New Bill Would Require Builders to Present License When Recording Construction Lien

On April 20, 2021, Rep. Tommy Brann (R. Wyoming) introduced a new bill, which would require lien claimants to present their contractor's license and drivers license, or attach a copy of them, when recording a construction lien under the Michigan Construction Lien Act. Contractors who violate this requirement would be guilty of a misdemeanor (up to 90 days in jail) and incur a $500 fine.

H.B. 4668 would amend Section 114 of the Construction Lien Act (MCL 570.1114), by adding four new subsections. 

Section 114(2) would require contractors to display (present) their builder's license and some form of personal identification, such as a drivers license, when recording a claim of lien in person.

Section 114(3) would require prohibit a register of deeds from accepting a claim of lien for recording without seeing or attaching a copy of the contractor's license and personal identification to the claim of lien. 

Section 114(4) outlines the penalties for violation. A contractor who violates Section 114 would be guilty of a misdemeanor and face a fine of up to $500, or both. 

Section 114(5) outlines five different forms of "personal identification" that would be acceptable.

Comment: The Michigan Construction Lien Act already includes safeguards against unlicensed builders trying to enforce their construction liens. Section 114a(3) for instance requires that a person who brings an action to enforce a construction lien, who is required to have a license, allege and prove that he (or she) is properly licensed. Section 114a(1) allows an owner of residential property (Homeowner) to bring an action to discharge a construction lien recorded by an unlicensed builder, and recover actual attorney fees and costs.   

For more information about the Michigan Construction Lien Act, contact Peter Cavanaugh or Gary Quesada at (248) 543-8320.  Or visit our website - www.MichiganConstructionLaw.com

New Skilled Trades Regulation Act Impacts Section 114 of Michigan Construction Lien Act

During the recent lame duck session in December, the Michigan Legislature passed a series of bills aimed at consolidating the licensing and regulation of skilled trades, including residential builders, electricians, plumbing and mechanical contractors. All of these trades are now regulated under the “Skilled Trades Regulation Act.” 

S.B. 963 repealed the Electrical Administrative Act, the Forbes Mechanical Contractors Act, the State Plumbing Act, the Boiler Act, and the Building Officials and Inspectors Registration Act and created in its place the "Skilled Trades Regulation Act" to regulate all of those trades. Signed by Governor Snyder on January 3, 2017, the new statute, designated Public Act 407 of 2016 will take effect in 90 days on April 4, 2017

Passage of Skilled Trades Regulation Act also affects the Michigan Construction Lien Act for residential construction.  

Section 114 of the Construction Lien Act requires that contracts for residential construction include certain statutory language regarding licensure.  In a companion bill, S.B. 971 (PA 415 of 2016), the Michigan Legislature changed Section 114 to refer to the new “Skilled Trades Regulation Act.”  

TAKE ACTION IN JANUARY, 2017 –

1. Residential builders and other contractors that perform residential construction, you should update your contracts to incorporate the new language. It’s an easy fix. Do it today.   

2. Residential Builders and contractors who do not use a written contract or whose contract does not include any of the language required by Section 114, you should use this opportunity fix things. Amend your contract form to include the (new) statutory language. Don’t wait.

NEW LANGUAGE / ADD TO YOUR CONTRACT

“Pursuant to Section 114 of the Michigan Construction Lien Act, Homeowner is advised as follows:

“(a) That a residential builder or a residential maintenance and alteration contractor is required to be licensed under article 24 of the occupational code, 1980 PA 299, MCL 339.2401 to 339.2412. That an electrician is required to be licensed under article 7 of the skilled trades regulation act, MCL 339.5701 to 339.5739. That a plumbing contractor is required to be licensed under article 11 of the skilled trades regulation act, MCL 339.6101 to 339.6133. That a mechanical contractor is required to be licensed under article 8 of the skilled trades regulation act, MCL 339.5801 to 339.5819. 

“(b) If the contractor is required to be licensed to provide the contracted improvement, that the contractor is licensed and the contractor’s license number.

For residential builders, use the following: 

(b) {Name of Contractor} is a licensed residential builder in the State of Michigan (License No. ___________; {qualifying officer’s name}, Qualifying Officer.

For electrical contractors, use the following:

(b) {Name of Contractor” is a licensed electrician in the State of Michigan (License No. _______; {qualifying officer’s name}, Qualifying Officer.  

NOTE: Under Michigan law, for residential construction, the entity contracting for the work must be properly licensed. It is not sufficient for an individual to be licensed if the business entity, corporation or LLC, which is contracting with the homeowner, is not licensed. This is a common pitfall that builders, licensed individually, can fall into when they start a new business and fail to secure a builder’s license for the business.

For more about Michigan Construction Law Update, or to talk with one of our construction attorneys, click here.

Michigan Legislature Enacts "Owner Built Residence Transfer Act"

On Februray 13, 2008, the Michigan Legislature enacted SB 0577. The "Owner Built Residence Transfer Act" (PA 6 of 2008) is designed to protect homeowners who buy homes from unlicensed builders. The Act takes effect in 180 days.

