SB-0405, As Passed Senate, May 31, 2006

SUBSTITUTE FOR

SENATE BILL NO. 405

      A bill to amend 1980 PA 497, entitled

"Construction lien act,"

by amending sections 110, 115, 202, 203, 204, and 206 (MCL

570.1110, 570.1115, 570.1202, 570.1203, 570.1204, and 570.1206),

section 110 as amended by 2001 PA 151, sections 115 and 203 as

amended by 1982 PA 17, and sections 202 and 206 as amended by

1981 PA 191.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 1        Sec. 110. (1) A contractor shall provide a sworn statement

 2  to the owner or lessee in each of the following circumstances:

 3        (a) When payment is due to the contractor from the owner or

 4  lessee or when the contractor requests payment from the owner or

 5  lessee.

 1        (b) When a demand for the sworn statement has been made by

 2  or on behalf of the owner or lessee.

 3        (2) A subcontractor shall provide a sworn statement to the

 4  owner or lessee when a demand for the sworn statement has been

 5  made by or on behalf of the owner or lessee.

 6        (3) A subcontractor shall provide a sworn statement to the

 7  contractor when payment is due to the subcontractor from the

 8  contractor or when the subcontractor requests payment from the

 9  contractor.

10        (4)  The  A sworn statement shall list each subcontractor

11  and supplier with whom the person issuing the sworn statement has

12  contracted relative to the improvement to the real property. The

13  sworn statement shall contain a list of laborers with whom the

14  person issuing the sworn statement has contracted relative to the

15  improvement to the real property and for whom payment for wages

16  or fringe benefits and withholdings are due but unpaid and the

17  itemized amount of such wages or fringe benefits and

18  withholdings. The sworn statement shall be in substantially the

19  following form:

20 SWORN STATEMENT

21 State of Michigan)

22                  )   ss.

23 County of .......)

24 ............(deponent), being sworn, states the following:

25 ......... is the (contractor) (subcontractor) for an improvement

26 to the following real property in ............ County, Michigan,

27 described as follows:

1  ...............................................................

2  (insert legal description of property)

 3        The following is a statement of each subcontractor and

 4  supplier, and laborer for whom payment of wages or fringe

 5  benefits and withholdings is due but unpaid, with whom the

 6  (contractor) (subcontractor) has (contracted) (subcontracted) for

 7  performance under the contract with the owner or lessee of the

 8  property, and the amounts due to the persons as of the date of

 9  this statement are correctly and fully set forth opposite their

10  names:

11 Name,      

12 address,   

13 and        

14 tele-      

15 phone                                                           Amount

16 number                                                          of

17 Name of                                                         laborer

18 subcon-                                                 Amount  fringe

19 trac-                                                   of      benefits

20 tor,        Type of                            Balance  laborer and

21 sup-        improve- Total             Amount   to com-  wages   with-

22 plier,      ment    con-     Amount   cur-     plete    due     holdings

23 or          fur-    tract    already  rently   (op-     but     due but

24 laborer     nished  price    paid     owing    tional)  unpaid  unpaid

25  .................................................................

26 Totals

27  (Some columns are not applicable to all persons listed)

28        The contractor has not procured material from, or

29  subcontracted with, any person other than those set forth and

30  owes no money for the improvement other than the sums set forth.

31        I make this statement as the (contractor) (subcontractor) or

 1  as ......... of the (contractor) (subcontractor) to represent to

 2  the owner or lessee of the property and his or her agents that

 3  the property is free from claims of construction liens, or the

 4  possibility of construction liens, except as specifically set

 5  forth in this statement and except for claims of construction

 6  liens by laborers that may be provided under section 109 of the

 7  construction lien act, 1980 PA 497, MCL 570.1109.

