Young v. CES, Inc., 2014 IL App (2d) 131090-U also provides clarity on which services are lienable and which aren’t. The lienable vs. non-lienable distinction is an important one to grasp because if a contractor tries to affix a lien for work that didn’t improve the property, his lien can be defeated. Obvious examples of lienable work include building a house or other physical structure on a piece of land. Work that plainly isn’t lienable includes vacuuming, sweeping or property maintenance.
The tricky issues and resulting litigation emerge in the middle ground between the polar opposites of work that’s obviously lienable and work that’s clearly not.
The Young court held that the engineering firm lien claimant’s (the “Firm”) preparatory survey and construction drawing services were lienable – even though the properties remained undeveloped.
Section 1(a) of the Mechanics’ Lien Act (the “Act”) provides that anyone who contracts with a landowner (or with someone whom the owner authorized to contract) for property improvements can lien the property. 770 ILCS 60/1(a).
– To “improve” under the Act means to perform services as an architect, structural engineer, professional engineer, land surveyor or property manager for a piece of property. But this list isn’t exclusive: “[a]ny person who does improvement work on the land under a contract with the owner can assert a mechanic’s lien.”
– The main focus in assessing the validity of a mechanic’s lien is whether the work actually enhanced the value of the land or benefitted the landowner.
– the Act’s purpose is to require a person with an interest in real property to pay for improvements or benefits which have been induced or encouraged by its own conduct
– services that merely maintain rather than improve property are nonlienable;
– where a lien claimant can’t separate lienable from nonlienable work, the entire lien claim must fail
Pre-Development Work Is Lienable
Under these guidelines, the court found the Firm’s services were lienable improvements to the two properties. The evidence at trial showed that the Firm prepared preliminary development plans and installed an underground sewer main beneath the sites.
Moreover, the developer testified that the Firm’s pre-development engineering work improved the properties’ values because the municipality approved the project subject to final engineering. There was also testimony that thanks to the Firm’s work, the property will change from agricultural to residential use; making it more valuable.
Another factor in finding the Firm’s services were lienable was that its preliminary engineering work would not have to be redone in the future and that the survey and engineering services altered the sites so they could be developed in the future. The court wrote: “[i]t remains that[Plaintiff’s] work moved the projects in the direction of becoming… developable.” This clearly conferred a monetary benefit on the landowner. (¶¶ 137-138) .
The court also held that the engineering firm could recover prejudgment interest – even though there was no written contract between it and the plaintiff property owner.
In Illinois, prejudgment interest is allowed where it’s authorized by statute, agreement of the parties or warranted by equitable considerations. Illinois law allows creditors to recover interest at the rate of five (5) percent on moneys after they become due on “instruments of writing.” 815 ILCS 205/2. (¶ 144)
Here, even though there was no contract between the Firm and the landowner, the Firm did have a written contract with the developer – who the court ruled was the plaintiff/owner’s agent. This satisfied the statute’s “instrument of writing” requirement so that the Firm could recover prejudgment interest.
Afterwords: Pre-development work that makes it easier to develop property in the future can be lienable; especially where there is witness testimony that the preparatory work improved the land and increased its value. Also, prejudgment interest can be recovered absent a written contract between a plaintiff and defendant as long as plaintiff has a written contract with an agent of the defendant or where there is some writing that tangentially connects plaintiff to the dispute.