“New and Improved” Design Professional Lien Rights and Procedures in Michigan
On December 12, 2018, Governor Snyder signed into law Public Act 367 of 2018, which amends the Michigan Construction Lien Act, MCL § 570.1101, et seq. (“CLA”) to provide design professionals (i.e., licensed architects, engineers, or surveyors) specific lien rights and procedures to follow in the event the project owner does not proceed with the actual physical construction of the project. The amended CLA has immediate effect. These amended lien rights apply to both design professionals with a written contract with the project owner (“Lead Design Professional”) and to design professionals who were retained by the Lead Design Professional (“Subcontractor Design Professional”).
Prior to this amendment, the CLA permitted design professionals lien rights on construction projects where actual physical construction work commenced on the project. However, uncertainty and legal debates arose regarding priority and enforceability of the design professional’s lien rights for design services when the project owner decided not to commence construction of the project. The amended CLA resolves this uncertainty by adding a new statutory notice requirement for design professionals to secure lien rights specifically in the event the project owner does not commence construction.
In particular, a design professional must complete and record a written notice form (per MCL § 570.1107(a) and (b) of the CLA) with the local register of deeds stating among other requirements that it is providing professional services on the property (the “Design Professional Notice”). The Design Professional Notice must be recorded after the design professional enters into the written contract for services on the project, but not later than 90 days after its last day of providing services on the project. The statute provides different Design Professional Notice forms and content requirements for the Lead Design Professionals and the Subcontractor Design Professionals. Furthermore, the Subcontractor Design Professional must receive written approval “by or on behalf of the owner of the property” of the subcontract with the Lead Design Professional and Lead Design Professional must have previously recorded notice before the Subcontractor Design Professional files its notice.
The Design Professional Notice (a) is valid for one year after its recorded, but subsequent notice can be recorded if needed; (b) has a priority date (relative to other interests and encumbrances on the property) based on the date the notice is recorded unless actual physical construction work commences; (c) has a priority date based on the first date of actual physical construction work, if construction commences. The amended CLA also maintains equal priority between construction lien claimants, irrespective of whether the lien claimant is a design professional, contractor, subcontractor or supplier.
Subsequent to recording the Design Professional Notice, the Design Professional must still perfect its lien rights by following the previous CLA requirements, e.g., serving a Notice of Furnishing (if applicable), serving a sworn statement, recording a Claim of Lien, commencing a lien foreclosure lawsuit, and other requirements under the CLA.
This e-alert provides an introduction to the amended CLA. For more information on the amendments to the CLA and how it applies to your particular situation, Jeffrey M. Gallant at firstname.lastname@example.org or (313) 967-4071, or any member of Clark Hill’s Construction Law Practice Group are available to assist you.