HB2757 99TH GENERAL ASSEMBLY

LRB099 09563 HEP 29772 b

99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
HB2757

Introduced , by Rep. Thomas Bennett

SYNOPSIS AS INTRODUCED:

770 ILCS 60/23	from Ch. 82, par. 23
770 ILCS 60/23.5 new
770 ILCS 60/38.1 new

Amends the Mechanics Lien Act. Provides that an applicant may at any time file a petition to substitute a bond for the property subject to a lien claim under the Act with the clerk of the circuit court of the county in which the property against which the lien claim is asserted is located, or, if there is a pending action to enforce the lien claim, an applicant may timely apply to become a party to the pending action at any time before a final judgment is rendered and file a petition to substitute a bond for the property subject to the lien claim in the pending action. Defines terms. Contains notice and procedural requirements; a statement of legislative intent; and language limiting the applicability of the new provisions.

A BILL FOR

AN ACT concerning civil law.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Mechanics Lien Act is amended by changing Section 23 and by adding Sections 23.5 and 38.1 as follows:

(770 ILCS 60/23) (from Ch. 82, par. 23)

Sec. 23. Liens against public funds.

(a) For the purpose of this Section "contractor" includes any sub-contractor; "State" includes any department, board or commission thereof, or other person financing and constructing any public improvements for the benefit of the State or any department, board or commission thereof; and "director" includes any chairman or president of any State department, board or commission, or the president or chief executive officer or such other person financing and constructing a public improvement for the benefit of the State.

(a-5) For the purpose of this Section, "unit of local government" includes any unit of local government as defined in the Illinois Constitution of 1970, and any entity, other than the State, organized for the purpose of conducting public business pursuant to the Intergovernmental Cooperation Act or the General Not For Profit Corporation Act of 1986, or where a not-for-profit corporation is owned, operated, or controlled by one or more units of local government for the purpose of conducting public business.

(b) Any person who shall furnish labor, services, material, fixtures, apparatus or machinery, forms or form work to any contractor having a contract for public improvement for any county, township, school district, city, municipality, municipal corporation, or any other unit of local government in this State, shall have a lien for the value thereof on the money, bonds, or warrants due or to become due the contractor having a contract with such county, township, school district, municipality, municipal corporation, or any other unit of local government in this State under such contract. The lien shall attach only to that portion of the money, bonds, or warrants against which no voucher or other evidence of indebtedness has been issued and delivered to the contractor by or on behalf of the county, township, school district, city, municipality, municipal corporation, or any other unit of local government as the case may be at the time of the notice.

(1) No person shall have a lien as provided in this subsection (b) unless such person shall, before payment or delivery thereof is made to such contractor, notify the clerk or secretary, as the case may be, of the county, township, school district, city, municipality, municipal corporation, or any other unit of local government by written notice of the claim for lien containing a sworn statement identifying the claimant's contract, describing the work done by the claimant, and stating the total amount due and unpaid as of the date of the notice for the work and furnish a copy of said notice at once to said contractor. The person claiming such lien may cause notification and written notice thereof to be given either by sending the written notice (by registered or certified mail, return receipt requested, with delivery limited to addressee only) to, or by delivering the written notice to the clerk or secretary, as the case may be, of the county, township, school district, city, municipality, municipal corporation, or any other unit of local government; and the copy of the written notice which the person claiming the lien is to furnish to the contractor may be sent to, or delivered to such contractor in like manner. The notice shall be effective when received or refused by the clerk or secretary, as the case may be, of the county, township, school district, city, municipality, municipal corporation, or any other unit of local government.

(2) Provided further, that where such person has not so notified the clerk or secretary, as the case may be, of the county, township, school district, city, municipality, municipal corporation, or any other unit of local government of his claim for a lien, upon written demand of the contractor with service by certified mail (return receipt requested) and with a copy filed with the clerk or secretary, as the case may be, that person shall, within 30 days, notify the clerk or secretary, as the case may be, of the county, township, school district, city, municipality, municipal corporation, or any other unit of local government of his claim for a lien by either sending or delivering written notice in like manner as above provided for causing notification and written notice of a claim for lien to be given to such clerk or secretary, as the case may be, or the lien shall be forfeited.

