Can a building contractor in Michigan add any other items like interest to his lien total?
1 reply
Nov 3, 2019
Michigan law provides that a lien acquired under the lien statute “shall not exceed the amount of the lien claimant’s contract less payments made on the contract.” MCL 570.1107(1). The term “contract,” as defined under the statute, is broad enough to include extra work, which is work performed outside the scope of the original contract and which has not yet been recognized by a change order. Disputes about extra work are common and a frequent source of construction disputes.
But if the lien claimant is prevented from completing its work, “by reason of the failure of an owner or lessee to perform the contract, and without fault on the part of the lien claimant,” the lien claimant is entitled to “compensation for as much as was performed by the claimant under the contract, in proportion to the price stipulated for complete performance of the whole contract, less any payments made to the lien claimant and also to any additional damages which the lien claimant may be entitled to as a matter of law.” MCL 570.1120. By way of illustration, if a lien claimant completes 50% of a $10,000 contract and was paid $2,500 before the owner terminated the contract, the lien amount is $2,500, the unpaid portion of the completed work, not $7,500, the balance of the unfinished contract.
A lien on a residential project may also include interest and time-price differential charges, with some limitations: “a construction lien of a subcontractor or supplier for an improvement to a residential structure shall only include an amount for interest, including, but not limited to, a time-price differential or a finance charge, if the amount is in accordance with the terms of the contract between the subcontractor or supplier and the contractor or subcontractor and does not include any interest that accrues after 90 days after the claim of lien is recorded.” MCL 570.1107(7).
For commercial projects, there is case law that addresses the issue and supports including interest as part of a lien amount. See, Michigan Pipe & Valve-Lansing, Inc v Hebeler Enters, 292 Mich App 479, 808 NW2d 323 (2011) (reading MCL 570.1107(1) and (7) together, service charge provided for in supplier’s contract on a commercial project could be included in supplier’s construction lien).
A lien that is overstated may be lost if the court finds that the lien amount was overstated in bad faith. But where a lien is overstated, and the court finds no evidence of bad faith, the remedy is to reduce the lien amount. Although attorney fees may be awarded to a prevailing party in a lien foreclosure suit, they are not generally included in the original lien amount.