The Michigan Legislature recently approved amendments to the Construction Lien Act (“CLA”) eliminating the Homeowner Construction Lien Recovery Fund (“HCLRF”). The amendments became effective on August 23, 2010.
Under the CLA, licensed contractors were required to pay “membership fees” when they received or renewed their licenses. This requirement applied to residential builders, electrical contractors, plumbing contractors, and mechanical contractors. Before the amendments, the CLA provided that, in some cases, subcontractors and suppliers who performed work on a residential structure, but were not paid by the general contractor, could be paid from the HCLRF.
Because the HCLRF was effectively insolvent and could no longer pay monetary claims, the legislature abolished it. At the same time, however, the legislature retained an important procedural step through which an owner or lessee can avoid construction liens by filing an affidavit and supporting documents demonstrating that they paid the general contractor in full for the disputed work. Additionally, if there is no written contract between the owner or lessee and the general contractor, subcontractors and suppliers may face challenging legal standards in proving that they were not paid. As a result, anyone working in residential construction should be aware that under certain circumstances, construction liens will no longer attach to residential structures.
With the elimination of the HCLRF, subcontractors and suppliers will have to pursue other legal remedies to receive payment. Varnum has extensive experience in successfully representing subcontractors, suppliers, general contractors and developers with construction lien issues. If you have performed work on a residential structure but have not been paid, or if you have any questions regarding construction liens generally, please contact any of the following members of Varnum’s Construction Lien Team to discuss potential remedies:
Mark Hills 616/336-6502 or [email protected]
Pete Schmidt 616/336-6411 or [email protected]