(3) No official shall withhold from the contractor money, bonds, warrants, or funds on the basis of a lien forfeited as provided herein.

(4) The person so claiming a lien shall, within 90 days after serving such notice commence proceedings by complaint for an accounting, making the contractor having a contract with the county, township, school district, city, municipality, municipal corporation, or any other unit of local government and the contractor to whom such labor, services, material, fixtures, apparatus or machinery, forms or form work was furnished, parties defendant, and shall within 10 days after filing the complaint notify the clerk or secretary, as the case may be, of the county, township, school district, city, municipality, municipal corporation, or any other unit of local government of the commencement of such suit by delivering to him or them a copy of the complaint filed.

(5) Failure to commence proceedings by complaint for accounting within 90 days after serving notice of lien shall terminate the lien and no subsequent notice of lien may be given for the same claim nor may that claim be asserted in any proceedings pursuant to this Act, provided, however, that failure to file the complaint after notice of the claim for lien shall not preclude a subsequent notice or action for an amount or amounts becoming due to the lien claimant on a date after the prior notice or notices.

(6) It shall be the duty of any such clerk or secretary, as the case may be, upon receipt of the first notice herein provided for to cause to be withheld a sufficient amount to pay such claim for the period limited for the filing of suit plus the period for notice to the clerk or secretary of the suit, unless otherwise notified by the person claiming the lien. Upon the expiration of this period the money, bonds or warrants so withheld shall be released for payment to the contractor unless the person claiming the lien shall have instituted proceedings and delivered to the clerk or secretary, as the case may be, of the county, township, school district, city, municipality, municipal corporation, or any other unit of local government a copy of the complaint as herein provided, in which case, the amount claimed shall be withheld until the final adjudication of the suit is had or until a bond is substituted under Section 23.5 of this Act. Provided, that the clerk or secretary, as the case may be, to whom a copy of the complaint is delivered as herein provided may pay over to the clerk of the court in which such suit is pending a sum sufficient to pay the amount claimed to abide the result of such suit and be distributed by the clerk according to the judgment rendered or other court order. Any payment so made to such claimant or to the clerk of the court shall be a credit on the contract price to be paid to such contractor.

(c) Any person who shall furnish labor, services, material, fixtures, apparatus or machinery, forms or form work to any contractor having a contract for public improvement for the State, may have a lien for the value thereof on the money, bonds or warrants due or about to become due the contractor having a contract with the State under the contract. The lien shall attach to only that portion of the money, bonds or warrants against which no voucher has been issued and delivered by the State.

(1) No person or party shall have a lien as provided in this subsection (c) unless such person shall, before payment or delivery thereof is made to the contractor, notify the Director or other official, whose duty it is to let such contract, written notice of a claim for lien containing a sworn statement identifying the claimant's contract, describing the work done by the claimant and stating the total amount due and unpaid as of the date of the notice for the work. The claimant shall furnish a copy of said notice at once to the contractor. The person claiming such lien may cause such written notice with sworn statement of the claim to be given either by sending such notice (by registered or certified mail, return receipt requested, with delivery limited to addressee only) to, or by delivering such notice to the Director or other official of the State whose duty it is to let such contract; and the copy of such notice which the person claiming the lien is to furnish to the contractor may be sent to, or delivered to such contractor in like manner. The notice shall be effective when received or refused by the Director or other official whose duty it is to let the contract.

(2) Provided, that where such person has not so notified the Director or other official of the State, whose duty it is to let such contract, of his claim for a lien, upon written demand of the contractor, with service by certified mail (return receipt requested) and with a copy filed with such Director or other official of the State, that person shall, within 30 days, notify the Director or other official of the State, whose duty it is to let such contract, of his claim for a lien by either sending or delivering written notice in like manner as above provided for giving written notice with sworn statement of claim to such Director or official, or the lien shall be forfeited.

