HB2804 98TH GENERAL ASSEMBLY

  
  

 


 
98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014
HB2804

 

Introduced , by Rep. Arthur Turner

 

SYNOPSIS AS INTRODUCED:
 
770 ILCS 60/38.1 new

    Amends the Mechanics Lien Act. Provides that an applicant may at any time file a petition to substitute a bond for the property subject to a lien claim under the Act with the clerk of the circuit court of the county in which the property against which the lien claim is asserted is located, or if there is a pending action to enforce the lien claim, an applicant may timely apply to become a party to the pending action at any time before a final judgment is rendered and file a petition to substitute a bond for the property subject to the lien claim in the pending action. Defines terms. Contains notice and procedural requirements; a statement of legislative intent; and language limiting the applicability of the new provisions.


LRB098 09251 HEP 39390 b

 

 

A BILL FOR

 

HB2804LRB098 09251 HEP 39390 b

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 adding
5Section 38.1 as follows:
 
6    (770 ILCS 60/38.1 new)
7    Sec. 38.1. Substitution of bond for lien.
8    (a) As used in this Section:
9    "Lien claim" means a claim on account of which (1) a notice
10of claim for lien under Section 24 of this Act has been served;
11(2) a claim for lien under Section 7 of this Act has been
12recorded; or (3) a suit to enforce a lien under this Act,
13including but not limited to a lien on funds action under
14Section 27 of this Act, has been filed. Unless otherwise
15indicated in this Section, "lien claim" is the lien claim to be
16affected by an eligible surety bond.
17    "Lien claimant" means the party whose lien claim is to be
18affected by an eligible surety bond.
19    "Applicant" means (1) an owner, other lien claimant, or
20other person having an interest in the property against which a
21lien claim under this Act is asserted; (2) an association
22representing owners organized under any statute or to which the
23Common Interest Community Association Act applies; or (3) any

 

 

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1person who may be liable for the payment of a lien claim,
2including an owner, former owner, association representing
3owners organized under any statute or to which the Common
4Interest Community Association Act applies, or the contractor
5or subcontractor.
6    "Eligible surety bond" means a surety bond that meets all
7of the following requirements:
8        (1) it specifically states that the principal and
9    surety thereunder submit to the jurisdiction of the circuit
10    court of the county where the property being improved is
11    located and that any final non-appealable judgment or
12    decree entered in a proceeding in favor of the lien
13    claimant based on any lien claim that is the subject of an
14    eligible surety bond shall constitute a judgment against
15    the principal and surety of the bond for the amount found
16    due to the lien claimant, including interest and fees,
17    limited as to the surety to the full amount of the bond,
18    payable within 15 days of the expiration of all appeal
19    periods;
20        (2) it continues in effect until the complete
21    satisfaction of the adjudicated amount due under the lien
22    claim or as to the surety to the payment of the full amount
23    of the bond or a final determination that the lien claim is
24    invalid, void, has been released by the lien claimant, or
25    the time to enforce the lien claim has expired;
26        (3) it is in an amount equal to 150% of the amount of

 

 

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1    the lien claim;
2        (4) it has as its surety a company that has a
3    certificate of authority from the Department of Insurance
4    specifically authorizing the company to execute surety
5    bonds;
6        (5) the surety has a current financial strength rating
7    of not less than A with no rating modifier, an outlook
8    which is either positive or stable, and a financial size
9    category of not less than IX, as rated by A.M. Best Company
10    Inc.; and
11        (6) if property affected by a mechanics lien is in a
12    judicial circuit that has its own list of approved
13    sureties, the bond shall be issued by a surety company
14    specifically authorized to issue surety bonds for that
15    circuit court by order or rule.
16    Except as otherwise expressly provided in this Section, the
17terms not expressly defined in this Section shall have the same
18meaning as they have under other provisions of this Act.
19    (b) This Section applies to liens arising under Sections 1
20or 21 of this Act and to claims or actions arising under
21Sections 9, 27, or 28 of this Act.
22    (c) The Department of Insurance may issue a certificate of
23authority to a surety company to issue bonds to discharge real
24estate and moneys due to contractors and subcontractors from
25liens asserted under Sections 1, 21, or 27 of this Act,
26provided the surety:

