Clearing the Way: Removing Expired Mechanics Liens From Title In Illinois

Mechanics liens help construction professionals receive payment for their hard work, but they also create headaches for property owners. A recorded mechanics lien raises red flags in title searches, clouds title, and prevents property owners from selling or refinancing. Because recorded liens do not disappear on their own, even satisfied and expired liens, which are unenforceable in court, can delay and disrupt sales and business deals. This article aims to provide guidance to property owners who need to remove such unenforceable liens from title in a swift and cost-effective manner.

Filing and Perfecting a Mechanics Lien Claim

Property owners must understand the requirements for recording and perfecting a mechanics lien before determining whether and/or how to remove expired liens. The process is governed by the Illinois Mechanics Lien Act, 770 ILCS 60 (the “Act”). An unpaid prime contractor, subcontractor, or supplier must file its mechanics lien with the recorder of deeds within two years after completion of the contract. However, to be effective against lenders, future owners or other third parties, the claim must be recorded within four months of completion. In addition to those deadlines, subcontractors and suppliers must issue certain pre-lien notice(s), depending on the type of project, including notice to the owner, lender, and all known mortgagees within 90 days after completion of their work, unless they are listed on a sworn statement provided to the owner. After properly recording a lien claim, a claimant must file suit to foreclose the lien within two years after completion of the part of the work for which the lien claimant seeks payment. Illinois courts strictly enforce these deadlines and routinely find liens unenforceable if the deadlines are not met.

Forcing the Issue By Shortening the Two Year Period

Recognizing that two years is a long time for a property owner to live with clouded title, the Illinois legislature created a mechanism for owners to shorten the two-year limitations period and force the issue of the validity of the claim. Under Section 34 of the Act, the owner or other person with an interest in the property may serve a demand to commence suit on the lien claimant at any time after the claim has been recorded. If the claimant fails to file suit within 30 days of the demand, it forfeits its lien rights. Thus, a lien claim expires if the claimant fails to file suit within two years after completion of the work or within 30 days receipt of a Section 34 demand.

Section 35 of the Act works with Section 34 to ensure title is unclouded when a lien has been satisfied or forfeited. It requires claimants to provide a written lien release whenever a claim “is paid” or is forfeited for failure to file suit within 30 days of a Section 34 demand. It enforces that requirement with a remedy. An owner may issue a written demand for a lien release, and if the claimant fails to provide one within 10 days of the demand, the claimant is liable to the owner for the sum of $2,500 along with attorneys’ fees, which may be recovered in a civil action.

Section 35 does not address “stale” liens – ones that have expired due to the passing of the two-year time period in which to file suit. Presumably, the legislature considered the two-year period self-executing, such that owners did not need a remedy for such liens. However, this is often not the case in practice. That is because it is often difficult for a title professional to know whether and when the two-year deadline passed. And some title companies and professionals are uncomfortable making those determinations without more information.

Removing the Cloud

There are only a handful of ways to uncloud title in the face of an expired or satisfied lien: (1) obtaining and recording a lien release issued by the lien claimant; (2) providing an attorney opinion letter to the title company; (3) obtaining and recording a lien release bond; and (4) filing suit and recording a court order rendering the lien invalid. The problem with the last two options is that they may require significant time and money, when the goal is to resolve an unenforceable lien quickly and with minimal cost.

The quickest and most cost effective way to remove a lien is by obtaining and recording a lien release from the lien claimant. If the owner cannot locate the claimant or if the claimant refuses to provide a lien release, the owner can compel the issuance of a lien release by issuing a Section 35 demand, as described above. Although the $2,500 statutory penalty may not seem like much, the threat of a judgment that includes attorneys’ fees is often enough to convince a lien claimant to quickly provide a lien release.

As discussed above, Section 35 does not address stale liens (where a lawsuit was not filed within two years of recording). Such liens may still raise red flags in a title search, especially in the face of a murky operative deadline. A property owner may be able to compel the issuance of a lien release by issuing a Section 34 notice reminding the claimant of its potential liability under Section 35. A Section 34 notice must include the precise statutory language set forth in Section 34, state why the property owner believes the lien is expired, and reference the lien claimant’s obligation to acknowledge release in writing under Section 35. This tactic sometimes proves successful in the face of a subcontractor lien where the claimant failed to timely issue a 90-day notice.

