September 9, 2004, Introduced by Senator BASHAM and referred to the Committee on Economic Development, Small Business and Regulatory Reform.
A bill to amend 1980 PA 497, entitled
"Construction lien act,"
by amending the title and sections 104, 106, 107, 114, 201, 202,
203, and 204 (MCL 570.1104, 570.1106, 570.1107, 570.1114,
570.1201, 570.1202, 570.1203, and 570.1204), sections 104, 106,
107, 114, and 203 as amended by 1982 PA 17, section 201 as
amended by 1984 PA 190, and section 202 as amended by 1981 PA
191, and by adding section 114a.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
1 TITLE
2 An act to establish, protect, and enforce by lien the rights
3 of persons performing labor or providing material or equipment
4 for the improvement of real property; to provide for certain
5 defenses with respect
thereto; to establish a the homeowner
6 construction lien
recovery fund; within the department of
1 licensing and
regulation; to provide for the
powers and duties
2 of certain state officers and agencies; to provide for the
3 assessments assessment of certain occupations; to provide
4 remedies and prescribe
penalties; and to repeal certain acts
5 and parts of acts.
6 Sec. 104. (1) "Court" means the circuit court in which an
7 action to enforce a construction lien through foreclosure is
8 pending.
9 (2)
"Department" means the department of licensing and
10 regulation labor and economic growth.
11 (3) "Designee" means the person named by an owner or lessee
12 to receive, on behalf of the owner or lessee, all notices or
13 other instruments whose furnishing is required by this act. The
14 owner or lessee may name himself or herself as designee. The
15 owner or lessee may not name the contractor as designee.
16 However, a contractor who is providing only architectural or
17 engineering services may be named as designee.
18 (4) "Fringe benefits and withholdings" means compensation
19 due an employee pursuant to a written contract or written policy
20 for holiday, time off for sickness or injury, time off for
21 personal reasons or vacation, bonuses, authorized expenses
22 incurred during the course of employment, and any other
23 contributions made to or on behalf of an employee.
24 (5) "Fund" means the homeowner construction lien recovery
25 fund created under
part 2 in section 201.
26 (6) "General contractor" means a contractor who contracts
27 with an owner or lessee to provide, directly or indirectly
1 through contracts with subcontractors, suppliers, or laborers,
2 substantially all of the improvements to the property described
3 in the notice of commencement.
4 (7) "Improvement" means the result of labor or material
5 provided by a contractor, subcontractor, supplier, or laborer,
6 including, but not limited to, surveying, engineering and
7 architectural planning, construction management, clearing,
8 demolishing, excavating, filling, building, erecting,
9 constructing, altering, repairing, ornamenting, landscaping,
10 paving, leasing equipment, or installing or affixing a fixture or
11 material, pursuant to a contract.
12 (8) "Laborer" means an individual who, pursuant to a
13 contract with a contractor or subcontractor, provides an
14 improvement to real property through the individual's personal
15 labor.
16 Sec. 106. (1) "Person" means an individual, corporation,
17 partnership, sole proprietorship, association, other legal
18 entity, or any combination thereof.
19 (2) "Project" means the aggregate of improvements contracted
20 for by the contracting owner.
21 (3) "Residential structure" means an individual residential
22 condominium unit or a residential building containing not more
23 than 2 residential units, the land on which it is or will be
24 located, and all
appurtenances, thereto, in which the owner or
25 lessee contracting for the improvement is residing or will reside
26 upon completion of the improvement.
27 (4) "Subcontractor" means a person, other than a laborer or
1 supplier, who pursuant to a contract between himself or herself
2 and a person other than the owner or lessee performs any part of
3 a contractor's contract for an improvement.
4 (5) "Supplier" means a person who, pursuant to a contract
5 with a contractor or a subcontractor, leases, rents, or in any
6 other manner provides
material or equipment which that is used
7 in the improvement of real property.
8 (6) "Wages" means all earnings of an employee whether
9 determined on the basis of time, task, piece, commission, or
10 other method of
calculation for labor or services except those
11 defined as fringe benefits and withholdings.
