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GOOD NEWS FOR REAL ESTATE PURCHASERS AND DEVELOPERS - CONTRACTORS BEWARE By
: James M. Dworman
and Jeffrey L.
Hudson
Real estate purchasers and developers scored an end-of-millennium
victory in the Michigan Supreme Court.
In its last opinion of 1999, the high court reversed a Court
of Appeals decision which allowed suppliers of labor or material to
construction sites to maintain liens against real estate even where
the subcontractor missed the statutory deadline for recording the lien.
In Northern Concrete Pipe, Inc. v Sinacola Companies Midwest,
Inc., a unanimous Supreme Court held that, under the state’s
Construction Lien Act, a subcontractor’s right to a lien ceases
to exist if not recorded with the county register of deeds within 90
days after the last furnishing of labor or material.
This means that property owners and purchasers can rely upon
a title search to show that no liens exist for work performed on their
property. It is recommended
that all real estate purchasers obtain from their seller a policy of
title insurance without standard exceptions, which insures against unrecorded
construction lien claims.
In the Northern Concrete Pipe case, the real estate developer
hired a general contractor for a construction project.
The developer paid its general contractor for the work performed,
but the general contractor went bankrupt before paying many of its subcontractors.
One subcontractor asserted that its claim of lien was rejected
by the register of deeds twice, based on technical deficiencies.
By the time that subcontractor recorded its claim of lien, more
than 90 days had passed from the date on which it last provided materials
to the job site. The Court of Appeals would have validated late-filed liens, where the lien claimant substantially complied with recording requirements. Dean & Fulkerson convinced the Supreme Court that the Legislature intended strict adherence to the statutory deadline, arguing that a contrary result would have wrecked havoc upon real estate transactions. For the building trades, this decision highlights the need for better record keeping and attention to deadlines. |
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