 

 

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1        (1) is licensed to issue surety bonds in this State;
2    and
3        (2) is domiciled in one of the states of the United
4    States of America.
5    (d) An applicant may at any time file a petition to
6substitute a bond for the property subject to a lien claim with
7the clerk of the circuit court of the county in which the
8property against which the lien claim is asserted is located,
9or if there is a pending action to enforce the lien claim, an
10applicant may timely apply to become a party to the pending
11action at any time before a final judgment is rendered and file
12a petition to substitute a bond for the property subject to the
13lien claim in the pending action. The petition shall be
14verified and shall include:
15        (1) the name and address of the applicant and the
16    applicant's attorney, if any;
17        (2) the name and address of the lien claimant;
18        (3) if there is a suit to enforce the lien claim, the
19    name of the attorney of record for the lien claimant, or if
20    no suit has been filed but a lien claim has been recorded
21    by the lien claimant, the name of the preparer of the lien
22    claim;
23        (4) the name and address of the owner of record of any
24    real estate subject to the lien claim or the name and
25    address of any condominium association or association to
26    which the Common Interest Community Association Act

 

 

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1    applies representing owners of record if the association is
2    an obligor under the bond;
3        (5) a description of the property subject to the lien
4    claim and, if the property includes real estate, both a
5    common and legal description of the real estate, including
6    the address, if any;
7        (6) an attached copy of the lien claim which includes
8    the date of its recording, where it was recorded, and the
9    number under which it was recorded if there is no pending
10    proceeding to enforce the lien claim;
11        (7) an attached copy of the proposed eligible surety
12    bond;
13        (8) a certified copy of the surety's certificate of
14    authority; and
15        (9) an undertaking by the applicant to replace the bond
16    with another eligible surety bond in the event that the
17    proposed eligible surety bond at any time ceases to be an
18    eligible surety bond.
19    Liability of the principal and surety on a bond that has
20ceased to be an eligible surety bond shall continue until a
21court order is entered replacing the bond with another eligible
22surety bond. Even if a bond ceases to be an eligible surety
23bond, the original bond remains in effect as substitute
24security until it is replaced.
25    (e) The person filing a petition under this Section shall
26personally serve or send via certified mail, return receipt

 

 

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1requested, to each person whose name and address is stated in
2the petition, or his or her attorney of record in a pending
3action, a copy of the petition attached together with the
4following notice:
 
5    "PLEASE TAKE NOTICE that on .............(date), the
6undersigned, ..............., filed a petition to substitute a
7bond for property subject to a lien claim, a copy of which is
8attached to this notice.
 
9    PLEASE TAKE FURTHER NOTICE that if you fail to file an
10objection to the substitution of a bond for the lien claim with
11the clerk of the circuit court of .............. County under
12general number .........., or under case number ..........,
13within 30 days after you receive this notice or 33 days after
14this notice is mailed by certified mail, whichever date is
15earlier, you will have waived your right to object and an order
16will be entered substituting the security of the bond for the
17property securing the lien claim and discharging the property
18described in the petition as being subject to the lien, such as
19the real estate and the moneys or other considerations due or
20to become due from the owner to the contractor under the
21original contract giving rise to the lien claim."
22    For purposes of this Section, notice by certified mail,
23return receipt requested, shall be deemed served 3 business
24days after mailing of the notice.