12 Sec. 107. (1) Each contractor, subcontractor, supplier, or
13 laborer who provides an
improvement to real property shall have
14 has a construction lien upon the interest of the owner or lessee
15 who contracted for the improvement to the real property, as
16 described in the notice
of commencement provided for by given
17 under section 108 or 108a, the interest of an owner who has
18 subordinated his or her interest to the mortgage for the
19 improvement of the real property, and the interest of an owner
20 who has required the improvement. A construction lien acquired
21 pursuant to this act shall not exceed the amount of the lien
22 claimant's contract less payments made on the contract.
23 (2) A construction
lien under this act shall attach
24 attaches to the entire interest of the owner or lessee who
25 contracted for the improvement, including any subsequently
26 acquired legal or equitable interest.
27 (3) Each contractor, subcontractor, supplier, or laborer who
1 provides an improvement to real property to which the person
2 contracting for the
improvement had no legal title shall have
3 has a construction lien upon the improvement for which the
4 contractor, subcontractor, supplier, or laborer provided labor,
5 material, or equipment. The forfeiture, surrender, or
6 termination of any title
or interest held by any an owner or
7 lessee who contracted for
an improvement to the property, or by
8 any an owner who subordinated his or her interest
to the
9 mortgage for the
improvement, or by any an owner who has
10 required the improvement shall
does not defeat the lien of the
11 contractor, subcontractor, supplier, or laborer upon the
12 improvement.
13 (4) If the rights of a person contracting for an improvement
14 as a land contract vendee or a lessee are forfeited, surrendered,
15 or otherwise terminated, any lien claimant who has provided a
16 notice of furnishing or is excused from providing a notice of
17 furnishing pursuant
to under section 108, 108a, or 109 and who
18 performs the covenants contained in the land contract or lease
19 within 30 days after receiving actual notice of the forfeiture,
20 surrender, or termination
shall be is subrogated to the rights
21 of the contracting vendee or lessee as those rights existed
22 immediately before the forfeiture, surrender, or termination.
23 (5) For purposes of this act, if the real property is owned
24 or leased by more than 1 person, there is a rebuttable
25 presumption that an
improvement to real property pursuant to
26 under a contract which
was entered into by with an owner or
27 lessee shall be
presumed to have been was consented to by any
1 other co-owner or
co-lessee. , but the presumption shall in all
2 cases be rebuttable. If enforcement of a construction lien
3 through foreclosure is sought and the court finds that the
4 improvement has been was
consented to by a co-owner or
5 co-lessee who did not contract for the improvement, the court
6 shall order the entire interest of that co-owner or co-lessee,
7 including any subsequently acquired legal or equitable interest,
8 to be subject to the construction lien. A deficiency judgment
9 shall not be entered against a noncontracting owner, co-owner,
10 lessee, or co-lessee.
11 (6) If the real property of an owner or lessee is subject to
12 multiple construction liens, the sum of the construction liens
13 shall not exceed the amount
which the owner or lessee agreed to
14 pay the person with whom he or she contracted for the improvement
15 as modified by any
and all additions, deletions, and any
16 other amendments, less payments made by or on behalf of the owner
17 or lessee, pursuant to either a contractor's sworn statement or a
18 waiver of lien, in accordance with this act.
19 (7) After the effective date of the amendatory act that
20 added this subsection, a construction lien of a subcontractor or
21 supplier for an improvement to a residential structure shall not
22 include an amount charged or assessed under the contract between
23 the subcontractor or supplier and the general contractor for
24 interest on the unpaid principal amount due, a time-price
25 differential, a finance charge, or any other item of interest.