 8        WARNING TO OWNER OR LESSEE: AN OWNER OR LESSEE OF THE

 9  PROPERTY MAY NOT RELY ON THIS SWORN STATEMENT TO AVOID THE CLAIM

10  OF A SUBCONTRACTOR, SUPPLIER, OR LABORER WHO HAS PROVIDED A

11  NOTICE OF FURNISHING OR A LABORER WHO MAY PROVIDE A NOTICE OF

12  FURNISHING UNDER SECTION 109 OF THE CONSTRUCTION LIEN ACT, 1980

13  PA 497, MCL 570.1109, TO THE DESIGNEE OR TO THE OWNER OR LESSEE

14  IF THE DESIGNEE IS NOT NAMED OR HAS DIED.

15        ON RECEIPT OF THIS SWORN STATEMENT, THE OWNER OR LESSEE, OR

16  THE OWNER'S OR LESSEE'S DESIGNEE, MUST NOTIFY, EITHER IN WRITING,

17  BY TELEPHONE, OR PERSONALLY, EACH SUBCONTRACTOR, SUPPLIER, AND

18  LABORER NAMED IN THE SWORN STATEMENT OF ITS RECEIPT. IF A

19  SUBCONTRACTOR, SUPPLIER, OR LABORER NAMED IN THE SWORN STATEMENT

20  MAKES A REQUEST WITHIN 10 DAYS AFTER RECEIVING THE NOTICE, THE

21  OWNER, LESSEE, OR DESIGNEE SHALL GIVE THE REQUESTER A COPY OF THE

22  SWORN STATEMENT.

23 ...............................

24                                              Deponent

25        WARNING TO DEPONENT: A PERSON WHO GIVES A FALSE SWORN

26  STATEMENT WITH INTENT TO DEFRAUD IS SUBJECT TO CRIMINAL PENALTIES

 1  AS PROVIDED IN SECTION 110 OF THE CONSTRUCTION LIEN ACT, 1980 PA

 2  497, MCL 570.1110.

3  Subscribed and sworn to before me on .....................(DATE)

4                     .............................................

5                       Notary Public,........ County, Michigan.

6  My commission expires: .................................. .

 7        (5) The contractor or subcontractor is not required to list

 8  in the sworn statement material furnished by the contractor or

 9  subcontractor out of his or her own inventory that was not

10  purchased specifically for performing the contract.

11        (6) On receipt of a sworn statement, the owner, lessee, or

12  designee shall notify in writing, by telephone, or personally

13  each subcontractor, supplier, and laborer named in the sworn

14  statement of its receipt. Within 10 days after receiving a

15  request from a subcontractor, supplier, or laborer named in the

16  sworn statement, the owner, lessee, or designee shall provide a

17  copy of the sworn statement to the requester.

18  (7)  (6) After the contractor or subcontractor provides the

19  sworn statement, the owner or lessee may withhold or, upon

20  written demand from the contractor, shall withhold  , from the

21  amount due or to become due to the contractor or to the

22  subcontractor for work already performed an amount sufficient to

23  pay all sums due to subcontractors, suppliers, or laborers, as

24  shown by the sworn statement, or due to lien claimants who have

25  provided a notice of furnishing under section 109. From the

26  amount withheld, the owner or lessee may directly pay

 1  subcontractors, suppliers, or laborers the amount they are due as

 2  shown by the sworn statement. If the contract provides for

 3  payments by the owner to the general contractor in the normal

 4  course of construction, but the owner elects to pay lien

 5  claimants directly under this section, the first time the owner

 6  elects to make payment directly to a lien claimant, he or she

 7  shall provide at least 5 business days' notice to the general

 8  contractor of the intention to make direct payment. Subsequent

 9  direct disbursements to lien claimants need not be preceded by

10  the 5-day notice provided in this section unless the owner first

11  returns to the practice of paying all sums to the general

12  contractor. As between the owner or lessee and the contractor or

13  subcontractor, all payments made under this subsection are

14  considered the same as if paid directly to the contractor or

15  subcontractor. If an amount is withheld under this subsection

16  from the contractor or subcontractor, the owner or lessee, upon

17  request, shall prepare and provide to the contractor or

18  subcontractor an itemized statement of the sums withheld. If an

19  amount is paid directly to a lien claimant under this section,

20  the owner or lessee shall, if requested by the contractor or

21  subcontractor, provide to the contractor or subcontractor an

22  itemized statement of the sums paid.

23  (8)  (7) An owner, lessee, designee, mortgagee, or

24  contractor may rely on a sworn statement prepared by a party

25  other than himself or herself to avoid the claim of a

26  subcontractor, supplier, or laborer unless the subcontractor,

27  supplier, or laborer has provided a notice of furnishing as

 1  required under section 109 or unless the notice of furnishing is

 2  excused under section 108 or 108a.

