Small business owners servicing customers' personal property are frequently faced with the dilemma of what do to when a client doesn't pay the bill. This issue can be more prevalent when the bill is less than $2,000. It often makes little sense to file a lawsuit to recover what is owed considering the time and expense associated with such litigation. Some business owners believe the only alternative is to return the item and take a loss.
A solution may lie in the Illinois Labor and Storage Lien (Small Amount) Act. This law gives a business the right to sell the item at a public or private sale and keep the proceeds. The law gives the business a possessory lien on a customer's personal property.
So long as the business remains in possession of the item, the business has a priority security interest in the property above other previously perfected security interests. If the client does not pay the service provider the sums owed within 90 days of the completion of the expenditure of the work, the lien may be enforced by a commercially reasonable public or private sale conducted so as to maximize the net proceeds of said sale.
In order to enforce the lien by selling the property, the business must give "30 days' notice of the time and place of such sale," in a newspaper of "general circulation" in the city where the labor or services were rendered. If there is no such available publication, then notice must be published "in some newspaper of general circulation in the county" where the labor or services were rendered, and by sending a copy of the notice to the client via certified mail.
If the customer does not redeem the property within the 30 days following publication of the notice, the business may sell the articles at a commercially reasonable public or private sale. The service provider may then apply the sales proceeds to the outstanding invoice. The provider must hold any excess funds for a period of six months in the event the item ends up selling for more than what is owed. If the customer fails to claim the excess funds within that time, the business must then deposit the funds with the county treasurer of the county where the services were rendered. If the business adhered to the law, the customer is barred from seeking to recover any damages, including the recovery of the item or its value, from the business.
Originally published January 6, 2023
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