Michigan provides a fair amount of protection to homeowners when dealing with construction contracts. The contract must be in writing, include certain provisions, and requires that the contractor must be licensed in order to file a construction lien.
A recent bill was introduced into the Michigan Legislature may up the ante even further. On April 20, 2021, HB4688 was proposed to the Michigan House of Representatives. This bill will potentially require residential contractors to provide proof of licensing and identification when filing a lien claim, as well as outlining additional penalties for failing to provide the required information in their residential construction contracts.
Residential contractors must be licensed to file liens in Michigan
Michigan lien laws currently state that a contractor’s license isn’t required to file a construction lien — unless the property is a “residential structure.”
Which begs the question: What’s considered a residential structure in Michigan? This term is defined as “an individual residential condominium unit or a residential building containing not more than two residential units, the land on which it is or will be located, and all appurtenances, in which the owner or lessee contracting for the improvement is residing or will reside on completion of the improvement.”
Contractors on such projects must:
- Be licensed if required
- Have the prime contract with the owner in writing
- Include certain notice language in the contract, along with the contractor’s license number issued by Michigan’s Department of Licensing and Regulatory Affairs.
Proposed new legislation regarding contractors on residential projects
If enacted, HB4688 would amend the current provisions under Mich. Comp. Laws §570.1114, which sets out the requirements for contractors working on residential projects.
Proof of licensing and identification when filing
The most significant change this bill would introduce affects the filing requirements for contractors on residential projects. Specifically, such contractors when filing a construction lien must provide proof of licensing and some form of ID.
“A contractor who is required to be licensed… shall display the contractor’s license, and if the contractor is an individual, the contractor’s personal identification when recording a claim of lien under section 111.
If the claim of lien is not presented in person, the contractor shall attach to the claim of lien copies of the contractor’s license and personal identification.”
The provisions continue by stating that the county register of deeds office will not record such claims without the requisite proof of licensing and identification. Acceptable forms of identification include operator or chauffeur licenses, enhanced driver licenses, and state personal ID cards. Thus, if this bill succeeds, residential contractors should be ready with a copy of their license and ID if they decide to file a construction lien.
The other new addition under this bill would be to increase the penalties for violating the section being amended. Under these provisions:
“A contractor who violates this section is guilty of a misdemeanor punishable by imprisonment for not more than 90 days or a fine of not more than $500.00, or both.”
From the context of the statute, it appears that these penalties apply when a residential contractor fails to include the notice language and/or license number in the written contract.
So, not only will the contractor be unable to file a mechanics lien if unpaid, but they may face fines or potential imprisonment as well. Note that this may be the case even if the contractor is licensed! Therefore, residential contractors must be absolutely sure that they have written contract templates that include their license number.
If the bill is eventually signed by Governor Whitmer, the new changes will go into effect 90 days after its enacted. We’ll keep an eye on its progress and let you know of any changes.