Disputes between contractors and homeowners are common. The owner runs out of funds midway through the project and cannot pay what is owed to the builder. The owner is unhappy with the quality of work and refuses to pay until the alleged mistakes are fixed. Whatever the reason, many contractors find themselves in a situation where they have done the work but are not being paid for it.
A construction lien is one of the most powerful tools a contractor has for ensuring payment. In Michigan, an unpaid contractor can record a claim of lien against the property within 90 days of the day of last work.
The lien encumbers the owner's interest in the property. Effectively, the homeowner cannot sell their home or refinance their mortgage until the debt is paid and the lien is discharged. Additionally, if recording the lien does not prompt the owner to pay, the contractor has one year from the date it records the lien to file a lawsuit to foreclose on the property. In foreclosure, the property will be sold at a public sale, and the proceeds will be used to pay off the debt to the contractor.
Liens are relatively inexpensive and easy to record. However, if not done accurately, they can cost a great deal. Under Michigan law, a person who records a lien without a legal basis may be liable for damages. Moreover, a person who records a lien with the intent to harass or intimidate is guilty of a felony punishable by imprisonment for up to three years, a fine up to $5,000, or both.
An experienced real estate attorney can guide you through the process, ensuring liens are recorded timely and accurately, and you and your business are protected from potential liability. If we can help, contact our office at email@example.com or (248) 477-6300.