 3  (9)  (8) If a contractor fails to provide a sworn statement

 4  to the owner or lessee before recording the contractor's claim of

 5  lien, the contractor's construction lien is not invalid. However,

 6  the contractor is not entitled to any payment, and a complaint,

 7  cross-claim, or counterclaim may not be filed to enforce the

 8  construction lien, until the sworn statement has been provided.

 9  (10)  (9) If a subcontractor fails to provide a sworn

10  statement under subsection (2) to the owner or lessee before

11  recording the subcontractor's claim of lien, the subcontractor's

12  construction lien is valid. However, a complaint, cross-claim, or

13  counterclaim may not be filed to enforce the construction lien

14  until the sworn statement has been provided.

15  (11)  (10) A contractor or subcontractor who desires to

16  draw money and gives or causes to be given to any owner or lessee

17  a sworn statement required by this section that is false, with

18  intent to defraud, is guilty of a crime as follows:

19        (a) If the statement involved is for less than $200.00, the

20  contractor or subcontractor is guilty of a misdemeanor punishable

21  by imprisonment for not more than 93 days or a fine of not more

22  than $500.00 or 3 times the statement amount, whichever is

23  greater, or both imprisonment and a fine.

24        (b) If any of the following apply, the contractor or

25  subcontractor is guilty of a misdemeanor punishable by

26  imprisonment for not more than 1 year or a fine of not more than

27  $2,000.00 or 3 times the statement amount, whichever is greater,

 1  or both imprisonment and a fine:

 2        (i) The statement involved is for $200.00 or more but less

 3  than $1,000.00.

 4        (ii) The statement involved is for less than $200.00 and the

 5  contractor or subcontractor  violates subdivision (a) and has 1

 6  or more prior convictions for committing or attempting to commit

 7  an offense under this act.

 8        (c) If any of the following apply, the contractor or

 9  subcontractor is guilty of a felony punishable by imprisonment

10  for not more than 5 years or a fine of not more than $10,000.00

11  or 3 times the statement amount, whichever is greater, or both

12  imprisonment and a fine:

13        (i) The statement involved is for $1,000.00 or more but less

14  than $20,000.00.

15        (ii) The statement involved is for more than $200.00 but less

16  than $1,000.00 and the contractor or subcontractor  violates

17  subdivision (b)(i) and has 1 or more prior convictions for

18  violating or attempting to violate this act. For purposes of this

19  subparagraph, however, a prior conviction does not include a

20  conviction for  violating or attempting to violate  a violation

21  or attempted violation described in subdivision (a) or (b)(ii).

22        (d) If any of the following apply, the contractor or

23  subcontractor is guilty of a felony punishable by imprisonment

24  for not more than 10 years or a fine of not more than $15,000.00

25  or 3 times the statement amount, whichever is greater, or both

26  imprisonment and a fine:

27        (i) The statement involved is for $20,000.00 or more.

 1        (ii) The statement involved is for $1,000.00 or more but less

 2  than $20,000.00 and the contractor or subcontractor  violates

 3  subdivision (c)(i) and has 2 or more prior convictions for

 4  committing or attempting to commit an offense under this act. For

 5  purposes of this subparagraph, however, a prior conviction does

 6  not include a conviction for  violating or attempting to violate

 7  a violation or attempted violation described in subdivision (a)

 8  or (b)(ii).

 9  (12)  (11) Statements  For purposes of subsection (11),

10  statements involved in separate incidents pursuant to a scheme or

11  course of conduct within any 12-month period may be aggregated to

12  determine the total amount involved in the statements.

13  (13)  (12) If the prosecuting attorney intends to seek an

14  enhanced sentence for a violation under this section based upon

15  the defendant having 1 or more prior convictions, the prosecuting

16  attorney shall include  on  in the complaint and information a

17  statement listing the prior conviction or convictions. The

18  existence of the defendant's prior conviction or convictions

19  shall be determined by the court, without a jury, at sentencing

20  or at a separate hearing for that purpose before sentencing. The

21  existence of a prior conviction may be established by any

22  evidence relevant for that purpose, including, but not limited

23  to, 1 or more of the following:

24        (a) A copy of the judgment of conviction.

