Mechanic’s lien rights are a powerful tool commonly utilized by contractors and materials suppliers to secure payment for work performed on construction projects. Lien rights are defined by statute and originally developed to protect laborers and contractors against non-payment. When funding dries up on a project, lien rights may be the only avenue available to obtain payment. Typically, the lien “attaches” to property that has been improved by a laborers or contractors work. But what if work or services do not directly “improve” the property, or increase a property’s value in a measurable way, is a lien available? Should one be?
The work of design professionals that precedes construction generally does not result in an appreciable increase to the value of property. Design drawings do not “improve” real property in the sense of a physical improvement constructed or built on the property. But design work is essential to successful construction. And the absence of lien rights places greater risk of non-payment on design professionals. Many states, though, do now extend at least some of the protection of lien rights to design professionals. As with conventional mechanic’s liens, however, the lien rights of design professionals vary from state to state, and the scope of design professional liens is continually developing.
Enter Christopher B. Burke Engineering, Ltd. v. Heritage Bank of Central Illinois
. In this Illinois Supreme Court case, Burke Engineering had surveyed a tract of land, and drafted and recorded a subdivision plat, incurring over $100,000 in costs in the process that went unpaid by the property owner. A mechanic’s lien was recorded and a foreclosure action filed. The defense claimed the lien invalid, arguing that the design services performed did not constitute an improvement upon property. Lower courts agreed and invalidated the lien, with the appellate court concluding “there was no physical improvement to the property or calculable increase in the property’s value.”
The Illinois mechanic’s lien statute, however, extends lien rights both to those who contract to improve an owner’s property, and to those who contract with an owner “for the purpose of improving the tract of land
”. The term “improve” is expressly defined to include the performance of “any services … as an architect, structural engineer, professional engineer, [or] land surveyor.” Based on the statutory language, the Illinois Supreme Court rejected the lower court decisions, and ruled that Illinois law provides a lien for design professionals not only when their services result in an improvement to property, but also when their services are completed for the purpose of improving the property, even if the improvement is left incomplete.
This Burke Engineering
ruling affords design professionals in Illinois enhanced protection against non-payment. Design services that enable an owner to improve property are lienable, even if the owner does not or cannot proceed with the improvement.