Michigan’s Builders Trust Fund Act (MCL 570.151 et seq.) is one of the most powerful, and sometimes overlooked, statutes in Michigan construction law. It is not a lien law. It is a criminal statute that can make the intentional diversion or fraudulent misuse of construction funds a felony under Michigan law. And it is also a source of civil liability that subcontractors, suppliers, and laborers can use to recover money they are owed.

This article explains what the Builders Trust Fund Act does, who it covers, what violates it, and how both contractors and subcontractors should be using it to protect their interests on every Michigan project.

Key Takeaways

• Michigan’s Builders Trust Fund Act can impose felony consequences for intentional misuse or diversion of covered construction funds.
• The Act applies to both general contractors and subcontractors who receive construction funds at any tier of the payment chain.
• Using trust funds for anything other than paying the subcontractors, suppliers, and laborers on the specific project for which the money was received is a violation.
• Unpaid subcontractors and suppliers have both criminal complaint options and civil claims available.
• Contractors can protect themselves through dedicated project bank accounts, documented disbursement records, and proper payment procedures.

The Short Answer — What the Builders Trust Fund Act Does

Michigan’s Builders Trust Fund Act, codified at MCL 570.151 et seq., was enacted to protect subcontractors, suppliers, and laborers from a contractor who gets paid by the owner but fails to pass that money down the payment chain.

The core principle is simple: when a contractor receives money for a construction project, that money is not the contractor’s to spend freely. It is held in trust. The contractor is acting as a trustee, and the beneficiaries of that trust are the subcontractors, suppliers, and laborers who contributed labor or materials to that project.

Wrongfully diverting trust funds away from project-specific obligations can violate the Act and, depending on the circumstances, may support felony prosecution.

Who Does the Builders Trust Fund Act Apply To?

The Act applies broadly to contractors and subcontractors at every level of the construction payment chain. You do not have to be a general contractor to be subject to the Act. A subcontractor who receives payment from a GC and fails to pay its sub-subcontractors or material suppliers faces the same exposure.

The Act covers:

• General contractors who receive payment from project owners or developers
• Subcontractors of all tiers who receive payment from GCs or upper-tier subcontractors

The Act does not require formal trust documentation or a dedicated account. The trust obligation arises automatically by operation of law the moment construction funds are received. That is a critical point that many contractors miss.

What Counts as a “Trust Fund” Under MCL 570.151?

Under the Act, funds received in payment for a Michigan construction project are trust funds from the moment of receipt. This generally includes project-specific funds paid to a contractor or subcontractor for the particular improvement:

• Progress payments from owners to GCs
• Draw disbursements from construction lenders (in some cases)
• Payments from GCs to subcontractors for work on a specific project
• Retainage releases attributable to a specific project

The trust obligation attaches to those specific funds and is tied to the specific project for which they were received. A GC who receives a $200,000 draw for Project A cannot use those funds to cover payroll for Project B, even if the company intends to repay the money later. Those funds must be applied consistently with the Act to project-specific obligations before they are diverted elsewhere.

What Violates the Builders Trust Fund Act?

A contractor violates the Act when it receives construction funds and intentionally uses those funds for a purpose other than paying the subcontractors, suppliers, and laborers on the project for which the funds were received. Common violations include the following.

Using Construction Funds for Overhead on Another Project

This is the most common violation pattern. A GC receives a draw on Project A, then uses those funds to cover payroll, subcontractor invoices, or material costs on Project B. Using Project A funds to cover Project B obligations creates serious exposure under the Act, even if the contractor intends to later replace the money.

Covering General Operating Expenses

Using construction funds to pay rent, insurance premiums, office staff, or other general overhead expenses while subcontractors remain unpaid on the project is a violation. The fact that the business was struggling financially is not a defense to a trust fund misappropriation claim.

Commingling Project Funds Creates Significant Risk

Commingling project-specific funds with general business operating accounts, and then spending from that account without ensuring project subcontractors are paid first, can create significant legal exposure. Depositing project funds into a general operating account is not, by itself, the statutory violation; the danger is that commingling makes diversion easier and proof problems much worse if protected parties remain unpaid.  Michigan courts have found violations in cases where construction funds were deposited into operating accounts and then spent in ways that left subcontractors unpaid.

Paying Yourself Before Paying Subcontractors and Suppliers

A GC who pays its own overhead, profits, or management fees from construction funds before fully paying the subcontractors and suppliers on the project is walking directly into Builders Trust Fund Act exposure. The trust fund obligation runs first to the subcontractors, suppliers, and laborers who provided labor and materials.