25        (b) A transcript of a prior trial, plea-taking, or

26  sentencing.

27        (c) Information contained in a presentence report.

 1        (d) The defendant's statement.

 2  (14)  (13) If the sentence for a conviction under this

 3  section is enhanced by 1 or more convictions, those prior

 4  convictions shall not be used to further enhance the sentence for

 5  the conviction pursuant to section 10, 11, or 12 of chapter IX of

 6  the code of criminal procedure, 1927 PA 175, MCL 769.10, 769.11,

 7  and 769.12.

 8        Sec. 115. (1) A person shall not require, as part of any

 9  contract for an improvement, that the right to a construction

10  lien be waived in advance of work performed. A waiver obtained as

11  part of a contract for an improvement is contrary to public

12  policy, and shall be invalid, except to the extent that payment

13  for labor and material furnished was actually made to the person

14  giving the waiver. Acceptance by a lien claimant of a promissory

15  note or other evidence of indebtedness from an owner, lessee, or

16  contractor shall not of itself serve to waive or discharge

17  otherwise valid construction lien rights.

18        (2) A lien claimant who receives full payment for his or her

19  contract shall provide to the owner, lessee, or designee a full

20  unconditional waiver of lien.

21        (3) A lien claimant who receives partial payment for his or

22  her contract shall provide to the owner, lessee, or designee a

23  partial unconditional waiver of the lien for the amount which the

24  lien claimant has received, if the owner, lessee, or designee

25  requests the partial unconditional waiver.

26        (4) A partial conditional waiver of lien or a full

27  conditional waiver of lien shall be effective upon payment of the

 1  amount indicated in the waiver.

 2        (5) For purposes of this act, retainage  which  that is not

 3  payable under a contract until the happening of a certain event

 4  in addition to the providing of an improvement  , is not due as

 5  of the date of the providing of the improvement.

 6        (6) A waiver of a lien under this section shall be effective

 7  when a person makes payment relying on the waiver unless at the

 8  time payment was made the person making the payment has written

 9  notice that the consideration for the waiver has failed.

10        (7) Subject to subsection (8), an owner, lessee, or designee

11  shall not accept a full or partial unconditional or conditional

12  waiver of lien from a person other than the lien claimant named

13  in the waiver, unless the owner, lessee, or designee first

14  contacts the lien claimant named in the waiver to verify its

15  authenticity.

16  (8)  (7) An agent who is authorized to prepare and serve a

17  notice of furnishing  on behalf of a laborer or group of laborers

18  or an agent who is authorized  or to prepare, record, and serve a

19  claim of lien on behalf of a laborer or group of laborers is

20  automatically authorized to provide and responsible for providing

21  waivers of lien, unless or until the laborer or group of laborers

22  notifies the designee in writing that someone other than  a

23  previously authorized  the agent is  duly authorized to provide

24  appropriate waivers.  An agent who is authorized to prepare and

25  serve a notice of furnishing or a claim of lien on behalf of a

26  laborer or group of laborers shall be responsible for providing

27  waivers on behalf of such laborer or laborers pursuant to this

 1  section. An agent who is authorized to prepare and serve a claim

 2  of lien on behalf of a laborer or group of laborers shall be

 3  responsible for providing waivers of lien on behalf of such

 4  laborer or laborers pursuant to this section. An individual

 5  laborer may also provide waivers  pursuant to  under this section

 6  instead of the agent.

 7  (9)  (8) The following forms shall be used in substantially

 8  the following format  in executing  to execute waivers of

 9  construction liens:

10      (a)         PARTIAL UNCONDITIONAL WAIVER

11 I/we have a contract with ................................... to

12                              (other contracting party)

13 provide ............... for the improvement to the property

14 described as ............................, and hereby

15 by signing this waiver waive my/our construction lien to the

16 amount of $ .........., for labor/materials provided

17 through ............................ .

18                     (date)

19 This waiver, together with all previous waivers, if any,

20 (circle one)  does  does not  cover all amounts due to me/us for

21 contract improvement provided through the date shown above.

22 If the owner or lessee of the property or the owner's or lessee's

23 designee does not receive this waiver directly from me/one of

24 us, the owner, lessee, or designee must contact me/one of us

25 directly to verify that it is authentic.

