Once a mechanics lien is satisfied and a delinquent client has finally paid up, a lien claimant then has to complete an important step: release or cancel the mechanics lien.
In Michigan, releasing a mechanics lien is as simple as filing what is known as the Michigan discharge of construction lien form. Filing this cancelation document effectively releases a property from the burden of having a mechanics lien attached to it, signifying that the debt has been duly settled.
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- When to release a Michigan construction lien
- Why do you have to file a Michigan discharge of construction lien?
- What happens if you fail to release a Michigan construction lien?
- How to file a Michigan discharge of construction lien
- Best practices when releasing a Michigan construction lien
When to release a Michigan construction lien
There is no specific deadline for releasing a mechanics lien in Michigan. However, the state laws say that a lien claimant must discharge a construction lien “when any claim of lien has been fully paid.” This means that you are expected to file a discharge of construction lien once a higher-tier party has settled the outstanding debt and you have successfully recovered your payment.
One important thing to keep in mind is that you must wait until the payment has been verified before you cancel an existing mechanics lien. Even if you receive a payment through a cheque or a credit card transaction, you must wait until you are certain that the payment has been properly deposited to your account.
Be wary of bouncing cheques and rejected credit card transactions. It is best practice to make sure that payment is on hand before you release a Michigan mechanics lien.
Why do you have to file a Michigan discharge of construction lien?
A mechanics lien is one of the most effective tools to encourage property owners to settle payment disputes on a project. When a mechanics lien is filed against a property, the property’s records get tainted with a record of debt that discourages potential financiers and buyers from investing in it.
This is why releasing a mechanics lien is a very important step. Once a payment dispute has been resolved, the mechanics lien is subsequently satisfied, and it should be released to inform potential financiers and buyers that the property involved is no longer encumbered.
In Michigan, releasing a mechanics lien is written into the law, so lien claimants are required to cancel or release a lien once they receive their delayed payment.
What happens if you fail to release a Michigan construction lien?
If you do not release a Michigan mechanics lien, your working relationship with property owners and other higher-tier parties may turn sour. Furthermore, you might also be fined and penalized since filing a Michigan discharge of construction lien is a statutory requirement.
Always file a Michigan discharge of construction lien once your payment claim has been duly satisfied. You will not only be following the rules, but you will also be potentially building good working relationships with property owners.
How to file a Michigan discharge of construction lien
1. Prepare the Michigan discharge of construction lien form
Michigan’s state laws do not have a prescribed Michigan discharge of construction lien form. You can build your own template, but make sure that it includes the following details:
- the clerk and recorder’s file number for the original construction lien
- the date when you filed the construction lien
- the name of the person from whom you are claiming payment
- your name and address
- a general statement expressing that you are releasing the construction lien
You can simply refer back to your original Michigan construction lien to provide the required information. Make sure that you copy the details properly and that you sign the document before you have it recorded.
2. Record the Michigan discharge of construction lien
Filing a Michigan discharge of construction lien is as simple as having your form recorded in the same recorder’s office where the original construction lien was filed. Note that you must pay the necessary filing costs when you cancel your Michigan mechanics lien, so make sure that you bring enough money to cover the fees.
While there is no specific deadline for discharging a Michigan construction lien, it is best practice that you release the mechanics lien as soon as you have verified that full payment is on hand. Waiting until further disputes arise will do you no good, so it is best to move forward and cancel a mechanics lien once it has been satisfied.
Keep in mind that releasing a Michigan mechanics lien is a state requirement, so never forget to comply with this rule.
Best practices when releasing a Michigan construction lien
1. Release the construction lien as soon as applicable
There is no hard-and-fast deadline for canceling a Michigan mechanics lien. However, it is always a good idea to release a mechanics lien as soon as you know that full payment has been received.
Note that releasing a mechanics lien in Michigan is an all-or-nothing process – if you only received partial payment for your claim, do not file a discharge of construction lien yet. Release a Michigan mechanics lien only when full payment for your mechanics lien claim has been received.
2. Verify that payment is on hand before releasing the construction lien
Before you file your Michigan discharge of construction, you must first be 100% certain that payment has been received. It’s possible for payments to not go through, so you must first wait until a cheque or a credit card transaction has been approved. Otherwise, you might end up with no payment and a mechanics lien that is no longer enforceable.
3. Double-check the details that you write on your Michigan discharge of construction lien form
When you prepare your Michigan discharge of construction lien, you will be copying most of the required information from your original mechanics lien document. Make sure that you pay attention to the detail and you copy the correct record numbers. Simple typographical errors may invalidate your mechanics lien release form, so be diligent and ensure that you prepare your form correctly.