May 4, 2005, Introduced by Senators BASHAM, PRUSI, SWITALSKI, SCOTT and CLARKE and referred to the Committee on Economic Development, Small Business and Regulatory Reform.
A bill to amend 1980 PA 497, entitled
"Construction lien act,"
by amending the title and sections 104, 106, 107, 114, 201, 202,
203, and 204 (MCL 570.1104, 570.1106, 570.1107, 570.1114, 570.1201,
570.1202, 570.1203, and 570.1204), sections 104, 106, 107, 114, and
203 as amended by 1982 PA 17, section 201 as amended by 1984 PA
190, and section 202 as amended by 1981 PA 191, 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) "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.
(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.
(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.
(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 not include an
amount charged or assessed under the contract between the
subcontractor or supplier and the general contractor for interest
on the unpaid principal amount due, a time-price differential, a
finance charge, or any other item of interest.
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 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) 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,
2003, a renewal fee of $50.00 on or before June 1, 2006, and a
renewal fee of $50.00 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, 2003, a
renewal fee of $50.00 on or before the first June 1 following the
third anniversary date of the initial payment, plus a proportional
amount for the portion of the year from that anniversary date to
June 1, and a renewal fee of $50.00 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, 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 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) (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.
Sec.
202. (1) The director of licensing and regulation the
department shall manage the affairs of the fund pursuant fund
according to this act. A detailed financial statement of the
condition
of the fund shall be published by the director annually.
This
The fund shall be subject to
an audit by the auditor general.
The state treasurer shall deposit or invest money from the fund, in
the
same manner as and subject to all provisions of law with
respect
that apply to the deposit or
investment of state funds by
the state treasurer, and interest earned shall be credited to the
fund. The unexpended fund balance shall carry forward to the new
fiscal year at the end of each fiscal year.
(2)
The department may employ such office clerical and
professional
help and claims investigators as are necessary to
carry
out the provisions of this act. The attorney general shall
assign members of his or her staff and may supplement that staff by
contracting
with those private attorneys as are necessary to
adequately
defend the actions against the fund. All wages,
professional fees, and other administrative expenditures necessary
for operation and defense of the fund, including legal counsel,
shall
be charged to and payable from the fund. Except as provided
in
subsection (3) for legal counsel fees, the
amount paid in a
fiscal year for wages, professional fees, and other administrative
expenditures
necessary for the operation of the fund shall not
exceed
20% of funds collected by the fund in the previous fiscal
year
the average of the ending balances in the fund for the
previous 2 fiscal years.
(3)
If the $50.00 fee is not assessed against license
applications
and renewals during a year under section 201, the
limitation
on fund expenditures provided in subsection (2) shall be
calculated
on the basis of the closest previous year in which the
$50.00
fee was assessed and collected for license application and
renewals
under section 201.
Sec.
203. (1) A claim of construction lien shall does
not
attach to a residential structure, to the extent payments have been
made, if the owner or lessee files an affidavit with the court
indicating that the owner or lessee has done all of the following:
(a) Paid the contractor for the improvement to the residential
structure, and
indicating in the affidavit the amount of the
payment.
(b) Not colluded with any person to obtain a payment from the
fund.
(c) Cooperated and will continue to cooperate with the
department in the defense of the fund.
(2)
In the absence of a If
there is no written contract
pursuant
to as required by section 114,
the filing of an affidavit
under
this section shall create creates a rebuttable presumption
that the owner or lessee has paid the contractor for the
improvement. The presumption may be overcome only by a showing of
clear and convincing evidence to the contrary.
(3) Subject to section 204, a person who has recorded a claim
of
lien and who is precluded from recovering having
a
construction lien under subsection (1) may recover from the fund
the
amount for which the lien is established he or she would have
been entitled to recover but for subsection (1). A person who seeks
recovery from the fund shall establish all of the following:
(a) That he or she would be entitled to a construction lien on
a residential structure except for the defense provided in
subsection (1).
(b) That payment was made by the owner or lessee to the
contractor or subcontractor.
(c) That the contractor or subcontractor has retained or used
the proceeds or any part of the proceeds paid to the contractor or
subcontractor without having paid the person claiming the
construction lien.
(d) That he or she has complied with section 201.
(e) That he or she has not colluded with another person to
obtain a payment from the fund.
(f) That he or she has complied with any applicable licensing
acts.
(g) That he or she has made a reasonable effort to obtain
payment from the contractor or subcontractor.
(h)
That the contractor or the subcontractor , with whom
the
person claiming the construction lien contracted with, is
licensed if required by law to be licensed.
(i) That the contractor or subcontractor with whom the person
claiming the construction lien contracted is the same individual or
legal entity with whom the owner or lessee contracted.
(4) A subcontractor, supplier, or laborer who seeks
enforcement of a construction lien on a residential structure
through foreclosure shall join the fund as a defendant in the
foreclosure
action , and serve a summons and complaint shall be
served
on the director office of the fund administrator within
the
department by certified or registered
mail , or by leaving a
copy
thereof at the office. of the director. The failure to
serve
a summons and complaint upon the fund shall constitute a bar
to
under this subsection bars
recovery from the fund. After
service
upon the defendant of a defendant is served with a summons
and
complaint in an action in which enforcement of to foreclose a
construction
lien, through foreclosure is sought, the
department
may intervene in the action as a party defendant with respect to
other construction liens.
(5) The attorney general shall make every reasonable effort to
defend the fund and may assert any defense to a claim of lien that
would have been available to the owner or lessee.
(6) Payment from the fund shall be made only if the court
finds that a subcontractor, supplier, or laborer is entitled to
payment from the fund. Subject to section 204, after the judgment
has become final the department shall pay the amount of the
judgment out of the fund.
Sec. 204. (1) A payment from the fund shall not include an
amount for interest on the unpaid principal amount due, a time-
price differential, a finance charge, or any other form of
interest.
(2) The department shall not pay out of the fund to
subcontractors, suppliers, and laborers more than $75,000.00 per
residential structure. When it appears that the amount claimed from
the
fund , with respect to a residential structure , will
exceed $75,000.00, the department may delay payment until the total
amount to be paid can be ascertained. If the total amount payable
to subcontractors, suppliers, and laborers exceeds $75,000.00, they
shall be paid their proportional shares of that amount.