26                                    ............................

27                                    ............................

28                                    (signature of lien claimant)

29 Signed on: .................. Address: ........................

1                   (date)                ........................

2                                Telephone: ......................

3  DO NOT SIGN BLANK OR INCOMPLETE FORMS. RETAIN A COPY.

4       (b)         PARTIAL CONDITIONAL WAIVER

5  I/we have a contract with ..................................  to

6                               (other contracting party)

7  provide ............... for the improvement to the property

8  described as: ............................, and hereby

9  by signing this waiver waive my/our construction lien to the

10 amount of $ .........., for labor/materials provided

11 through................................ .

12                    (date)

13 This waiver, together with all previous waivers, if any,

14 (circle one)  does  does not  cover all amounts due to me/us for

15 contract improvement provided through the date shown above.

16 This waiver is conditioned on actual payment of the amount

17 shown above.

18 If the owner or lessee of the property or the owner's or lessee's

19 designee does not receive this waiver directly from me/one of

20 us, the owner, lessee, or designee must contact me/one of us

21 directly to verify that it is authentic.

22                                    ............................

23                                    ............................

24                                    (signature of lien claimant)

25 Signed on: .................. Address: ........................

26                  (date)                ........................

27                               Telephone: ......................

28 DO NOT SIGN BLANK OR INCOMPLETE FORMS. RETAIN A COPY.

29      (c) FULL UNCONDITIONAL WAIVER

30 My/our contract with ......................................  to

31                              (other contracting party)

1  provide ............... for the improvement of the property

2  described as: ............................ having has been

3  fully paid and satisfied. ,  By signing this waiver, all my/our

4  construction lien rights against such  the described property

5  are hereby waived and released.

6  If the owner or lessee of the property or the owner's or lessee's

7  designee does not receive this waiver directly from me/one of

8  us, the owner, lessee, or designee must contact me/one of us

9  directly to verify that it is authentic.

10                                    ............................

11                                    ............................

12                                    (signature of lien claimant)

13 Signed on: .................. Address: ........................

14                  (date)                ........................

15                               Telephone: ......................

16 DO NOT SIGN BLANK OR INCOMPLETE FORMS. RETAIN A COPY.

17      (d) FULL CONDITIONAL WAIVER

18 My/our contract with ......................................  to

19                              (other contracting party)

20 provide ............... for the improvement of the property

21 described as: ............................ having  has been

22 fully paid and satisfied. ,  By signing this waiver, all my/our

23 construction lien rights against such  the described property

24 are hereby waived and released.

25 This waiver is conditioned on actual payment of .............. .

26 If the owner or lessee of the property or the owner's or lessee's

27 designee does not receive this waiver directly from me/one of

28 us, the owner, lessee, or designee must contact me/one of us

29 directly to verify that it is authentic.

30                                    ............................

31                                    ............................

1                                     (signature of lien claimant)

2  Signed on: .................. Address: ........................

3                   (date)                ........................

4                                Telephone: ......................

5  DO NOT SIGN BLANK OR INCOMPLETE FORMS. RETAIN A COPY.

 6        Sec. 202. (1) The director of  licensing and regulation the

 7  department shall manage the  affairs of the fund pursuant fund

 8  according to this act. A detailed financial statement of the

 9  condition of the fund shall be published by the director

10  annually.  This The fund shall be subject to an audit by the

11  auditor general. The state treasurer shall deposit or invest

12  money from the fund, in the same manner as and subject to all

13  provisions of law  with respect that apply to the deposit or

14  investment of state funds by the state treasurer, and interest

15  earned shall be credited to the fund. The unexpended fund balance

16  shall carry forward to the new fiscal year at the end of each

17  fiscal year.

18        (2) The department may employ  such  office clerical and

19  professional help and claims investigators as  are  necessary to

20  carry out  the provisions of  this act. The attorney general

21  shall assign members of his or her staff and may supplement that

22  staff by contracting with  those  private attorneys as  are

23  necessary to adequately defend  the  actions against the fund.