(3) No public official shall withhold from the contractor money, bonds, warrants or funds on the basis of a lien forfeited as provided herein.

(4) The person so claiming a lien shall, within 90 days after serving such notice, commence proceedings by complaint for an accounting, making the contractor having a contract with the State and the contractor to whom such labor, services, material, fixtures, apparatus or machinery, forms or form work was furnished, parties defendant, and shall, within 10 days after filing the suit notify the Director of the commencement of such suit by delivering to him a copy of the complaint filed; provided, if money appropriated by the General Assembly is to be used in connection with the construction of such public improvement, that suit shall be commenced and a copy of the complaint delivered to the Director not less than 15 days before the date when the appropriation from which such money is to be paid, will lapse.

(5) Failure to commence proceedings by complaint for accounting within 90 days after serving notice of lien pursuant to this subsection shall terminate the lien and no subsequent notice of lien may be given for the same claim nor may that claim be asserted in any proceedings pursuant to this Act, provided, however, that failure to file suit after notice of a claim for lien shall not preclude a subsequent notice or action for an amount or amounts becoming due to the lien claimant on a date after the prior notice or notices.

(6) It shall be the duty of the Director, upon receipt of the written notice with sworn statement as herein provided, to withhold payment of a sum sufficient to pay the amount of such claim, for the period limited for the filing of suit plus the period for the notice to the Director, unless otherwise notified by the person claiming the lien. Upon the expiration of this period the money, bonds, or warrants so withheld shall be released for payment to the contractor unless the person claiming the lien shall have instituted proceedings and delivered to the Director a copy of the complaint as herein provided, in which case, the amount claimed shall be withheld until the final adjudication of the suit is had or until a bond is substituted under Section 23.5 of this Act. Provided, the Director or other official may pay over to the clerk of the court in which such suit is pending, a sum sufficient to pay the amount claimed to abide the result of such suit and be distributed by the clerk according to the judgment rendered or other court order. Any payment so made to such claimant or to the clerk of the court shall be a credit on the contract price to be paid to such contractor.

(d) Any officer of the State, county, township, school district, city, municipality, municipal corporation, or any other unit of local government violating the duty hereby imposed upon him shall be liable on his official bond to the claimant giving notice as provided in this Section for the damages resulting from such violation, which may be recovered in a civil action in the circuit court. There shall be no preference between the persons giving such notice, but all shall be paid pro rata in proportion to the amount due under their respective contracts.

(e) In the event a suit to enforce a claim based on a notice of claim for lien is commenced in accordance with this Section, and the suit is subsequently dismissed, the lien for the work claimed under the notice of claim for lien shall terminate 30 days after the effective date of the order dismissing the suit unless the lien claimant shall file a motion to reinstate the suit, a motion to reconsider, or a notice of appeal within the 30-day period. Notwithstanding the foregoing, nothing contained in this Section shall prevent a public body from paying a lien claim in less than 30 days after dismissal.

(f) Unless the contract with the State, county, township, school district, city, municipality, municipal corporation, or any other unit of local government otherwise provides, no lien for material shall be defeated because of lack of proof that the material after the delivery thereof, actually entered into the construction of the building or improvement, even if it be shown that the material was not actually used in the construction of the building or improvement so long as it is shown that the material was delivered either (i) to the owner or its agent for that building or improvement, to be used in that building or improvement or (ii) pursuant to the contract, at the place where the building or improvement was being constructed or some other designated place, for the purpose of being used in construction or for the purpose of being employed in the process of construction as a means for assisting in the erection of the building or improvement in what is commonly termed forms or form work where concrete, cement, or like material is used, in whole or in part.

(Source: P.A. 95-274, eff. 8-17-07.)

(770 ILCS 60/23.5 new)

Sec. 23.5. Substitution of bond for lien against public funds.

