Are "No-Lien" Clauses Enforceable in Illinois Construction Contracts?

A no-lien clause is a provision in a construction contract stating that no mechanics lien may be filed against the property. These clauses show up regularly in contracts drafted by property owners, developers, and lenders - and they raise an immediate question for any contractor or subcontractor reading the fine print: is this actually enforceable?

The answer under Illinois law is not a simple yes or no. It depends on where the clause appears in the contractual chain, who it is being enforced against, and whether certain statutory requirements have been met. Getting it wrong in either direction can be expensive - either by giving up lien rights unnecessarily or by assuming a valid clause does not apply.

What a No-Lien Clause Looks Like

A no-lien clause typically appears in the contract between the property owner and the general contractor. It may state that the contractor agrees not to file or permit any mechanics lien against the property, or that all lien rights are waived as part of the agreement. Some versions go further and require the GC to ensure that no subcontractors or suppliers file liens either.

These provisions can also appear as conditions in subcontracts or purchase orders, sometimes buried in boilerplate language that contractors sign without reading closely.

A no-lien clause is not the same as a lien waiver. A lien waiver is signed during the project in exchange for a specific payment, releasing lien rights for that payment amount. A no-lien clause attempts to eliminate lien rights at the outset, before any work has been performed or any payment has been made.

When a No-Lien Clause Can Be Enforceable

Under Section 21(b) of the Illinois Mechanics Lien Act, a no-lien clause is binding if it appears in a contract between the owner and contractor, or between the contractor and subcontractor, and is not otherwise prohibited by the Act. The statute is straightforward on this point - if the provision is part of a valid agreement, it is enforceable.

The practical question is usually whether the subcontractor or supplier had notice. A no-lien clause sitting in the owner-GC agreement does nothing to bind a sub who never saw it and had no reason to know it existed. But when the sub did have actual knowledge of the provision before starting work, courts have enforced it. In Bethlehem Steel Corp. v. Tishman-Adams, Inc., 45 Ill. App. 3d 1003, the Illinois Appellate Court upheld a no-lien clause against materialmen who had actual notice of the owner-contractor agreement.

One of the most common ways this notice occurs in practice is through subcontract incorporation clauses. Most commercial subcontracts include a provision binding the subcontractor to the terms of the prime contract between the owner and GC. If the prime contract contains a no-lien clause, and the subcontract incorporates those terms by reference, the sub has effectively agreed to the no-lien provision as part of its own contract - which falls squarely within Section 21(b). This is standard practice on commercial projects and is something subcontractors should watch for when reviewing their agreements.

For property owners, this means a no-lien clause has real teeth only when you can show that downstream parties were on notice. Incorporating the provision into subcontracts and purchase orders, or requiring written acknowledgment before work begins, strengthens your position significantly if a lien is later filed.

When a No-Lien Clause Is Void

There is a hard line in Illinois law that no contract drafting can cross. Under Section 1(d) of the Mechanics Lien Act, any agreement to waive or subordinate lien rights "in anticipation of and in consideration for the awarding of a contract or subcontract" is against public policy and unenforceable.

In plain terms: you cannot be required to give up your lien rights as the price of getting the job. If the contract effectively says "we will hire you, but only if you agree never to file a lien," that provision is void regardless of how it is worded.

The Illinois Supreme Court addressed this directly in R.W. Dunteman Co. v. C/G Enterprises, Inc., 181 Ill. 2d 153, confirming that the Act is designed to protect subcontractors and material suppliers who contribute labor and materials in good faith to improve real property. The prohibition reflects a policy judgment that lien rights are too important to be bargained away before work even begins.

This protection was further strengthened by Public Act 98-764, effective July 16, 2014, which added a specific restriction on lender-required subordination. Under the amended Section 1(d), an agreement to subordinate a mechanics lien to a mortgage lien securing a construction loan is only enforceable if it is made after more than 50 percent of the loan has been disbursed. Before that threshold, the subordination agreement is void.

The Line Between Enforceable and Void

The distinction comes down to timing and leverage. A no-lien clause in an existing owner-contractor agreement, properly noticed to downstream parties, is a legitimate contractual tool. It reflects a deal that has already been struck between the owner and GC, and the law allows it to bind subs and suppliers who had fair warning.

What the law prohibits is using lien rights as a bargaining chip during the bidding or contracting process. If the message is "waive your liens or you do not get the contract," that crosses the line - regardless of whether the clause appears in a prime contract, subcontract, or purchase order.

Courts look at the substance of the arrangement, not just the form. In Ridgeview Construction Co. v. American National Bank & Trust Co., 205 Ill. App. 3d 1045, the court invalidated a no-lien provision where fraudulent conduct tainted the agreement. Even a clause that might otherwise be enforceable can be struck down if the circumstances surrounding it involve bad faith.

What Contractors Should Do When They See One

If you are a contractor or subcontractor and you encounter a no-lien clause in a contract or subcontract, do not ignore it and do not assume it is automatically void. The right response depends on the specifics.

What Property Owners Should Know

If you are a property owner relying on a no-lien clause to protect your property from mechanics liens, make sure you have the notice requirements covered. A clause that exists only in the owner-GC agreement, without any evidence that subs and suppliers knew about it, is unlikely to hold up if challenged.

Best practices include incorporating the no-lien provision into every subcontract and purchase order on the project, requiring written acknowledgment from each subcontractor and supplier before they begin work, and recording the agreement with the county recorder where the property is located. The more documentation you have showing that affected parties had actual notice, the stronger your position if a lien is filed.

That said, a no-lien clause is not a substitute for proper lien waiver management. Even with a no-lien provision in place, collecting waivers with each progress payment remains the standard practice for tracking payments and documenting that subs have been paid.

Frequently Asked Questions

Are no-lien clauses legal in Illinois?

It depends on the context. A no-lien clause in an owner-contractor agreement can be enforceable against subcontractors and suppliers if they had actual notice before furnishing labor or materials. However, under Section 1(d) of the Illinois Mechanics Lien Act, requiring a contractor or subcontractor to waive lien rights as a condition of being awarded a contract is void as against public policy.

Can a subcontractor be bound by a no-lien clause they did not sign?

Yes, under certain circumstances. If the subcontract incorporates the terms of the prime contract by reference - which is common on commercial projects - and the prime contract contains a no-lien clause, the subcontractor has effectively agreed to that provision. Courts have also enforced no-lien clauses against parties who had actual notice of the provision before they began furnishing labor or materials, even without a direct signature on the document containing the clause.

What is the difference between a no-lien clause and a lien waiver?

A lien waiver is a document signed during a project, typically in exchange for a specific payment, releasing lien rights for that payment amount. A no-lien clause is a contract provision that attempts to prohibit lien rights entirely before any work begins. They serve different purposes and are analyzed under different legal standards.

Can a lender require lien subordination in Illinois?

Only after a threshold has been met. Under Section 1(d) of the Mechanics Lien Act, an agreement to subordinate a mechanics lien to a mortgage lien securing a construction loan is enforceable only if made after more than 50 percent of the loan has been disbursed to fund improvements. Subordination agreements made earlier are void.

For more information on mechanics liens and construction contract issues in Illinois, visit our practice area pages or our Mechanics Liens FAQ.