Criminal Penalties

The Builders Trust Fund Act’s most significant feature is that it provides for criminal prosecution. Intentional misappropriation of covered construction trust funds can expose a contractor, and potentially responsible individuals, to felony charges under Michigan law.

The criminal dimension of the Act matters for several reasons:

• It creates potential criminal enforcement consequences beyond an ordinary civil payment dispute.
• A defrauded subcontractor or supplier can report suspected misconduct to appropriate law-enforcement or regulatory authorities.
• A felony conviction has consequences far beyond the specific construction dispute, such as contractor licensing, bonding capacity, banking relationships, and personal reputation are all at risk.
• Individual officers, members, and managers of construction companies who personally participate in or direct the diversion of trust funds can be held personally liable for trust fund misappropriation, not just the corporate entity.

For subcontractors and suppliers who are owed money, the criminal angle creates meaningful leverage. The prospect of a criminal investigation, and the reputational damage that comes with it, often motivates GCs to resolve payment disputes that they might otherwise contest or delay.

Civil Liability Under the Builders Trust Fund Act

In addition to criminal exposure, the Builders Trust Fund Act provides a basis for civil claims by unpaid subcontractors, suppliers, and laborers. A party that is owed money and can show that the contractor received construction funds and misappropriated them has a viable civil cause of action for trust fund misappropriation. A claimant does not need to wait for criminal charges to pursue civil remedies.

Civil claims under the BTFA offer several advantages over ordinary breach of contract litigation:

• The claim can be brought against individual officers and members of the contracting company, not just the entity, if they were responsible for the misappropriation.
• The BTFA civil claim can be combined with a Michigan construction lien claim, providing multiple enforcement pathways simultaneously.
• The combination of lien foreclosure and a BTFA civil claim gives unpaid subcontractors two independent legal tools: a lien against the property and a claim against the contractor and potentially its principals personally.

It is important to understand that a BTFA civil claim is separate from and in addition to a construction lien claim. An unpaid subcontractor who has properly perfected a Michigan construction lien under MCL 570.1101 et seq. has two independent legal tools available: lien foreclosure against the property and a BTFA civil claim against the contractor.

How Subcontractors and Suppliers Can Use the Builders Trust Fund Act

If you are a subcontractor or supplier who is owed money on a Michigan construction project, the Builders Trust Fund Act gives you tools beyond a lien.

Step 1 — Document the Payment Chain

Gather evidence that the owner or upper-tier contractor paid the party that owes you money. Payment applications, certified payrolls, draw schedules, and bank records can all establish that the trust funds were received. The key question is whether money came in and your payment did not go out.

Step 2 — Send Written Demand Referencing the BTFA

A written demand letter that specifically references the Builders Trust Fund Act and the contractor’s obligations under MCL 570.151 puts the GC on notice that you are aware of the statute. This often produces a faster response than a generic payment demand. Consult a Michigan construction attorney before sending demand letters that assert potential criminal liability.

Step 3 — Evaluate Criminal-Reporting Options with Counsel

If the contractor received payment and failed to pay you, you can file a complaint with law enforcement authorities.  While criminal prosecution is not guaranteed, a pending investigation creates powerful incentive for resolution.

Step 4 — Pursue Civil Claims Concurrently

Work with a Michigan construction attorney to file civil claims for trust fund misappropriation alongside any lien foreclosure action. The combination of lien enforcement, BTFA civil claims, and a pending criminal complaint provides maximum leverage on a non-paying GC.

What Contractors Must Do to Stay Compliant

If you are a GC or subcontractor receiving construction funds on Michigan projects, here is how to protect yourself from Builders Trust Fund Act exposure.

Maintain Dedicated Project Bank Accounts

The single best risk management practice is to maintain a separate bank account for each significant project, or at minimum to track project funds separately from general operating funds. When trust funds are segregated, it is far easier to demonstrate that project funds were used for project obligations.

Pay Subcontractors and Suppliers Before Paying Overhead

When construction funds are received, prioritize payment to subcontractors, suppliers, and laborers on that project before using any portion for overhead, management fees, or other business expenses. Document every payment with date, amount, project reference, and payee.

Document Every Disbursement

Maintain contemporaneous records of how construction funds are received and disbursed. If the company is ever investigated or sued, detailed disbursement records are your primary defense. If records do not exist, it becomes very difficult to demonstrate that trust funds were properly applied.

