Bonding Under the Revised Illinois Mechanics Lien Act

The New Year brought with it the enactment of 770 ILCS 60/38.1 of the Illinois Mechanics’ Lien Act, (the “Act”). This new addition to the Act allows the substitution of a bond in place of a mechanics’ lien. This article highlights some important features of this new law.

The Process

In order to “bond over” a mechanic’s lien, a proper applicant must file a verified petition with the clerk of the circuit clerk in the county where the property is located. The applicant is essentially any individual or entity that has an interest in the subject property, including the property owner, the lien claimant, an owners association, or anyone else liable for payment of the lien claim. This petition may be filed at any time after a lien claim is perfected and prior to the commencement of litigation. Alternatively, after a complaint or counterclaim is filed the applicant only has 5 months to file its petition. Section 38.1(c) clearly lays out the specific details that must be included in the verified petition.
Section 38.1 also sets forth specific requirements for an “eligible surety bond.” For example, the bond must be in an amount equal to 175% of the claim for lien. Furthermore, the surety company providing the bond must be “A rated” and meet other financial-strength requirements. The local circuit court is also authorized to provide a list of approved sureties by order or local rule.

The Effect of Substitution

Once a petition is filed, any interested party may file an objection within 30 days after receiving notice, or 33 days after the notice is mailed, whichever is earlier. Failure to do so will be considered a waiver. If the petition meets all statutory requirements, then the court must enter an order (1) substituting the surety bond for the property securing the lien claim and (2) substituting the lien claimant’s right to recover on the bond for certain claims under the Act. As a result, the principal and surety become parties to any lawsuit in the future, or if there is litigation pending, they substitute in while all other parties can be dismissed. It is important to note that Section 38.1 does not permit a bond to release or discharge the underlying lien.

One of the most notable features under this amendment is the prevailing party’s ability to recover attorney fees. If the lien claimant is successful and is awarded a judgment of at least 75% of the lien claim, then it may be entitled to attorney’s fees capped at 50% of the amount of the lien claim. Alternatively, the principal of the bond can be deemed the “prevailing party” if a judgment is awarded for 25% or less of the claim for lien, and would be eligible to collect attorney’s fees.

The advantages of Section 38.1 are immediately apparent. Lien claimants are afforded an easier path to actually recovering a favorable judgment with the added bonus of possibly collecting up to half of their attorney’s fees. Conversely, property owners now have a mechanism that could potentially avoid foreclosure of the lien. As Section 38.1 is utilized, it will be interesting to see whether this helps simplify mechanics’ litigation, and whether the added potential for attorney’s fees encourages “bonding over” a lien. But before weighing the pros and cons of substituting a bond, one must still ensure full compliance with the rest of the Illinois Mechanics’ Lien Act.


We are excited to invite you to BizOver™, a biannual event founded by Lema Khorshid in 2006 that celebrates Chicago business owners and entrepreneurs. Please join us on Wednesday, February 24 and take part in makeovers, skin consultations, and fragrance sampling all while networking with other business owners and professionals. There will be delicious hors d’oeuvres to savor and cocktails to sip throughout the event at Neiman Marcus on Michigan Avenue from 5:30-7:30pm. Both female and male guests are invited to participate in BizOver™ festivities.

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A candid Q&A with Vanessa Moses of Freezee

Tell us about your business?

“Our business operates out of Trinidad and Tobago and we are a beverages distribution and service company. What we do is provide, sell, and rent beverage equipment and high marginal beverage programs along with premium products to restaurants, hotels, shops, convenience stores, fast food, retail and offices. We provide anything from frozen cocktails, coffee, hot tea, iced tea, slush, frozen carbonated equipment and more. We also provide the best service on the island for beverage equipment and support.”

What prompted you to start your business?

“The business was started originally by my brother one hot day when he felt for a “slurpee” – realizing there was no frozen beverages you could run to the store and just grab and go! From there we started with our own brand we created, Freezee, installing in many grab and go locations, movie theaters and gas stations. This business allowed us to evolve into other beverage product and machine offerings.”

 What are three tips you have for entrepreneurs who are looking to start their own small business?

  1. “Be flexible. Have a plan, have a roadmap, but accept that it can change.
  2. Leave your ego at the door. Always be open to learning and looking at how you can change/shift your business. Basically, be open to taking advice whether you want to hear it or not. More people will want to work with you.
  3. Remember you are going to feel like you want to quit 1,000 times but that just means you are about 90% there. The last 10% is always the hardest before you hit it big.”

“Fuksa Khorshid has been a fantastic resource from day 1 to our business from structuring our partnership agreements, distribution agreements, machine rental and policy contracts as well as overall business advising! Lema has even come to Trinidad multiple times to meet in person to discuss growth and strategy plans we need to put in place to grow.”

Five Tips for the Newly Minted Entrepreneur

The New Year is in full swing and it is the perfect time to kick start those resolutions of finally getting your idea off the ground.
Figure out the ABC’s
Before you rush into your business, sit down and really brainstorm. Determine what the new name of your company will be and have an attorney help you set it up. Really hone in on what you want to focus on in terms of products and services and look around for competition so you can really determine your niche in the market you are operating in to stand out. Lastly, determine your target customers. Who is going to make you successful?
Build a Team
It’s always good to have a smart, reliable team around you that you can tap for advice and ideas when you are in over your head. If you need space, reach out and find a great person in real estate. A good accountant is essential from the beginning to make sure everything is in order from a business perspective and you are setting yourself up for financial success. A seasoned attorney is also a big piece of the puzzle – they can help you set up the business structure, evaluate intellectual property and navigate contracts. Lastly, marketing and design/digital will be paramount in attracting new customers. Find someone that shares your vision and can articulate it into a logo, website, etc.
Market Yourself and Your Business
Now that you have a go forward strategy, get out there and market yourself and your company. Attend as many networking events that make sense for your business and consider marketing tactics like free samples or sponsoring events. Also, really build out your social media networks (not only your personal one, but one specifically dedicated to the business).
Find a Mentor
Mentors can be one of the most important resources a new entrepreneur should have. A good mentor, someone who has already built a successful business and faced the same challenges you face today, can really help you navigate through difficult situations and provide the sound, honest advice you need to hear. Connect with a local small business resource center and see if they have any programs available to you.
Go All In
There will be ups and downs for every entrepreneur, and each day is different than the last. You need to commit to your idea and really go all in on this business. You can only be as successful as you want to be, so make this your passion and give it your all.