A mechanics lien is arguably the best weapon you can wield if you want to recover payment from non-paying clients in your construction projects. Filing a mechanics lien allows you to limit a property’s market value by warning potential buyers and financiers about the outstanding debts related to such property. This, in turn, incentivizes property owners to get rid of the lien and have you paid right away.
In Michigan and in all states, filing a mechanics lien requires you to follow specific rules and regulations. Making minor mistakes and failing to meet the statutory deadlines may cost you your lien rights, so it is very important that you familiarize yourself with the requirements that apply to you.
This guide explains everything you need to know about filing a mechanics lien in Michigan, from the important deadlines to the best business practices that you must keep in mind.
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Who can file a mechanics lien in Michigan?
Most construction parties who contribute to the improvement or construction of a property have the right to file a mechanics lien in Michigan. This includes general contractors, subcontractors, material suppliers, and laborers.
Additional qualifications are required for parties who are working on residential projects. For general contractors who are working on residential properties with 2 units or fewer, you must have a written contract with the owner or lessee before you can have your lien rights. You must also be licensed under the Michigan occupational code.
All parties working on residential projects are also expected to have the necessary occupational license before they can exercise their lien rights. No specific licensing requirements apply to parties working on non-residential projects.
Pre-lien notices in Michigan
There are two pre-lien notices in Michigan that you may have to serve, depending on your role in a project, the Notice of Furnishing and the Sworn Statement.
Notice of Furnishing
To file a valid mechanics lien in Michigan, a preliminary notice known as the Notice of Furnishing is required from all parties who do not have a direct contractual relationship with the property owner. The Notice of Furnishing informs the property owner of your participation in the project and warns them about the possibility of having to pay twice.
The Notice of Furnishing must be served within 20 days of your first day of work, and it must be sent to the property owner via personal delivery or through registered or certified mail with return receipt requested.
The following information must also be included in your Notice of Furnishing:
- Name and address of the property owner
- Name and address of the party that hired you
- Name and address of the lien claimant (you)
- A description of the type of work that you are providing to the project
- Name of the county where the Notice of Commencement was recorded
Another pre-lien notice, called the Sworn Statement, may be required from general contractors and subcontractors. This notice is required for all general contractors, subcontractors, and material suppliers working on residential projects.
For parties working on non-residential properties, the Sworn Statement may be required upon request from the property owner or general contractor.
A Sworn Statement lists all the subcontractors or sub-subcontractors working for you. The purpose of this notice is to inform the property owner or another higher-tier party about all the parties who are taking part in a project, and to give them a bigger picture of the payment chain for which they may be liable.
A Sworn Statement must include these details, next to the name of each construction participant working for you:
- Total contract price
- Amount already paid
- Amount currently owing
- Balance to complete (optional)
- Amount of laborer wages due but unpaid
- Amount of laborer fringe
- Benefits and withholdings due but unpaid
A Sworn Statement must also include a legal property description and be notarized.
Be aware that subcontractors are also expected to present a Sworn Statement when they are requesting payment from a general contractor.
What happens if you fail to serve the required pre-lien notices?
Failing to serve the Notice of Furnishing limits the amount of money that you may recover through a mechanics lien. Without the Notice of Furnishing, you will be entitled only to the amount that is yet to be paid to the party who hired you.
If, for example, you are working for a subcontractor who already received $25,000 of the total $50,000 payment from a general contractor, you are only allowed to file a mechanics lien for the remaining $25,000 balance if you do not serve a Notice of Furnishing.
Failing to serve a Sworn Statement, if requested to do so, will still keep your mechanics lien valid. However, serving a Sworn Statement when required to do so is necessary before you can enforce a mechanics lien. Without this document, you may not receive payment or file a complaint or countercomplaint regarding your mechanics lien.