24  All wages, professional fees, and other administrative

25  expenditures necessary for operation and defense of the fund,

26  including legal counsel, shall be charged to and payable from the

27  fund. Except  as provided in subsection (3) for legal counsel

 1  fees, the amount paid in a fiscal year for wages, professional

 2  fees, and other administrative expenditures  necessary for the

 3  operation of the fund  shall not exceed 20% of  funds collected

 4  by the fund in the previous fiscal year the average of the

 5  ending balances in the fund for the previous 2 fiscal years.

 6        (3) If the $50.00 fee is not assessed against license

 7  applications and renewals during a year under section 201, the

 8  limitation on fund expenditures provided in subsection (2) shall

 9  be calculated on the basis of the closest previous year in which

10  the $50.00 fee was assessed and collected for license application

11  and renewals under section 201.

12        Sec. 203. (1) A claim of construction lien  shall does not

13  attach to a residential structure, to the extent payments have

14  been made, if the owner or lessee files an affidavit with the

15  court indicating that the owner or lessee has done all of the

16  following:

17        (a) Paid the contractor for the improvement to the

18  residential structure  and according to the contract, indicating

19  in the affidavit the amount of the payment. The owner or lessee

20  shall attach to the affidavit copies of the contract, any change

21  orders, and any evidence of the payment that the owner or lessee

22  has, including, but not limited to, a canceled check or a credit

23  card or other receipt.

24        (b) Not colluded with any person to obtain a payment from

25  the fund.

26        (c) Cooperated and will continue to cooperate with the

27  department in the defense of the fund.

 1        (2)  In the absence of a If there is no written contract

 2  pursuant to as required by section 114, the filing of an

 3  affidavit under this section  shall create creates a rebuttable

 4  presumption that the owner or lessee has paid the contractor for

 5  the improvement. The presumption may be overcome only by a

 6  showing of clear and convincing evidence to the contrary.

 7        (3) Subject to section 204, a person who has recorded a

 8  claim of lien and who is precluded from  recovering having a

 9  construction lien under subsection (1) may recover from the fund

10  the amount  for which the lien is established he or she would

11  have been entitled to recover but for subsection (1). A person

12  who seeks recovery from the fund shall establish all of the

13  following:

14        (a) That he or she would be entitled to a construction lien

15  on a residential structure except for the defense provided in

16  subsection (1).

17        (b) That payment was made by the owner or lessee to the

18  contractor or subcontractor.

19        (c) That the contractor or subcontractor has retained or

20  used the proceeds or any part of the proceeds paid to the

21  contractor or subcontractor without having paid the person

22  claiming the construction lien.

23        (d) That he or she has complied with section 201.

24        (e) That he or she has not colluded with another person to

25  obtain a payment from the fund.

26        (f) That he or she has complied with any applicable

27  licensing acts.

 1        (g) That he or she has made a reasonable effort to obtain

 2  payment from the contractor or subcontractor.

 3        (h) That the contractor or  the  subcontractor  ,  with whom

 4  the person claiming the construction lien contracted  with,  is

 5  licensed if required by law to be licensed.

 6  (i) That the contractor or subcontractor with whom the

 7  person claiming the construction lien contracted is the same

 8  individual or legal entity with whom the owner or lessee

 9  contracted.

10        (j) If the person claiming the construction lien is a

11  supplier, that he or she has documentary proof that, unless the

12  supplier had provided material or equipment to the contractor or

13  subcontractor within the preceding year, before he or she

14  provided the material or equipment that is the subject of the

15  lien without obtaining advance payment in full, he or she did

16  both of the following:

17        (i) Required the contractor or subcontractor to whom he or

18  she provided the material or equipment to complete and submit a

19  credit application.

20        (ii) Before beginning to supply material or equipment to the

21  contractor or subcontractor without obtaining advance payment in

22  full, did either of the following, as applicable:

23        (A) If the contractor or subcontractor is a corporation

24  whose shares are publicly traded, obtained a report on the

25  contractor or subcontractor from a nationally recognized

26  organization that provides credit ratings of businesses to

27  determine the financial stability of the contractor or

 1  subcontractor.

 2        (B) If sub-subparagraph (A) does not apply, did both of the

 3  following:

 4        (I) Obtained a credit report on the owner or qualifying

 5  officer or the principal partners, officers, shareholders, or

 6  members of the contractor or subcontractor to determine the

 7  financial stability of the contractor or subcontractor.

