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Full Text of SB1564  97th General Assembly

SB1564 97TH GENERAL ASSEMBLY

  
  

 


 
97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
SB1564

 

Introduced 2/9/2011, by Sen. Kirk W. Dillard

 

SYNOPSIS AS INTRODUCED:
 
See Index

    Amends the Mechanics Lien Act. Provides that if questions arise 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 of the contract plus (instead of at the time of making of the contract, and the lien creditor shall be preferred to the value of the improvements erected on the premises) the value of the improvements paid for pursuant to the Act by said incumbrancer for the building erected, or materials furnished, and the lien creditor shall be preferred to the value of its share of the unpaid improvements erected on said premises. Adds provisions pertaining to surety bonds over: a recorded mechanics lien claim; a claim on funds in the hands of the owner; and on public construction funds. Provides procedures and requirements for filing surety bonds. Provides that a corporate surety bond for the purposes of these provisions shall meet specified requirements. Provides that a surety bond shall be in an amount equal to 1 1/2 times the amount of the mechanics lien or claim, plus costs, and include additional documents and information. Provides that for a condominium, the current owners and lenders of the condominium may be represented by the condominium association. Includes other provisions.


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A BILL FOR

 

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1    AN ACT concerning civil law.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Mechanics Lien Act is amended by changing
5Section 16 and by adding Section 38.5 as follows:
 
6    (770 ILCS 60/16)  (from Ch. 82, par. 16)
7    Sec. 16. No incumbrance upon land, created before or after
8the making of the contract under the provisions of this act,
9shall operate upon the building erected, or materials furnished
10until a lien in favor of the persons having done work or
11furnished material shall have been satisfied, and upon
12questions arising between incumbrancers and lien creditors,
13all previous incumbrances shall be preferred to the extent of
14the value of the land at the time of making of the contract
15plus , and the lien creditor shall be preferred to the value of
16the improvements paid for pursuant to the requirements of this
17Act by said incumbrancer for the building erected, or materials
18furnished, and the lien creditor shall be preferred to the
19value of its share of the unpaid improvements erected on said
20premises, and the court shall ascertain by jury or otherwise,
21as the case may require, what proportion of the proceeds of any
22sale shall be paid to the several parties in interest. All
23incumbrances, whether by mortgage, judgment or otherwise,

 

 

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1charged and shown to be fraudulent, in respect to creditors,
2may be set aside by the court, and the premises freed and
3discharged from such fraudulent incumbrance.
4(Source: Laws 1903, p. 230.)
 
5    (770 ILCS 60/38.5 new)
6    Sec. 38.5. Bonds.
7    (a) Surety bond.
8        (i) Whenever a mechanic's lien has been filed in
9    accordance with this Act, the owner or former owner,
10    whether legal or beneficial, of any interest in the
11    property subject to the lien or the lender having a lien on
12    said property or a contractor or subcontractor through whom
13    the mechanics lien claimant is claiming, may, at any time,
14    file with the circuit clerk of the county wherein the
15    property is situated a corporate surety bond as provided in
16    subsection (b).
17        (ii) Whenever an owner, whether legal or beneficial, of
18    any interest in property, has received notice from a
19    subcontractor or material supplier pursuant to Section 24
20    that constitutes a lien on funds in the hands of the owner
21    due the contractor, the contractor or a subcontractor
22    through whom the claimant is claiming may, at any time,
23    file with the circuit clerk of the county wherein the
24    property is situated a corporate surety bond as set forth
25    in subsection (b).

 

 

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1        (iii) Whenever an official of a public body has
2    received a notice from a subcontractor or material supplier
3    that constitutes a lien on public funds pursuant to Section
4    23, the contractor or a subcontractor through whom the
5    claimant is claiming may, at any time, file with the
6    circuit clerk of the county wherein the public improvement
7    being constructed is situated a corporate surety bond as
8    provided in subsection (b).
9    (b) Bond requirements.
10        (i) The bond shall be from a surety (a) authorized to
11    do business in this State (b) having at least an A rating
12    from A.M. Best, (c) authorized to issue bonds per the
13    United States Department of the Treasury's Listing of
14    Approved Sureties, and (d) authorized in the Treasury's
15    Listing of Approved Sureties to issue a bond to federal
16    agencies in an amount equal to or in excess of the amount
17    of the specific bond issued pursuant to this Section. The
18    bond shall be in an amount equal to 1 1/2 times the amount
19    of the mechanics lien or claim plus costs allowed to date.
20    The bond shall have a copy of the filed mechanics lien
21    claim or notice to the owner of a private project or to the
22    clerk or secretary of the public body described in Section
23    23(b) attached and set forth the names and addresses of the
24    record owner or the name and address of the clerk or
25    secretary of the public body described in Section 23(b) who
26    is disbursing the funds, the construction lender, if any,

 

 

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1    and any other parties who are to be protected by the bond.
2    If a condominium is involved, for the purposes of this
3    Section, the current owners and lenders of the condominium
4    may be represented by the condominium association, whose
5    address shall also be furnished. A single bond may cover
6    both a mechanics lien claim and a claim of funds in the
7    hands of the owner due the subcontractor or material
8    supplier if said mechanics lien claim and claim on funds in
9    the hands of the owner are based upon the same claim by the
10    subcontractor or material supplier. The bond shall be
11    conditioned that, if the lien claimant shall be finally
12    adjudged to be entitled to recover upon the claim upon
13    which his or her lien or claim for funds is based, the
14    principal or his or her sureties shall pay to such claimant
15    the amount of his or her judgment, together with any
16    interest, costs, and other sums which such claimant would
17    be entitled to recover upon the foreclosure of the
18    mechanics lien claim or upon any claim that it may have as
19    to funds in the hands of the owner or any public official,
20    or upon any other bond posted by any other party.
21        (ii) Upon receipt of a bond complying with the
22    requirements of subsection (b)(i), the circuit clerk shall
23    (1) send a copy of said bond by certified mail to the
24    claimant at the claimant's address set forth on the lien
25    claim or notice together with the parties whose names and
26    addresses are set forth on the bond by certified mail,

 

 

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1    return receipt requested. The claimant and the parties
2    listed on the bond may contest either the form or amount of
3    the bond or the sufficiency of the surety by requesting a
4    hearing on the sufficiency of the bond before a judge of
5    the circuit court. (2) If no hearing is requested within 15
6    days after the mailing by the clerk or if the judge
7    confirms the sufficiency of the bond, the clerk shall
8    record a Certificate of Release of Lien of any filed
9    mechanic's lien claim with a copy of said bond attached,
10    whereupon the mechanics lien claimant shall have no rights
11    or remedies against the property, and (3) mail a copy of
12    said Certificate of Release by certified mail to the owner
13    holding funds due the contractor or to the public official
14    set forth in any claim for funds pursuant to Section 23,
15    which mailing shall constitute a release of the claim of
16    the lien claimant to funds in the possession of the owner
17    or the public official. If the bond does not comply with
18    the requirements of subsection (b)(i), the clerk shall
19    return the bond to the party posting the bond indicating
20    the deficiencies of the bond.
21    (c) Priorities. The bond shall not modify any aspect of (1)
22the priority of the claimant's interest at the time of the
23filing of the bond, (2) any requirements to perfect or prove up
24the claimant's claim, or (3) any defenses or priorities that
25the owner, the lender, or the contractor may have at the time
26of the filing of the bond.

 

 

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1 INDEX
2 Statutes amended in order of appearance
3    770 ILCS 60/16from Ch. 82, par. 16
4    770 ILCS 60/38.5 new