How to file a mechanics lien in Michigan
1. Prepare your mechanics lien form
The first step in filing a mechanics lien is preparing your lien form properly. The following information must be included on your Michigan mechanics lien form:
- Date when the mechanics lien is recorded
- Your name and address
- A legal description of the property
- Name and address of the property owner or lessee
- The date when you last provided labor or materials
- The total contract amount
- The amount of payment that you have already received
- The amount that you are yet to receive (claim amount)
Note that laborers who are recording a mechanics lien must also indicate their hourly rate. Also, keep in mind that most of these details may be found in the Notice of Commencement or your contract.
The Notice of Commencement is a document filed by the property owner and you should be able to have access to it. It is typically posted in a conspicuous location in the property, and it has all the information such as the legal property description and the owner’s legal name and address.
Michigan lien laws prescribe your mechanics lien to substantially be in the following form:
A mechanics lien in Michigan must be notarized for it to be valid.
2. Record your mechanics lien in the local county clerk’s office
Once you have your Michigan mechanics lien form ready, you must have it recorded in the clerk’s office in the county where the project property is located.
You must file a mechanics lien no later than 90 days after your last day of work. Once this deadline elapses, you may no longer exercise your lien rights and you lose your chance of recovering your payment via a mechanics lien.
When you file a mechanics lien, you are expected to bring a copy of a documented proof that you have served a Notice of Furnishing. You must present this copy to the clerk who will be recording your lien claim. The only exception to this rule is if you are a general contractor who is not required to serve said preliminary notice.
3. Serve a copy of your lien on the appropriate parties
Once you have successfully recorded your mechanics lien, you must serve a copy of your mechanics lien on the property owner within 15 days of the recordation date. Note that this is another mandatory step that you may not skip.
Be aware that the validity of your mechanics lien may be questioned if you do not serve a copy of your lien on the property owner within the 15-day time frame. Also keep in mind that the lien copy is considered served at the time of mailing.
4. Enforce/foreclose the mechanics lien
The best-case scenario after you have filed a mechanics lien is for you to finally receive the payment that you duly earned. Once a mechanics lien has been satisfied, you may file a lien cancellation in the same county clerk’s office where you recorded the lien.
Filing a lien release is not a statutory requirement in Michigan, but it is considered a good business practice to do so. It helps you build good business relationships with a property owner, especially if they have done their part in covering for your payment.
If, on the other hand, your lien does not work and you do not receive your payment, you must consider enforcing your lien. A mechanics lien in Michigan only lasts for one year after the recordation date – the lien loses its power after this deadline. This implies that you must initiate a foreclosure action and recover your payment from the foreclosure sale of the property.
Remember that the foreclosure lawsuit must be initiated before the one-year period elapses. Once your lien expires, you may no longer win a foreclosure case against a property because of your failure to abide the deadline.
Important deadlines to remember when filing a mechanics lien in Michigan
Best practices when filing a Michigan mechanics lien
1. Take advantage of the Notice of Commencement
Michigan requires its property owners to file a Notice of Commencement, and this document contains most of the information that you must include in your mechanics lien form. Such information includes the legal property description, which typically requires some sophisticated research to secure.
Taking advantage of the Notice of Commencement will make preparing your mechanics lien form easier, so be sure to have a copy of the Notice of Commencement from the property owner or the general contractor.
2. Serve your Notice of Furnishing early
You have 20 days after your first day of work to serve a Notice of Furnishing. However, note that this notice will only protect your lien rights over the amount that is yet to be paid to the party that hired you. Serving this preliminary notice as early as possible is a good business practice if you want full protection of your lien rights.
Preparing the Notice of Furnishing early also gives you time to correct and verify the accuracy of the information included in your form. This will save you from making minor spelling or formatting mistakes that could be fatal to the validity of your mechanics lien.
3. Keep copies of your mailing and postal receipts
Serving the required preliminary notice and the copy of the recorded mechanics lien is a mandatory step in Michigan. Failing to fulfill these requirements could cost you your lien rights, so make sure that you keep all the documented proofs that you have indeed served the required notices.
These proofs include your postal receipts and other mailing documents. If you serve your Notice of Furnishing via personal delivery, make sure to ask for a signed receipt acknowledgment form to prove that an authorized party has officially received your notice.