Opinion ID: 1802140
Heading Depth: 2
Heading Rank: 1

Heading: The Construction Lien Act

Text: This case involves the Construction Lien Act, M.C.L. § 570.1101 et seq.; M.S.A. § 26.316(101) et seq., which took effect on January 1, 1982, and replaced the mechanics' lien laws enacted in 1891. See House Legislative Analysis, HB 4053, January 26, 1981. The act was intended to protect the interests of contractors, workers, and suppliers through construction liens, while protecting owners from excessive costs. See M. D. Marinich, Inc. v. Michigan Nat'l Bank, 193 Mich.App. 447, 453, 484 N.W.2d 738 (1992), Fischer-Flack, Inc. v. Churchfield, 180 Mich. App. 606, 611, 447 N.W.2d 813 (1989), and 1 Cameron, Michigan Real Property Law (2d ed.), § 19.16, p. 800. The act is to be liberally construed to effectuate these purposes. M.C.L. § 570.1302(1); M.S.A. § 26.316(302)(1). Further, substantial compliance is sufficient to meet the provisions of part one of the act. Brown Plumbing & Heating, Inc. v. Homeowner Construction Lien Recovery Fund, 442 Mich. 179,183, 500 N.W.2d 733 (1993). However, the act's clear and unambiguous requirements should not be ignored. Id. at 185, 500 N.W.2d 733. The act is based on an exchange of information between the owner of the property, the general contractor, subcontractors, material suppliers, and laborers. See Cameron, supra, § 19.18, pp. 802-803. The act creates this flow of information through a series of documents that provide the information necessary to allow the parties to protect their interests. McAlpine & Keating, Construction Liens in Michigan, § 4.1, pp. 4-3. Normally, this flow of information begins with the property owner. The act requires an owner to file a notice of commencement with the register of deeds before any improvement is made on the property. M.C.L. § 570.1108; M.S.A. § 26.316(108). See McAlpine & Keating, supra, § 4.5, pp. 4-7 to 4-8. The notice of commencement must be posted at the construction site, and contain certain information necessary for the preparation and filing of any future construction liens. It also notifies the public that the property has been improved, and that liens may exist. Id. After the notice of commencement is filed, any entity listed in the act who performs improvements on the property is required to provide notice that it has begun work through a notice of furnishing. M.C.L. § 570.1109; M.S.A. § 26.316(109). McAlpine & Keating, supra, §§ 4.13-4.16, pp. 4-13 to 4-16. In most cases, a subcontractor is required to provide a notice of furnishing to the owner and the general contractor within twenty days after first furnishing labor or material. M.C.L. § 570.1109(1); M.S.A. § 26.316(109)(1). This notifies owners of the identity of subcontractors improving the property who may become future lien claimants. See McAlpine & Keating, supra, § 4.13, pp. 4-13. A subcontractor's failure to provide a notice of furnishing within the twenty-day time frame does not serve to defeat its right to a lien. M.C.L. § 570.1109(5); M.S.A. § 26.316(109)(5). However, failure to comply with the twenty-day time limit may reduce the value of the lien. Subsection 109(6) of the act provides: The failure of a lien claimant, to provide a notice of furnishing within the time specified in this section shall not defeat the lien claimant's right to a construction lien for work performed or materials furnished by the lien claimant before the service of the notice of furnishing except to the extent that payments were made by or on behalf of the owner or lessee to the contractor pursuant to either a contractor's sworn statement or a waiver of lien in accordance with this act for work performed or material delivered by the lien claimant. This subsection does not apply to a laborer. [M.C.L. § 570.1109(6); M.S.A. § 26.316(109)(6)]. Thus, a subcontractor's delay in providing the notice of furnishing will reduce the lien by the amount that the owner had already paid for the subcontractor's work before the notice was provided. McAlpine & Keating, supra, § 4.15, pp. 4-15. However, these payments must have been made pursuant to a contractor's sworn statement or waiver of lien. Id. The act also provides owners with information by requiring general contractors and subcontractors to make sworn statements itemizing their bills. M.C.L. § 570.1110; M.S.A. § 26.316(110). See McAlpine & Keating, supra, § 4.17, pp. 4-17. A general contractor must provide the owner with such a statement when payment is due or demanded, and whenever such a statement is demanded by the owner. M.C.L. § 570.1110(1); M.S.A. §26.316(110)(1). The subcontractor must provide a statement to the owner only when demanded, but must provide the general contractor with a sworn statement when payment is demanded. M.C.L.§ 570.1110(2), (3); M.S.A. § 26.316(110)(2), (3). Thus, the owner can rely on a sworn statement as a comprehensive list of potential lien claimants. Sworn statements can also be used as a defense to a claim of lien. An owner or general contractor may rely on a sworn statement prepared by another party to avoid the claim of a subcontractor, unless the subcontractor has provided a notice of furnishing. M.C.L. § 570.1110(7); M.S.A. § 26.316(110)(7). A contractor or subcontractor who fails to file a sworn statement does not lose lien rights, but may not bring an action to enforce a lien until the statement is filed. M.C.L. § 570.1110(8), (9); M.S.A. § 26.316(110)(8), (9). However, these defenses must be evaluated in light of the remedial and equitable purpose of the act. Potential lien claimants are required to provide a waiver of lien to the owner payment. The act recognizes four types of waivers. M.C.L. § 570.1115; M.S.A. § 26.316(115). Each type releases, to varying degrees, a potential claim of lien. See, generally, McAlpine & Keating, supra, §§ 4.23-4.40, pp. 4-21 to 4-32. This allows an owner to compare the waivers of lien against the sworn statements, and to determine if there are any potential lien claimants who have not been satisfied. See McAlpine & Keating, supra, § 4.20, pp. 4-18. The Legislature recognized that this system could be abused. Because it clouds title, a lien can be used by unscrupulous contractors to force property owners to pay excessive construction charges. Thus, the act protects owners by providing a defense to liens that would force owners to pay more than the price stated in the general contract. The act provides: If the real property of an owner or lessee is subject to construction liens, the sum of the construction liens shall not exceed the amount which the owner or lessee agreed to pay the person with whom he or she contracted for the improvement as modified by any and all additions, deletions, and any other amendments, less payments made by or on behalf of the owner or lessee, pursuant to either a contractor's sworn statement or a waiver of lien, in accordance with this act. [M.C.L. § 570.1107(6); M.S.A. § 26.316(107)(6).] This is the defense asserted by the defendant in this case.