A construction lien is a way for contractors, subcontractors, suppliers, and laborers secure payment for work that is completed but has not been paid for by a property owner. The purpose of the construction lien is to protect contractors, subcontractors, suppliers, and laborers from not being paid for their improvements to real property. This article will lay out the steps, procedures, and various deadlines involved in obtaining a construction lien.
Who can obtain a construction lien?
The only individuals that can obtain a construction lien are contractors, subcontractors, suppliers, or laborers who have provided a physical improvement to real property. The Michigan Construction Lien Act defines “actual physical improvement” as an actual physical change in, or alteration of, real property as a result of labor provided pursuant to a contract. Residential builders, maintenance and alteration contractors, electricians, plumbers, and mechanical contractors must be licensed in Michigan in order to assert a lien against real property.
According to MCL 570.1114, a contractor does not have a lien right unless the contractor performed the work pursuant to a written contract with the owner or lessee of the real property. Additionally, all changes to the proposed work must be in writing as well.
What is the process for Acquiring a Construction Lien?
For a contractor to establish a lien, the following steps must be taken:
- Prepare a Claim of Lien form and record it in the office of the register of deeds for the county in which the owner’s property is located within 90 calendar days of the last labor or material received and give the owner a final sworn statement;
- Serve a copy of the recorded Claim of Lien on the owner by certified mail or personal delivery within 15 days of recording;
- Prepare a proof of service verifying when the Claim of Lien was served upon the owner. It is important to keep the proof of service in a safe place as it will need to be produced should a contractor end up having to file a lawsuit.
For subcontractors, suppliers, and laborers, the following steps must be taken:
- Serve a Notice of Furnishing on both the general contractor and the owner within 20 days after the first labor performed by certified mail or personal delivery;
- Prepare a proof of service for the Notice of Furnishing;
- Prepare and record a Claim of Lien in the office of the register of deeds for the county in which the owner’s property is located within the 90 calendar days of last labor or material received.
- Serve a copy of the recorded Claim of Lien to the owner within 15 days from the date of recording by certified mail or personal delivery.
- Prepare proof of service verifying when the Claim of Lien was served upon the owner. Again, it is important to keep the proof of service in a safe place.