By: Ellen Mason, J.D., Hotline Attorney
Val and Douglas bought a fixer-upper, bargain-basement-priced house in one of Detroit’s up-and-coming neighborhoods. They are quite handy, so they planned on doing a lot of work themselves. But, for the electrical work they hired a professional. They became dissatisfied with his work and fired him. Since he was a licensed contractor, they filed a complaint against him with the Michigan Department of Licensing and Regulatory Affairs (LARA).
The contractor got mad and filed a construction lien against Val and Douglas for the unpaid balance of the contract. But, the contractor didn’t tell Val and Douglas. It wasn’t until their mortgage company contacted them several months later that they found out about the lien.
In Michigan, a construction lien (MCL 570.1101) is a short legal document that gets publicly filed in the county clerk’s office that puts “a cloud” on the property title, which means that the property cannot be sold until the lien is removed.
There are a few options on how to remove the lien:
- Before the lien is filed on the property, negotiate a settlement.
- Obtain a “lien bond” through a surety company that guarantees payment to the contractor if the contractor is successful on his legal claims. The bond immediately removes the lien from the property record.
- Initiate a lawsuit against the contractor.
- Wait and let the statute of limitations expire on the lien.
Exercising these options may require additional expenses or hiring professional services. Additionally, most contracts have dispute resolution clause built in so that any dispute must go to arbitration. Obtaining a resolution by arbitration may require the need to hire the services of an attorney.
Here are a few things to know about liens:
- The contractor has 90 days from the last date of work to file the lien.
- If the contractor isn’t licensed, the contractor can’t file a lien.
- The contractor must move to enforce the lien within one year, or the lien is void.
Often, after a lien is placed on a property, homeowners opt to wait to see if the contractor files for arbitration within one year. If the contractor doesn’t move for arbitration, the lien will expire. If the contractor decides to move for arbitration, the homeowners must decide whether they will go to arbitration or attempt to negotiate a settlement.
In my opinion, the best option is to attempt to negotiate with the contractor before the lien is filed. If you or a loved one needs legal advice, Elder Law of Michigan is here to provide assistance free of charge to Michigan seniors and those with disabilities.
Additional information on Mechanic’s Liens in Michigan for Homeowners can be found here.