Do Not Cross-Collateralize Projects

Using funds from Project A to cover obligations on Project B, with the intention of repaying from the next draw, is a potential violation of the Act. Each project’s funds must be treated independently.

Consult a Construction Attorney Before Withholding Disputed Funds

If you receive construction funds but a payment dispute arises — disputed change orders, backcharges, claims of defective work — consult a Michigan construction attorney before withholding or diverting any portion of those funds. There are proper procedures for handling disputed amounts. Unilaterally diverting funds while a dispute is pending can still create BTFA exposure. Not every payment dispute, offset, or backcharge becomes a Builders Trust Fund Act violation, but using received project funds for non-project purposes before protected claimants are paid can create serious legal risk.

Why This Matters for Metro Detroit Contractors

Michigan’s construction industry operates on thin margins and compressed project timelines. On major commercial and institutional projects across Oakland County, Wayne County, and Macomb County, the payment chain runs from developer to GC to multiple tiers of subcontractors and suppliers. A payment failure at any level sends immediate shock waves down the chain.

The Builders Trust Fund Act exists precisely because ordinary breach of contract remedies are sometimes too slow and too expensive to protect the subcontractors and suppliers who are most vulnerable to payment failure. The criminal dimension of the Act, and the ability to reach individual owners and officers personally, gives it teeth that a simple civil lawsuit often lacks.

For Metro Detroit GCs and subcontractors, understanding the Act is not optional. It is a basic element of operating a compliant and financially sound construction business in Michigan.

Frequently Asked Questions: Michigan Builders Trust Fund Act

What is the Michigan Builders Trust Fund Act?

Michigan’s Builders Trust Fund Act (MCL 570.151 et seq.) is a statute that requires contractors and subcontractors who receive construction funds to hold those funds in trust for the subcontractors, suppliers, and laborers on the specific project for which the money was paid. Intentionally misusing those funds is a criminal violation that can result in felony prosecution.

Is violating the Builders Trust Fund Act really a felony in Michigan?

Yes. Michigan’s Builders Trust Fund Act provides for criminal prosecution, including felony charges, for intentional misappropriation of construction funds. Individual officers and members of contracting companies can be prosecuted personally, not just the business entity. The severity of the criminal charge depends on the facts and circumstances of the misappropriation.

Does the Builders Trust Fund Act apply to subcontractors, or only to GCs?

The Act applies to both general contractors and subcontractors. Any party who receives construction funds at any tier of the payment chain holds those funds in trust for the parties below them who provided labor and materials on the same project. A subcontractor who is paid by a GC and fails to pay its sub-subcontractors or suppliers faces the same legal exposure as a GC who fails to pay subcontractors.

Can I file a criminal complaint if my GC is not paying me?

Yes. Unpaid subcontractors and suppliers can file complaints with law enforcement for Builders Trust Fund Act violations. They may investigate contractors who receive construction funds and fail to pay their project subcontractors and suppliers, and refer them to the prosecutor.  A Michigan construction attorney can advise you on the process and how it interacts with your civil remedies.

How does the Builders Trust Fund Act work with my Michigan construction lien?

The Builders Trust Fund Act and Michigan’s Construction Lien Act (MCL 570.1101 et seq.) are independent legal tools that can be used simultaneously. A lien encumbers the property and must be foreclosed in circuit court. A BTFA claim can be brought against the contractor, and potentially its principals personally, in a civil lawsuit. An unpaid subcontractor may wish to pursue both remedies concurrently to maximize leverage and recovery options.

This blog post is for general educational purposes only and does not constitute legal advice. Michigan construction law is complex and fact-specific. No attorney-client relationship is created by reading this article. Contact Szura & Delonis, PLC at (248) 716-3600 for advice on your specific situation.

About the Author

Richard M. Delonis is a Michigan construction, business, and real estate attorney at Szura & Delonis, PLC (Southfield/Metro Detroit). He advises construction managers, general contractors, subcontractors, and property owners on lien rights, collections strategy, contract disputes, and project-risk issues.

What are liquidated damages in a Michigan construction contract?

Liquidated damages are a contractually agreed-upon dollar amount, typically assessed on a daily basis, that a contractor owes the owner if the project is not substantially complete by a specified deadline. They are not a penalty; they are supposed to represent the parties’ best estimate, at the time of signing, of what a delay would actually cost the owner. Michigan courts may likely enforce them when they meet that standard.

