Full Text of HB2635 99th General Assembly
HB2635eng 99TH GENERAL ASSEMBLY |
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| 1 | | AN ACT concerning civil law.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Mechanics Lien Act is amended by adding | 5 | | Section 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 | | (1) "Applicant" means: | 10 | | (A) an owner, other lien claimant, or other person | 11 | | having an interest in the property against which a lien | 12 | | claim under this Act is asserted; | 13 | | (B) an association representing owners organized | 14 | | under any statute or to which the Common Interest | 15 | | Community Association Act applies; or | 16 | | (C) any person who may be liable for the payment of | 17 | | a lien claim, including an owner, former owner, | 18 | | association representing owners organized under any | 19 | | statute or to which the Common Interest Community | 20 | | Association Act applies, or the contractor or | 21 | | subcontractor. | 22 | | (2) "Eligible surety bond" means a surety bond that | 23 | | meets all of the following requirements: |
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| 1 | | (A) it specifically states that the principal and | 2 | | surety thereunder submit to the jurisdiction of the | 3 | | circuit court of the county where the property being | 4 | | improved is located and that a final non-appealable | 5 | | judgment or decree entered in a proceeding in favor of | 6 | | the lien claimant based on the lien claim that is the | 7 | | subject of an eligible surety bond shall constitute a | 8 | | judgment against the principal and surety of the bond | 9 | | for the amount found due to the lien claimant, | 10 | | including interest and attorney's fees, limited as to | 11 | | the principal and surety to the full amount of the | 12 | | bond, payable no later than 14 days after the | 13 | | expiration of all appeal periods; | 14 | | (B) it continues in effect until the complete | 15 | | satisfaction of the adjudicated amount due under the | 16 | | lien claim or the payment of the full amount of the | 17 | | bond or to a final determination, and the expiration of | 18 | | all appeal periods, that the lien claim is invalid, | 19 | | void, has been released by the lien claimant, or the | 20 | | time to enforce the lien claim has expired without the | 21 | | required action by the lien claimant; | 22 | | (C) it is in an amount equal to 175% of the amount | 23 | | of the lien claim; | 24 | | (D) it has as its surety a company that has a | 25 | | certificate of authority from the Department of | 26 | | Insurance specifically authorizing the company to |
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| 1 | | execute surety bonds; | 2 | | (E) the surety has a current financial strength | 3 | | rating of not less than A with no rating modifier, an | 4 | | outlook which is either positive or stable, and a | 5 | | financial size category of not less than IX, as rated | 6 | | by A.M. Best Company, Inc.; and | 7 | | (F) if property affected by a mechanics lien is in | 8 | | a judicial circuit that has its own list of approved | 9 | | sureties, the bond shall be issued by a surety company | 10 | | specifically authorized to issue surety bonds for that | 11 | | circuit court by order or rule. | 12 | | (3) "Lien claim" means a claim on account of which (A) | 13 | | a notice of claim for lien under Section 24 of this Act has | 14 | | been served; (B) a claim for lien under Section 7 of this | 15 | | Act has been recorded; or (C) a suit to enforce a lien | 16 | | under this Act, including, but not limited to, an action | 17 | | under Section 9, 27, or 28 of this Act, has been filed. | 18 | | Unless otherwise indicated in this Section, "lien claim" is | 19 | | the lien claim to be affected by an eligible surety bond. | 20 | | (4) "Lien claimant" means the party whose lien claim is | 21 | | to be affected by an eligible surety bond. | 22 | | (5) "Prevailing party" means a lien claimant that | 23 | | recovers at least 75% of the amount of its lien claim, or | 24 | | the principal of the bond if the lien claimant recovers | 25 | | less than 25% of the amount of its lien claim; otherwise, | 26 | | no party is the prevailing party. |
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| 1 | | Except as otherwise expressly provided in this Section, the | 2 | | terms not expressly defined in this Section have the same | 3 | | meaning as they have under other provisions of this Act. | 4 | | (b) This Section applies to liens arising under Section 1 | 5 | | or 21 of this Act and to claims or actions arising under | 6 | | Section 9, 27, or 28 of this Act. | 7 | | (c) An applicant may file a petition to substitute a bond | 8 | | for the property subject to a lien claim with the clerk of the | 9 | | circuit court of the county in which the property against which | 10 | | the lien claim is asserted is located, or if there is a pending | 11 | | action to enforce the lien claim, an applicant may at any time | 12 | | prior to 5 months