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What steps I need to take to protect my rights when I am a general contractor?

You are most likely a general contractor if:

  • Have a written signed agreement. Please note that according to Illinois law, all contracts for home repair or remodeling for more than $1,000 should be in writing. Even a simple written agreement is better than a verbal agreement as it provides more guidance to the scope of your work and any extra work orders. If you can’t draft a separate agreement, have the owner sign and accept the Estimate. Make sure all extra work orders, for which you will also bill extra, are reduced to writing. Make sure you write exactly what the extra work will be and include the extra price you will charge. Deliver the extra work order to the person who asked for the extra work to be done (the property owner) before you begin the work and retain a copy in your file.
  • Give the property owner a "Home Repair: Know Your Consumer Rights" pamphlet. Under Illinois law, all contractors who perform home repairs or remodeling work on a property occupied by owner must give the owner the pamphlet. The pamphlet can be found on http://www.ag.state.il.us/publications/pdf/homerep0403.pdf. When you give the property owner the pamphlet, fill out the required info on the pamphlet and retain the acknowledgment of pamphlet receipt signed by the owner in your file.
  • Give property owner a Sworn Statement. Under Illinois law, a contractor must provide a written list of the names and addresses of all parties furnishing materials and labor and the amount due or to become die to each to a property owner. In other words, the Sworn Statement is a list of all subcontractors and amounts you agreed to pay them for their work on the property. If subcontractors change, or the amount, you should update the Sworn Statement and give a copy to the owner.
  • Send a notice of a breach of agreement. If you performed work, but the property owner has failed to pay as agreed, stop work and send the owner a Notice of Breach of your agreement providing him with short time period to pay. If he does not pay, you should consult an attorney and consider filing a lien against the property.
  • File a Mechanics Lien against the property within four (4) months from the last day of your work on the property. To be the first in line for payment (should the property be sold/auctioned/foreclosed), you must record a lien against the property within four (4) months from the time you last performed any work on the property. The Lien must be recorded with the Recorder of Deeds of the county where the property is located. If you are outside the four months window, you can still file a lien and enforce it against the original owner (the person you had an agreement with and still owns the property) within two (2) years from your last day of work at the property. Note that you cannot file and enforce a lien against a subsequent purchaser.
  • Send a copy of the lien to property owner. You must send a copy of the Lien filed with the Recorder of Deeds to the property owner within ten (10) days of filing. Send the notice by certified mail, return receipt requested.
  • File a Foreclosure of Lien court action. To receive benefits of the Lien (be paid), you must initiate a foreclosure action within two (2) years from the last day of your work on the property. Please consult an attorney to see whether you have proper basis for filling a mechanics lien foreclosure action. If you have a corporation, you must hire an attorney to represent you in court. You, as the owner of the corporation, cannot represent the corporation in court ‘pro se’, unless you are a licensed attorney.
  1. Please note that it is not enough that you record a lien against the property. If you do not file a foreclosure action within the two year window, the lien will be invalidated. The property owner can sell the property without paying you. You will lose your right to payment under the lien law. (However, you may still have some other legal remedies available, such as breach of contract or quantum meruit)
  2. Beware! If you receive a letter from the property owner, or any person interested in the property, demanding that you file a foreclosure action within 30 days (enforce your lien under Section 34 of the Illinois Lien Act), you MUST do so. If you fail to file a court action with 30 days, your lien will be forfeited.

You are most likely a subcontractor if:

  • You have a verbal or a written agreement with someone other than property owner,
  • Your work is supervised/reviewed by another contractor, and
  • Your payments come from a contractor’s company or a title company.
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