Key Takeaways

• Liquidated damages clauses have been seen, and can be enforceable, in Michigan construction contracts.
• Michigan courts will not enforce an LD clause that functions as a penalty rather than a genuine pre-estimate of damages.
• The dollar amount, the deadline, and the definition of “substantial completion” all matter enormously.
• Contractors have specific defenses available, including owner-caused delays, concurrent delays, and waiver.
• You can negotiate LD clauses before signing. Many contractors do not try.

Why This Matters for Michigan Contractors

Michigan construction projects often run on tight margins. On a $2 million project with a 10% projected profit, the entire margin is $200,000. A liquidated-damages clause of $3,000 per day would consume that projected profit in about 67 days. On larger commercial projects, daily liquidated-damages rates of $5,000, $10,000, or more can appear, depending on the project and the owner’s estimated cost of delay

What makes this worse is that delays on construction projects are almost never entirely one party’s fault. Owners change orders. Design professionals issue late drawings. Material deliveries slip. Subcontractors fall behind. When delay happens, the owner looks to the LD clause first. Whether you can fight back depends entirely on what your contract says and what you documented along the way.

What Michigan Courts Require Before Enforcing an LD Clause

Michigan courts apply a two-part test before enforcing a liquidated damages clause. The clause must satisfy both elements.

First: Damages Must Be Difficult to Estimate at the Time of Contracting

If the owner could easily calculate the precise financial harm a one-day delay would cause, the LD clause loses much of its justification. But on most commercial projects, construction delays produce losses that are genuinely hard to pin down precisely: lost rental income, carrying costs, business interruption, financing costs, reputational harm. Michigan courts recognize this difficulty and generally find it satisfied on most commercial construction projects.

Second: The Amount Must Be a Reasonable Pre-Estimate of Actual Damages, Not a Penalty

This is where LD clauses get challenged. If the agreed daily amount bears no reasonable relationship to the actual losses the owner could expect from a delay, a Michigan court may refuse to enforce it as a penalty clause. The key word is “reasonable.” Courts look at what the parties knew or should have known at the time they signed, not what actually happened.

Are liquidated damages clauses enforceable in Michigan?

Yes, liquidated damages clauses are enforceable in Michigan if two conditions are met: (1) actual damages from a breach were difficult to estimate when the contract was signed, and (2) the agreed amount represents a reasonable pre-estimate of those damages rather than a punishment. A clause that functions as a penalty, bearing no reasonable relationship to anticipated harm, may be unenforceable.

The Clauses That Create the Most Risk

Not all LD clauses are created equal. These are the contract provisions that create the most exposure for Michigan contractors.

Vague or Missing Milestone Definitions

If the contract says LDs run until “completion” but never defines what completion means, you have a problem. Does completion mean substantial completion? Final completion? Certificate of occupancy? Each definition produces a different outcome. A contract that is silent on this point may give the owner the ability to run LDs for weeks after the project is functionally done.

No-Excuse Provisions

Some contracts include language that purports to hold the contractor liable for LDs regardless of the cause of delay, including owner-caused delays. Michigan courts do not look favorably on provisions that eliminate all contractor defenses, but the language still creates a fight you would rather not have.

Missing Float Allocation Language

On a project with a CPM schedule, float is a resource that belongs to someone. If the contract does not address who owns schedule float, the owner may claim it. That means any delay eats into the contractor’s schedule buffer before it even becomes an excusable delay event.

Asymmetric Provisions

Watch for contracts that impose LDs on the contractor for late completion but give the owner no corresponding obligation for late design deliverables, slow RFI responses, or restricted site access. Asymmetry in a contract can run against the contractor.

What is the difference between liquidated damages and a penalty in Michigan?

In Michigan, a liquidated damages clause is a binding agreement on a pre-estimated amount of harm. A penalty clause imposes an amount designed to punish or coerce, without regard to actual loss. Michigan courts will enforce the former and may refuse to enforce the latter. The distinction turns on whether the agreed amount was a reasonable estimate of anticipated damages at the time of contracting, not on what it is called in the contract.

Defenses Available to Michigan Contractors

If an owner asserts a liquidated damages claim, these are your most important defenses:

Owner-Caused Delay

If the owner contributed to the delay through late approvals, slow responses to RFIs, design changes, or restricted site access, you have grounds to seek a time extension and to argue that the LD clock should not run for owner-caused periods. This defense requires documentation. A paper trail of unanswered RFIs, change order requests, and schedule notices can be your best evidence.