 8        (II) Obtained a personal guaranty from the owner or 1 or

 9  more of the partners, officers, directors, managing members,

10  trustees, or shareholders of the contractor or subcontractor.

11        (k) If the person claiming the construction lien is a

12  supplier seeking to recover for material or equipment supplied to

13  a contractor or subcontractor without obtaining advance payment

14  in full, that a credit report obtained by the supplier on the

15  contractor or subcontractor did not disclose any of the

16  following:

17        (i) That the contractor or subcontractor had become

18  insolvent.

19        (ii) That the contractor or subcontractor was subject to a

20  receivership.

21        (iii) An unsatisfied judgment.

22        (iv) An outstanding tax lien.

23        (4) A subcontractor, supplier, or laborer who seeks

24  enforcement of a construction lien on a residential structure

25  through foreclosure shall join the fund as a defendant in the

26  foreclosure action  , and  within the period provided in section

27  117(1). The subcontractor, supplier, or laborer shall serve a

 1  summons and complaint  shall be served  on the  director office

 2  of the fund administrator within the department by certified or

 3  registered mail  ,  or by leaving a copy  thereof  at the office.

 4  of the director.  The failure to serve a summons and complaint

 5  upon the fund shall constitute a bar to under this subsection

 6  bars recovery from the fund. After  service upon the defendant of

 7  a defendant is served with a summons and complaint in an action

 8  in which enforcement of to foreclose a construction lien,

 9  through foreclosure is sought,  the department may intervene in

10  the action as a party defendant with respect to other

11  construction liens.

12        (5) The attorney general shall make every reasonable effort

13  to defend the fund and may assert any defense to a claim of lien

14  that would have been available to the owner or lessee.

15        (6) A payment from the fund shall not include interest on

16  the unpaid principal amount due, including, but not limited to, a

17  time-price differential or a finance charge, that accrued after

18  90 days after the claim of lien was recorded.

19        (7) A payment from the fund to a supplier shall not include

20  money due for material or equipment supplied to a contractor or

21  subcontractor without obtaining advance payment in full if either

22  of the following applies:

23        (a) The contractor or subcontractor was more than 90 days

24  delinquent in paying an indebtedness to the supplier at the time

25  the material or equipment was supplied. For purposes of this

26  subdivision, it is irrelevant that there was a delinquency of

27  more than 90 days if the delinquency is 90 days or less at the

 1  time the material or equipment is supplied.

 2        (b) The contractor or subcontractor was indebted to the

 3  supplier in an amount equal to or more than the credit limit

 4  established by the supplier for the contractor or subcontractor

 5  at the time the material or equipment was supplied.

 6  (8)  (6) Payment from the fund shall be made only if the

 7  court finds that a subcontractor, supplier, or laborer is

 8  entitled to payment from the fund. Subject to section 204, after

 9  the judgment has become final the department shall pay the amount

10  of the judgment out of the fund.

11        Sec. 204. The department shall not pay out of the fund to

12  subcontractors, suppliers, and laborers more than  $75,000.00

13  $100,000.00 per residential structure. When it appears that the

14  amount claimed from the fund  ,  with respect to a residential

15  structure  ,  will exceed  $75,000.00  $100,000.00, the

16  department may delay payment until the total amount to be paid

17  can be ascertained. If the total amount payable to

18  subcontractors, suppliers, and laborers exceeds  $75,000.00

19  $100,000.00, they shall be paid their proportional shares of that

20  amount.

21        Sec. 206. (1) The department shall maintain a website. If

22  the department makes a payment from the fund as the result of a

23  contractor's failure to pay a subcontractor or supplier, the

24  department shall post on the website the name and license number

25  of the contractor and the name and license number of any

26  qualifying officer of the contractor. The website shall be

27  designed to allow a visitor to search the posted names and

 1  license numbers of contractors and qualifying officers.

 2        (2) If the department makes a payment from the fund as the

 3  result of a licensee's failure to pay a lien claimant, the

 4  department shall enter a complaint against the licensee with the

 5  appropriate licensing agency to be addressed by the disciplinary

 6  proceedings under the appropriate licensing law.

 7        Enacting section 1. This amendatory act does not take effect

 8  unless Senate Bill No. 459 of the 93rd Legislature is enacted

 9  into law.