract, which statute governs? The new or the old statute?

While this is what appears to be one of those gray areas, there is case law that answers this question. The answer is: the lien statute in place at the time when the parties enter into the contract will govern if any disputes arise.

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What is Enhancement in the Context of Mechanic’s Liens?

Section 16 of the MechanicsLien Act provides in relevant part that “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 the contract, and the lien creditor shall be preferred to the value of the improvements erected * * *.” 770 ILCS 60/16 (West 1994). Therefore, in order to have priority over a mortgagee, mechanicslien claimants whose contracts with the owner are made after the mortgage is recorded, must prove that they have enhanced the value of the property. If they fail to prove this, then the mortgage will have complete priority over the liens.

Lyons Sav. v. Gash Assocs., 279 Ill. App. 3d 742, 744, 665 N.E.2d 326, 329 (1996)(citing Commercial Mortgage & Finance Co. v. Woodcock Construction Co., 51 Ill.App.2d 61, 65, 200 N.E.2d 923, 925 (1964)).

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How does a Lien Claimant prove Enhancement?

“[L]ien claimants must prove the value of their enhancements by applying the market value theory. Generally, under the market value theory, the value of the enhancements equals the market value of the property after the improvements are made minus the value of the property before the improvements are made.” Lyons Sav. v. Gash Assocs., 279 Ill. App. 3d 742, 744–45, 665 N.E.2d 326, 329 (1996).

What is the Market Value Theory?

Market value theory is the manner in which a lien claimant proves enhancement of the property.  “Enhancement is the increase in market value of the property by reason of the improvement, and is not affected by the cost of labor or material, the original amount of the claim, or the balance due thereupon.” Lyons Sav. v. Gash Assocs., 279 Ill. App. 3d 742, 745, 665 N.E.2d 326, 329 (1996)(citing Moulding-Brownell v. E.C. Delfosse Construction Corp., 304 Ill.App. at 493-94, 26 N.E.2d 709, 712 (1940).

What are other Ways to Prove Enhancement of Property?

Some Illinois appellate courts have determined that “the contract price is the appropriate measure of the lien claimants’ improvements.” Lyons Sav. v. Gash Assocs., 279 Ill. App. 3d 742, 745, 665 N.E.2d 326, 330 (1996)(citingNoel State Bank v. Blakely Real Estate Improvement Corp., 321 Ill.App. 594, 53 N.E.2d 621 (1944)). This measure of damages typically only applies in limited circumstances where the improvements are limited though.

When is the Market Value Theory the Appropriate Method of Determining the Enhancements on Property?

The Illinois Court of Appeals held generally that when the improvements were greater than 10% of the structure, then the proper measure of damages is the market value theory.  This reason comes in part from the concept that “the margin of error in utilizing the market value approach is 10%.” Lyons Sav. v. Gash Assocs., 279 Ill. App. 3d 742, 746, 665 N.E.2d 326, 330 (1996).

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What are the Elements when the Market Value Theory is Inappropriate?

When the market value approach is not the proper method of determining the enhancement of the property, “the lien claimant must establish the contract price as an accurate measure of the value of the enhancements by showing that the improvements aided the property in achieving its highest and best use.” Lyons Sav. v. Gash Assocs., 279 Ill. App. 3d 742, 747, 665 N.E.2d 326, 330 (1996).
The following are the elements to prove enhancement of the property using a contract: “(1) the work in question was properly authorized by the owner of the property, (2) the contract price was reasonable for the work done, (3) the lien claimants complied with the terms of the contract, and (4) the work constitutes a valuable and permanent improvement to the property.” Lyons Sav. v. Gash Assocs., 279 Ill. App. 3d 742, 746–47, 665 N.E.2d 326, 330 (1996).

Notice

What Notice must be given on Owner-Occupied Single-Family Residences?

“A contractor for improvements of an owner-occupied single-family residence must give the owner written notice within 10 days after recording a lien against any property of the owner.” (770 ILCS 60/7)

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How is Service effectuated regarding the Contractor’s Notice Requirement on Owner-Occupied Single Family Residences?

With respect to owner-occupied single-family residences, the service is effective at the time it is “sent or personally delivered.” (770 ILCS 60/7)

In the event that the contractor fails to give timely notice to the owner the lien may be extinguished in part, if the owner has suffered damages before notice is given, but only to the extent of the damages caused by failure to provide notice may the lien be extinguished. (770 ILCS 60/7)

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What Notice does a Subcontractor have to give to the Owner of Residential Property in order to preserve its Mechanic’s Lien Rights?

Pursuant to 770 ILCS 60/21(c), the subcontractor must give 60 days’ notice from the first day labor is performed.

It shall be the duty of each subcontractor who has furnished, or is furnishing, labor, services, material, fixtures, apparatus or machinery, forms or form work for an existing owner-occupied single family residence, in order to preserve his lien, to notify the occupant either personally or by certified mail, return receipt requested, addressed to the occupant or his agent of the residence within 60 days from his first furnishing labor, services, material, fixtures, apparatus or machinery, forms or form work, that he is supplying labor, services, material, fixtures, apparatus or machinery, forms or form work provided…770 ILCS 60/21

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Does a Subcontractor lose its lien rights if it fails to give 60 days’ Notice to a Residential Property Owner?