26 Sec. 114. A
contractor shall does not have a right to a
27 construction lien upon
on the interest of any an owner or
1 lessee in a residential structure unless the contractor has
2 provided an improvement to the residential structure pursuant to
3 a written contract between the owner or lessee and the contractor
4 and any amendments or
additions to the contract are also shall
5 be in writing. The contract required by this section
shall
6 contain a statement, in type no smaller than that of the body of
7 the contract, setting
forth stating all of the following:
8 (a) That a residential builder or a residential maintenance
9 and alteration contractor is required to be licensed under
10 article 24 of Act 299
of the Public Acts of 1980, as amended,
11 being sections 339.2401
to 339.2412 of the Michigan Compiled
12 Laws the occupational code, 1980 PA 299, MCL 339.2401
to
13 339.2412. That an electrician is required to be licensed under
14 Act No. 217 of the
Public Acts of 1956, as amended, being
15 sections 338.881 to
338.892 of the Michigan Compiled Laws the
16 electrical administrative act, 1956 PA 217, MCL 338.881 to
17 338.892. That a plumber
plumbing contractor is required to be
18 licensed under Act
No. 266 of the Public Acts of 1929, as
19 amended, being
sections 338.901 to 338.917 of the Michigan
20 Compiled Laws the state plumbing act, 2002 PA 733, MCL 338.3511
21 to 338.3569. That a mechanical contractor is required to be
22 licensed under the Forbes mechanical contractors act, 1984 PA
23 192, MCL 338.971 to 338.988.
24 (b) If the contractor is required to be licensed to provide
25 the contracted
improvement, that the contractor is so licensed
26 and the contractor's license number.
27 (c) If a license
is required, the contractor's license
1 number.
2 Sec. 114a. (1) The owner of residential property on which a
3 construction lien has been recorded by a person who was not
4 licensed as described in section 114, or any person affected by
5 the lien, may bring an action to discharge the lien.
6 (2) If the court in an action under subsection (1) determines
7 that the person who recorded the lien was not licensed as
8 required, the person is liable to the person who brought the
9 action for all damages that result from the recording and any
10 attempts to enforce the lien, including actual costs and attorney
11 fees.
12 (3) A person who brings an action to recover for the
13 performance of an act or contract for which a license is required
14 as described in section 114 shall allege in the complaint and has
15 the burden of proving that he or she was properly licensed.
16 Sec. 201. (1) A The
homeowner construction lien recovery
17 fund is created within
the department. of licensing and
18 regulation. The fund shall be self-supporting and shall consist
19 of assessments charged
in the following manner be funded
as
20 follows:
21 (a) Except as
provided in subsection (4), when applying for
22 renewal licensure for
1982 and when applying for initial
23 licensure, each of the
following persons shall be assessed in In
24 addition to the license
fee, a fee of $50.00 for deposit in the
25 fund person who applies for 1 of the following shall
pay a fee
26 of $10.00 and a person who applies to renew 1 of the following
27 shall pay a fee of $10.00 for each year that the renewed license
1 will be valid:
2 (i) A person applying for a residential
builders license
3 or a residential maintenance and alteration contractor's license
4 under article 24 of the
occupational code, Act No. 299 of the
5 Public Acts of 1980,
as amended, being sections 339.2401 to
6 339.2412 of the Michigan
Compiled Laws 1980 PA 299, MCL
339.2401
7 to 339.2412.
8 (ii) A person applying for an An
electrical contractor's
9 license under the
electrical administrative act, Act No. 217 of
10 the Public Acts of
1956, as amended, being sections 338.881 to
11 338.892 of the Michigan
Compiled Laws 1956 PA 217, MCL
338.881
12 to 338.892.
13 (iii) A person applying for an authorized master
plumber's
14 plumbing contractor's
license under Act No. 266 of the Public
15 Acts of 1929, as
amended, being sections 338.901 to 338.917 of
16 the Michigan Compiled
Laws, which license authorizes the securing
17 of plumbing
installation permits the state
plumbing act, 2002 PA
18 733, MCL 338.3511 to 338.3569.
19 (iv) A person applying for a mechanical
contractor's
20 license under the Forbes mechanical contractors act, 1984 PA 192,
21 MCL 338.971 to 338.988.
22 (b) A laborer who seeks to recover from the fund for the
23 first time shall not be required to pay a fee until he or she
24 obtains a recovery from the fund, at which time a fee of $15.00
25 shall be withheld by the fund from the laborer's final recovery.
26 However, in no event
shall the total amount withheld by the fund
27 from a laborer in a
1-year period exceed $50.00.
1 (c) Except for persons described in subdivisions (a) and
2 (b), all other lien claimants may become members of the fund by
3 paying a fee of $50.00 prior to the date of the lien claimant's
4 contract for the improvement
to the a residential structure.
