Home > Uncategorized > Construction Liens: Part 2

Construction Liens: Part 2

Last week I posted about Construction Liens and if a Court determines that a lien was filed in bad faith, or “vexatiously” the Court may award sanctions against the lien claimant.

 

I received a comment to the effect that it seemed like the legislature was making it harder and harder to recover under a construction lien.

However,  contractors should keep in mind a few concepts regarding the Michigan Construction Lien Act:

 

1. The Construction Lien Act is Remedial to benefit Lien Claimants

 

MCL 570.1302(1) states:

“This act is declared to be a remedial statute, and shall be liberally construed to secure the beneficial results, intents, and purposes of this act.”

 

2. Substantial Compliance is Generally the Standard Called For

MCL 570.1302(1) further states:

“Substantial compliance with the provisions of this act shall be sufficient for the validity of the construction liens provided for in this act, and to give jurisdiction to the court to enforce them.”

 

Therefore, substantial compliance is the general standard. This is not the case for “timing” provisions under the act.

 

 

A great example of this is the lien amount – what happens if you file a lien and indicate too much?  Is your lien void? Typically. no.

 

In order to void a construction lien that is filed in an excessive amount a showing of bad faith is required.  Tempo Inc v Rapid Elec Sales & Services, Inc, 132 Mich App 93; 347 NW2d 728 (Mich Ct App 1984).  “A lien is not lost because the amount claimed is excessive, unless the claim was made in bad faith. In such instances, the proper remedy is to reduce the amount of the lien to the correct amount.” Id

 

 

 

3. Timing of Recording  – Strict Compliance

 

The Michigan Construction Lien Act, MCL 570.1111, provides:

the right of a contractor…to a construction lien created by this act shall cease to exist unless, within 90 days after the lien claimant’s last furnishing of labor or material for the improvement, pursuant to the lien claimant’s contract, a claim of lien is recorded in the office of the register of deeds for each county where the real property to which the improvement was made is located. (Emphasis added.)

 

This 90 day filing is not governed by the “substantial compliance” standard.  This makes sense, since as the Michigan Court of Appeals noted in Stock Bldg Supply, LLC v Dept of Energy,  if there is no way to measure the last day of improvements, then lien claimants could potentially bring liens in perpetuity and cloud title to property.

The Legislature has imposed certain and definite limits on the timing and scope of the claiming of construction liens, so as to protect owners and purchasers of property, including that claims of lien be filed within a very short period of time after a contractor’s work is finished, which commences upon the last furnishing of labor or material for an improvement pursuant to a contract defining the scope of that improvement. MCL 570.1111(1).  Stock Bldg Supply, LLC v Dept of Energy, No. 295893, 2011 WL 1816510 (Mich Ct App May 12, 2011).

 

 

 

4.  Takeaway – Substantial Compliance is the general standard – Strict Compliance is applied in certain cases and means you should pay attention to “timing”

 

In general, the legislature provided that contractors should “substantially comply” with the CLA.  Strict Compliance is, however, the standard in the timing requirements of the CLA – 90 days to record a lien from the last date of improvement, 1 year statute of limitations to foreclose on the lien.

There are other prerequisites to foreclosing on liens such as providing notice of furnishings for sub contractors, and providing sworn statements, that I have not delved into. This is why it is always a good idea to consult with an attorney before filing a lawsuit, or recording a lien, in the context of construction liens.

 

 

 

 

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