It depends.  “[A]ny notice given after 60 days by the subcontractor shall preserve his lien, but only to the extent that the owner has not been prejudiced by payments made prior to receipt of the notice.” 770 ILCS 60/21(c)

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What does the Subcontractor’s Notice have to include?

  1. name and address of the subcontractor or material man;
  2. the date the subcontractor began the work or delivered the materials;
  3. a description of the work performed and that will be performed (or a description of the materials that have been delivered and will be delivered,
  4. the general contractor’s name who solicited the work from the subcontractor, and
  5. Certain specific language, written exactly as follows:

“NOTICE TO OWNER

The subcontractor providing this notice has performed work for or delivered material to your home improvement contractor. These services or materials are being used in the improvements to your residence and entitle the subcontractor to file a lien against your residence if the services or materials are not paid for by your home improvement contractor. A lien waiver will be provided to your contractor when the subcontractor is paid, and you are urged to request this waiver from your contractor when paying for your home improvements.”

*The above notice must be in at least 10 point bold face font.

The statute generally states that if the notice is sent via certified mail, then the mailbox rule applies.  The mailbox rule means that the notice would be deemed to be given on the date that the notice was properly addressed and mailed.  770 ILCS 60/21(c)

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Contractors’ Rights

What are the Contractor’s Rights when an Owner Stops Paying on a Project?

If the money is lawfully due and owing to the contractor (always consult with an attorney to know your rights), the contractor can stop performing the work, and the contractor will be immune from any claims due to delay during that time period. 770 ILCS 60/4

Additionally, if payment is not received for a period of at least 10 days, the contractor can abandon the work and pursue a lien on the property. The lien can only be for the amount of work that has already been performed.  Also, the contractor is entitled to keep materials supplied by the contractor if they are not incorporated into the improvement. 770 ILCS 60/4

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Can a Tenant who performs Improvements on a Landlord’s Property Claim a Mechanic’s Lien?

Yes. Even when there was a provision in the contract prohibiting a mechanic’s lien from being filed on the property by the tenant, the Illinois Appellate Court of the First District held that the tenant had lien rights, treating him like any other contractor.

The court stated the following, in relevant part:

under the broad terms of the Act, any person who contracts with a property owner or his agent for the furnishing of services or materials for the benefit of the land may properly claim a lien against the property. (Delaney Electric Co. v. Schiessle (1992), 235 Ill.App.3d 258, 264, 176 Ill.Dec. 280, 601 N.E.2d 978.) This result obtains regardless of whether the lien claimant may have a leasehold interest in the property. It is the lienor’s performance of the contract, and not his status incident to tenancy, which determines his right to a mechanic’s lien.

Leveyfilm, Inc. v. Cosmopolitan Bank & Trust, 274 Ill. App. 3d 348, 353, 653 N.E.2d 875, 878 (1995).

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Bonding over a Mechanic’s Lien

What does it mean to Bond over a Mechanic’s Lien?

When a subcontractor files a mechanic’s lien, sometimes it can cause tension between the general contractor and the owner.  In some situations, it can destroy their relationship. Depending on the extent of the business relationship, this could cost the general contractor thousands to millions of dollars in lost future business opportunities.

What if the claim isn’t even valid?  For example, if the subcontractor files without any just cause? Shouldn’t the contractor be able to get the lien off immediately?

In a number of states, like Missouri for example, the general contractor is stuck litigating the case to vitiate/invalidate the lien or if the general contractor loses, the property is foreclosed upon.

In a lot of these cases, long before the Court or a jury make a decision, the owner puts significant pressure on the contractor to forces them to prematurely settle with the subcontractor.  If the general contractor does not settle these cases immediately, it clouds the owner’s title, which most owners will not tolerate a subcontractor encumbering their property.

Fortunately for general contractors in Illinois, there is the possibility of removing the lien from the property and replacing it with a bond.  This is called bonding over the lien or the substitution of a bond for a lien.

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What Illinois Statute governs Bonding over a Mechanic’s Lien?

In Illinois, section 770 ILCS 60/38.1 governs the substitution of bonds for mechanics’ liens.  As noted above bonding over a mechanic’s lien is one of the most effective ways to relieve the general contractor from getting pressure from the owner.

In Missouri, there is no statute that allows a contractor to bond over a lien.  Instead, the contractor is stuck dealing with a battle from two fronts (from the owner and from the lien claimant).  The only way of getting the lien off is by having a court adjudicate it invalid or by paying it and receiving a lien release from the lien claimant.

In certain situations, where the lien could be ripe for a slander of title claim, the subcontractor may just release the lien and litigate its contractual claim.  This obviously varies greatly depending on the factual circumstances of the case.

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