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Michigan Construction Liens and Recent Developments

In an earlier blog post, I discussed the role of what was known as the Homeowner Construction Lien Recovery Fund. I also discussed at length the benefits the fund provided to both homeowners and contractors alike and speculated on the likelihood that the fund would be terminated.

Recent legislation, effective August 23, 2010 has in fact brought about the termination of the construction lien fund. With the abolition of the fund, the legislature created a process which limits the placement of liens on residential property. According to the new law, residential structures include individual condominium units or a residential building containing not more than two residential units. This definition however only applies to structures which are constructed for the landowner or lessee where that individual intends to reside in the structure. By this definition, for example, a property would be eligible for a lien if it was being renovated by a landlord that has no intention of living on the property.

The new statute goes on to provide a way by which to remove liens that might be placed upon the property. For example if a supplier places a lien on a property for materials supplied to a general contractor, a homeowner would be able to file an affidavit in the court showing that the entire cost of a renovation was paid to the general contractor. To the extent that there is evidence of payment the lien would not attach for that amount.

Needless to say this new statute is a change to the process that many contractors and suppliers have come to know and love. In that regard it is probably a good time for contractors and suppliers to contact their attorney to make sure that their processes regarding the collection of receivables and the perfecting of liens is in proper order.