KHVPF Insight

Michigan’s Construction Lien Act Is Amended To Expand Lien Coverage For Design Professionals

Michigan’s Construction Lien Act Is Amended To Expand Lien Coverage For Design Professionals

 

One of many statutory changes passed during the legislature’s lame duck session, this amendment modified Michigan’s Construction Lien Act (CLA) to establish a procedure for “design professionals” to perfect construction lien rights for “professional services” provided during the planning stages of a project for improvements to real property—whether or not actual physical improvements ever occur. This amendment took immediate effect on December 12, 2018.

The CLA, enacted in 1982, is intended to protect the interests of contractors, laborers, and suppliers (including design services) through construction liens, while also protecting owners from excessive costs. Prior to the recent amendment, lien rights did not arise until the first “actual physical improvement” was made to the property.

The actual physical improvement requirement essentially meant that there had to be a physical change that was readily visible and would put a person making a reasonable inspection of the property on notice that improvements were being made to the property that may give rise to lien rights. That actual physical improvement requirement left those providing professional design services—for example, the type of services customarily provided by architects, engineers, and surveyors—without a claim of lien to secure their right to payment for services provided in the planning stages of a project if the project did not go forward.

The CLA now provides that “design professionals,” i.e., licensed architects, engineers, and professional surveyors under Michigan’s Occupational Code, have a claim of lien for professional services rendered before the first actual physical improvement occurs. To perfect a claim of lien for these professional services, the design professional must comply with each of these technical requirements set forth in the amended CLA:

• The services must be provided pursuant to a written contract for erection, alteration, repair, or removal of a structure, or other improvement to real property.
• The claimant must record a “Notice of Professional Services Contract,” which must substantially comport with the form set forth in Section 107(a) of the CLA.
• The Notice must be filed with the register of deeds for the county in which the property is located.
• The Notice may be filed anytime after the contract is executed, whether or not services have commenced or are completed.
• However, the Notice must be filed within 90 days of the last day services were provided.
• The Notice is valid for one year—consequently, an action to foreclose the lien must be brought within one year from the date the lien was recorded.
• If an actual physical improvement is made to the property, the notice is only effective from the date of the first actual physical improvement.

As with all other construction lien claims, the design professional’s lien is of equal priority with all other construction lien claims and subordinate to other claims of interest in the property (such as a mortgage) recorded before the first actual physical improvement.

 

Gary D. Reeves