Does A Design Professional Have A Mechanic's Lien If The Project Wasn't Constructed?
Unfortunately we’re getting this question quite a bit in today’s market. If you think you’re alone in not getting payment or in having an invoice refused where you put the time and efforts into the design only to have a developer decide that they can’t go through with the project, think again.
Fortunately, the answer is yes, you do have the right to a lien on the property if the building wasn’t constructed – provided that the other requirements of the Mechanic’s Lien Statute are met, e.g. filing deadlines, proper contractual status with the owner, etc.
The authority for placing the lien comes from the statute and was addressed by the Illinois Supreme Court in 1930 in the case of Crowen v. Meyer, et al., 342 Ill. 46.
In Crowen, the Meyer’s were property owners who had a contract with Crowen to prepare plans and specifications for a laundry building that they would erect between “Ninety-Eighth and Ninety-Ninth streets on the east side of South Michigan avenue, in Chicago.” The price for Crowen’s services was agreed at 6% of the total cost of the building. Crowen completed the plans and specifications, the project was bid on, but the defendant refused to proceed with construction and when Crowen demanded payment for his services, the defendant refused to pay him.
Crowen filed his lien.
The opinion delineates the testimony given by the different parties regarding the project and will be interesting to anyone wanting to see that the disputes between owners and architects haven’t changed much in 80 years.
The defendants challenged his right to a lien and claimed that there could be no claim for lien unless there had been “actual” improvement to the land and that an architect is not entitled to a mechanic’s lien for plans and specifications for a building that was not constructed.
The trial court found for the plaintiff, the appellate court reversed, and the Illinois Supreme Court found that Section 1 of the mechanic’s lien act “gives to the architect a lien for services rendered for the purpose of improving property.”
This case is also important for lien claimants generally because the proposed building here was to be built on three lots but only two were owned by the defendants. The court found that while the claimant couldn’t lien the third lot, a lien for the proposed improvements was valid as to the two lots the owner did own and only for the amount of the work performed for the improvement of those two lots, not the third.
There is scant case law interpreting this remedy in light of Section 16 of the Act which states:
“Sec. 16. No incumbrance upon land, created before or after the making of the contract under the provisions of this act, shall operate upon the building erected, or materials furnished until a lien in favor of the persons having done work or furnished material shall have been satisfied, and upon questions arising between incumbrancers and lien creditors, all previous incumbrances shall be preferred to the extent of the value of the land at the time of making of the contract, and the lien creditor shall be preferred to the value of the improvements erected on said premises, and the court shall ascertain by jury or otherwise, as the case may require, what proportion of the proceeds of any sale shall be paid to the several parties in interest. All incumbrances, whether by mortgage, judgment or otherwise, charged and shown to be fraudulent, in respect to creditors, may be set aside by the court, and the premises freed and discharged from such fraudulent incumbrance.”
People will want to consider this before incurring the costs of filing because it is possible that any lien might be worthless if the property was mortgaged for its full value (and that mortgage was recorded) prior to the contract with the architect because if the building was not constructed, the mortgage would need to be satisfied before the lien.
This is continued worry with many an engagement - will the client get the lending necessary to build it, and pay the bill?