(a) As used in this Section:

(1) "Applicant" means:

(A) a unit of local government within the meaning of subsection (b) of Section 23 of this Act;

(B) the State, as that term is referred to in subsection (c) of Section 23 of this Act;

(C) a lien claimant or other person having an interest in the funds against which a lien claim is asserted, including, without limitation, the contractor or subcontractor who may be liable to the lien claimant for the payment of the lien claim.

(2) "Eligible surety bond" means a surety bond that meets all of the following requirements:

(A) it specifically states that the principal and surety thereunder submit to the jurisdiction of the circuit court of the county where the property being improved is located and that any final non-appealable judgment or decree entered in a proceeding in favor of the lien claimant based on any lien claim that is the subject of an eligible surety bond shall constitute a judgment against the principal and surety of the bond for the amount found due to the lien claimant, including interest and fees, limited as to the surety to the full amount of the bond, payable no later than 14 days after the expiration of all appeal periods;

(B) it continues in effect until the complete satisfaction of the adjudicated amount due under the lien claim or as to the surety to the payment of the full amount of the bond or a final determination that the lien claim is invalid, void, has been released by the lien claimant, or the time to enforce the lien claim has expired;

(C) it is in an amount equal to 150% of the amount of the lien claim;

(D) it has as its surety a company that has a certificate of authority from the Department of Insurance specifically authorizing the company to execute surety bonds;

(E) the surety has a current financial strength rating of not less than A with no rating modifier, an outlook which is either positive or stable, and a financial size category of not less than IX, as rated by A.M. Best Company, Inc.; and

(F) if property affected by a mechanics lien is in a judicial circuit that has its own list of approved sureties, the bond shall be issued by a surety company specifically authorized to issue surety bonds for that circuit court by order or rule.

(b) An applicant may, after a suit is filed by the lien claimant under Section 23 of this Act, file a petition to substitute a surety bond for the money, bonds, or warrants subject to the lien claim in that pending action. An applicant, if not already a party to the action, may intervene as a matter of right in the pending action at any time before a final judgment in order to file a petition under this subsection (b).

(c) A petition filed under this Section shall be verified and shall include:

(1) the name and address of the applicant and the applicant's attorney, if any;

(2) the name of the lien claimant;

(3) the name of the attorney of record for the lien claimant;

(4) the name and address of the general contractor for the construction;

(5) the name and address of the public body which let the contract for the construction;

(6) a copy of the proposed surety bond identifying the proposed surety, principal, and obligee;

(7) a certified copy of the surety's certificate of authority from the Department of Insurance or other State agency charged with the duty to issue such a certificate as evidence that the surety is authorized to do business in this State; and

(8) an undertaking by the applicant, if so ordered by the court as provided in this Section, to replace the surety bond with another surety bond meeting all of the requirements set forth in this Section.

(d) If no objection is filed to the substitution of the eligible surety bond for the funds securing the lien claim within 30 days after the petition is filed and served, the court, on motion of the applicant, shall approve the bond and enter an order which:

(1) substitutes the eligible surety bond for the funds securing the lien claim; and

(2) substitutes the lien claimant's right to recover on the bond for the lien claimant's right to recover from the moneys, bonds, and warrants of the public body.

(e) If an objection is filed within 30 days after service of notice, the court shall set a hearing as to the adequacy of the proposed surety bond. The petitioner shall establish prima facie that the proposed surety bond meets the criteria set forth in this Section. If it is established prima facie that the proposed surety bond meets the criteria, the burden is on the objector to prove that a proposed surety bond does not meet the criteria of subdivision (a)(2) of this Section. The fact that the proposed surety is also surety on other bonds on the same project is not a sufficient reason to reject the surety.

(f) Upon entry of a court order substituting the surety bond as security for the lien claim, the applicant shall file the original bond with the court and shall serve copies of the order and the approved surety bond on all parties to the case and on the public body holding moneys, bonds, and warrants subject to the lien claim.

(g) Upon entry of the order, the public body shall have no further or other obligations under Section 23 of this Act with respect to the lien claim and may pay any moneys, bond, and warrants withheld pursuant to the lien claim to the person to whom the moneys, bond, and warrants are due.