Concurrent Delay

Where both parties contribute to a delay at the same time, Michigan courts may not award LDs to the owner for the concurrent period. The theory is that the owner cannot prove its own conduct was not responsible for the overrun. Establishing concurrent delay requires a detailed schedule analysis.

Waiver and Course of Conduct

If the owner knew about the contractor’s delayed schedule, accepted progress payments without objection, and never formally invoked the LD clause during the project, the owner may have waived the right to enforce it. Courts look at the parties’ conduct throughout the project, not just the language in the contract.

Penalty Clause Challenge

If the daily LD rate is grossly disproportionate to any harm the owner could reasonably have anticipated, challenge it. The burden is on the party seeking to avoid enforcement, but a clause set at an absurdly high amount gives you a legitimate argument.

Can a Michigan contractor fight a liquidated damages claim?

Yes. Common defenses include owner-caused delay, concurrent delay, waiver, and a challenge to the clause as an unenforceable penalty. Prevailing on any of these defenses typically requires contemporaneous documentation: RFI logs, change order requests, schedule updates, written notices, and meeting minutes. Contractors who document delays as they happen are in a far stronger position than those who try to reconstruct the record after the dispute begins.

How to Negotiate Liquidated Damages Clauses Before You Sign

Many contractors accept LD clauses without negotiating them. That is a mistake. Here is what you should address before you sign.

Ask for a cap.

Many sophisticated contractors negotiate a cap on total LD exposure, often expressed as a percentage of the contract price. A cap of 5% or 10% of the contract price significantly limits your worst-case outcome.

Define substantial completion clearly.

The contract should specify exactly what events constitute substantial completion and when the LD clock stops. Tie it to a specific, objective milestone, not a judgment call by the owner or architect.

Add an owner delay credit.

If the owner can assess LDs for contractor delays, the contractor should have the right to a time extension and, ideally, a day-for-day credit against LDs for any period of delay attributable to the owner.

Push for mutual delay provisions.

If the owner demands bonus or penalty provisions, make them mutual. If you finish early, you get a bonus. If the owner causes delay, the LD clock stops.

Identify excusable delay events explicitly.

Force majeure, supply chain disruptions, labor shortages, and government-ordered work stoppages should all be listed as events that extend the contract time without triggering LDs.

How should a Michigan contractor negotiate a liquidated damages clause?

Before signing, a contractor should seek a cap on total LD exposure (typically 5 to 10 percent of the contract price), a clear definition of substantial completion, explicit excusable delay provisions, and a day-for-day credit for owner-caused delays. At minimum, the contractor should understand the maximum financial exposure the clause creates before accepting the project at the proposed margin.

Contractor Takeaway: The Bottom Line

Liquidated damages clauses are not going away. They can often be found in many commercial construction projects in Michigan and are especially common on public projects in Wayne County, Oakland County, Macomb County, and Washtenaw County, where owners often want a defined daily remedy for delay. The question is not whether you will encounter them. It is whether you are prepared.

Three things give you the best protection. First, read and negotiate the clause before you sign. Know your maximum exposure going in. Second, document every delay event, every RFI, every change, and every notice as it happens. Third, if an owner asserts an LD claim that does not match the facts, get a Michigan construction attorney involved early. The sooner you engage counsel, the more options you have.

Frequently Asked Questions

Before you sign your next construction contract, make sure you understand your maximum LD exposure. A contract review now costs far less than a damages dispute later. Contact Szura & Delonis, PLC to schedule a consultation.

This article is provided for general educational and informational purposes only. It does not constitute legal advice and does not create an attorney-client relationship between the reader and Szura & Delonis, PLC. Michigan construction law involves complex statutory requirements and fact-specific analysis. Do not rely on this content as legal advice for your specific situation. If you have a time-sensitive construction law matter, consult a qualified Michigan construction attorney immediately.

About the Author

Richard M. Delonis is a Michigan construction, business, and real estate attorney at Szura & Delonis, PLC (Southfield/Metro Detroit). He advises construction managers, general contractors, subcontractors, and property owners on lien rights, collections strategy, contract disputes, and project-risk issues.

The result is predictable: when payment falls through, the contractor discovers that the waiver they signed wiped out the very rights that would have forced payment.

Lien waivers are not mere formalities. Under Michigan’s Construction Lien Act (MCL 570.1101 et seq.), a signed lien waiver can permanently eliminate your right to file a construction lien, one of the most powerful payment tools available to Michigan contractors. Getting the waiver language right is not optional.