 

 

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1    (f) If no objection is filed to the substitution of the
2proposed eligible surety bond for the property securing the
3lien claim within 30 days after all persons entitled to notice
4under subsection (e) of this Section have either received the
5notice or have been served with the notice, or have waived any
6objections to the substitution, if the petition complies with
7the requirements of this Section, the court, on ex parte motion
8of the petitioner, shall, if the court finds that the proposed
9bond is in fact an eligible surety bond, enter an order:
10        (1) substituting the eligible surety bond for the
11    property securing the lien claim; and
12        (2) substituting the lien claimant's right to recover
13    on the bond for the lien claimant's causes of action that
14    could be asserted by the lien claimant under Sections 9,
15    27, or 28 of this Act.
16    (g) If an objection is filed within 30 days of service of
17notice required by this Section, the petitioner may, upon
18notice to all parties to whom the notice was required to be
19served, move for a hearing as to the adequacy of the proposed
20eligible surety bond. The burden shall be upon the petitioner
21to establish prima facie that the proposed surety bond is an
22eligible surety bond. If it is established prima facie that the
23bond is an eligible surety bond, the burden is on the objector
24to prove that a proposed surety bond is not an eligible surety
25bond. If at the conclusion of the hearing the court finds that
26the proposed bond is in fact an eligible surety bond, it shall

 

 

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1enter an order:
2        (1) substituting the eligible surety bond for the
3    property securing the lien claim; and
4        (2) substituting the lien claimant's right to recover
5    on the bond for the lien claimant's causes of action that
6    could be asserted by the lien claimant under Sections 9,
7    27, or 28 of this Act.
8    The prevailing party under this subsection (g) is entitled
9to attorney's fees and costs and expenses of litigation to
10determine if the proposed bond is an eligible surety bond.
11    (h) If the court enters an order discharging as security
12for the lien claim the real estate and the moneys or other
13considerations due or to become due from the owner under the
14original contract and substituting the eligible surety bond as
15security for the lien claim, the petitioner shall:
16        (1) send copies of the order to the lien claimant and
17    all persons who were to receive copies of the petition and,
18    if there is a pending proceeding to enforce the lien claim,
19    to all parties who have appeared in the proceeding; and
20        (2) record a copy of the order, together with an
21    executed copy of the approved eligible surety bond, with
22    the recorder of deeds of any county where the property is
23    located.
24    (i) If the eligible surety bond is approved either before
25or after any suit is brought to enforce the lien claim, the
26action on the bond shall be in equity against the principal and

 

 

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1surety of the bond. If the eligible surety bond is approved and
2a proceeding to enforce the lien claim is pending, the sureties
3shall, by approval of the bond, ipso facto become parties to
4the proceeding.
5    (j) If a prior owner, an association representing owners
6organized under any statute or to which the Common Interest
7Community Association Act applies, or a contractor or
8subcontractor is the principal under the eligible surety bond,
9the principal may petition the court to have the current owner,
10lien claimant, or party having an interest in the real estate
11who is not a principal or surety of the eligible surety bond
12dismissed from a pending proceeding to enforce the lien claim.
13    (k) If the bond ceases to be an eligible surety bond, the
14court may, after due notice and a hearing, order the surety to
15deposit the collateral for the bond posted by the principal to
16the surety with the clerk of the court or to assign the
17security to an alternative surety company who is ready,
18willing, and able to issue an eligible surety bond. Upon the
19deposit or assignment, the court shall release the original
20surety from its obligations under the original surety bond.
21    (l) The principal and surety of a surety bond shall be
22jointly and severally liable to the lien claimant for the
23amount that the lien claimant would have been entitled to
24recover under this Act if no surety bond had been furnished,
25subject to the limitation of liability of the surety to the
26face amount of the bond. A judgment in favor of the lien

 

 

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1claimant and against the principal and surety shall be entered
2for the amount of their liability to the lien claimant.
3    (m) The principal and surety of the bond may assert
4defenses only against the lien claim that could have been
5asserted against the lien claim by the principal if no surety
6bond had been issued.
7    (n) It is the express intent of the General Assembly in
8enacting this Section that the entry of an order under this
9Section does not release the lien claim or any remedies the
10lien claimant may have, but rather substitutes an eligible
11surety bond for the property subject to the lien claim and
12substitutes an action on the bond for the actions the lien
13claimant would otherwise have under Sections 9, 27, and 28 of
14this Act.