When you subcontract on a project, you expect that you are going to take your crew in, do your job, and collect payment for services rendered. Many times, that is how the process goes; but almost every contractor we talk to has a story of a job that took a wrong turn which forced them to take off the painter hat and put on the bill collector helmet.
Michigan is different from most states in that liens filed on construction projects are called “construction liens.” The Construction Lien Act of 1980 establishes the procedures to “protect and enforce by lien the rights of persons performing labor or providing material or equipment for the improvement of real property.” This law basically says that when you file a Michigan Construction Claim of Lien for work you performed on the privately owned property, the lien attaches to and encumbers the fee simple ownership of property. Translation? The owner cannot sell or refinance the property until you get paid.
That sounds great, but you must know which forms to file and when you need to file them.
- Owners and lessees must file a Notice of Commencement before the start of any actual physical improvement. You need a copy before starting work.
- Subcontractors and suppliers must provide a Notice of Furnishing to the owner and general contractor within 20 days after furnishing the first labor or material to a job. And don’t think the General Contractor will take care of that detail. Under Michigan law, general contractors are not required to serve a notice of furnishing.
- You must file a Construction Lien within 90 days after you have last provided materials or services on a project.
- Once you receive the outstanding payment, you should file a Release and Discharge of Lien form.
In January 2007, the Michigan Legislature amended the law to give contractors even more tools. One that applies to painters working for residential developers is the establishment of a database that tracks and posts the names, license numbers, and “Qualifying Office/Owner” name for contractors who have failed to pay their subs or their suppliers.
Another great resource is the Construction Association of Michigan (CAM). CAM provides training classes and offers a modestly priced Michigan Construction Lien Forms CD that contains 18 complete Lien Forms in PDF format with text fields enabled so that you can type directly onto the forms from your computer. This allows you to fill in the right form, print it out, and file it at the appropriate government office. This CD is available at http://cam-online.com/Publications/LienLaw.aspx.
The disclaimer is that CAM recommends that every company engaging in commercial construction in Michigan have at least one person available who has a thorough understanding of Michigan’s construction lien law.
Bottom line: There is no substitute for professional legal advice.