SB-0459, As Passed House, December 13, 2006

SUBSTITUTE FOR

SENATE BILL NO. 459

     A bill to amend 1980 PA 497, entitled

"Construction lien act,"

by amending the title and sections 104, 106, 107, 114, and 201 (MCL

570.1104, 570.1106, 570.1107, 570.1114, and 570.1201), sections

104, 106, 107, and 114 as amended by 1982 PA 17 and section 201 as

amended by 1984 PA 190, and by adding section 114a.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

TITLE

     An act to establish, protect, and enforce by lien the rights

of persons performing labor or providing material or equipment for

the improvement of real property; to provide for certain defenses

with respect thereto; to establish  a the homeowner construction

lien recovery fund;  within the department of licensing and

regulation;  to provide for the powers and duties of certain state

officers and agencies; to provide for the  assessments assessment

of certain occupations; to provide remedies and prescribe

penalties; and to repeal  certain  acts and parts of acts.

     Sec. 104. (1) "Court" means the circuit court in which an

action to enforce a construction lien through foreclosure is

pending.

     (2) "Department" means the department of  licensing and

regulation labor and economic growth.

     (3) "Designee" means the person named by an owner or lessee to

receive, on behalf of the owner or lessee, all notices or other

instruments whose furnishing is required by this act. The owner or

lessee may name himself or herself as designee. The owner or lessee

may not name the contractor as designee. However, a contractor who

is providing only architectural or engineering services may be

named as designee.

     (4) "Fringe benefits and withholdings" means compensation due

an employee pursuant to a written contract or written policy for

holiday, time off for sickness or injury, time off for personal

reasons or vacation, bonuses, authorized expenses incurred during

the course of employment, and any other contributions made to or on

behalf of an employee.

     (5) "Fund" means the homeowner construction lien recovery fund

created  under part 2 in section 201.

     (6) "General contractor" means a contractor who contracts with

an owner or lessee to provide, directly or indirectly through

contracts with subcontractors, suppliers, or laborers,

substantially all of the improvements to the property described in

the notice of commencement.

     (7) "Improvement" means the result of labor or material

provided by a contractor, subcontractor, supplier, or laborer,

including, but not limited to, surveying, engineering and

architectural planning, construction management, clearing,

demolishing, excavating, filling, building, erecting, constructing,

altering, repairing, ornamenting, landscaping, paving, leasing

equipment, or installing or affixing a fixture or material,

pursuant to a contract.

     (8) "Laborer" means an individual who, pursuant to a contract

with a contractor or subcontractor, provides an improvement to real

property through the individual's personal labor.

     Sec. 106. (1) "Person" means an individual, corporation,

partnership, sole proprietorship, association, other legal entity,

or any combination thereof.

     (2) "Project" means the aggregate of improvements contracted

for by the contracting owner.

     (3) "Qualifying officer" means an individual designated as a

qualifying officer of the contractor or subcontractor in the

records of the department under article 24 of the occupational

code, 1980 PA 299, MCL 339.2401 to 339.2412.

(4)  (3) "Residential structure" means an individual

residential condominium unit or a residential building containing

not more than 2 residential units, the land on which it is or will

be located, and all appurtenances,  thereto,  in which the owner or

lessee contracting for the improvement is residing or will reside

upon completion of the improvement.

(5)  (4) "Subcontractor" means a person, other than a laborer

or supplier, who pursuant to a contract between himself or herself

and a person other than the owner or lessee performs any part of a

contractor's contract for an improvement.

(6)  (5) "Supplier" means a person who, pursuant to a

contract with a contractor or a subcontractor, leases, rents, or in

any other manner provides material or equipment  which that is

used in the improvement of real property.

(7)  (6) "Wages" means all earnings of an employee whether

determined on the basis of time, task, piece, commission, or other

method of calculation for labor or services except  those defined

as  fringe benefits and withholdings.

     Sec. 107. (1) Each contractor, subcontractor, supplier, or

laborer who provides an improvement to real property  shall have

has a construction lien upon the interest of the owner or lessee

who contracted for the improvement to the real property, as

described in the notice of commencement  provided for by given

under section 108 or 108a, the interest of an owner who has

subordinated his or her interest to the mortgage for the

improvement of the real property, and the interest of an owner who

has required the improvement. A construction lien acquired pursuant

to this act shall not exceed the amount of the lien claimant's

contract less payments made on the contract.

     (2) A construction lien under this act  shall attach attaches

to the entire interest of the owner or lessee who contracted for

the improvement, including any subsequently acquired legal or

equitable interest.

     (3) Each contractor, subcontractor, supplier, or laborer who

provides an improvement to real property to which the person

contracting for the improvement had no legal title  shall have has

a construction lien upon the improvement for which the contractor,

subcontractor, supplier, or laborer provided labor, material, or

equipment. The forfeiture, surrender, or termination of any title

or interest held by  any an owner or lessee who contracted for an

improvement to the property,  or by any an owner who subordinated

his or her interest to the mortgage for the improvement, or  by any

an owner who has required the improvement  shall does not defeat

the lien of the contractor, subcontractor, supplier, or laborer

upon the improvement.