Rationale

Michigan law contains various provisions requiring a residential builder to be licensed, but this requirement does not aply to someone who is building their own home. Article 24 of the Occupational Code, however, permits an unlicensed property owner to act as a residential builder when building a home for their own use and occupancy. The exception has led to abuses by unlicensed builders, who build several homes per year "for their own use" and decide the sell them as soon as the house is completed. Effectively, such persons are acting as (unlicensed) residential builders.

Provisions

The Owner Built Residence Transfer Act --

• requires that an "owner-builder" who intends, at the onset of construction, to live in a "residential structure" either to live in it or place it for sale if he or she is unable to live there;
  
• allows an owner-builder to sell only one owner-built residence per year;
  
• prohibits an owner-builder who lives in a new residential structure from selling it or transferring ownership for at least 120 days;
  
• requires an owner-builder, when offering a residential structure, to supply a notice that the structure was built by an owner-builder who was not a licensed builder;
  
• specifies that an owner-builder who fails to comply with the disclosure requirements is liable for repair costs and the buyer's temporary shelter costs;
  
• allows the buyer of an owner-builder residential structure to bring an action within 18 month for damages resulting from a violation of the disclosure requirements.

The Act includes the following definitions:

• "Owner-builder" means an individual who is not a licensed residential builder and who builds, or acts as a general contractor for the construction of a residential structure in which that person, or a member of his or her family, actually resides or intends to occupy for his or her own use upon the issuance of an occupancy permit.
• "Residential structure" means premises used or intended to be used for a residence purpose and related facilities appurtenant to the premises used or intended to be used as a adjunct of residential occupancy.

For more information about this issue, contact Peter Cavanaugh at Keranen & Associates, P.C., 6895 Telegraph Road, Bloomfield Hills, Michigan 48301, Tel: (248) 647-9653.

New Bill Would Bar (Most) Construction Liens Against Residential Property - Why?

On July 27, 2007, a new bill was introduced by Rep. John Stakoe (R. Highland Twp), which would modify the Michigan Construction Lien Act to bar most claims of lien against Residential Structures by subcontractors, suppliers, and laborers, but not contractors.

H.B. 5051 would amend Section 107 of the Construction Lien Act by adding the following subsection:

(7) A Subcontractor, Supplier, or Laborer is not entitled to a Construction Lien on a Residential Structure.

H.B. 5051 also amends other sections in the Construction Lien Act to conform the statute with this basic prohibition.

H.B. 5051, if passed, would represent a significant, negative deviation from the protections afforded subcontractors, suppliers, and laborers by the Construction Lien Act. It is unclear what prompted Rep. Stakoe to introduce this legislation, or why he thinks it would be a good idea.

H.B. 5051 can be read here.

Update (8/28/07): Based upon discussions with Rep. Stakoe's office earlier today, I now understand that this bill was prompted by an elderly constituent who had a claim of lien recorded against his house by a roofing contractor's subcontractor. Rep. Stakoe's constituent was unable to pay the subcontractor's lien. If the homeowner had already paid the contractor, however, he shouldn't have to pay twice. The remedy to this problem lies with the Homeowner Lien Recovery Fund, not a new piece of legislation.

The Michigan Homeowner Construction Lien Recovery Fund (Fund) was created under Section 2 of the Construction Lien Act (PA 497 of 1980), 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 Michigan Department of Labor & Economic Growth publishes an excellent "Citizen's Guide" to the Construction Lien Act and the Homeowner Lien Recovery Fund that can be found on their website here. The "Citizen's Guide" is updated through PA 28 of 2007, which became effective July 10, 2007 and which was discussed in an earlier post.

For More Information

Since the facts of each case are unique, this update cannot be taken as legal advice. For more information about the Michigan Construction Lien Act or how H.B. 5051 might affect you or your business, please feel free to contact Peter Cavanaugh.

Residential Builders Exempt from Michigan Consumer Protection Act, Michigan Supreme Court Rules

A residential home builder is exempt from the Michigan Consumer Protection Act under MCL 445.904(1)(a) because the general transaction of residential home building, including contracting to perform such a transaction, is "specifically authorized" by the Michigan Occupational Code, MCL 339.101 et seq. This was the recent ruling of the Michigan Supreme Court in Liss v Lewiston-Richards, Inc, 478 Mich 203; 732 NW2d 514 (Mich Sup Ct, June 6, 2007).

In reaching its decision, the Supreme Court overruled two earlier decisions of the Michigan Court of Appeals -- Forton v Laszar, 239 Mich App 711, 609 NW2d 850 (2000), and Hartman & Eichhorn Bldg Co, Inc v Dailey, 266 Mich App 545, 701 NW2d 749 (2005) -- which had permitted homeowners to sue home builders under the Michigan Consumer Protection Act.

The full text of Liss v Lewiston-Richards, Inc can be found here.

Comment: The Michigan Consumer Protection Act was used to pursue claims against residential builders because it provided a statutory basis to recovery attorney fees. As a practical matter, the Liss decision will make it more difficult for homeowners to pursue claims against their builders. At common law, under the "American Rule," every party pays their own attorney fees. Unless the parties agree by contract that the prevailing party can recover their attorney fees (rare in contracts for residential construction), the only other way to recover attorney fees is by statute.

For More Information

Since the facts of each case are unique, this update cannot be taken as legal advice. For more information about the Liss decision or how it might affect you or your business, please contact Peter Cavanaugh.