This guide explains what Michigan lien waivers actually release, the difference between conditional and unconditional waivers, how to read the forms GCs hand you at payment time, and what to do when you are pressured to sign something that does not protect you.

For immediate assistance reviewing a lien waiver or protecting your construction payment rights in Michigan, contact the Michigan construction attorneys at Szura & Delonis, PLC. We represent contractors, subcontractors, and suppliers throughout Oakland, Wayne, Macomb, Washtenaw, and Livingston Counties.

What Is a Lien Waiver Under Michigan Law?

A lien waiver is a written document in which a contractor, subcontractor, or supplier gives up — in whole or in part — their right to file a construction lien against the project property in exchange for payment or in anticipation of payment. Michigan’s Construction Lien Act (MCL 570.1115) governs how lien rights can be waived, modified, or released.

Lien waivers typically flow through the payment chain: an owner pays a general contractor and requires a lien waiver covering the full project or the current payment application. The GC, in turn, collects lien waivers from every subcontractor and supplier before passing payment downstream. Title companies and lenders also demand lien waivers at closing to confirm the property can transfer with a clean title.

The practical result is that lien waivers are ubiquitous on Michigan construction projects — and the pressure to sign them quickly, without review, is constant.

What a Lien Waiver Does — and Does Not — Release

This is the single most misunderstood aspect of lien waivers in Michigan construction. Many contractors believe that signing a lien waiver means they have given up all rights to pursue payment. That is not correct — unless the waiver language says so specifically.

A lien waiver releases your right to file a construction lien against the specific property. It does not automatically release: your breach of contract claim against the GC or owner, your quantum meruit claim for the reasonable value of work performed, your bond claim rights on public projects under Michigan’s Little Miller Act, your rights under the Michigan Builders Trust Fund Act (MCL 570.151 et seq.), or your right to sue for payment in court or arbitration.

However, many GC-drafted lien waivers may contain language that goes far beyond releasing lien rights. Phrases like “releases all claims,” “waives all rights against the owner and contractor,” or “discharges all claims arising out of the project” can release your breach of contract claim, your change order claims, and your retainage rights along with your lien rights.

⚠ Critical Warning: Always read the full text of every lien waiver before signing. A lien waiver that releases “all claims” or “all rights” is fundamentally different from one that releases only lien rights. The title “Lien Waiver” does not limit what the document actually releases — the operative language does. If you are unsure what you are giving up, do not sign until an attorney reviews the form.

The Four Types of Michigan Construction Lien Waivers

Michigan construction practice uses four categories of lien waivers. Understanding which one you are signing, and when each is appropriate, is essential to protecting your payment rights.

1. Conditional Partial Lien Waiver

A conditional partial waiver releases lien rights for a specific payment — and only upon actual receipt of that payment. If the payment is not made (for example, the check bounces or the wire transfer is reversed), the conditional waiver is void and your lien rights remain intact. The waiver covers only the portion of the contract value specified, not the full contract, retainage, or future work.

This is the safest type of lien waiver to sign during an ongoing project. Use it for progress payments covering work billed through a specific date or payment application.

2. Unconditional Partial Lien Waiver

An unconditional partial waiver releases lien rights for a specific payment amount, regardless of whether payment is actually received. Once signed, it is effective immediately, and Michigan courts have enforced unconditional waivers even when the contractor never received the money.

Never sign an unconditional partial lien waiver before the corresponding payment has cleared. Never sign it in exchange for a promise of payment that has not yet been fulfilled.

3. Conditional Final Lien Waiver

A conditional final waiver releases all remaining lien rights for the entire project, but conditioned on receipt of the specified final payment. Once the final payment is received, all lien rights are released permanently. This is the appropriate document to use at project completion when receiving final payment.

4. Unconditional Final Lien Waiver

An unconditional final waiver releases all lien rights for the entire project immediately upon signing; regardless of payment. Signing an unconditional final waiver without receiving full final payment, including retainage, may eliminate every lien remedy you have.

Unconditional final waivers should be signed only after full final payment , including all retainage, has been confirmed received in cleared funds.

Side-by-Side Comparison: Conditional vs. Unconditional Waivers

Michigan’s Construction Lien Act: The Statutory Framework for Waivers

Michigan’s Construction Lien Act (MCL 570.1101 et seq.) establishes the framework within which lien rights can be waived. The key provisions every contractor must understand are outlined below.

