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Common Construction Lien Issues Faced by Community Associations

September 2003

1.    What is a construction lien?

A construction lien, also known under the Michigan Construction Lien Act, § 570.1101 et seq., as a "Claim of Lien," is a claim against real property for money due as a result of providing labor and materials to an improvement of property.  Any contractor, subcontractor, laborer, or supplier who supplies labor or materials to an improvement is entitled to claim a construction lien.

2.    What is a Notice of Commencement?

A Notice of Commencement is a notice to the world that the association has contracted for an improvement and work is about to begin.  It is the association's job to prepare this document and record it with the Register of Deeds at the commencement of the project, before actual work begins.  The association must be stated as the "owner" of the property on the Notice of Commencement.

3.    What is a Sworn Statement?

A sworn statement is a list made under oath of every subcontractor, laborer or supplier with whom the person issuing the statement has contracted relative to the improvement, along with a description of the type of improvement furnished, the amount of the contract, the amount paid and the amount owing.  MCL § 570.1110.  A contractor, subcontractor or supplier must provide a sworn statement to the association at the time payment is due or at the request of the association.  MCL § 570.1110.  The association does not have to pay a contractor, subcontractor or laborer until the association receives a sworn statement from the contractor, subcontractor or laborer seeking payment.  § 570.1110(8)-(9).

4.    If a contractor is hired to perform work on condominium units and/or common elements, can the contractor file a claim of lien on all of the units in the condominium?

In general, a construction lien for work performed on either a condominium unit or a limited common element may attach only to the unit upon which the work was performed or to which the limited common element is appurtenant.  MCL  § 559.232(a).

However, a construction lien for work authorized by the association of co-owners may attach to each condominium unit in the project, but only to the extent that the co-owner of the unit is required to contribute to the expenses of administration as provided by the condominium documents.  MCL § 559.232(c).  Thus, if the association contracts for and specifically authorizes the work, each unit in the condominium is subject to a claim of lien for the work performed, but such liability is capped for each co-owner by the co-owner's respective percentage of value (the co-owner's percentage of value as set forth in the condominium's Master deed is what determines a co-owner's share of the administrative expenses in most condominium projects).

A lien may not attach to a condominium unit for work performed on common elements if such work was not contracted by the developer, residential builder, principal contractor or by the association of co-owners.  MCL § 559.232(d).
 
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