Does Michigan law require any notice or filing before performing the work?
Yes. Before the commencement of any physical improvements to real property, the owner or lessee contracting for such improvements must record a Notice of Commencement with the local register of deeds. A Notice of Commencement must contain the legal description of the property, and the names and addresses of the owner and/or lessee of the property, owner or lessee’s designee and general contractor. The Construction Lien Act also prescribes certain language that must be included with the notice. [1]
What is the time frame for filing a Claim of Lien?
A Claim of Lien must be recorded within ninety (90) days after the last date when labor or materials are furnished. [2] This deadline is strictly enforced by the courts. [3]
How long is a construction lien valid in Michigan? Is there a deadline to enforce a lien?
Michigan law requires that an action to enforce a construction lien be commenced within one (1) year from the date the lien is recorded. [4] If a foreclosure action is not commenced within one year, the lien expires. An owner or lessee who wishes to obtain a discharge of lien after one year must follow the administrative process outlined in the Construction Lien Act. [5]
Does Michigan law impose any mandatory notice requirements?
Yes. Generally, within twenty (20) days after furnishing the first labor or material, a subcontractor or supplier who contracts to provide an improvement to real property must serve a Notice of Furnishing to the Designee and General Contractor identified in the Notice of Commencement. Notice of Furnishing may be served either in person or by certified mail. No Notice of Furnishing is required if the contractor or supplier has a direct contract with the Owner or Lessee of the real property.[6]
Does Michigan law impose special requirements or limitations on lower-tier subcontractors or suppliers?
No, other than written notice within twenty (20) days after first supplying labor or material.
When is a contractor or supplier deemed to have last performed work or furnished materials to trigger the start of the lien filing period?
The 90 day period for recording a Claim of Lien in Michigan begins on the date of completion of the original installation work and is not extended by the later performance of warranty work. Warranty work is not considered an “improvement” because it does not confer any additional value to the property.[7]
Does Michigan law have a procedure for bonding off or otherwise removing the Claim of Lien?
Yes. A lien claimant’s bond may be vacated and discharged upon the filing of a cash or surety bond with the county clerk where the property is located. An owner or lessee may also pay the lien claimant directly, bypassing the general contractor, to obtain a discharge of the lien. The process of bonding off a construction lien is outlined in detail in an earlier post here.
Who is not protected by the Michigan Construction Lien Act?
Unlicensed residential home builders are prohibited under Michigan law from bringing or maintaining an action in court to enforce a contract.[8] This prohibition includes actions to foreclose construction liens.[9]
What costs or damages are typically not allowed in a lien claim?
Michigan law provides that lien acquired under the lien statute “shall not exceed the amount of the lien claimant’s contract less payments made on the contract.”[10] The term “contract,” as defined under the statute, is broad enough to include extra work, which is work performed outside the scope of the original contract and which has yet to be recognized through a change order. Disputes about extra work are a common occurrence and a frequent source of construction disputes. A Claim of Lien which is overstated, however, may be lost if the court finds that the lien amount was overstated in bad faith. [11] Where a lien is overstated, but the court finds no evidence of bad faith, the remedy is to reduce the amount of the lien. [12] Attorney fees, which may be awarded to a prevailing party, are not generally included in the original lien amount. [13]
REFERENCES
[1] MCL 570.1108.
[2] MCL 570.1111(1).
[3] Northern Concrete Pipe, Inc v Sinacola Companies - Midwest, Inc, 461 Mich 316; 603 NW2d
257 (1999) (“the most reasonable interpretation of ’90 days’ is precisely ’90 days’ . . .”).
[4] MCL 570.1117(1).
[5] MCL 570.1128.
[6] MCL 570.1109.
[7] Woodman v Walter, 204 Mich App 68, 69-70; 514 NW2d 190 (1994). See also, Stock Bldg Supply, LLC v Parsley Homes of Mazuchet Harbor, LLC, 291 Mich App 403, 408; 804 NW2d 898, 901 (2011) (“The distinguishing factor between a repair constituting an improvement to the real property, which allows for the commencement of the 90–day filing period, and warranty work, which does not allow for the commencement of a new 90–day filing period, is whether the work in question conferred any value beyond the value furnished by the completion of the original work.”)
[8] MCL 339.2412(1); Utica Equipment Co v Ray W Malow Co, 204 Mich App 476, 479; 516
[9] See, MCL 339.2412(3). See also, MCL 570.1114 (requiring a written contract that includes residential builder’s license number), and MCL 570.1114a(1) (“owner of residential property on which a construction lien has been recorded by a person who was not licensed as described in section 114, or any person affected by the lien, may bring an action to discharge the lien”); and also, Stokes v Millen Roofing Co, 466 Mich 660; 649 NW2d 371 (2002) (holding that equity may not “be used to defeat the statutory ban on an unlicensed contractor seeking compensation for residential construction”).
[10] MCL 570.1107(1).
[11] Tempo, Inc v Rapid Electric Sales & Service, Inc, 132 Mich App 93; 347 NW2d 728 (1984).
[12] Vugterveen Systems, Inc v Olde Millpond Corp, 210 Mich App 34, 40 (1995).
[13] MCL 570.1118(2) (“The court may allow reasonable attorneys' fees to a lien claimant who is the prevailing party. The court also may allow reasonable attorneys' fees to a prevailing defendant if the court determines the lien claimant's action to enforce a construction lien under this section was vexatious.”)
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