after the filing of a complaint or | 13 | | counterclaim by a mechanics lien claimant to enforce its | 14 | | mechanics lien claim, and thereafter for good cause shown, | 15 | | apply to become a party to the pending action at any time | 16 | | before a final judgment is rendered and file a petition to | 17 | | substitute a bond for the property subject to the lien claim in | 18 | | the pending action. The petition shall be verified and shall | 19 | | include: | 20 | | (1) the name and address of the applicant and the | 21 | | applicant's attorney, if any; | 22 | | (2) the name and address of the lien claimant; | 23 | | (3) if there is a suit to enforce the lien claim, the | 24 | | name of the attorney of record for the lien claimant, or if | 25 | | no suit has been filed but a lien claim has been recorded | 26 | | by the lien claimant, the name of the preparer of the lien |
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| 1 | | claim; | 2 | | (4) the name and address of the owner of record of any | 3 | | real estate subject to the lien claim or the name and | 4 | | address of any condominium association or association to | 5 | | which the Common Interest Community Association Act | 6 | | applies representing owners of record if the association is | 7 | | an obligor under the bond; | 8 | | (5) a description of the property subject to the lien | 9 | | claim and, if the property includes real estate, both a | 10 | | common and legal description of the real estate, including | 11 | | the address, if any; | 12 | | (6) an attached copy of the lien claim which includes | 13 | | the date of its recording, where it was recorded, and the | 14 | | number under which it was recorded if there is no pending | 15 | | proceeding to enforce the lien claim; | 16 | | (7) an attached copy of the proposed eligible surety | 17 | | bond; | 18 | | (8) a certified copy of the surety's certificate of | 19 | | authority from the Department of Insurance or other State | 20 | | agency charged with the duty to issue such a certificate; | 21 | | and | 22 | | (9) an undertaking by the applicant to replace the bond | 23 | | with another eligible surety bond in the event that the | 24 | | proposed eligible surety bond at any time ceases to be an | 25 | | eligible surety bond. | 26 | | (d) The person filing a petition under this Section shall |
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| 1 | | personally serve or send via certified mail, return receipt | 2 | | requested, to each person whose name and address is stated in | 3 | | the petition, or his or her attorney of record in a pending | 4 | | action, a copy of the petition attached together with the | 5 | | following notice: | 6 | | "PLEASE TAKE NOTICE that on .............(date), the | 7 | | undersigned, ..............., filed a petition to substitute a | 8 | | bond for property subject to a lien claim, a copy of which is | 9 | | attached to this notice. | 10 | | PLEASE TAKE FURTHER NOTICE that if you fail to file an | 11 | | objection to the substitution of a bond for the lien claim with | 12 | | the clerk of the circuit court of .............. County under | 13 | | general number .......... or case number .........., within 30 | 14 | | days after you receive this notice or 33 days after this notice | 15 | | is mailed by certified mail, whichever date is earlier, you | 16 | | will have waived your right to object and an order will be | 17 | | entered substituting the security of the bond for the property | 18 | | securing the lien claim and discharging the property described | 19 | | in the petition as being subject to the lien, such as the real | 20 | | estate and the moneys or other considerations due or to become | 21 | | due from the owner to the contractor under the original | 22 | | contract giving rise to the lien claim." | 23 | | (e) If no objection is filed to the substitution of the | 24 | | proposed eligible surety bond for the property securing the |
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| 1 | | lien claim within 30 days after all persons entitled to notice | 2 | | under subsection (d) of this Section have either received the | 3 | | notice or have been served with the notice, or have waived any | 4 | | objections to the substitution, if the petition complies with | 5 | | the requirements of this Section, the court, on ex parte motion | 6 | | of the petitioner, shall, if the court finds that the proposed | 7 | | bond is in fact an eligible surety bond, enter an order: | 8 | | (1) substituting the eligible surety bond for the | 9 | | property securing the lien claim; and | 10 | | (2) substituting the lien claimant's right to recover | 11 | | on the bond for the lien claimant's causes of action that | 12 | | could be asserted by the lien claimant under Section 9, 27, | 13 | | or 28 of this Act. | 14 | | (f) If an objection is filed within 30 days of service of | 15 | | notice required by this Section, the petitioner may, upon | 16 | | notice to all parties to whom the notice was required to be | 17 | | served, move for a hearing as to the adequacy of the proposed | 18 | | eligible surety bond. The burden shall be upon the petitioner | 19 | | to establish prima facie that the proposed surety bond is an | 20 | | eligible surety bond. If it is established prima facie that the | 21 | | bond is an eligible surety bond, the burden is on the objector | 22 | | to prove that a proposed surety bond is not an eligible surety | 23 | | bond. If at the conclusion of the hearing the court finds that | 24 | | the proposed bond is in fact an eligible surety bond, it shall | 25 | | enter an order: | 26 | | (1) substituting the eligible surety bond for the |