(h) Upon the granting of the petition and filing of the surety bond, the surety shall become a party defendant to the action and the public body, if a party to the action, may be dismissed on motion of the public body.

(i) If the bond ceases to meet the criteria set forth in this Section, the obligee on the approved surety bond may file a petition with the court setting forth the reasons that the approved surety bond fails to meet the criteria and the court may, upon due notice and hearing, enter an order that does any one or more of the following:

(1) require that the surety deposit the face amount of the bond in cash with the clerk of the court;

(2) assign the security to an alternative surety company that is ready, willing, and able to issue a bond meeting the criteria specified in this Section;

(3) require all costs of the action to be borne by the principals of the original bond;

(4) release the original surety from its obligations under the original surety bond upon deposit or assignment;

(5) deny the petition.

(j) The principal and surety of a surety bond shall be jointly and severally liable to the lien claimant for the amount that the court determines the lien claimant would have been entitled to recover under Section 23 of this Act if no surety bond had been furnished, up to and not exceeding the penal sum or face amount of the surety bond. The surety bond shall be deemed conditioned upon payment to the lien claimant, up to and not exceeding the penal sum or face amount of the surety bond, the amount to which the court determines that the lien claimant is entitled under Section 23 of this Act. A judgment against the principal and surety shall be entered as follows:

(1) in favor of the lien claimant in the amount, up to and not exceeding the penal sum or face amount of the surety bond, that the lien claimant is entitled under Section 23 or this Act; or

(2) to fund a pro rata award by the court to multiple claimants; or

(3) to make an award returning funds to the public owner; or

(4) any combination of items (1) through (3) of this subsection.

(k) Notwithstanding any provision in this Section or Section 23 of this Act to the contrary, the surety's liability under the bond shall be limited to the face amount of the bond.

(l) The principal and surety of the surety bond may assert only defenses against the lien claim that could have been asserted against the lien claim if no surety bond had been issued. The limitation under this subsection shall be deemed included in the language of the bond.

(m) Liability of the principal and surety on a bond that has ceased to meet the criteria for a bond set forth in this Section shall continue until a court order is entered replacing the bond and relieving the liability.

(n) Nothing in this Section expands or modifies the rights of any lien claimant under Section 23 of this Act.

(770 ILCS 60/38.1 new)

Sec. 38.1. Substitution of bond for lien.

(a) As used in this Section:

(1) "Applicant" means:

(A) an owner, other lien claimant, or other person having an interest in the property against which a lien claim under this Act is asserted;

(B) an association representing owners organized under any statute or to which the Common Interest Community Association Act applies; or

(C) any person who may be liable for the payment of a lien claim, including an owner, former owner, association representing owners organized under any statute or to which the Common Interest Community Association Act applies, or the contractor or subcontractor.

(2) "Eligible surety bond" means a surety bond that meets all of the following requirements:

(A) it specifically states that the principal and surety thereunder submit to the jurisdiction of the circuit court of the county where the property being improved is located and that any final non-appealable judgment or decree entered in a proceeding in favor of the lien claimant based on any lien claim that is the subject of an eligible surety bond shall constitute a judgment against the principal and surety of the bond for the amount found due to the lien claimant, including interest and fees, limited as to the surety to the full amount of the bond, payable no later than 14 days after the expiration of all appeal periods;

(B) it continues in effect until the complete satisfaction of the adjudicated amount due under the lien claim or as to the surety to the payment of the full amount of the bond or a final determination that the lien claim is invalid, void, has been released by the lien claimant, or the time to enforce the lien claim has expired;

(C) it is in an amount equal to 150% of the amount of the lien claim;

(D) it has as its surety a company that has a certificate of authority from the Department of Insurance specifically authorizing the company to execute surety bonds;

(E) the surety has a current financial strength rating of not less than A with no rating modifier, an outlook which is either positive or stable, and a financial size category of not less than IX, as rated by A.M. Best Company, Inc.; and

(F) if property affected by a mechanics lien is in a judicial circuit that has its own list of approved sureties, the bond shall be issued by a surety company specifically authorized to issue surety bonds for that circuit court by order or rule.

