May 7, 2009, Introduced by Senators BASHAM, GARCIA, GLEASON and JANSEN and referred to the Committee on Economic Development and Regulatory Reform.
A bill to amend 1980 PA 497, entitled
"Construction lien act,"
by amending section 203 (MCL 570.1203), as amended by 2006 PA 572.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 203. (1) A claim of construction lien does not attach to
a residential structure, to the extent payments have been made, if
the owner or lessee files an affidavit with the court indicating
that the owner or lessee has done all of the following:
(a) Paid the contractor for the improvement to the residential
structure according to the contract, indicating in the affidavit
the amount of the payment. The owner or lessee shall attach to the
affidavit copies of the contract, any change orders, and any
evidence of the payment that the owner or lessee has, including,
but not limited to, a canceled check or a credit card or other
receipt.
(b) Not colluded with any person to obtain a payment from the
fund.
(c) Cooperated and will continue to cooperate with the
department in the defense of the fund.
(2) If there is no written contract as required by section
114, the filing of an affidavit under this section creates a
rebuttable presumption that the owner or lessee has paid the
contractor for the improvement. The presumption may be overcome
only by a showing of clear and convincing evidence to the contrary.
(3) Subject to section 204, a person who has recorded a claim
of lien and who is precluded from having a construction lien under
subsection (1) may recover from the fund the amount he or she would
have been entitled to recover but for subsection (1). A person who
seeks recovery from the fund shall establish all of the following:
(a) That he or she would be entitled to a construction lien on
a residential structure except for the defense provided in
subsection (1).
(b) That payment was made by the owner or lessee to the
contractor or subcontractor.
(c) That the contractor or subcontractor has retained or used
the proceeds or any part of the proceeds paid to the contractor or
subcontractor without having paid the person claiming the
construction lien.
(d) That he or she has complied with section 201.
(e) That he or she has not colluded with another person to
obtain a payment from the fund.
(f) That he or she has complied with any applicable licensing
acts.
(g) That he or she has made a reasonable effort to obtain
payment from the contractor or subcontractor.
(h) That the contractor or subcontractor with whom the person
claiming the construction lien contracted is licensed if required
by law to be licensed.
(i) That the contractor or subcontractor with whom the person
claiming the construction lien contracted is the same individual or
legal entity with whom the owner or lessee contracted.
(j) If the person claiming the construction lien is a
supplier, that he or she has documentary proof that, unless the
supplier had provided material or equipment to the contractor or
subcontractor within the preceding year, before he or she provided
the material or equipment that is the subject of the lien without
obtaining advance payment in full, he or she did both of the
following:
(i) Required the contractor or subcontractor to whom he or she
provided the material or equipment to complete and submit a credit
application.
(ii) Before beginning to supply material or equipment to the
contractor or subcontractor without obtaining advance payment in
full, did either of the following, as applicable:
(A) If the contractor or subcontractor is a corporation whose
shares are publicly traded, obtained a report on the contractor or
subcontractor from a nationally or regionally recognized
organization that provides credit ratings of businesses to
determine the financial stability of the contractor or
subcontractor.
(B) If sub-subparagraph (A) does not apply, did both of the
following:
(I) Obtained a credit report on the owner or qualifying
officer or the principal partners, officers, shareholders, or
members of the contractor or subcontractor to determine the
financial stability of the contractor or subcontractor.
(II) If the contractor or subcontractor is less than 4 years
old, obtained a personal guaranty from the owner or 1 or more of
the partners, officers, directors, managing members, trustees, or
shareholders of the contractor or subcontractor.
(k) If the person claiming the construction lien is a supplier
seeking to recover for material or equipment supplied to a
contractor or subcontractor without obtaining advance payment in
full, that a credit report obtained by the supplier on the
contractor or subcontractor did not disclose any of the following:
(i) That the contractor or subcontractor was, at the time of
the application, or had been, within 2 years before the
application, insolvent.
(ii) That the contractor or subcontractor was, at the time of
the application, subject to a receivership.
(iii) Total delinquent judgments of more than $1,000.00.
(4) A subcontractor, supplier, or laborer who seeks
enforcement of a construction lien on a residential structure
through foreclosure shall join the fund as a defendant in the
foreclosure action within the period provided in section 117(1).
The subcontractor, supplier, or laborer shall serve a summons and
complaint on the office of the fund administrator within the
department by certified or registered mail or by leaving a copy at
the office. The failure to serve a summons and complaint under this
subsection
bars recovery from the fund. After a defendant is served
with
a summons and complaint in an action to foreclose a
construction
lien, the department may intervene in the action as a
party
defendant with respect to other construction liens. A lien
claimant who is not a member of the fund is not required to join
the fund as a defendant or serve the summons and complaint on the
office of the fund administrator under this section.
(5) The attorney general shall make every reasonable effort to
defend the fund and may assert any defense to a claim of lien that
would have been available to the owner or lessee.
(6) A payment from the fund shall not include interest on the
unpaid principal amount due, including, but not limited to, a time-
price differential or a finance charge, that accrued after 90 days
after the claim of lien was recorded.
(7) A payment from the fund to a supplier shall not include
money due for material or equipment supplied to a contractor or
subcontractor without obtaining advance payment in full if either
of the following applies:
(a) The contractor or subcontractor was delinquent in paying
the supplier for material or equipment for more than the following
number of days after the first business day of the month following
the shipment of the material or equipment:
(i) In 2007, 180 days.
(ii) In 2008, 150 days.
(iii) In 2009, 120 days.
(iv) In 2010 and each year after 2010, 90 days.
(b) The contractor or subcontractor was indebted to the
supplier in an amount equal to or more than the credit limit
established by the supplier for the contractor or subcontractor at
the time the material or equipment was supplied.
(8) Payment from the fund shall be made only if the court
finds that a subcontractor, supplier, or laborer is entitled to
payment from the fund. Subject to section 204, after the judgment
has become final the department shall pay the amount of the
judgment out of the fund.