Several bills affecting the construction and real estate industries have passed the Illinois General Assembly and now await Gov. Rauner’s signature. The governor has almost until the end of August to sign, veto or exercise an amendatory veto, recommending changes.
CONTRACTOR PROMPT PAYMENT ACT – SB 3052
For many years, subcontractors and secondary subcontractors have sought a bill to limit the amount of retention withheld on a project. SB 3052 authorizes withholding 10 percent retainage of a payment under a construction contract prior to completion of 50 percent of the contract. After 50 percent of the contract is completed, the amount of retainage may not exceed 5 percent. If signed by the governor, the bill would be effective immediately.
The bill does create a number of potential issues and problems; it applies to all subcontracts, including secondary subcontracts. For example, what happens to a contract that proposes more than 5 percent retainage? Who determines when the contract is 50 percent complete? What about back charges? Is a holdback for default different then a holdback which is not considered retention? The bill would likely govern contracts entered into after its effective date, however, what about contracts modified after the effective date?
INTERIOR REGISTERED DESIGNERS ACT – SB 355
The Mechanics Lien Act was previously expanded to include property managers. SB 355 would further expand the Mechanics Lien Act to include registered interior designers.
HOME REPAIR AND REMODELING ACT – HB 4268
The Home Repair and Remodeling Act is amended to make the consumer rights brochure more explanatory for homeowners and contractors by notifying consumers of their right to a sworn statement pursuant to Section V of the Mechanics Lien Act. The bill does not change the substance of the Home Repair and Remodeling Act. The bill would become effective on January 1, 2019.
MECHANICS LIEN DEMAND AND REFER – HB 5201
HB 5201 would create a three year pilot program which would permit a recorder of deeds of a county to establish an administrative law process to adjudicate “expired” mechanics liens recorded against residential real estate. An expired mechanics lien is one where two years have passed from the completion date stated in the claim for lien, or two years have passed from the date the claim was recorded if no completion date is stated in the claim for lien. Additionally, there cannot be a bankruptcy prohibiting an action to foreclose the claim for lien. The recorder may seek the homeowner’s permission to serve a notice and demand to commence suit under Section 34 of the Mechanics Lien Act. If suit is not filed within 30 days, pursuant to Section 34 of the Mechanics Lien Act, the recorder can request that an administrative law judge issue a release of record after providing notice to the lien claimant of the notice and demand to commence suit, time to respond to the notice and a hearing.
SUMMONS/FORECLOSURE/PROCCEDS – SB2432
This bill is a result of Arch Bay Holdings, LLC- Series 2010B v. Perez 2015 IL App. (2d) 141117 and other technical defects with service of process. It amends the Code of Civil Procedure to provide that jurisdiction is not affected by a technical error in the format of service of summons if the summons had been issued by a clerk of the court, the person or entity to be served is identified as a defendant on the summons and the summons is properly served upon the defendant. The bill is important in today’s world of court generated forms and e-filing because an attorney no longer has complete control over the summons.
The bill also addresses situations like the one in West Suburban Bank v. 2340 Franklin Park, LLC 2017 IL App (2d) 1606228-U where a former mortgagor attempted to vacate a judgment of foreclosure to a fifth party purchaser about five years after the foreclosure sale. Actions for recovery of real property following foreclosure are also more limited. Actions for recovery of real property following a foreclosure are required to be filed within two years after possession is taken. If a petition is filed to reopen the proceeding, the purchaser or a successor purchaser is entitled to remain in possession of the property until the foreclosure action is defeated; or the previously foreclosed defendant redeems from the foreclosure sale if the purchaser has been in possession for more than six months. Additionally, everyone in possession as a purchaser following a foreclosure is adjudged to be the legal owner of the property, as long as he or she maintains possession for two successive years and pays all taxes legally during that time.
The statute also amends the Mortgage Rescue Fraud Act to provide that it is a violation for a distressed property consultant to, among other things, enter into, enforce or act upon any agreement with a foreclosure defendant, whether the foreclosure is completed or otherwise, if the agreement provides for a division of proceeds between the foreclosure defendant and the distressed-property consultant derived from the foreclosure litigation. Hopefully, this bill will give comfort to those who purchase property following a mortgage foreclosure proceeding.