(3) "Lien claim" means a claim on account of which (A) a notice of claim for lien under Section 24 of this Act has been served; (B) a claim for lien under Section 7 of this Act has been recorded; or (C) a suit to enforce a lien under this Act, including but not limited to a lien on funds action under Section 27 of this Act, has been filed. Unless otherwise indicated in this Section, "lien claim" is the lien claim to be affected by an eligible surety bond.

(4) "Lien claimant" means the party whose lien claim is to be affected by an eligible surety bond.

Except as otherwise expressly provided in this Section, the terms not expressly defined in this Section have the same meaning as they have under other provisions of this Act.

(b) This Section applies to liens arising under Section 1 or 21 of this Act and to claims or actions arising under Section 9, 27, or 28 of this Act.

(c) An applicant may, at any time prior to 5 months after the filing of a complaint or counterclaim by a mechanics lien claimant to enforce its mechanics lien claim, and with leave of court after 5 months after the filing of a complaint or counterclaim by a mechanics lien claimant to enforce its mechanics lien claim, file a petition to substitute a bond for the property subject to a lien claim with the clerk of the circuit court of the county in which the property against which the lien claim is asserted is located, or if there is a pending action to enforce the lien claim, an applicant may timely apply to become a party to the pending action at any time before a final judgment is rendered and file a petition to substitute a bond for the property subject to the lien claim in the pending action. The petition shall be verified and shall include:

(1) the name and address of the applicant and the applicant's attorney, if any;

(2) the name and address of the lien claimant;

(3) if there is a suit to enforce the lien claim, the name of the attorney of record for the lien claimant, or if no suit has been filed but a lien claim has been recorded by the lien claimant, the name of the preparer of the lien claim;

(4) the name and address of the owner of record of any real estate subject to the lien claim or the name and address of any condominium association or association to which the Common Interest Community Association Act applies representing owners of record if the association is an obligor under the bond;

(5) a description of the property subject to the lien claim and, if the property includes real estate, both a common and legal description of the real estate, including the address, if any;

(6) an attached copy of the lien claim which includes the date of its recording, where it was recorded, and the number under which it was recorded if there is no pending proceeding to enforce the lien claim;

(7) an attached copy of the proposed eligible surety bond;

(8) a certified copy of the surety's certificate of authority from the Department of Insurance or other State agency charged with the duty to issue such a certificate; and

(9) an undertaking by the applicant to replace the bond with another eligible surety bond in the event that the proposed eligible surety bond at any time ceases to be an eligible surety bond.

(d) The person filing a petition under this Section shall personally serve or send via certified mail, return receipt requested, to each person whose name and address is stated in the petition, or his or her attorney of record in a pending action, a copy of the petition attached together with the following notice:

"PLEASE TAKE NOTICE that on .............(date), the undersigned, ..............., filed a petition to substitute a bond for property subject to a lien claim, a copy of which is attached to this notice.

PLEASE TAKE FURTHER NOTICE that if you fail to file an objection to the substitution of a bond for the lien claim with the clerk of the circuit court of .............. County under general number .......... or case number .........., within 30 days after you receive this notice or 33 days after this notice is mailed by certified mail, whichever date is earlier, you will have waived your right to object and an order will be entered substituting the security of the bond for the property securing the lien claim and discharging the property described in the petition as being subject to the lien, such as the real estate and the moneys or other considerations due or to become due from the owner to the contractor under the original contract giving rise to the lien claim."

For purposes of this Section, notice by certified mail, return receipt requested, shall be deemed served 3 business days after mailing of the notice.