     (4) If the rights of a person contracting for an improvement

as a land contract vendee or a lessee are forfeited, surrendered,

or otherwise terminated, any lien claimant who has provided a

notice of furnishing or is excused from providing a notice of

furnishing  pursuant to under section 108, 108a, or 109 and who

performs the covenants contained in the land contract or lease

within 30 days after receiving actual notice of the forfeiture,

surrender, or termination  shall be is subrogated to the rights of

the contracting vendee or lessee as those rights existed

immediately before the forfeiture, surrender, or termination.

     (5) For purposes of this act, if the real property is owned or

leased by more than 1 person, there is a rebuttable presumption

that an improvement to real property  pursuant to under a contract

which was entered into by with an owner or lessee  shall be

presumed to have been was consented to by any other co-owner or

co-lessee.  , but the presumption shall in all cases be rebuttable.

If enforcement of a construction lien through foreclosure is sought

and the court finds that the improvement  has been was consented

to by a co-owner or co-lessee who did not contract for the

improvement, the court shall order the entire interest of that co-

owner or co-lessee, including any subsequently acquired legal or

equitable interest, to be subject to the construction lien. A

deficiency judgment shall not be entered against a noncontracting

owner, co-owner, lessee, or co-lessee.

     (6) If the real property of an owner or lessee is subject to

multiple construction liens, the sum of the construction liens

shall not exceed the amount  which  the owner or lessee agreed to

pay the person with whom he or she contracted for the improvement

as modified by  any and  all additions, deletions, and  any  other

amendments, less payments made by or on behalf of the owner or

lessee, pursuant to either a contractor's sworn statement or a

waiver of lien, in accordance with this act.

(7) After the effective date of the amendatory act that added

this subsection, a construction lien of a subcontractor or supplier

for an improvement to a residential structure shall only include an

amount for interest, including, but not limited to, a time-price

differential or a finance charge, if the amount is in accordance

with the terms of the contract between the subcontractor or

supplier and the contractor or subcontractor and does not include

any interest that accrues after 90 days after the claim of lien is

recorded.

     Sec. 114. A contractor  shall does not have a right to a

construction lien  upon on the interest of  any an owner or

lessee in a residential structure unless the contractor has

provided an improvement to the residential structure pursuant to a

written contract between the owner or lessee and the contractor and

any amendments or additions to the contract are also  shall be  in

writing. The contract required by this section shall contain a

statement, in type no smaller than that of the body of the

contract,  setting forth stating all of the following:

     (a) That a residential builder or a residential maintenance

and alteration contractor is required to be licensed under article

24 of  Act 299 of the Public Acts of 1980, as amended, being

sections 339.2401 to 339.2412 of the Michigan Compiled Laws the

occupational code, 1980 PA 299, MCL 339.2401 to 339.2412. That an

electrician is required to be licensed under  Act No. 217 of the

Public Acts of 1956, as amended, being sections 338.881 to 338.892

of the Michigan Compiled Laws the electrical administrative act,

1956 PA 217, MCL 338.881 to 338.892. That a  plumber plumbing

contractor is required to be licensed under  Act No. 266 of the

Public Acts of 1929, as amended, being sections 338.901 to 338.917

of the Michigan Compiled Laws the state plumbing act, 2002 PA 733,

MCL 338.3511 to 338.3569. That a mechanical contractor is required

to be licensed under the Forbes mechanical contractors act, 1984 PA

192, MCL 338.971 to 338.988.

     (b) If the contractor is required to be licensed to provide

the contracted improvement, that the contractor is  so  licensed

and the contractor's license number.

      (c) If a license is required, the contractor's license

number.

Sec. 114a. (1) The owner of residential property on which a

construction lien has been recorded by a person who was not

licensed as described in section 114, or any person affected by the

lien, may bring an action to discharge the lien.

     (2) If the court in an action under subsection (1) determines

that the person who recorded the lien was not licensed as required,

the person is liable to the person who brought the action for all

damages that result from the recording and any attempts to enforce

the lien, including actual costs and attorney fees.

     (3) A person who brings an action to recover for the

performance of an act or contract for which a license is required

as described in section 114 shall allege in the complaint and has

the burden of proving that he or she was properly licensed.

