HB-4658 was introduced in the legislature this month. It proposes to amend the Contractor Prompt Payment Act, 815 ILCS 615/5, et.seq. It makes some technical clarifications, provides an additional 25 days for payment if the construction lender requires it to process an invoice, and it permits up to 5% retainage if a contract provides for it.
HB 4658 can be found here on the Illinois General Assembly’s website:
By James T. Rohlfing
Issue:
HB-4657, the so-called “bonding over” proposal, would seriously weaken the mechanics lien rights of contractors, subcontractors, laborers and material suppliers that the construction industry has fought hard to secure.
Often times, the only leverage available to a contractor who is owed money for work performed is to record a mechanics lien against a project. Property owners are more interested in paying for the work done on the property if there is a mechanics lien that they must cause to be released at the insistence of their bank or other parties. Without a mechanics lien on the property, contractors and subcontractors, especially smaller and minority firms are compelled to either accept a significantly smaller payment for their work, or endure expensive and lengthy litigation. When an owner retains a substantial payment owed a small subcontractor, the playing field is not level in the ensuing game to recover payment. Often, the only counter lever is to record a mechanics lien. If a bond could easily replace a lien, the leverage available to encourage fair payment would be lost.
Further, a “bonded over” lien does not guarantee the contractor will be paid in full for work completed. Once title on a property is cleared – the property can then be sold. If a contractor filed a lien that was “bonded over” the only available option is to hire an attorney and seek payment from the surety. The surety’s objective is to negotiate for a lesser dollar amount. This proposal requires the contractor to obtain legal counsel to object to the bond if it is inadequate and make the argument to the court – placing the burden of proof upon the contractor.
Solution:
We are asking for your support and a “no” vote on HB 4657. This bill will further damage an already stunted construction industry in Illinois. Mechanic’s liens are the only assurance a contractor has to ensure payment on work completed. Allowing bonds to stand in the place of mechanic’s liens will remove the ability of contractors to receive full and timely payments for work and materials supplied.
HB 4657 can be found on the Illinois General Assembly’s website here:
By James T. Rohlfing
The Issue:
HB-4657 would amend the Public Construction Bond Act (the “Act”) by requiring sureties to meet certain qualifications. The Act requires contractors working on a public project to obtain a bond for the benefit of all subcontractors and suppliers who perform work to assure they will be paid for the work and materials furnished to a public project. Most public entities require bonds with a surety that is a financially sound, such as an insurance company in the business of issuing such bonds. Unfortunately, the Act does not expressly set forth any qualifications for a surety and some bonds have been used with financially unsound sureties who have no ability to pay for work if a contractor defaults. HB-4657 would require bonds with a surety with a certificate of authority from the Department of Insurance. In addition, the company shall have a financial strength rating of at least A as rated by A.M. Best Company, Inc. or a similar rating agency.
The Solution:
We are asking for your support and a “yes” vote on HB 4769. This bill seeks to provide protection to government entities and to contractors who provide construction services.
HB 4769 can be found here on the Illinois General Assembly’s website:
By James T. Rohlfing
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James T. Rohlfing & Associates, P.C. 