5 A lien claimant under
this subdivision shall not pay a fee of
6 more than $50.00 in a
calendar year. If the lien
claimant is a
7 supplier that conducts business from more than 1 retail location,
8 each retail location shall be treated as a separate person for
9 purposes of paying fees and renewal fees for fund membership.
10 (d) A person who has paid a fee under subdivision (b) or (c)
11 shall pay a renewal fee as follows:
12 (i) If the person paid the initial fee on or before June 1,
13 2002, a renewal fee of $50.00 shall be paid on or before June 1,
14 2005, and a renewal fee of $50.00 on or before June 1 of every
15 third year after the first renewal payment.
16 (ii) If the person paid the initial fee after June 1, 2002,
17 a renewal fee of $50.00 on or before the first June 1 following
18 the third anniversary date of the initial payment, plus a
19 proportional amount for the portion of the year from that
20 anniversary date to June 1, and a renewal fee of $50.00 on or
21 before June 1 of every third year after the first renewal
22 payment.
23 (2) If, on
December 1 of any year, the balance in the fund
24 is less than
$1,000,000.00, the director of licensing and
25 regulation may require
an additional assessment or payment, not
26 to exceed $50.00, from
each of the persons described in
27 subsection (1)(a) and
(c), unless, within 30 legislative days
1 after the director
requires an additional assessment, the
2 legislature, by
majority vote of the members elected and serving
3 in both houses by
record roll call vote, adopts a concurrent
4 resolution to prohibit
the additional assessment. As used in
5 this subsection
"legislative day" means a day on which the senate
6 and house is called to
order and a quorum of the senate and house
7 is present. A person may pay a renewal fee under subsection
8 (1)(d) after the date on which it is due, but is not entitled to
9 recover from the fund for an improvement made after the due date
10 and before the renewal fee is paid.
11 (3) A person who becomes a member of the fund by paying a
12 fee under subsection (1) shall notify the department division
13 that administers the fund, in writing, of a change in the
14 person's name, address, or form of business organization within
15 30 days of the change. Proof that a notice or other document was
16 mailed or, if another method of delivery is required by law or
17 rule, delivered by that other method to a member at the last
18 address that the member provided to the fund administrator is
19 conclusive proof that the notice or document was received by the
20 member.
21 (4) (3) A
person shall is not be entitled to recover
22 from the fund unless he
or she the person has paid into the
23 fund as required by this section
act.
24 (4)
Notwithstanding subsection (1)(a), a person shall not
25 be assessed more than
$50.00 in an assessment period regardless
26 of the number of
licenses applied for or held.
27 Sec. 202. (1) The
director of licensing and regulation
1 the department shall
manage the affairs of the fund pursuant
2 fund according to this act. A detailed financial statement of
3 the condition of the fund shall be published by the director
4 annually. This The
fund shall be subject to an audit by the
5 auditor general. The state treasurer shall deposit or invest
6 money from the fund, in the same manner as and subject to all
7 provisions of law with
respect that apply to the deposit or
8 investment of state funds by the state treasurer, and interest
9 earned shall be credited to the fund. The unexpended fund
10 balance shall carry forward to the new fiscal year at the end of
11 each fiscal year.
12 (2) The department
may employ such office clerical and
13 professional help and
claims investigators as are necessary to
14 carry out the
provisions of this act. The attorney general
15 shall assign members of his or her staff and may supplement that
16 staff by contracting with
those private attorneys as are
17 necessary to adequately
defend the actions against the fund.
18 All wages, professional fees, and other administrative
19 expenditures necessary for operation and defense of the fund,
20 including legal counsel, shall be charged to and payable from the
21 fund. Except as
provided in subsection (3) for legal counsel
22 fees, the amount paid in a fiscal year for wages, professional
23 fees, and other
administrative expenditures necessary for the
24 operation of the fund shall not exceed 20% of funds collected
25 by the fund in the
previous fiscal year the average
of the
26 ending balances in the fund for the previous 2 fiscal years.
