When a construction project commences, a lot of the parties involved are putting some blind trust into the others. The property owner for example, is counting on the project being completed on time and on budget. The architect is guaranteeing that the work is done to his or her design. When both of these tasks are completed to satisfaction, the contractors are relying on getting paid for their services.
It’s that third aspect which makes the lien law such an important one. What you should know about the lien law is that it’s there to satisfy the fact that builders are paid fully for their work. Often times payment terms are set up “remainder on completion” which can leave a contractor guessing as to when, or even if, they’ll get paid.
What is a Lien?
Liens are designed to take that guesswork out of payment for services rendered. They are found across a number of industries ensuring things such as a mechanic getting paid for their automotive work or a doctor being compensated for medical procedures or even state governments receiving their due taxes.
A lien basically makes a consumer responsible for services performed to or for them. That compensation can come in the form of property, financial savings, as well as future earnings.
What You Should Know about the Lien Law
Contractors need to be very aware of the ins and outs of the Lien Law. A lien doesn’t just “exist” it is actually a formal document filed with the County Recorder. Some things you need to know about the Lien Law in Michigan include:
- Any contractor, subcontractor, laborer, or supplier who provides an improvement to a property can claim a lien.
- The amount of the lien may not exceed the original contracted amount minus fees already paid.
- A lien must be filed within 90 days of the last services rendered.
- A lien form includes documentation of labor and materials provided as well as amount due and owed.
- Subcontractors need to file a Notice of Furnishing to the general contractor within 20 days of starting a project.
- Property owners must file a Notice of Commencement to the County Recorder prior to starting work.
- Waiver forms are filed on the lien as payments are received.