- February 26, 2019
- All Michigan Issuing Offices
- UNDERWRITING - Construction Lien Act
On December 12, 2018, the Governor of Michigan signed into law Public Act 367 of 2018 (attached) which Act modified parts of the Michigan Construction Lien Act. It added a definition to Section 104 for “Design Professionals” (identified as architects, professional engineers, and professional surveyors) and created Section 107a, which section enables the design professional to record a Notice of Professional Services Contract in the county where the property is located. The intent of the recording is to give constructive notice that a design professional has furnished professional services related to the property with the ultimate goal of increasing the likelihood that the design professional will be paid during the course of construction.
The Notice is to be recorded within 90 days after the design professional last performed professional services and, per Section 107a (4), the Notice is only effective from the date of first physical improvement to the property. This means that the mere recording of the Notice, prior to first physical improvement to the property, does not create a super-priority for the design professional over the other trades (or the construction lender). Priority is equal for all trades and design professionals and that priority begins upon first physical improvement to the property.
It is most important to note that Section 107a (5) provides that: the recording of the Notice does not affect the requirements of this Act regarding the creation of a construction lien, including requirements of section 107, the steps necessary to claim a lien or the manner of enforcing the lien. Thus, the Notice does not, in and of itself, constitute a lien against the property. The design professional must still record a claim of lien against the property (within 90 days of providing professional services) and bring a foreclosure action in circuit court within 1 year of the recording of the lien or the lien expires by operation of law. Practically speaking, the Notice is the equivalent of a notice of furnishing.
It will be important to remember that the Sworn Statement signed by the General Contractor is not likely to reflect surveying, engineering or architectural design as a line item of work. The owner is the party most likely to have contracted directly with the design professional and we will need to secure a writing from the owner identifying the involvement of any design professional on the project and require the submission of a waiver of lien from any such party.
Please advise all appropriate personnel of the above-identified information.
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