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Contractor's Services That Did Not Benefit Land Is Not Lienable Under the Illinois Mechanic's Lien Act

The Fifth District Appellate Court of Illinois recently ruled that a subcontractor who performed land feasibility studies on an owner's land could not enforce a mechanic's lien because the services performed did not improve or benefit the land and did not involve the owner as defined under the Illinois Mechanic's Lien Act. The importance of this decision to our construction clients is that courts in Illinois continue to closely scrutinize the work performed by contractors and the contracts entered into between the parties when analyzing whether enforcement of a mechanic's lien is appropriate. When a contractor performs work on a project that does not benefit the property, was not intended to benefit the property, and does not contractually involve the property owner, courts in Illinois will reject any attempt by the contactor to enforce a mechanic's lien. However, an architect or engineer may be treated differently if they furnish services for an intended improvement.[1] Please read the more detailed analysis below, written by one of our construction attorneys, Rob Boroff.

In Mostardi-Platt Assoc., Inc. v. Czerniejewski, Docket No. 5-09-0339, a plaintiff who provided a contractor air quality construction permitting and dispersion modeling services on 157 acres of land could not seek relief under the Illinois Mechanics Lien Act ("the Act") since such services were not lienable. In Mostardi, A. Dale Anderson & Associates, Inc. d/b/a ADA Resources ("ADAR") was granted a 24-month option to purchase 157 acres of land owned by Leonard and Barbara Czerniejewski. The option agreement provided that ADAR could assign its option rights and enter upon the land "to conduct such feasibility studies as may be reasonably necessary to enable [p]urchaser to make an election with respect to its exercise of the option. ADAR assigned its option right to Power Holdings of Illinois, LLC ("Power Holdings") who subsequently entered into a service contract with Mostardi-Platt Associates, Inc. ("Mostardi"). The contract provided that Mostardi would conduct air quality construction permitting and dispersion services on the land owned by the Czerniejewskis.

Mostardi subsequently recorded a mechanic's lien against the subject land in order to recover amounts due on the contract it entered into with Power Holdings.When Power Holdings refused to pay the amount due on the contract, Mostardi filed a complaint against Power Holdings, the Czerniejewskis, and ADAR ("the defendants") seeking to foreclose on the property owned by the Czerniejewskis. The defendants then filed a motion to dismiss pursuant to 735 ILCS 5/2-619 on the basis that the services provided by Mostardi were not lienable under the Act. Specifically, the defendants argued in their motion to dismiss that the land remained in substantially the same condition as it was before the services were provided by Mostardi, the services provided by Mostardi did not directly or indirectly benefit the land, and Mostardi did not provide any design or construction work. The circuit court ultimately granted the defendants' motion to dismiss on the basis that the feasibility study performed by Mostardi was not lienable under the Act.

On appeal, the Fifth District affirmed the circuit court's decision by relying upon Ohrenstein v. Howell, 227 Ill. App. 3d 215 (1st Dist. 1922) and L.J. Keefe Co. v. Chicago & Northwestern Transportation Co., 287 Ill. App. 3d 119 (1st Dist. 1997).In Ohrenstein, an architect was retained by the defendant to prepare plans and specifications for the construction of a building. The plans and specifications were used solely by the defendant to assess whether constructing the building was feasible. The defendant ultimately purchased the property and constructed a building based upon plans and specifications prepared by another architect.The original architect subsequently attempted to enforce a mechanic's lien against the property when the defendant failed to pay for the unused plans and specifications. The appellate court rejected the architect's mechanic's lien foreclosure action because it determined that, in order to sustain such a claim, the architect must show that his work was intended to improve the land. Because the appellate court concluded that the contract was entered into for the purpose of providing the defendant with information tending to show the possibilities of such an improvement, the appellate court dismissed the architect's action.

The Fifth District also relied upon L.J. Keefe, which provided that a lien was not enforceable against an owner of land since the work performed by a subcontractor was for a contractor's sole benefit. In L.J. Keefe, a property owner granted Commonwealth Edison Company ("ComEd") a license to install power lines on its land.ComEd retained a subcontractor to perform tunneling work in order to allow ComEd to properly install the power lines. The subcontractor subsequently filed a complaint for a mechanic's lien foreclosure against ComEd; however, the court ultimately dismissed the action. The court reached this decision because the contract entered into between the subcontractor and ComEd was not intended to improve the land.Instead, the court determined that the subcontractor's work was performed solely for ComEd's benefit and did not benefit the land in any way.

Based upon Ohrenstein and L.J. Keefe, the Fifth District concluded that Mostardi could not enforce a mechanic's lien against the defendants because: 1) the contract entered into between Mostardi and Power Holdings was not intended to improve the land, 2) the contract entered into between Mostardi and Power Holdings did not involve the "owner" of the land as defined under the Act, and 3) the work performed by Mostardi did not, in fact, improve the land or benefit the Czerniejewskis in any way.Accordingly, the Fifth District affirmed the trial court's decision to grant the defendants' motion to dismiss pursuant to Section 2-619.

[1] An architect or engineer will still have a lien on property if they provide architectural or engineering services for the purpose of an intended improvement, whether or not the architectural or engineering services actually improve the property. See Crowen v. Meyer, 342 Ill. 46 (1930).