     Sec. 201. (1)  A The homeowner construction lien recovery

fund is created within the department.  of licensing and

regulation.  The fund shall be self-supporting and shall  consist

of assessments charged in the following manner be funded as

follows:

     (a)  Except as provided in subsection (4), when applying for

renewal licensure for 1982 and when applying for initial licensure,

each of the following persons shall be assessed in In addition to

the license fee, a  fee of $50.00 for deposit in the fund person

who applies for 1 of the following shall pay a fee of $10.00 and,

subject to subsection (6), a person who applies to renew 1 of the

following shall pay a fee of $10.00 for each year that the renewed

license will be valid:

     (i) A  person applying for a  residential builders license or a

residential maintenance and alteration contractor's license under

article 24 of the occupational code,  Act No. 299 of the Public

Acts of 1980, as amended, being sections 339.2401 to 339.2412 of

the Michigan Compiled Laws 1980 PA 299, MCL 339.2401 to 339.2412.

     (ii)  A person applying for an  An electrical contractor's

license under the electrical administrative act,  Act No. 217 of

the Public Acts of 1956, as amended, being sections 338.881 to

338.892 of the Michigan Compiled Laws 1956 PA 217, MCL 338.881 to

338.892.

     (iii) A  person applying for an authorized master plumber's

plumbing contractor's license under  Act No. 266 of the Public Acts

of 1929, as amended, being sections 338.901 to 338.917 of the

Michigan Compiled Laws, which license authorizes the securing of

plumbing installation permits the state plumbing act, 2002 PA 733,

MCL 338.3511 to 338.3569.

     (iv) A  person applying for a mechanical contractor's license

under the Forbes mechanical contractors act, 1984 PA 192, MCL

338.971 to 338.988.

     (b) A laborer who seeks to recover from the fund for the first

time shall not be required to pay a fee until he or she obtains a

recovery from the fund, at which time a fee of $15.00 shall be

withheld by the fund from the laborer's final recovery.  However,

in no event shall the total amount withheld by the fund from a

laborer in a 1-year period exceed $50.00.

     (c) Except for persons described in subdivisions (a) and (b),

all other lien claimants may become members of the fund by paying a

fee of $50.00 prior to the date of the lien claimant's contract for

the improvement to  the a residential structure.  A lien claimant

under this subdivision shall not pay a fee of more than $50.00 in a

calendar year. If the lien claimant is a supplier that conducts

business from more than 1 retail location, each retail location

shall be treated as a separate person for purposes of paying fees

and renewal fees for fund membership.

(d) Subject to subsection (6), a person who has paid a fee

under subdivision (b) or (c) shall pay a renewal fee as follows:

     (i) If the person paid the initial fee on or before June 1,

2006, a renewal fee of $30.00 on or before June 1, 2009, and a

renewal fee of $30.00 on or before June 1 of every third year after

the first renewal payment.

     (ii) If the person paid the initial fee after June 1, 2006, a

renewal fee of $30.00 on or before the first June 1 following the

third anniversary date of the initial payment and a renewal fee of

$30.00 on or before June 1 of every third year after the first

renewal payment.

     (2)  If, on December 1 of any year, the balance in the fund is

less than $1,000,000.00, the director of licensing and regulation

may require an additional assessment or payment, not to exceed

$50.00, from each of the persons described in subsection (1)(a) and

(c), unless, within 30 legislative days after the director requires

an additional assessment, the legislature, by majority vote of the

members elected and serving in both houses by record roll call

vote, adopts a concurrent resolution to prohibit the additional

assessment. As used in this subsection "legislative day" means a

day on which the senate and house is called to order and a quorum

of the senate and house is present. A person may pay a renewal fee

under subsection (1)(d) after the date on which it is due, but is

not entitled to recover from the fund for an improvement made after

the due date and before the renewal fee is paid.

(3) A person who becomes a member of the fund by paying a fee

under subsection (1) shall notify the department division that

administers the fund and, if required by law, the appropriate

licensing agency, in writing, of a change in the person's name,

address, or form of business organization within 30 days of the

change. Proof that a notice or other document related to this act

was mailed or, if another method of delivery is required by law or

rule, delivered by that other method to a member at the last

address that the member provided to the fund administrator is

conclusive proof that the notice or document was received by the

member.

     (4) At least 30 days before the date that a renewal payment

under subsection (1)(d) is due, the department shall send a notice

of the amount that will be due and the payment due date to the

person who paid the fee under subsection (1)(b) or (c). The notice

shall be sent by ordinary mail to the last address that the person

provided to the fund administrator.

(5)  (3)  A person  shall is not  be  entitled to recover

from the fund unless  he or she the person has paid into the fund

as required by this  section act.

     (4) Notwithstanding subsection (1)(a), a person shall not be

assessed more than $50.00 in an assessment period regardless of the

number of licenses applied for or held.

     (6) If on December 1 of any year the balance in the fund is

more than $6,000,000.00, a renewal fee under subsection (1) with a

due date after January 1 of the following year is not due. If on

any subsequent December 1 the balance in the fund is less than

$4,000,000.00, renewal fees under subsection (1) are due after

January 1 of the following year.

     Enacting section 1. This amendatory act does not take effect

unless Senate Bill No. 405 of the 93rd Legislature is enacted into

law.