When we talk mechanics liens, we’re usually speaking to contractors, subs, or suppliers. However, in a large number of states, mechanics lien rights also extend to design professionals. The architects, engineers, and surveyors who put hard work into the design of improvements deserve protection too, right?
Recently, Michigan provided a strong vote of approval for that sentiment.
Lien Rights For Design Professionals, Generally
Before getting into the new changes, let’s first look at the lay of the land for design professionals.
For “traditional” lien claimants (contractors, subs, suppliers, etc.) mechanics liens rights arise directly as a result of improving the property. The right to file a lien exists specifically because the claimant provided labor or materials for the property’s improvement – and the property was improved! Thus, it’s pretty easy to determine when a traditional lien claimant will be entitled to lien.
For design professionals, things are less simple. It’s pretty intuitive, if you think about it. When an architect, engineer, or surveyor provides work to a project – the property isn’t immediately improved. Often, these parties can pour hundreds of man hours into a job while the property itself is still just a vacant lot or condemned building waiting to be torn down.
Still – these parties are often granted lien rights. However, their lien rights are typically contingent on the actual improvement of property. So, generally, where an architect is owed money for their drawings – if the project they’ve drawn never actually breaks ground, that architect won’t have the right to lien. The same is generally true of all design professionals.
Michigan has now bucked that trend.
Further Reading:
How To Financially Protect Yourself As A Design Professional
Lien Rights Expanded for Michigan Design Professionals
You can find a summary of SB 465 here, and the full text can be found here.
Under the latest amendment to Michigan’s mechanics lien statute, under certain situations, design professionals will be entitled to file a mechanics lien – regardless of whether the project property is improved. Let’s look at the specifics…
Who Can File?
Architects, engineers, and professional surveyors (collectively, “design professionals”) who directly contract with the property owner will have the right to file a lien. Those design professionals who have been hired by another design professional (a “sub-design professional”) might have the right to file as well.
In order for a sub-design professional to have the right to lien, they
- must have been hired by a design professional who directly contracted with the owner (a “lead design professional”),
- the design professional’s hiring of the sub-design professional is approved (in writing) by the owner, and
- the lead design professional must have previously filed statutory notice (more on that in a second).
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Preliminary Notice Must Be Filed To Preserve Lien Rights
In order to preserve the right to lien, Michigan architects, engineers, and surveyors must first provide preliminary notice. Sub-design professionals must also provide notice. To make things simple, Michigan provided forms right in the statute for those notices (which we’ve recreated below). To make things complicated, Michigan requires that they be filed with the register of deeds – much like a mechanics lien is filed. Anyway, here are the forms:
NOTICE OF PROFESSIONAL SERVICES CONTRACT
Under a written contract dated ___________________ between ____________________, owner, and ____________________, design professional, the design professional is to furnish or has furnished professional services relating to the proposed or actual erection, alteration, repair, or removal of a structure on or other improvement to real property described as follows:
(Insert description of services)
The legal description of the real property is as follows:
(Insert legal description)
NOTICE OF PROFESSIONAL SERVICES SUBCONTRACT
Under a written subcontract dated _________________ between ________________________________, design professional, and ______________________________, as sub-design professional, ________________________________ is to furnish or has furnished professional services relating to the proposed or actual erection, alteration, repair, or removal of a structure on or other improvement to real property described as follows, which services are a portion of the services furnished or to be furnished by the design professional under a written original contract with ______________________, the owner:
(Insert description of services rendered)
The legal description of the real property is as follows:
(Insert legal description)
At the time of this notice, an account of the subcontract is as follows:
1. Estimated or agreed contract price: ________________
2. Approved extra or additional services: __________________
3. Payments received: ___________________
The regular mailing address of the subcontracting party recording this notice is as follows:
(Insert address)
Timing For Notices
The above notices must be recorded within 90 days of the design professional’s last furnishing. They’re effective for 1 year – but this timeframe can be extended by refiling.
Priority
In order to keep priority straight, there’s a bit of an interesting rule regarding the effectiveness of the notices described above. Before the work on the project is actually commenced, the priority of any design professional’s lien claim will be based on when the notice was filed. After work begins, the effective date for the notice, for priority purposes, becomes the first date of work on the project.
When you take into account the rules about mechanics liens and relating back, this provision makes a lot of sense. It puts architects, engineers, and surveyors on the same playing field as any other party who can file a mechanics lien.
Filing A Michigan Design Professional’s Lien
While the notice requirements are quite a bit different, once Michigan architects, engineers, or surveyors have preserved their lien rights, the process of actually filing a lien is the same. For more on that process, this article should be helpful: How to File a Michigan Mechanics Lien.
