A Contractors, Subcontractor’s & Supplier's Step-By-Step Guide to Getting Paid - Webinar

In Michigan, learn when to file a Notice of Commencement, when to provide a Sworn Statement, when to serve a Notice of Furnishing, and when a suit must be filed against payment bond.

Ariela Wagner
Ariela Wagner
Oct 10, 2022
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Oct 10, 2022
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Michigan

In Michigan, contractors, subcontractors, and suppliers can get paid by understanding when to file a Notice of Commencement, the importance of contracts, when you need a written contract, important lien dates, and how a contractor, subcontractor, supplier, or laborer needs to record a lien. Also know when to serve a copy of the Claim of Lien, private construction jobs, how to serve a Notice of Furnishing, when to provide a Sworn Statement Michigan, public construction jobs (exceeding $50,000), wat a lien bond is, when a suit must be filed against the payment bond, and about federal construction jobs (exceeding $100,000).

INDEX

  1. Contract 101
  1. Important lien dates
  1. Private construction jobs
  1. Public construction jobs
  1. Federal construction jobs

Michigan provides contractors, subcontractors, suppliers, and laborers a remedy for payment beyond a contract claim. This remedy is called a construction lien.  

In order to have the remedy of a construction lien, the land involved must be privately owned. For example, a hotel, an office building, or a restaurant.  

This is opposed to the land owned by a city. A township, the state, or even the federal government, the privately owned land must be in the state of Michigan for the Michigan Construction Lien Act to govern. The mechanic’s lien is recorded against the land of the private homeowner.  

Then the contractor, subcontractor, material suppliers, and laborers must be able to prove that they performed an improvement on the owner’s land.  

So the individual needs to first start by determining whether the project you are doing is a private project or a public project. Because there are different steps you have to take to secure your rights to getting paid on either.  

Once you know whether it is a public or private job, you need to establish who you are, whether you are the contractor, a subcontractor, a supplier, or a laborer. The contractor is the one who provides an improvement under a direct contract with the owner or the tenant of the land.

The subcontractor is the one who provides labor and material to either a contractor or another subcontractor. A supplier is one who only provides equipment or rents material or provides equipment or material to a contractor or subcontractor that is used in the improvement of the owner’s land.  

A supplier to a supplier has no construction lien rights in Michigan. In addition, a laborer, who is an individual who performs work for a contractor or subcontractor also has lien rights.  

So in Michigan when a private job starts, the homeowner or the tenant files what is called a Notice of Commencement. This is a document that is filed with the Register of Deeds on the commercial project before the project commences, and it provides you with the description of the land.  

The name and the address of the general contractor, the legal description of the land, and the name and the address of the owner’s designee. This is important because you are going to need to serve notices on the owner’s designee. You are going to need the legal description for your lien rights.  

Contracts 101

We will now take a step back and just talk about contracts. It is important that all subcontractors, contractors, laborers, suppliers, need a written contract. You need a written contract to enforce your rights to govern the terms. The scope of work, the price of your work, what happens if there is a change in the work, what happens if the party you are contracted with does not perform and you have a default issue, and the contract will govern any dispute between you and the other contracting party.  

Important Lien Dates  

Now we will discuss the important dates for lien rights.  

a. Subcontractor, supplier, or laborer, to serve Notice of Furnishing 

Twenty days after a subcontractor, supplier, or laborer first provides labor or material, it is required to serve the Notice of Furnishing on the owner’s designee. That would be listed in the Notice of Commencement.  

b. Contractor, subcontractor, supplier, or laborer to record a lien  

After the subcontractor, supplier, or laborer performs work, if they have not been paid they need to record a lien within the last 90 days of their work.

protect your lien rights

c. Serve a copy of the recorded Claim of Lien  

Fifteen days after recording the Claim of Lien in the county where the job is situated, a copy of the recorded mechanic’s lien has to be served on the owner’s designee.  

d. File construction lawsuit to enforce or foreclose the Claim of Lien  

Then there is one year from that recording of the Claim of Lien to file a suit to enforce and foreclose on the real property.  

Private Construction Jobs

Now we come to private construction jobs.  

a. Subcontractors and Suppliers

If you are a subcontractor or supplier, there are five steps you need to take to secure your lien rights.  

i. Serve Notice of Furnishing

You have to serve a Notice of Furnishing within 20 days after labor or material was provided on the job. You have to serve this on the owner’s designee by certified mail or personal delivery.  

ii. Prepare Proof of Service of Notice of Furnishing

You are going to want to keep a copy and you are going to prepare a Proof of Service of the Notice of Furnishing.  

This is a document that needs to be signed under notary, stating that you did in fact serve a copy of the Notice of Furnishing within 20 days after the first day of labor or material, and you served it on the owner’s designee.  

iii. Record Claim of Lien in county where property is located

If you are not paid within 90 days of your last work, you need to record a Claim of Lien in the county where the property is located. The last 90 days of work have to be an actual improvement on the property. The last day of work cannot be warranty work.  