(e) If no objection is filed to the substitution of the proposed eligible surety bond for the property securing the lien claim within 30 days after all persons entitled to notice under subsection (d) of this Section have either received the notice or have been served with the notice, or have waived any objections to the substitution, if the petition complies with the requirements of this Section, the court, on ex parte motion of the petitioner, shall, if the court finds that the proposed bond is in fact an eligible surety bond, enter an order:

(1) substituting the eligible surety bond for the property securing the lien claim; and

(2) substituting the lien claimant's right to recover on the bond for the lien claimant's causes of action that could be asserted by the lien claimant under Section 9, 27, or 28 of this Act.

(f) If an objection is filed within 30 days of service of notice required by this Section, the petitioner may, upon notice to all parties to whom the notice was required to be served, move for a hearing as to the adequacy of the proposed eligible surety bond. The burden shall be upon the petitioner to establish prima facie that the proposed surety bond is an eligible surety bond. If it is established prima facie that the bond is an eligible surety bond, the burden is on the objector to prove that a proposed surety bond is not an eligible surety bond. If at the conclusion of the hearing the court finds that the proposed bond is in fact an eligible surety bond, it shall enter an order:

(1) substituting the eligible surety bond for the property securing the lien claim; and

(2) substituting the lien claimant's right to recover on the bond for the lien claimant's causes of action that could be asserted by the lien claimant under Section 9, 27, or 28 of this Act.

The prevailing party under this subsection is entitled to attorney's fees and costs and expenses of litigation to determine if the proposed bond is an eligible surety bond.

(g) If the court enters an order discharging as security for the lien claim the real estate and the moneys or other considerations due or to become due from the owner under the original contract and substituting the eligible surety bond as security for the lien claim, the petitioner shall:

(1) send copies of the order to the lien claimant and all persons who were to receive copies of the petition and, if there is a pending proceeding to enforce the lien claim, to all parties who have appeared in the proceeding; and

(2) record a copy of the order, together with an executed copy of the approved eligible surety bond, with the recorder of deeds of any county where the property is located.

(h) If the eligible surety bond is approved either before or after any suit is brought to enforce the lien claim, the action on the bond shall be in equity against the principal and surety of the bond. If the eligible surety bond is approved and a proceeding to enforce the lien claim is pending, the sureties shall, by approval of the bond, ipso facto become parties to the proceeding. All other parties to the proceedings may be dismissed.

(i) If a prior owner, an association representing owners organized under any statute or to which the Common Interest Community Association Act applies, or a contractor or subcontractor is the principal under the eligible surety bond, the principal or the lien claimant may petition the court to have the current owner or other party having an interest in the real estate who is not a principal or surety of the eligible surety bond dismissed from a pending proceeding to enforce the lien claim.

(j) If the bond ceases to be an eligible surety bond, the court may, after due notice and a hearing, order the surety to deposit the collateral for the bond posted by the principal with the surety with the clerk of the court or to assign the security to an alternative surety company that is ready, willing, and able to issue an eligible surety bond. Upon the deposit or assignment, the court shall release the original surety from its obligations under the original surety bond.

(k) Subject to the defenses allowable under subsection (l) of this Section, the principal and surety of a surety bond shall be jointly and severally liable to the lien claimant for the amount that the lien claimant would have been entitled to recover under this Act if no surety bond had been furnished, subject to the limitation of liability of the surety to the face amount of the bond. A judgment in favor of the lien claimant and against the principal and surety shall be entered for the amount of their liability to the lien claimant.

(l) The principal and surety of the bond may assert defenses only against the lien claim that could have been asserted against the lien claim by the principal of the surety bond or the owner of record of the real estate at the time the petition to approve the bond is filed as if no surety bond had been issued.

(m) Liability of the principal and surety on a bond that has ceased to be an eligible surety bond shall continue until a court order is entered replacing the bond with another eligible surety bond. Even if a bond ceases to be an eligible surety bond, the original bond remains in effect as substitute security until it is replaced.

(n) It is the express intent of the General Assembly in enacting this Section that the entry of an order under this Section does not release the lien claim or any remedies the lien claimant may have, but rather substitutes an eligible surety bond for the property subject to the lien claim and substitutes an action on the bond for the actions the lien claimant would otherwise have under Sections 9, 27, and 28 of this Act.