Legal: Compliance Strategies for Contractors Seminar - October 31, 2007

The AGC of Michigan’s October 31 lien law seminar was anything but scary. A panel of six experts provided a detailed examination of complex issues surrounding lien law rights and recent changes to Michigan’s Construction Lien Act.

“Compliance Strategies For Contractors: Advanced Lien Law Protection & Surety Issues,” took a deep look at changes in Michigan’s law as it applies to both residential and nonresidential construction. As one of the panelists, David M. Lick, of Foster, Swift, Collins & Smith, PC, observed, with mixed use projects combining retail, office, and residential construction becoming more commonplace, AGC members should wisely be informed about both kinds of liens and surety requirements. They have different requirements and deadlines contractors must meet for their own protection.

During the introduction, it was noted that the AGC of Michigan was the impetus for needed change to Michigan’s Construction Lien Act following 2006 modifications to the longstanding law. Earlier this year, AGC succeeded in getting clarifications made so that the 2006 changes only affected residential construction as originally intended, thereby providing much needed relief for all commercial construction contractors.

Basic topics addressed during the two hour workshop, conducted at AGC of Michigan headquarters in Lansing and conveyed through videoconferencing to Upper Peninsula contractors at Northern Michigan University, covered such topics as:

• How to assure you, as a contractor, will obtain security for payment through the necessary and properly executed and filed construction liens.
• The impact bankruptcy can have on liens and sureties.
• Contractor rights under the Builders Trust Act, including what you have to do to assure them.
• How to recover lost profits and attorney fees.
• Bonding around a lien.
• What to do when you miss a notice deadline.
• Kevin S. Hendrick of the Detroit law firm of Clark Hill focused on the deadlines. The major one for general contractors is “90 days from last furnishing.” But there are strings attached to it.
• First, 90 days means 90 calendar days, not three months.
• Not when the lien is mailed for record, or taken to the register of deeds. The lien must be official registered by that office within the 90 day period, so its best to get it into official hands a week or so before the deadline expires.
• It doesn’t mean 90 days from when the last invoice was sent.

Subcontractors have to meet a 20 day deadline, a requirement that’s involving firms that are normally self-performing general contractors that have taken up subcontracting or trade work to supplement their business.

Stephen A. Hilger of Rhoades McKee, PC, Grand Rapids, outlined the relationships between lien waivers, releases, and indemnity. During his explanation of complex and technical issues, he observed how he had to develop forms to meet Michigan’s new requirements, as the state has not yet composed its own, then explain to local officials their function.

Patrick D. Monea of Granger Construction, Lansing, provided a contractor’s perspective on notice requirements under Michigan’s new law. He defined such terms as “notice of commencement,” “notice of furnishing,” and “proof of service.” Because liens can’t be filed on public projects, he explained Michigan’s Public Bond Act as well as the operations of the Michigan Builder’s Trust Fund.

Ron Torbert of Southfield construction management firm of Barton Malow, examined lien transfer bonds, providing information of their purpose and how they worked. They are a primary method of getting liens removed without court intervention. Outlined were such vehicles as the “discharge of a lien” and the posting of “lien transfer bonds,” a method commonly known as “bonding off.”

The last speaker, who also served as moderator for the panel speakers, was Michelle LeVeque from the Grand Rapids office of Dykema Gosset PLLC. Her presentation was on how claims are priorities in cases of bankruptcy or the use of the Builder’s Trust Fund Act.