Mechanics Lien Forfeited by Failing to Sue all Necessary Parties

June 2021

By: Jeffrey F. Clement

The Illinois Appellate Court, First District, recently issued an opinion which should remind contractors that the Illinois Mechanics Lien Act (the “Act”) is strictly construed and the lien can be forfeited when the Act is not properly followed.

In CB Construction & Design, LLC v. Atlas Brookview, LLC, 2021 IL App (1st) 200924, contractor CB Construction & Design, LLC (CB), performed renovation work for premises owner, Atlas. CB claimed that it completed its work but was still owed more than $1 million under the contract. CB filed a mechanics lien. Upon receipt of the lien, Atlas served CB with a Section 34 demand to file suit within 30 days. CB filed suit for breach of contract and enforcement of mechanics lien naming Atlas and “other defendants yet to be determined.”

Atlas then filed a motion to dismiss, arguing that CB failed to name all necessary parties to the mechanics lien action. Specifically, Atlas noted that the property lender, TPG, and rent assignee, Wells Fargo, both had recorded security interests in the property. Yet, the complaint failed to include either entity as defendants.

The Court agreed and granted Atlas’ motion to dismiss. The Court held that Section 11 of the Act requires each claimant to make as parties the owner of the premises, the contractor, all persons in the chain of contract between the claimant and the owner, all persons who have asserted or may assert liens against the premises under the Act, and any “other person against whose interest in the premises the claimant can assert a claim.” These Section 11 entities are referred to as “necessary parties.” In this case, CB’s lawsuit requested sale of the property and a declaration that the lien was “senior and superior” to any interest of any other person or entity. Because both TPG and Wells Fargo held a security interest and rents from the property and would be impacted by such relief, the Court determined that CB was asserting a claim against them and both entities were plainly necessary parties.

Attempting to avoid this ruling, CB next argued that the Statute of Limitations for a mechanics lien action is two years after the completion of the contract and it still had time to add both entities as defendants. In essence, CB argued it should not be bound by any failure to name all necessary parties within the 30 day period required to file suit when a Section 34 notice is served. The Court disagreed with this argument. The Court held, as a matter of statutory construction, the more specific 30 day deadline to respond to a Section 34 notice prevails over the more general Statute of Limitations to enforce a lien.

This decision is a cautionary tale as to the importance of performing a sufficient title search to identify all necessary parties prior to filing suit to enforce and foreclose upon a mechanics lien. Furthermore, when served with a 30 day notice under Section 34, this search must be expedited.