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Lien & Bond Primer

INTRODUCTION

The following is a summary of basic requirements for filing lien or bond claims on construction projects in Michigan and should not be construed as legal advice.  The applicable statutes can be subtle and complex, and the requirements that must be met in a particular situation are not always clear.  Caution must be used in taking all steps necessary to perfect one's claim, and consultation with qualified counsel is advised.

PRIVATE PROJECTS

Lien Requirements

Overview

As in most states, Michigan allows unpaid contractors, subcontractors, laborers or material suppliers who have provided an improvement to real property to file a construction lien against the property.  This right applies to private projects only, and requires the claimant to meet certain notice and filing requirements.  The applicable statute is known as the Construction Lien Act, MCL 570.1101 et seq. Most of the forms involved in the lien process are prescribed by statute, and many of these are available by going to the State of Michigan, Department of Licensing and Regulatory Affairs website.  Note that special requirements apply for improvements to residential structures that are not detailed in this summary.

Notice of Commencement

Before any actual physical improvements to the property are begun, the owner or lessee contracting for the improvements is required to file in each county where the real property is located a form known as a Notice of Commencement.  A copy of the notice must be conspicuously posted at the property, and must also be provided, along with a blank notice of furnishing form, to a subcontractor supplier or labor within 10 days of their mailing of a written request by certified mail.  The notice of commencement must contain a legal description of the property; the name, address and capacity of the owner or lessee of the property; the name and address of the owner's or lessee's designee; the name and address of the general contractor, if any; statutory language summarizing how to protect lien rights; the name and address of the person preparing the notice; and, an affidavit of the owner, lessee or agent verifying the notice.

Notice of Furnishing

A subcontractor or supplier who contracts to provide an improvement to real property must provide a notice of furnishing to the designee and the general contractor at the address shown in the notice of commencement, either personally or by certified mail, within 20 days after furnishing the first labor or material.  A laborer must supply the notice within thirty days after wages were contractually due but not paid, or, in the case of fringe benefits or withholdings, by the fifth day of the second month following the month in which fringe benefits or withholdings from wages were contractually due but were not paid.  Note that a contractor, i.e., a person or entity with a direct contract with the owner/lessee/tenant, is not required to provide a notice of furnishing.  A written Proof of Service of the Notice of Furnishing should be prepared and kept by the subcontractor, supplier or laborer for filing with any subsequent Claim of Lien.  Note that even if this deadline is missed, it is not necessarily fatal to one's lien rights.  In such circumstances the Notice of Furnishing should be served as soon as possible.

Sworn Statement

A contractor must provide a sworn statement to the owner or lessee when payment is due or requested, or when a demand for the sworn statement has been made by or on behalf of the owner or lessee.  Similarly, a subcontractor must provide a sworn statement to the contractor when payment is due or requested, and to the owner or lessee when a demand has been made by or on behalf of the owner or lessee.  The sworn statement must list each subcontractor and supplier with whom the person issuing the sworn statement has contracted relative to the improvement to the real property, and also list laborers with whom the person issuing the sworn statement has contracted and for whom payment of wages or fringe benefits and withholdings are due but not paid.  The contractor or subcontractor completing the sworn statement must swear that he has not procured material from or subcontracted with any person other than those listed and that he owes no money for the improvement other than those sums listed.  The contractor or subcontractor is not required to lists material furnished out of his own inventory that was not purchased specifically for performing the contract at issue.  A contractor or subcontractor may not file an action to enforce a construction lien until the sworn statement has been provided.

Claim of Lien

A contractor, subcontractor, labor or supplier must record a claim of lien within 90 days after last furnishing of labor or material for the improvement, pursuant to the lien claimant's contract.  A claim of lien by a subcontractor, supplier or laborer must have attached a proof of service of the Notice of Furnishing.  Within 15 days after the date of the recording, a copy of the claim of Lien and a copy of any proof of service recorded with it must be served on the designee either personally or by certified mail.  A Proof of Service form should be completed and must be attached to any complaint filed to enforce a construction lien.

Action to Enforce Construction Lien

An action to enforce a construction lien must be brought not later than one year after the date the claim of lien was recorded.

Bond Claims on Private Projects

Significant private projects may (but need not) require the general contractor to post a payment bond.  On such a project a copy of the bond and any notice requirements should be requested early in the project to ensure compliance.

PUBLIC PROJECTS - BOND CLAIMS

State (non-highway) and Municipal Projects

Overview

Construction liens cannot be filed against public property.  Instead, Michigan law protects subcontractors and suppliers by requiring that the principal (general) contractor furnish a payment bond on all public projects that exceed $50,000.  The applicable statute is MCL 129.201 et seq.  Note that a separate statute covers State highway projects.  (See below)

Notice

A subcontractor or supplier that has a direct contractual relationship with the principal contractor need not provide notice of furnishing or notice of claim.  If the claimant does not have a direct contractual relationship with the principal contractor, it must provide written notice to the principal contractor within 30 days of first furnishing labor or material, informing it of the nature of the material or labor, identifying the party contracting for the work and the site of performance or delivery.  Additionally, the claimant must give written notice to the principal contractor and the governmental unit involved within 90 days of last furnishing labor or material, stating with substantial accuracy the amount claimed and the name of the party to whom the labor or material was supplied.  The notices must be served by certified mail.

Action to Enforce Payment Bond Claim

An action to enforce a payment bond claim must be brought within one year of final payment to the principal contractor.

State Highway Projects - Michigan Department of Transportation

Overview

State highway jobs under the Michigan Department of Transportation (MDOT) are covered by a separate statute, MCL 570.101 et seq.  General contractors are required to file a payment bond for the protection of subcontractors suppliers.

Notice of Lien Claim

By statute, a subcontractor or material supplier must provide MDOT with notice of an intent to file a claim against the bond.  Even though the claim is against the bond and not real property, the notice is referred to as a Notice of Lien Claim  A form is available on MDOT's website.  By statute, subcontractors must provide the required notice within 60 days after furnishing the last material or supplies or performing the last work covered by their subcontract.  However, this period has been modified by MDOT endorsement.  A copy of the bond and notice requirements should be requested early in the project to ensure compliance.  In the notice the claimant must specify the work provided, that it relies upon the security of the bond given by the general contractor and directing the owner (MDOT) to notify the surety on the bond.

Action to Enforce Lien (Bond) Claim

An action to enforce a claim on the payment bond must be brought within one year of acceptance and completion of the project.

Federal Projects

Overview

The federal Miller Act, 40 U.S.C.' 3131 et seq., requires that in any contract for construction, alteration, or repair of any building or public work that exceeds $100,000, a payment bond must be furnished.

Notice

A subcontractor or supplier with a direct contract with the prime contractor does not need to provide notice.  Subcontractors and suppliers who have contracts with a subcontractor must provide written notice to the prime contractor within 90 days of last furnishing work or materials.  The notice must be in writing, stating the amount claimed and the name of the party for whom the work or material was furnished.  It must be served personally or by registered mail, return receipt requested.

Action to Enforce Miller Act Bond Claim

An action to enforce a claim on the payment bond must be filed no sooner than 90 days after the last labor and material were furnished and no later than one year after that date.

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