A mechanic’s lien can be a powerful tool for contractors and provides an extraordinary legal remedy for those providing labor and/or materials. However, that power is not easily granted to contractors. Those seeking to derive the benefits of a mechanics lien are required to comply with the stringent procedures in place in order to perfect their lien.
A common mistake by contractors is not apportioning the contract amount, for work on common elements, among all of the owners in the association. The preeminent decision regarding the requirement to apportion the amounts among the entire ownership, based upon their percentage of ownership, is Argonne Construction Co. vs Norton, 29 B.R. 731 (N.D.Ill. 1983). In Argonne, the court held that the contractor was required to apportion the lien among the ownership if the declaration was recorded prior to the date of the contract.
Meaning that if your declaration is recorded, and your association hires a contractor to make improvements to the common element, that contractor cannot perfect the lien unless they have divided the contract amount due and owing among the ownership within the lien. This requires contractors to take the extra steps of not only finding the recorded declaration, but then also doing the math to divide the amount among every owner based upon the percentage of ownership.
The concept of a mechanic’s lien and the possibility of rights being foreclosed through a mechanics lien can be intimidating; however, there are safeguards in place to protect condominium associations. The mere fact that a lien has been recorded does not leave an association defenseless. It is essential to make sure that the contractor has perfected its lien by following the statutory requirements, properly tendering notice, and, under Argonne, apportioning the amounts among the ownership. Even if the lien has been properly recorded and perfected, the association still may have the defenses available under contract theory; and, if the work was not completed properly, the association may have a counter-claim for breach of contract.
If you are having an issue with a contractor or a lien has been recorded against the association, contact our office to discuss your legal defenses and options.