In the case where a project is designed but never actually built, certain design professionals now have priority rights under MCL 570.1107a of the amended Michigan Construction Lien Act. Prior to the amendment, longstanding jurisprudence interpreted the Act as fixing priority at the time of the first actual improvement. The 2018 amendment, however, allows a design professional’s lien to relate back to the recording date of a statutory notice for pre-construction related services rendered.

To secure priority, the design professional may record a written notice called “Notice of Professional Service Contract,” with the register of deeds in the county the property is located. The amendment expands priority rights to registered and licensed architects, professional engineers, and professional surveyors who have a written contract with the owner, or a person acting as an agent of the owner, to provide professional services to erect, alter, repair, or remove a structure or make any other improvement to real property. The design professional must record the notice within 90 days of having last provided services, and the notice is valid for one year after the date it is recorded. The notice operates as constructive notice to subsequent purchasers or encumbrancers.

Generally, a construction lien took priority over all other interests, liens, or encumbrances on the property that were recorded after the first actual physical improvement. The amendment, however, affords design professionals priority on construction liens based on the date of the written notice of contract rather than the first physical improvement. MCLA 570.1119 states that the lien can arise at the time of first actual physical improvement or at the time notice is recorded. If an actual physical improvement is not made, the notice has a priority date at the time it was first recorded. If an actual physical improvement is made, however, the notice has priority based on the date of the actual physical improvement, which puts it at equal footing to all other construction lien claimants.

Importantly, the Act is also amended, under MCL 570.1107b, to extend priority rights to subconsultants of the aforementioned design professionals. The section provides that a subcontractor that provides professional services under a written contract with a design professional who has a recorded notice, and whose engagement has been approved in writing by the owner or someone on behalf of the owner, may record a notice of the subcontract with the register of deeds in the county the property is located. Similar to the design professional, the subcontractor must record the notice within 90 days of having last provided services, and the notice is valid for one year after the date it is recorded. Additionally, like the design professional, if an actual improvement is made to the property, the subcontractor stands in equal priority with all other construction lien claimants. In essence, the new amendments to the Construction Lien Act allow design professionals to assert lien rights for pre-construction related services in lieu of an actual physical improvement which has long been the standard.

Should you have any questions or concerns, please do not hesitate to reach out to the Kitch Commercial Litigation Team to discuss issues related to the new amendment in more details.

Authored by: Dominic DeBeul and Rayan Harajli

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Construction Lien Act – Changes in the Construction Industry

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