MCL 570.1115 — Waiver of Lien Rights

MCL 570.1115 governs the waiver and modification of lien rights under the Construction Lien Act. The statute permits lien rights to be waived by written instrument, but the waiver must be clear and express. Courts applying this provision have distinguished between waivers that clearly and unambiguously release lien rights and language that is ambiguous as to what was intended to be released. Ambiguity in a lien waiver is generally construed against the party seeking to enforce the waiver.

MCL 570.1110 — Sworn Statements and Their Relationship to Lien Waivers

Michigan’s Construction Lien Act requires a contractor or subcontractor to provide a sworn statement in specified circumstances. The sworn statement allows the owner to verify which subcontractors are owed money and to protect themselves from paying the GC while subcontractors remain unpaid.

The sworn statement mechanism interacts critically with lien waivers: when an owner pays the GC and collects lien waivers from subcontractors based on the sworn statement, those subcontractors’ lien rights as against the owner are implicated.

MCL 570.1110(7) — Owner’s Duty to Withhold Upon Receipt of Notice

After a sworn statement is provided, the owner or lessee may withhold, and upon written demand from the contractor shall withhold, from amounts due or to become due for work already performed an amount sufficient to pay sums due to subcontractors, suppliers, or laborers shown by the sworn statement or due to lien claimants who have provided a notice of furnishing. From the amount withheld, the owner or lessee may directly pay those claimants. Because the statutory framework is fact-sensitive, contractors should evaluate the sworn statement, any notice of furnishing, and the payment chain before signing a waiver that may affect available remedies.

Practical Note — The Sworn Statement Leverage Point: Before signing any lien waiver, confirm whether the GC has submitted a sworn statement to the owner listing you as a subcontractor owed payment. If the owner has received the sworn statement and disbursed funds to the GC without ensuring your payment, the owner may have independent liability. Do not sign a lien waiver that releases the owner before evaluating this issue.

Partial vs. Final Lien Waivers: What Each Covers on a Michigan Project

On a typical Michigan commercial construction project with monthly payment applications, lien waivers flow in two streams: progress payment waivers that accumulate through the project, and a final lien waiver at project completion. Understanding exactly what period and what dollar amount each waiver covers is critical to ensuring you are not releasing more than you intend.

Progress Payment Waivers: Protecting Retainage and Future Work

Every progress payment waiver you sign should include three specific protections:

1. Billing period identification. The waiver should cover only the specific payment application or billing period, identified by date. “Work performed through October 31, 2025” is proper. “All work performed on the project to date” may be broader than you intend if it encompasses disputed change orders or work performed after the stated date.
2. Retainage exclusion. The waiver should expressly exclude retainage. Retainage is earned. It is money you are owed but not yet being paid. Releasing lien rights for retainage in a progress payment waiver is a common and costly mistake. The waiver should state: “Excepting retainage in the amount of $[X] not yet due and payable.”
3. Conditionality. The waiver should be conditional. “This waiver is conditioned upon and effective only upon receipt of payment in the amount of $[X]” is the essential protective language.

A progress payment waiver that lacks these three elements: billing period specification, retainage exclusion, and conditionality, is a document that should not be signed without modification or attorney review.

Final Lien Waivers: When You Sign One and What It Covers

A final lien waiver releases all remaining lien rights for the entire project. On a Michigan construction project, a final lien waiver should not be signed until three conditions are confirmed:

1. Full final payment has been received — all invoices paid in cleared funds.
2. All retainage has been released and received.
3. All disputed change orders have been resolved, paid, or expressly carved out of the waiver.

If any of these three conditions are not met, the final waiver should be conditional, not unconditional, and should expressly identify any outstanding amounts or disputed items that are excluded from the waiver.

Example Scenario: A Pontiac-based framing subcontractor completes a large Oakland County apartment complex. At final closeout, the GC presents an unconditional final lien waiver along with a check for the final payment. The subcontractor has $18,000 in disputed change orders that have not been paid or formally denied. The subcontractor signs the unconditional final waiver before confirming the check has cleared and without carving out the change order dispute. The check is returned for insufficient funds three days later. The subcontractor’s lien rights, which would have secured recovery of both the final payment and the change orders, may be gone. The remaining remedies are a breach of contract claim and a potential Builders Trust Fund Act complaint, both more expensive and uncertain than lien foreclosure would have been.

The Bounced Check Problem: What Happens to Your Lien Waiver?

