License Requirements Under Michigan's Construction Lien Act

Author: Mark D. Hofstee
Date: 07/03/2007

From a contractor's point of view, one of the most valuable laws to come out of our Michigan legislature is the Construction Lien Act ("CLA"). This law provides remedies and protection for homeowners, contractors and laborers and ensures that those who are entitled to payment for their labor receive it.
Under the CLA, a building project is classified as either commercial or residential. Understanding the distinction between the two and following the correct procedures for each can make all the difference in a contractor's ability to collect on a particular job.
The requirements for a contractor are very similar, regardless of the type of project. In order for a contractor to take advantage of the CLA, the contractor must have a written contract directly with the owner, provide the owner with a Notice of Furnishing, execute Sworn Statements and record a Claim of Lien within ninety (90) days of providing the last labor or material on the project.
A residential builder who meets all of the other requirements previously stated may only enforce his lien rights under the CLA if he is a licensed contractor in the State of Michigan. This is the most overlooked requirement of the CLA and the ramifications to a contractor who fails to obtain a residential builder's license can be devastating.
For example, if a contractor working on a commercial project fails to fulfill his obligations under the lien act, he may still have another avenue to pursue collection - filing suit in state court. However, if a builder is required to be licensed under the terms of the CLA, which he must be if he's doing a residential project, recent case law suggests that that contractor may lose the right to sue in state court to collect money due, if he is not licensed. Therefore, not only has he lost the ability to foreclose on his construction lien under the CLA, he may be completely barred from recovering anything at all through the state courts.
If you have any questions about the Michigan Construction Lien Act or your rights as a contractor or property owner, feel free to schedule an appointment with one of our attorneys who can help guide you through the CLA.