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Under the Construction Lien Act, Claims of Lien Must be Filed on Individual Units to Which Labor and Materials are Provided

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Lindsey E. Smith & Andrew C. Vredenburg
Foster Swift Commercial Litigation News
Fall 2011

A recent decision by the Michigan Court of Appeals provides caution for contractors, subcontractors, laborers or suppliers seeking to file claims of lien on site condominium developments.  (Stock Building Supply, LLC v Department of Energy, Labor and Economic Growth Homeowner Construction Lien Recovery Fund, et al, unpublished opinion per curiam of the Court of Appeals, issued May 12, 2011 (Docket No. 295893).)  The court held that under the Construction Lien Act[1] claims of lien on a site condominium development consisting of individual units must be filed within ninety (90) days of the last furnishing of labor or materials to each individual unit.[2]  When the contract between the contractor and developer does not define "improvement" to the property, a claim must be filed on each individual unit within the development and cannot be filed against the development as a whole, even if the description in the notice of commencement does not describe the individual units. 

In the case, the owner of a condominium development project filed two notices of commencement containing a metes and bounds description of two parcels of land that became the first and second phases of the development.  Plaintiff supplied the labor and materials to some, but not all, of the individual condominium units under an agreement that constituted a contract under the Construction Lien Act, but "did not identify any particular project or define the scope of any particular improvement to any specific property."  Plaintiff recorded claims of lien as to Phase I and Phase II within 90 days of the date it last furnished labor or materials to each phase of the condominium development and not on the date it last furnished labor or materials to every individual unit.  The claims of lien referenced the meets and bounds legal description covering the entire parcels of Phase I and Phase II as set forth in the notice of commencement.  Plaintiff did not exclude individual units from the claims of lien when it did not provide labor or materials to those units. 

Plaintiff filed an action to foreclose on its liens.  Defendants argued that Plaintiff's claims of liens were invalid because they were filed against multiple units and the Construction Lien Act  required that construction liens may only attach to the specific condominium unit to which the lien claimant provided labor or materials.  Because Plaintiff last supplied labor and materials to Defendants' individual units outside 90 days, they argued that the claims of lien were not timely filed.  Plaintiff argued that the claims of lien were valid because the Construction Lien Act entitled it to rely on the legal description of the property set forth in the notice of commencement which described the parcels used for each phase of the project and did not describe the parcels for the individual units.  Because each lien was filed within 90 days of supplying the last labor or materials to any unit in Phase I or Phase II, Plaintiffs maintained that the claims of lien were valid.

The Michigan Court of Appeals rejected Plaintiff's argument and found that each unit constituted a separate and distinct improvement under the Construction Lien Act, requiring that a claim of lien be filed against each individual unit within 90 days of the last furnishing of labor or materials to that unit.  Under the plain language of the Construction Lien Act, "the commencement of the 90-day period for filing a claim of lien is determined by the scope of the improvement to be provided, as defined by the contract pursuant to which the labor or material are being furnished."  Id.  While the contract between the Plaintiff and developer Defendant did not define "improvement," the labor and materials for each unit was ordered and billed separately.  Therefore, the court determined that the scope of the "improvement" was the labor and materials supplied to each individual unit and Plaintiff was required to file its claim of lien within 90 days of the last furnishing of labor or materials to each individual unit.

[1] MCL 570.1101 et. seq. 

[2] The Construction Lien Act allows a contractor, subcontractor, laborer or supplier to obtain a construction lien if, "within 90 days after the lien claimant's last furnishing of labor or material for the improvement, pursuant to the lien claimant's contract, a claim of lien is recorded in the office of the register of deeds for each county where the real property to which the improvement was made is located.  A claim of lien shall be valid only as to the real property described in the claim of lien and located within the county where the claim of lien has been recorded."  MCL 570.1111(1)(emphasis added).