Paramont EO’s Norm Cowie Helps Rewrite Illinois Lien Law
Norm Cowie, Director of Credit for Paramont EO, has been helping state legislators rewrite the Illinois Lien Law. He is a fantastic resource for our customers and is often asked to contribute to articles developed by the National Association of Credit Management.
The following article is reprinted with permission from NACM:
States Consider Alternatives to Mechanic’s Liens
States are looking at other options for property owners to get around mechanic’s liens. The Vermont legislature is currently considering whether owners can deposit substitute collateral with a court after a contractor has attached a mechanic’s lien. However, at this time, the text of the bill does not provide more detailed information than that.
The committee assigned to the bill will draft its language, said co-sponsor Rep. William Botzow II (D-VT). As of yet, “it has not done so,” Botzow said.
“Several states already have legislation in place that allows the property owner to ‘bond around’ a lien,” said Chris Ring, of NACM’s Secured Transaction Services. “This allows the property owner to have the lien removed in exchange for the claimant’s ability to claim against a payment bond. Legislation varies by state, but the typical language is that the bond must be written by a surety that has at least an A rating and that the bond be anywhere from 100% to 150% of the claimed value.”
Illinois allows property owners to substitute a surety bond for a mechanic’s lien on the property, thus enabling the property owner to sell or refinance the property, said Norman Cowie, CCE, director of credit for Paramont EO, an electrical supply company based in Woodridge, IL. “Illinois is very specific about what constitutes substitute collateral.”
The Illinois section, which took effect this year, includes the following:
- The bond surety must be rated no less than an A by A.M. Best.
- Venue for litigation must be in the same county as the property.
- The bond must last as long as the lien would (two years by statute, longer if foreclosed).
- The bond must be 175% of the lien amount.
- The prevailing party is awarded attorney fees.
The Vermont proposal might allow for other alternatives such as letters of credit, personal guarantees or monies in trust, he added. “Illinois doesn’t allow alternatives. It has to be a bond.”