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| 1 | | property securing the lien claim; and | 2 | | (2) substituting the lien claimant's right to recover | 3 | | on the bond for the lien claimant's causes of action that | 4 | | could be asserted by the lien claimant under Section 9, 27, | 5 | | or 28 of this Act. | 6 | | (g) If the court enters an order discharging as security | 7 | | for the lien claim the real estate and claims under Sections 1, | 8 | | 9, 21, 27, and 28 of this Act, and substitutes the eligible | 9 | | surety bond as security for the lien claim, the petitioner | 10 | | shall: | 11 | | (1) send copies of the order to the lien claimant and | 12 | | all persons who were to receive copies of the petition and, | 13 | | if there is a pending proceeding to enforce the lien claim, | 14 | | to all parties who have appeared in the proceeding; and | 15 | | (2) record a copy of the order, together with an | 16 | | executed copy of the approved eligible surety bond, with | 17 | | the recorder of deeds of any county where the property is | 18 | | located. | 19 | | (h) If the eligible surety bond is approved either before | 20 | | or after any suit is brought to enforce the lien claim, the | 21 | | action on the bond shall be in equity against the principal and | 22 | | surety of the bond. If the eligible surety bond is approved and | 23 | | a proceeding to enforce the lien claim is pending, the bond | 24 | | principals and sureties shall, by approval of the bond, ipso | 25 | | facto become parties to the proceeding. All other parties to | 26 | | the proceedings may be dismissed. |
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| 1 | | (i) If the bond ceases to be an eligible surety bond, the | 2 | | court may, after due notice and a hearing, order the surety to | 3 | | deposit the collateral for the bond posted by the principal | 4 | | with the surety with the clerk of the court or to assign the | 5 | | security to an alternative surety company that is ready, | 6 | | willing, and able to issue an eligible surety bond. Upon the | 7 | | deposit or assignment, the court shall release the original | 8 | | surety from its obligations under the original surety bond. | 9 | | (j) Subject to the defenses allowable under subsection (k) | 10 | | of this Section, the principal and surety of a surety bond | 11 | | shall be jointly and severally liable to the lien claimant for | 12 | | the amount that the lien claimant would have been entitled to | 13 | | recover under this Act if no surety bond had been furnished, | 14 | | subject to the limitation of liability of the surety to the | 15 | | face amount of the bond. The prevailing party in an action | 16 | | brought under this Section shall be awarded its attorney's | 17 | | fees, but the attorney's fees for a lien claimant that is a | 18 | | prevailing party shall be limited to the amount remaining on | 19 | | the bond after the payment of the claim and interest, and the | 20 | | attorney's fees awarded to a bond principal shall be limited to | 21 | | 50% of the amount of the lien claim. Judgment in favor of the | 22 | | lien claimant and against the principal and surety shall be | 23 | | entered for the amount of their liability to the lien claimant. | 24 | | (k) The principal and surety of the bond may assert only | 25 | | those defenses that could have been asserted against the lien | 26 | | claim by the principal of the eligible surety bond or the owner |
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| 1 | | of record of the real estate at the time the contractor's | 2 | | contract under which the lien claimant is claiming was let as | 3 | | if no surety bond had been issued. | 4 | | (l) Liability of the principal and surety on a bond that | 5 | | has ceased to be an eligible surety bond shall continue until a | 6 | | court order is entered replacing the bond with another eligible | 7 | | surety bond. Even if a bond ceases to be an eligible surety | 8 | | bond, the original bond remains in effect as substitute | 9 | | security until it is replaced. | 10 | | (m) It is the express intent of the General Assembly in | 11 | | enacting this Section that the entry of an order under this | 12 | | Section substitutes an action on the bond for the actions the | 13 | | lien claimant would otherwise have under Sections 9, 17, 27, | 14 | | and 28 of this Act.
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