This article comes from law firm Howard & Howard.
The Appellate Court of Illinois ruled on a matter last week which pitted wind energy developers and landowners against the construction industry. In a landmark decision, the appellate panel ruled that AUI Construction could not foreclose a mechanic’s lien against a property on which it had erected a large wind tower and turbine after the upstream contractor declared bankruptcy.
According to Jon Kreucher, an attorney with Howard & Howard, this is the first case in the nation to consider whether commercial-scale wind turbines should be considered personal property or fixtures in a lien dispute. Kreucher also said that the importance of the ruling goes beyond the legal finding.
“If the decision was different and the court held that a farmer’s property could be foreclosed over a construction dispute it would have sent a chill through the wind energy industry,” said Kreucher, whose firm represented Clipper Windpower, a defendant party in the case. “The construction industry was also put on notice that a mechanics lien isn’t always available just because what’s being built is really big,” Kreucher said.
The case centers on a wind farm project being developed on the land of Louis and Carol Vaessens in Sublette, Ill. by GSG 7 LLC, a wind energy developer. The construction of the wind tower and turbine was completed in 2012.
As subcontractor on the project, AUI was hired in 2011 by Postensa Wind Structures USA to build the tower on the Vaessen property. Postensa declared bankruptcy in 2013, after AUI prevailed in arbitration and was awarded unpaid sums amounting to nearly $3 million. To protect its ability to collect the unpaid billings owed by insolvent Postensa, AUI moved to enforce a mechanic’s lien and foreclose on the Vaessens property where the wind tower was constructed.
The Illinois appeals court affirmed a lower court decision issued by Judge Daniel A. Fish and ruled against AUI and several construction industry associations who argued that the tower and wind turbine were so large that they had to be considered lienable fixtures to the real property. The turbine stands 507 feet tall and weighs nearly 1250 tons.
In its decision, the appellate court affirmed: “the parties intended that the tower was a trade fixture that would remain the property of GSG 7 and not become a land improvement.”
In addition, the appellate court rejected AUI’s argument that it would be not unfair to AUI to prevent the mechanic’s lien from attaching the property. The court noted that the AUI-Postensa contract recited the relationships of the parties and that developer GSG 7, and not the hosting landowner, owned the turbine.
Kreucher said that the ruling should also serve as an important lesson to wind developers who should be cautious in the way leases are drafted and contractors needing to secure payment for work performed.
Read the full ruling at http://bit.ly/2fW77Hi