When a subcontractor in Illinois files a mechanics lien, does the owner have the right to withhold payment to that lien claimant if the work was properly performed? What if the lien includes “extras” for which the lien claimant is not entitled?
In Roy Zenere Trucking v. Build Tech, Inc., 2016 IL App (3d140946 (Aug.2, 2016), the trial court ruled that two lien claimants were entitled to payment for their work, because the work was completed on time and in a workmanlike fashion, despite the fact that there was an error as to the original contract amount in one of the liens and both included claims for extras that were ultimately rejected by the court. The general contractor approved the change orders but they were never approved by the owner, as required by the contract. The owner’s counterclaim for constructive fraud was denied because the subcontractors reasonably believed that they were entitled to the change orders.
The final issue had to do with attorneys’ fees. In Illinois, the Act states as follows:
“If the court specifically finds that the owner who contracted to have the improvements made failed to pay any lien claimant the full contract price, including extras, without just cause or right, the court may tax that owner, but not any other party, the reasonable attorney’s fees of the lien claimant who had perfected and proven his or her claim.” 770 ILCS 60/17(b) (West 2008).
Section 17(d) further states:
“ ‘Without just cause or right,’ as used in this Section, means a claim asserted by a lien claimant or a defense asserted by the owner who contracted to have the improvements made, which is not well grounded in fact and warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law.” 770 ILCS 60/17(d) (West 2008).
The trial court found that the evidence failed to establish any reason why the lien claimants should not have been paid the underlying subcontract amount and, because the work had been performed properly and on time, the owner was required to pay. The trial court did not award attorneys’ fees because it found that the subcontractors were not entitled to their “extras.” The appellate court, however, remanded the case for a determination of the amount of attorneys’ fees to award to the lien claimants. While the owner may have had good reason not to pay for the extras, that does not make it permissible to withhold the “full subcontract price.”
The lesson for owners is that each subcontractor claim for lien must be carefully evaluated prior to trial and settled, if at all possible. If a court finds that the underlying claim was valid, the owner may wind up paying that amount plus the claimant’s attorneys’ fees.