Another option is to obtain an attorney opinion letter addressing a lien’s defects under the Act. Typically, an attorney opinion takes the form of a letter from an experienced construction lawyer that analyzes the lien and expresses an opinion about its enforceability. That may be all a property owner needs to demonstrate clear title in the face of an expired or satisfied lien. However, it only works if the title company cooperates, and not all title companies nor title professionals have the same procedures and standards. Therefore, it is difficult to predict if an attorney opinion letter will suffice. Moreover, this option requires the property owner to engage counsel and incur legal costs associated with analyzing the lien and drafting the letter.

The other options for removing mechanics liens—obtaining a lien release bond and filing suit to quiet title—require court intervention. That means time and money. Our colleague, Kendall Woods, has previously provided a useful overview of the requirements and procedures for enforcing a lien release bond under Section 38.1 of the Act. For purposes of this article, it is enough to know that lien release bonds can be expensive and, because they require court intervention, take time to enforce. Therefore, an owner faced with a satisfied or expired lien should seek a lien release bond only after it has failed to obtain a lien release or attorney opinion letter. The other way to remove a mechanics lien is by filing suit to quiet title and recording the court’s favorable decision, but that can take a year or more and require significant attorneys’ fees.

Another Option For Residential Property?

In 2019, the Illinois legislature passed the Mechanics Lien Demand and Referral Pilot Program (the “Lien Demand Act”) after finding “expired mechanics lien on residential property, which cloud title to property, are a rapidly growing problem throughout the State.”

The Lien Demand Act empowers County Recorders to enact rules for a lien demand and referral process. Under the Lien Demand Act, an expired lien may be removed at the insistence of the county recorder after completion of the following steps. First, if the recorder determines that a mechanics lien is expired, she may serve a Notice of Expired Lien to the property owner. In response, the property owner can confirm the lien is not involved in pending litigation and request that the recorder proceed with a referral or serve a Demand to Commence Suit. Upon the property owner’s request, the recorder must serve a Demand to Commence Suit under Section 34 of the Mechanics Lien Act. If the claimant fails to respond, the Recorder may proceed with a referral to the county’s code hearing unit by (a) filing a Notice of Referral, (b) notifying the lien claimant by certified mail or telephone if available, (c) sending a copy of the Notice of Referral to the property owner, and (d) recording the Notice of Referral on the title to property. After all that (and thirty days’ notice to interested parties), the county’s Code Hearing Unit may then determine the fate of the lien. If the Recorder shows by clear and convincing evidence that the lien in question is an expired lien, the Administrative Law Judge must rule that the lien is forfeited. Such ruling may then be recorded on the title to property. 

The Lien Demand Act demonstrates a laudable attempt at resolving the problem of expired liens, but Illinois can surely do better. The program is rarely, if ever, used, only applies to residential property, and is set to expire at the end of 2024. Most importantly, its procedures are cumbersome and, given the time required for them to play out, it offers no help to a property owner faced within an imminent deadline. Illinois should consider revising the statute to simplify the procedure and expand it to include commercial property as well.

Michigan provides guidance. In Michigan, pursuant to MCL § 570.1128, if the time within which proceedings to enforce a lien has elapsed, a property owner can take the initiative by providing an affidavit identifying the parties to the lien and when the claim was recorded. Upon receipt of the affidavit, the County Clerk is charged with examining the property records and determining if the statute of limitations has expired. If it has, the Clerk must provide the owner of a certificate of that fact, and the owner may record it, after which “the statement of claim of lien shall have no effect.” That type of process, coupled with the remedies under Section 34 and Section 35 of the Act, would empower Illinois property owners to quickly remove expired and satisfied liens from title.

Summary

For now, property owners are left with the remedies currently provided by the Act. These are the key takeaways:

• Illinois courts routinely find lien claims unenforceable if the claimant fails to comply with the timing requirements under the Act. A lien claimant must record its lien within two-years after completion of the contract. Subcontractors must also issue a 90-day pre-lien notice. However, no lien claim may be enforceable against third parties unless recorded within 120 days of completion of the work.
• A lien expires if the claimant fails to file suit within (a) two years of completion of the contract or (b) 30-days receipt of a Section 34 demand to commence suit.
• Liens do not disappear on their own. The easiest way to remove a mechanics lien is by obtaining and recording a lien release from the lien claimant. If the lien has been paid or has expired under Section 34, property owners can compel the issuance of a lien release by issuing a Section 35 notice. If the lien has expired due to the passing of the two year statute of limitations, an owner may be able to satisfy the title company by issuing an attorney opinion letter, but if that does not work, the owner can compel the lien release by issuing a Section 34 notice that references the remedies provided by Section 35 of the Act.
• Rather than continue with the Lien Demand Program, Illinois could better serve property owners by enacting a procedure for addressing expired liens like the one in force in Michigan, which provides a much simpler and more efficient procedure.