This is very important because if you did not make a real improvement on the 90th day, or from when you record the lien, the lien would not be enforceable.  

iv. Serve copy of the recorded Claim of Lien on owner’s

Then once you record your lien, you have 15 days from the recording to serve it on the owner’s designee.  

v. Prepare Proof of Service of Claim of Lien  

Once again, you are going to prepare a Proof of Service of your Claim of Lien. You need to keep a copy of this Proof of Service because if you have to file a lawsuit to enforce your lien. You are going to attach it to the lawsuit.  

In all cases, a lien foreclosure must be filed within one year from the date of the Claim of Lien was reported.  

b. Contractors only 

If you are the contractor, there are fewer steps required.  

i. Record Claim of Lien in county where property is located

To file the Notice of Furnishing and serve it on the owner’s designee or a contractor. All you have to do is Record a Claim of Lien where the property is located within 90 days of the last labor or material. Once again, this cannot be warranty work and you have to provide a Sworn Statement to the property owner.

filing a lien

ii. Serve copy of the recorded Claim of Lien on designee

You will then serve a copy of the Claim of Lien on the owner’s designee within 15 days of the date of the recording by certified mail or personal delivery.  

iii. Prepare Proof of Service of Claim of Lien 

Once again, you need to prepare a Proof of Service of your Claim of Lien. You are going to keep it and you are going to attach it to a lawsuit if a lawsuit is necessary.  

The same one-year statute of limitation is required to enforce your lien right for a contractor.  

Public Construction Jobs (exceeding $50,000)

We will now touch briefly that there is something called a lien bond. If you record a lien on a project, the owner, the contractor, or the subcontractor that you are contracted with may have a requirement under the construction contract or freely file a lien bond with a surety which is an insurance carrier to bond off the lien from the property which removes the encumbrance from the property.  

Then you would have a claim on the bond that was issued by the surety. This is done by filing the document with the circuit court clerk and where the project is located. The same one-year statute of limitation requirement applies.  

Now if you are doing work on a public job, you do not have lien rights. That is because you cannot foreclose, for example, on a fire station or a government-owned hospital. So instead on a public job that is exceeding $50,000, the general contractor has to get what is called a payment bond.  

On all public jobs, the contractor which is referred to as the principal along with its bonding company which is called a surety will deliver a payment bond to the government body. This protects the government body from any claims for nonpayment.  

a. No preliminary notice required if subcontractor or supplier has direct contract with contractor

If you are performing a job on a public construction job that exceeds $50,000, there is no preliminary notice required if a subcontractor or supplier has a direct contract with the contractor that provided the payment bond.  

b. Subcontractors and suppliers with no contract with contractor, must provide two written notices by certified mail

Subcontractors and suppliers that do not have a contract with the contractor must provide two preliminary written notices by certified mail with the postage prepaid.

notice to owner

i. Written notice must be sent to the contractor

First, a written notice must be sent to the contractor within 30 days from the date on which the lien claimant first performed its labor or first furnished the materials for which they claim payment. The notice must state the nature of the materials or labors being furnished and to be provided and identify the party contracting for such labor and material, and the site for the performance of such work or the delivery of such material.  

ii. Written notice must be sent to the contractor and the governmental body

The second notice requirement would be a written notice sent to the contractor and the government body within 90 days from the furnishing of the last day of labor or materials stating the amount claimed in the party to whom the materials were furnished, and the work was performed. In all cases, just as you do a lien claim, a suit on a payment bond must be initiated within one year after final payment from the government.  

c. In all cases, suit must be filed against payment bond  

You have a one-year requirement to initiate a lawsuit.  

Federal Construction Jobs (exceeding $100,000)  

On federal construction projects exceeding $100,000, meaning a federal project where either the United States or a federal department is the contracting party.  

a. No preliminary notice required by subcontractor or supplier with direct contract with contractor

There is no preliminary notice required for a subcontractor or supplier that has a direct contract with the contractor who issued the payment bond.  

b. Subcontractors and suppliers without direct contract with contractor must provide one preliminary notice to contractor  

But subcontractors and suppliers who do not have a contract with the contractor must provide one preliminary notice to the contractor within 90 days after the last day of work or material. The written notice must be served by any means that will assure actual receipt and must establish actual receipt.  

c. In all cases, suit on payment bond must be filed

This has the same one-year claim on a payment bond as there is on the public jobs.

lien laws
Disclaimer
THE INFORMATION ON THIS WEBPAGE IS NOT THE SAME AS LEGAL ADVICE. SUNRAY CONSTRUCTION SOLUTIONS, LLC IS NOT AN ATTORNEY OR A LAW FIRM. WE RECOMMEND THAT YOU CONSULT WITH AN ATTORNEY.
Ariela Wagner
Ariela Wagner
Ariela is the president and founder of SunRay Construction Solutions. She has over 13 years of construction industry experience.
Preliminary Notice| SunRay Notice
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