27 (3) If the $50.00
fee is not assessed against license
1 applications and
renewals during a year under section 201, the
2 limitation on fund
expenditures provided in subsection (2) shall
3 be calculated on the
basis of the closest previous year in which
4 the $50.00 fee was
assessed and collected for license application
5 and renewals under section
201.
6 Sec. 203. (1) A
claim of construction lien shall does not
7 attach to a residential structure, to the extent payments have
8 been made, if the owner or lessee files an affidavit with the
9 court indicating that the owner or lessee has done all of the
10 following:
11 (a) Paid the contractor for the improvement to the
12 residential structure,
and indicating in the affidavit the
13 amount of the payment.
14 (b) Not colluded with any person to obtain a payment from
15 the fund.
16 (c) Cooperated and will continue to cooperate with the
17 department in the defense of the fund.
18 (2) In the
absence of a If there is no written contract
19 pursuant to as required by section 114, the filing of an
20 affidavit under this
section shall create creates a rebuttable
21 presumption that the owner or lessee has paid the contractor for
22 the improvement. The presumption may be overcome only by a
23 showing of clear and convincing evidence to the contrary.
24 (3) Subject to section 204, a person who has recorded a
25 claim of lien and who is
precluded from recovering having a
26 construction lien under subsection (1) may recover from the fund
27 the amount for which
the lien is established he or she would
1 have been entitled to recover but for subsection (1). A person
2 who seeks recovery from the fund shall establish all of the
3 following:
4 (a) That he or she would be entitled to a construction lien
5 on a residential structure except for the defense provided in
6 subsection (1).
7 (b) That payment was made by the owner or lessee to the
8 contractor or subcontractor.
9 (c) That the contractor or subcontractor has retained or
10 used the proceeds or any part of the proceeds paid to the
11 contractor or subcontractor without having paid the person
12 claiming the construction lien.
13 (d) That he or she has complied with section 201.
14 (e) That he or she has not colluded with another person to
15 obtain a payment from the fund.
16 (f) That he or she has complied with any applicable
17 licensing acts.
18 (g) That he or she has made a reasonable effort to obtain
19 payment from the contractor or subcontractor.
20 (h) That the
contractor or the subcontractor , with whom
21 the person claiming the
construction lien contracted with, is
22 licensed if required by law to be licensed.
23 (i) That the contractor or subcontractor with whom the
24 person claiming the construction lien contracted is the same
25 individual or legal entity with whom the owner or lessee
26 contracted.
27 (4) A subcontractor, supplier, or laborer who seeks
1 enforcement of a construction lien on a residential structure
2 through foreclosure shall join the fund as a defendant in the
3 foreclosure action , and
serve a summons and complaint shall
4 be served on the director office of the fund
administrator
5 within the department by
certified or registered mail , or by
6 leaving a copy thereof
at the office. of the director. The
7 failure to serve a
summons and complaint upon the fund shall
8 constitute a bar to under this subsection bars recovery from the
9 fund. After service
upon the defendant of a defendant is
10 served with a summons and
complaint in an action in which
11 enforcement of to foreclose a construction lien, through
12 foreclosure is sought,
the department may intervene in the
13 action as a party defendant with respect to other construction
14 liens.
15 (5) The attorney general shall make every reasonable effort
16 to defend the fund and may assert any defense to a claim of lien
17 that would have been available to the owner or lessee.
18 (6) Payment from the fund shall be made only if the court
19 finds that a subcontractor, supplier, or laborer is entitled to
20 payment from the fund. Subject to section 204, after the
21 judgment has become final the department shall pay the amount of
22 the judgment out of the fund.
23 Sec. 204. (1) A payment from the fund shall not include an
24 amount for interest on the unpaid principal amount due, a
25 time-price differential, a finance charge, or any other form of
26 interest.
27 (2) The department shall not pay out of the fund to
1 subcontractors, suppliers, and laborers more than $75,000.00 per
2 residential structure. When it appears that the amount claimed
3 from the fund , with
respect to a residential structure ,
4 will exceed $75,000.00, the department may delay payment until
5 the total amount to be paid can be ascertained. If the total
6 amount payable to subcontractors, suppliers, and laborers exceeds
7 $75,000.00, they shall be paid their proportional shares of that
8 amount.