Is this up-front 'contractor waives all lien rights' clause good in Illinois?
No. Under 770 ILCS 60/1(d) an agreement to waive any right to enforce or claim any lien under the Mechanics Lien Act, or an agreement to subordinate the lien, where the agreement is in anticipation of and in consideration for the awarding of a contract or subcontract, express or implied, to perform work or supply materials for an improvement upon real property, is against public policy and unenforceable. The Act states the mirror rule too: where a contract provision's legal effect is that no lien may be filed or the lien is subordinated, and the provision "is not prohibited by this Act, such provision shall be binding if made as part of an agreement not prohibited by this Act" (770 ILCS 60/21(b)), so a waiver or subordination given outside § 1(d)'s in-anticipation-of-award setting holds. A pay-if-paid or pay-when-paid term is no defence to a subcontractor's or supplier's lien claim (§ 21(e)). And where a filed claim for lien is paid with the cost of filing, or suit to enforce it is not instituted after demand within the time the Act limits, the person who filed it must acknowledge satisfaction or release in writing on the written demand of the owner, lienor or any person interested in the real estate, and on neglect to do so for 10 days owes the owner $2,500 plus costs and reasonable attorney's fees (§ 35(a)).
The trap
The vice is the timing and the consideration, not the words: what § 1(d) reaches is an agreement "in anticipation of and in consideration for the awarding of a contract or subcontract", so the same sentence in the prime contract signed to WIN the work is, in the section's own words, against public policy and unenforceable, while a waiver or release given later for work already done is outside the words that void it. Read the carve-out for what it is, though. Section 1(d)'s own saving is narrower than a progress-payment waiver: it preserves "release of lien under subsection (b) of Section 35", and § 35(b) is the recording provision. A satisfaction or release may be filed with the recorder of deeds where the claim for lien was filed and once filed "shall forever thereafter discharge and release the claim for lien and shall bar all actions brought or to be brought thereupon", which is the back end of § 35(a)'s duty to acknowledge satisfaction of a FILED claim that has been paid. Nothing in § 1(d) names a progress-payment waiver. The subordination half catches the clause drafters use instead of a waiver (agreeing in advance that the lien sits behind the construction lender) with one exception in the statute: subordination to a mortgage securing a construction loan is permitted if agreed after more than 50% of the loan has been disbursed to fund improvements. Section 1(c) adds that taking additional security is not a waiver unless made one by express agreement and not prohibited by the Act.
7 authorities
- statute770 ILCS 60/1enactment date not established
The words that state the rule
(d) An agreement to waive any right to enforce or claim any lien under this Act, or an agreement to subordinate the lien, where the agreement is in anticipation of and in consideration for the awarding of a contract or subcontract, either express or implied, to perform work or supply materials for an improvement upon real property is against public policy and unenforceable.
- statute770 ILCS 60/1enactment date not established
The words that state the rule
This Section does not prohibit release of lien under subsection (b) of Section 35 of this Act, nor does it prohibit an agreement to subordinate a mechanics lien to a mortgage lien that secures a construction loan if that agreement is made after more than 50% of the loan has been disbursed to fund improvements to the property.
- statute770 ILCS 60/1enactment date not established
The words that state the rule
(c) The taking of additional security by the contractor or sub-contractor is not a waiver of any right of lien which he may have by virtue of this Act, unless made a waiver by express agreement of the parties and the waiver is not prohibited by this Act.
- statute770 ILCS 60/21enactment date not established
The words that state the rule
(b) If the legal effect of a provision in any contract between the owner and contractor or contractor and subcontractor is that no lien or claim may be filed or maintained, or that such contractor's lien shall be subordinated to the interests of any other party, and the provision is not prohibited by this Act, such provision shall be binding if made as part of an agreement not prohibited by this Act.
- statute770 ILCS 60/21enactment date not established
The words that state the rule
(e) Any provision in a contract, agreement, or understanding, when payment from a contractor to a subcontractor or supplier is conditioned upon receipt of the payment from any other party including a private or public owner, shall not be a defense by the party responsible for payment to a claim brought under Section 21, 22, 23, or 28 of this Act against the party.
- statute770 ILCS 60/35enactment date not established
The words that state the rule
(a) Whenever a claim for lien has been filed with the recorder of deeds, either by the contractor or sub-contractor, and is paid with cost of filing same, or where there is a failure to institute suit to enforce the same after demand as provided in the preceding Section within the time by this Act limited the person filing the same or some one by him duly authorized in writing so to do, shall acknowledge satisfaction or release thereof, in writing, on written demand of the owner, lienor, or any person interested in the real estate, or his or her agent or attorney, and on neglect to do so for 10 days after such written demand he or she shall be liable to the owner for the sum of $2,500, which may be recovered in a civil action together with the costs and the reasonable attorney's fees of the owner, lienor, or other person interested in the real estate, or his or her agent or attorney incurred in bringing such action.
- statute770 ILCS 60/35enactment date not established
The words that state the rule
(b) Such a satisfaction or release of lien may be filed with the recorder of deeds in whose office the claim for lien had been filed and when so filed shall forever thereafter discharge and release the claim for lien and shall bar all actions brought or to be brought thereupon.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.