Tuesday, December 29, 2009

Michigan Homeowner Construction Lien Recovery Fund Runs out of Money

In a sign of the times, the Michigan Homeowner Construction Lien Recovery Fund is broke, and there is currently no way to replenish its coffers.
The Michigan Homeowner Construction Lien Recovery Fund (Fund) was created under Part 2 of the Michigan Construction Lien Act (MCL 570.1101, et seq) to provide protection when the homeowner, has in good faith, paid their licensed contractor for materials and labor and the contractor failed to compensate materialmen, subcontractors, and/or laborers.

The funding problem for the Fund stems from PA 497 of 2006,  an amendment to the Michigan Construction Lien Act, which repealed Section 201(2) of the Act effective January 3, 2007. This amendment, reportedly the product of a legislative compromise, eliminated the ability of the Fund to make a $50 special assessment when the  Fund fell below $1 million. Instead, the Fund can only assess members a $10 annual renewal fee.

Beginning in 2006 and continuing through July, 2009, the Fund experienced an unprecedented increase in claims. This increase closely mirrored the collapse of the housing market.  The Fund is currently involved in over 250 pending lawsuits involving more than 350 claims against it that total more than $18 million.  In 2009, Judgments against the Fund have averaged $123,800 per month.  By mid-October, there was only $524,000 remaining in Fund coffers.

On October 21, 2009, the Fund sought to consolidate all 250 of the pending lawsuits into one proceeding in Macomb County and proposed a pro rata distribution of the remaining money among all the lien claimants. The result would be pennies on the dollar.  The Fund’s (interpleader) motion was heard by Judge James Biernat, Sr. on November 2, 2009, but denied several weeks later in a written opinion.  

As things stand now, and absent legislative intervention, the Fund has advised that it will run dry within a few months. This will leave unpaid subcontractors and suppliers to fight things out with Homeowners, who  will find themselves stuck in the middle of dispute with their builder and at significant risk of paying twice for  improvements to their home.

For more information, contact Peter Cavanaugh or Gary Quesada, or visit their website -- http://www.michiganconstructionlaw.com/ 

Update: Michigan Lawyer's Weekly recently ran a piece about this issue in its February 1, 2010 edition. The cite, for any lawyers reading this, is 24 Mich. L.W. 265.

Wednesday, December 23, 2009

Cavanaugh & Quesada, PLC -- New Offices in Royal Oak

Attorneys Peter Cavanaugh and Gary Quesada have moved their  law practice to new and larger offices in Downtown Royal Oak at 1027 S. Washington Ave. Cavanaugh & Quesada, PLC serves the unique legal needs of the design and construction communities.
  • Peter's practice is concentrated on business and construction law matters, including litigation, arbitration, and mediation of contract, construction lien and payment bond claims, and disputes involving owners, contractors, subcontractors, and suppliers. Peter also represents clients who specialize in water and wastewater construction projects, especially those projects involving the Detroit Water and Sewerage Department (DWSD).
  • Gary's practice is concentrated on representing architects, engineers, owners and contractors in business and construction law matters, including litigation and arbitration of commercial, municipal and residential construction claims, copyright and risk management consultation. Gary also represents clients in the fields of photographic, sculptural, literary and film arts.
To find out how we can help you, please contact either Peter Cavanaugh or Gary Quesada at Cavanaugh & Quesada, PLC, 1027 S. Washington Ave., Suite A, Royal Oak, MI 48067, Tel: (248) 543-8320, Fax: (248) 543-8330 or for more information visit our website -- www.MichiganConstructionLaw.com

Monday, December 21, 2009

AGC of Michigan Announces Construction Law Webinar Series

As a follow-up to its October 30, 2009 seminar, AGC of Michigan has announced a series of lunchtime webinars featuring some of the authors of the recently-updated publication "Contractor's Guide to Michigan Construction Law" (Rev'd 2009).
Webinar 1 - January 20, 2010 - 11:30 to 1:00 p.m.

  • Bids, Bidders and Bid Protests
  • The Contract for Construction: Standard Forms and Common Risk Transferring Provisions; 
  • Overview of State and Federal Prevailing Wage Law
Webinar 2 - February 10, 2010 - 11:30 to 1:00 p.m.
  • Contract Changes / Differing Site Conditions
  • Defective Plans and Specs
  • Delays in Contract Performance
  • Concepts in Business Valuation, Potential Financial Statement Impacts and More Accounting, Tax and Financial Issues
Webinar 3 - March 17, 2010 - 11:30 to 1:00 p.m.
  • Estate and Business Succession Planning for the Contractor
  •  Bankruptcy and the Construction Industry
  • Dealing with the Media and Press in Corporate Crisis Situations

Click here for more information and to register for one or all of these webinars.

Michigan Bill Would Allow Private Investments in Public Projects

Crain's Detroit Business reports today that legislation has been introduced in the Michigan legislature that would encourage private investors to fund public transportation infrastructure.

House Bill 5461 would create the Private Investment Infrastructure Funding Act, under which municipalities could enter into collaborative relationships with other public entities to develop public facilities and could, among other things, solicit private sector investment for the financing of public facilities through a bid process.  Generally speaking, "public facilities" means transportation-related projects, including public transportation-related infrastructure, as well as other similar public infrastructure improvements.  The term "municipality" would apply to cities, villages, and townships. 

The concept, called private investment infrastructure funding, or PIIF, was first proposed by the Oakland County Business Roundtable and is being discussed as lawmakers, local officials and business look at ways to help with Michigan's transportation-funding straits.

Update:  A December 23, 2009 Editorial in the the Detroit Free Press (here) endorses the idea of private funding for public infrastructure projects.  On January 27, 2010, it was reported (here, and here) that the Michigan Department of Transportation (MDOT) is seeking design, build, finance and operate proposals for the Detroit River International  Crossing (DRIC) project in southwest Detroit.  Click here for a copy of the RFP. 

Further Update (June 2, 2010): H.B. 5461 has gone nowhere since it was introduced, however, legislation to enable the DRIC project, through the creation of Public Private Partnerships (P3) has been moving forward under two other bills, H.B. 4961 and H.B. 6128.   H.B. 4961 was approved by the Michigan House on May 26, 2010.