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What is the law on deposits

MichiganConstruction Contract

In Michigan what is the law on deposits. Can you request 1/3 x 3 or 50% up front? Is there any law for this?

4 replies

Nov 15, 2021
To my knowledge there is no "law" on deposits for construction contracts. That said i have had several clients that paid significant up front deposits then the contractor never came back to even start the work. So asking for a significant up front deposit could drive away potential clients.
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Nov 15, 2021
I agree with James' comments. 1/3 and 1/2 are both pretty common. I will add that the form of your contract is extremely important, especially when it comes to being eligible for a construction lien if necessary; EVERY CONTRACTOR SHOULD HAVE HIS FORM REVIEWED BY A LAWYER WHO SPECIALIZES IN CONSTRUCTION LAW! ____________________ The above response is provided as a courtesy and does not establish an attorney-client relationship. If you would like to contact me directly for a consultation, I am located in Port Huron (810) 987-3970. Since 1975.
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Nov 17, 2021

In addition to the previous responses to your question, I will note that if you are receiving a deposit on a private construction project in Michigan, those funds are considered trust funds under the Michigan Builder's Trust Fund Act (MBTFA). You must use those funds to first pay your subs and suppliers on that particular job. You should not use the money to pay old bills on another project. You're asking for serious trouble if divert funds from the new job to use for other projects and come up short at the end of the job. The MBTFA is criminal statute which has been construed by the courts to apply in civil lawsuits and against the owners of construction firms personally. 

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Nov 17, 2021
Try some facts ... or should we assume?
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