A recent case discussed some very common Illinois lien law questions: “Will a minor error ruin my claim? What about ‘extras’ not included in the contract? Are attorney fees available?” The dispute arose after a pool instillation didn’t go so swimmingly. The owner refused to pay because he didn’t think the project was completed properly, so the contractor filed a lien.
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In Gerlick v. Powroznik, a contractor installed a pool pursuant to a verbal agreement with the owner (who was a contractor, himself). Throughout the project there were some disagreements, and, upon completion, the property owner withheld some of the contractor’s pay. According to the owner, the work was shoddy and incomplete. The contractor contended that all work was done pursuant to their agreement and that there was no good reason for the owner to withhold payment.
As a result, the contractor filed a lien on the project, which included “extras” not in the agreement, plus attorney fees. At trial, the court found the lien was valid, but the amounts representing the extras and fees could not be included. The court also decided that the claimant’s use of his own name (rather than the name of his business) was not enough to create a defective lien claim since the business was a sole proprietorship.
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This contractor was lucky- in many states, you can’t file a lien based on a verbal contract.
Defective Lien (Minor Errors)
The property owner first claimed that the lien was defective based on a clerical error by the claimant. Specifically, the claimant used his own name rather than the name of his business, which was a sole proprietorship. The court determined that because a sole proprietorship has the same legal identity as the person who controls it, the discrepancy was immaterial. Had the business been a partnership, LLC, or corporation, the outcome would probably have been different.
The owner also argued that the date on the lien claim was incorrect, and as a result, the claim should be invalid. However, both the alleged date of the project and the date on the lien were well before the deadline to file an Illinois lien. Since the lien would have been valid on either date, the court found this discrepancy was also immaterial.
Substantial Performance
Next, the court looked to determine whether the contract had been substantially performed by the contractor. An Illinois lien claimant must establish (1) that they had a valid contract; (2) with the owner (or their agent/ someone authorized to contract for property improvements); (3) to furnish labor, services, or materials; and (4) the claimant performed pursuant to the contract or had a valid excuse for nonperformance.
For a contract to be considered “substantially performed” in Illinois, the work need not be flawless- only the main parts to the contract must be completed in a workmanlike manner in order to file a lien. Some project aspects that are ancillary to the main purpose may be incomplete.
Here, the main purpose of the contract was to install the pool. The owner’s main argument in opposition of the lien was that the installation was poorly executed, leading to drainage problems. The court did not find the drainage issues to be a result of the contractor’s work. Since the contract had been substantially performed (in a workmanlike manner), the lien was valid.
Extras
In Illinois, “extras” in a project are only lienable when (1) the extra amount is for work outside of the contract, (2) it was furnished at the owner’s request, (3) the owner agrees to pay for the extra work (via words or conduct), (4) the work was not voluntarily undertaken by the claimant, and (5) the extra work is not required due to the fault of the contractor.
Here, the court found that the extra work was not done at the request of the owner. Thus, the amounts could not be liened. We should note that the contractor charged $60/hour for the extra services, which included cleaning the pool and waiting for the owner at the property, among other tasks.
Attorney Fees
In Illinois, fees may be included when an owner fails to pay without just cause. That is, when the refusal to pay is not well-grounded (in fact, or in law), and there is no good faith argument for the extension, modification, or reversal of the law. The court found that while the owner ultimately failed to discredit the lien claim, the dispute was in good faith. Despite ending up on the losing side, the basis for the owner’s failure to pay was a valid disagreement. Attorney fees could not be included.
Takeaway
The first, and most important, takeaway is to always put the contract in writing. Oral contracts can compound your problems, and going to court is expensive. Much of this case was “He said, he-said” between the contractor and the owner. Had there been a written contract, a lot of this dispute could have been settled before it came down to lien claims and litigation.
As for the case itself, Illinois lien law seems to work on behalf of claimants. It’s comforting to know that an Illinois court won’t toss out a claim due to an error as trivial as a claimant using their own name rather than the name of their sole proprietorship. Considering mechanics liens are often tossed aside for small errors or typos, this cannot be taken for granted.
For more on Illinois lien law, head over to our Illinois Construction Payment Resources. Not in Illinois? Select your state.
