You may have heard of a lien being referred to as a “mechanics’ lien”. That term owes to the fact that the legal underpinning behind a lien claim derives from origins of the law. As automobiles became more prevalent so did the need to repair them. The auto mechanic faced a difficult question when faced with a customer who refused to pay for repairs. If the mechanic allowed the owner to take the vehicle the odds of payment dropped to zero. However, if the mechanic retained the vehicle a claim for conversion (the civil version of theft) likely followed
The legal answer was to afford the mechanic lien rights. The mechanic could retain the vehicle by asserting a right to the value the repairs added, in effect claiming part ownership in the vehicle as necessary to secure payment. That same thinking was adopted in the context of construction liens; hence the reason the term “mechanic’s lien” is sometimes used to describe the process.
Inherent in the lien concept is the notion that the work has actually added value to the property. Obviously a vehicle repaired so that it is in running condition has value a vehicle that won’t run doesn’t. In the case of design services the added value isn’t quite so apparent. As such, the traditional lien laws have required actual physical improvement to the realty in order for a lien to attach. Therefore, where a design professional claims a lien but no actual work ever occurs, the lien would never attach and the lien would be unenforceable. That was particularly problematic since the design professional is the first to be engaged as without a design there can be no construction. In instances where the project didn’t proceed to construction, the design professional had no effective lien.
Senate Bill 465 (“SB 465”) addresses that failing. Once it became law, a design professional lien may attach to the realty even if no actual construction ever occurs. In specific, there could be two scenarios under which a lien could attach. Each is addressed as follows;
Actual Physical Construction / Improvement Occurs; In the event actual physical construction or improvement occurs, nothing changes. In order to keep all liens arising out of the design and construction process equal, all liens attach on the date actual physical construction commences. This is the current law, and that does not change presuming actual physical improvement occurs.
Actual Physical Construction / Improvement Never Occurs; In the event actual physical construction or improvement never occurs the design professional’s lien would still attach provided the design professional has complied with the requirements set out in SB 465.
With SB 465 effective, the design professional must now record a “Notice of Professional Services Contract” in the chain of title (actually that is now a precursor to any claim of lien by a design professional in every instance). If the design professional has taken that step and no construction / improvement ever occurs, any the lien will still attach effective on the date on which the notice was recorded. Although recording is a necessary step, it isn’t difficult or costly, and the required form (as is generally the case with all lien forms) is itself set out in the statute
In addition, to address some of the opposition from lenders and land title insurance interests SB 465 adds a requirement that a design professional have a written contract in order to make a lien claim. While perhaps not universally practiced, securing a written contract for any design services is certainly always a wise practice. While a breach of contract claim in the event of non-payment is still possible without a written contract, lien claims by design professionals no longer are. Similar requirements apply to sub-consultants, with the exception being their engagement and contract must be approved by the Owner in order for the lien to attach. In addition, a Notice of Design Professional Contract must be recorded by the prime design professional before a sub-consultant may record its notice.
The question then becomes whether a lien will attach to the interests of the Owner or whether its effect is limited to the interests of the person or entity contracting for the design services. Under the prior law, where a design professional has a contract with a tenant or a developer who only held an option on the realty, the lien would only attach to the tenant’s lease or the option unless the tenant or developer was acting as an agent of the Owner.
The new law clarifies the process for design professional liens and plugs a hole in the lien law but it also adds a number of other logistic changes the design professional who seeks to claim a lien must be aware of and must comply with. By reducing the process to statute, a significant portion of the litigation surrounding lien claims will hopefully be eliminated.
SB 465 passed 38-0 in the Senate and 105-4 in the House, by all accounts a massive majority. Although legislation typically takes effect 90 days after the end of the legislative session in which it passes, it may also be given immediate effect if it receives a 2/3 majority on an immediate effect vote in both chambers. The bill passed an immediate effect vote and became effective when it was signed by the Governor and filed with the Secretary of State on December 12, 2018.
This article is offered for general education and information only. Always consult with an attorney knowledgeable in the specific area of law applicable to your specific issue before making business decisions as how you should proceed.
 In a perfect world design services would simply be defined as an improvement. That approach would have dramatically clarified the law and while it would fall in line with the traditional design professional thinking, a change that drastic would not have been politically palatable. Legislation unfortunately often disregards the ideal and becomes an exercise in the “art of the possible”
 That requirement was a long standing feature of Michigan lien law, first established in Norcross Co. v. Turner-Fisher Associates, 165 Mich. App. 170 (1988). While an agency can be established by the express terms of a contract, it generally depends on the facts of a particular case – specifically the extent to which the Owner controls or dictates the specific activities of the person or entity contracting with the design professional. That will not change.
 An immediate effect votes is provided for in the Michigan Constitution at Article IV, Section 27
© Copyright Frederick F. Butters, 2018
all rights reserved
Frederick F. Butters, FAIA, Esq.
Frederick F. Butters, PLLC
Attorney at Law
Comprehensive Legal Services for the Design and Construction Professional
26677 West Twelve Mile Road
Southfield, Michigan 48034
(248) 357-0832 (fax)
(248) 514-4694 (cell)