Can a Sub Still Have a Valid Lien Without Supplying an Owner The Required 60-Day Notice?... An Exception to Weather-Tite? - Crawford Supply Co. v. Schwartz, et al.
In limiting and answering a certified question regarding Section 5(b) statements under the Illinois Mechanic’s Lien Act, the First District has opened the door to another interesting question in light of the Illinois Supreme Court’s recent Weather-Tite decision.
The case is Crawford Supply Company v. Schwartz, et al. (Doc. No. 1-09-0900) and the question presented was:
“Where a subcontractor asserts a claim for lien on an owner-occupied single-family residence and serves a 90-day notice as provided in Section 24 of the Mechanics Lien Act, does the subcontractor’s failure to serve a 60-day notice as provided in Section 5(b) of the Mechanics Lien Act render the claim for lien invalid?”
The scope of the question was narrowed by the court:
“We interpret the certified question to ask only whether plaintiff’s failure to serve a 60-day notice as provided in section 5(b) of the Act renders plaintiff’s claim for lien invalid as a matter of law.” (Slip Op. at 8).
The answer to the question was “no,” but the resulting discussion implied that a payment turned over to a general contractor that was not passed on to the sub might constitute prejudice to a home-owner under Section 5(b)(iii) of the Act. If it does, then its possible that Section 5(b)(iii) would allow for a different outcome than Weather-Tite (an owner paying the sub’s fee twice where the fee didn’t get to the sub the first time), which did not implicate 5(b)(iii) or owner-occupied single-family residences.
In Crawford, a sub sued the owner of a single-family owner-occupied residence to foreclose on a mechanic’s lien that it filed when it wasn’t paid for the plumbing supplies it delivered. The sub did not provide the home-owner with the 60-day notice required under Section 5(b)(ii) of the Act which requires that a sub on a project at an owner-occupied single-family residence provide the owner or agent with a statutorily specified notice and warning letting the owner know the name and address of the sub, the dates or its work, and the type of work. Owner-occupied single-family residences are different where many owners are not considered the sophisticated construction owner/consumers of commercial or large scale residential projects; the Act, along with other statutes, affords the unsophisticated owner a few added protections.
The owner moved to dismiss the action brought by the sub arguing that the failure to provide the required 60-day notice invalidated the lien. The trial court certified the question above. The appellate court held that the failure to serve the 60-day notice did not invalidate the lien. To hold as much contradicted with Section 5(b)(iii) and would read it out of the Act.
Section 5(b)(iii) states that the failure to serve the 60-day notice after the 60-day time-period will preserve the lien “only to the extent that the owner has not been prejudiced by payments made before receipt of the notice.”
The owner in Crawford had argued that since it never received the 60-day notice, the lien was invalid, although the owner had received the 90-day notice subcontractors must file under Section 24 of the Act (the court found that a 90-day notice substantially complied with the requirement for a 60-day notice). The appellate court found that because there had not yet been any evidence of prejudice and the 90-day Section 24 notice sufficed, Section 5(b)(iii) meant that the lien was not invalid as a matter of law and the claim made by the sub could go forward.
What is important here is that twice during the discussion of the matter the court noted that the owner had not yet introduced evidence of prejudice, and that prejudice might be shown by arguing that the owner had already made payment to the general for the sub’s work because the sub failed to provide the Section 5(b)(ii) notice.
This would mean that although the situation is comparable to Weather-Tite, where payment was tendered, but it didn’t make it to the sub, there is a conceivable situation where, at least with owner-occupied single-family residences, the owner might not have to pay twice if it made payment without getting the Section 5(a) notice. For those working on single-family residences, supplying the 60-day notice is now extremely important.