Constructive Fraud

The Illinois Mechanics’ Lien Act and supporting case law require that every lien claim be verified under oath and also contain statements with respect to the owner of the property, a description of the property, a brief statement of the parties’ contract, the amount due, and the date on which work on the property was completed. Where this information is knowingly false, an owner (or other interested party) can seek to defeat a lien claim. Most Illinois cases involving fraudulent lien claims stem from the fact that the contractor has knowingly overstated the amount due. One court, however, recently held that misstating the completion date can also be tantamount to fraud.

In Father & Sons Home Improvement II, Inc. v. Stuart, 2016 IL App. (1st) 143666 (Mar. 31, 2016), the Illinois Appellate Court confirmed a contractor committed constructive fraud and disallowed its lien claim where the lien claim contained a false completion date. There, in April 2009, property owners entered into an agreement with a contractor to construct a deck, garage and basement in their house. On September 10, 2009, the contractor obtained a building permit and began construction. On September 17, 2009, the contractor recorded a mechanics’ lien claim verifying under oath that the contractor had completed “all work required by the contract” on September 12, 2009. Over the next several months, however, the contractor required the owners to sign certificates verifying certain work had been performed and the work was not completed until June 2010.

The contractor then filed a lawsuit seeking to enforce its lien claim. During the lawsuit, the contractor made other admissions under oath stating that it did not complete its work on the property until June 2010. The contractor argued that to the extent the lien contained “overstatements,” they were innocent mistakes and did not establish any intent to defraud.  The Court disagreed and found that the contractor knowingly made the false statements:

[Contractor’s] mechanic’s lien, recorded on September 17, 2009, falsely stated that all the work required under the construction agreement, including the construction of the garage, basement and deck, was completed by September 12, 2009. This statement was proven false by [contractor’s] own admission that “it completed work at the subject property in or about June 2010.”  [Contractor] must have known that it had not completed all the work required under the construction agreement as the Department of Buildings on issued [contractor] a building permit on September 10, 2009. Likewise, the “completion certificates,” which [contractor] had the [owners] sign as the project progressed, clearly indicate that [contractor] knew that as of September 17, 2009, it had not constructed any of the land improvements . . . required under the construction agreement.

Based on the foregoing, not only did the Court enter judgment against the contractor, but it also awarded attorneys’ fees to the owners under Section 17 of the Mechanics’ Lien Act because the contractor’s lien claim was brought  “without just cause or right”  or, in other words, it was not well grounded in fact or warranted by existing law. This case demonstrates the importance of not only including the necessary facts in a mechanics’ lien claim, but verifying those facts are in fact true and accurate.

Chicago, Illinois 312-377-1501 | Crown Point, Indiana 219-488-2590
Indianapolis, Indiana 219-488-2590 | Milwaukee, Wisconsin 312-377-1501

Chicago, Illinois


Crown Point, Indiana


Indianapolis, Indiana


Milwaukee, Wisconsin