One of the most persistent misconceptions in Michigan construction is that a bounced check automatically voids a lien waiver. The answer depends entirely on whether the waiver was conditional or unconditional.

If you signed a conditional lien waiver: “effective only upon receipt of payment in the amount of $[X]”, a bounced check means the condition was never satisfied. The waiver never became effective. Your lien rights remain intact, subject to the 90-day filing deadline from last furnishing under MCL 570.1111.

If you signed an unconditional lien waiver, a bounced check may not restore your lien rights. The waiver may be deemed by a court to have been effective the moment you signed it. Whether you can pursue fraud, misrepresentation, or failure of consideration arguments to set aside the waiver is a fact-specific legal question that requires immediate attorney consultation, and the outcome is far less certain than a conditional waiver would have been.

⚠ The Bounced Check Scenario — Do This Immediately: If you signed a lien waiver and the corresponding payment has not cleared: (1) immediately calculate your 90-day lien deadline from your last furnishing date; (2) determine whether your waiver was conditional or unconditional; (3) if conditional, prepare to file your lien immediately and do not wait for the payment dispute to resolve; and (4) contact a Michigan construction attorney the same day. The window between a bounced check and an expired lien deadline closes fast.

GC-Drafted Lien Waiver Forms: The Language to Watch For

Some general contractors in Michigan may present their own lien waiver forms, not the neutral statutory forms, designed to maximize the scope of the release they obtain from subcontractors. Being able to identify problematic language before you sign is a core business skill for any Michigan contractor.

Language That Expands the Release Beyond Lien Rights

The following phrases, when present in a lien waiver, may release rights well beyond your lien claim. Each one deserves careful scrutiny before signing:

• “Releases all claims, demands, and causes of action” — may release your breach of contract claim, change order claims, and delay claims.
• “Waives all rights against the owner, general contractor, and their sureties” — potentially releases your bond claim on a public project.
• “Full and final settlement of all amounts due or to become due” — may release future invoices for work not yet billed.
• “Arising out of or related to the project” — a broad scope that could capture disputes not yet known at signing.
• “Including claims for extras, changes, and additional work” — directly releases unpaid change orders.

None of these phrases necessarily makes the waiver invalid. But each one expands the scope of what you are giving up. Before signing a form that contains any of this language, either add a handwritten carve-out for specific disputed amounts or excluded claims, or request that the GC use a form that limits the release to lien rights only.

How to Add a Carve-Out for Disputed Amounts

A carve-out is a handwritten or typed exception added to the waiver form before signing. A proper carve-out identifies the specific excluded amount and the basis for exclusion. The following is sample language that can be adapted for use:

“Notwithstanding the foregoing, this waiver expressly excludes and does not release: (a) retainage in the amount of $[X] not yet due and payable; (b) Change Order Request No. [X] dated [date] in the amount of $[X], which is currently disputed; and (c) any claims arising from events occurring after [date].”

Have the GC’s project manager initial the carve-out before you sign. Keep a copy. If the GC flatly refuses to allow a carve-out for a legitimate disputed amount, that refusal may itself be a significant warning sign that the waiver is being used to defeat a valid claim rather than simply administer a payment.

The Timing Trap: Never Sign an Unconditional Waiver Before Funds Clear

The most common way Michigan contractors lose lien rights is by signing an unconditional lien waiver in the same transaction as receiving a check, but before confirming the check has cleared. This sequence is standard GC practice: hand the sub the check and the unconditional waiver at the same time and create pressure to sign both before leaving the room.

The correct practice: accept the check, sign a conditional lien waiver stating it is effective only upon receipt of cleared funds, and wait for the check to clear before releasing any unconditional waiver. A GC who refuses to accept a conditional waiver and insists on an unconditional waiver before funds clear should be treated as a possible payment risk.

Lien Waivers and Retainage: How to Protect Earned Retainage Throughout the Project

Retainage is the percentage of each progress payment (typically 5 to 10 percent on Michigan commercial projects) that the owner or GC holds back until substantial completion. On a $500,000 subcontract, retainage of 10 percent means $50,000 of earned money is withheld throughout the project. That money is owed to you. It must be protected in every lien waiver you sign.

The standard approach is straightforward: every progress payment waiver should contain an express exclusion for outstanding retainage. When the project reaches substantial completion and retainage is released, collect retainage payment, confirm funds have cleared, then sign a conditional partial lien waiver covering the retainage amount specifically.

Never include retainage in the release amount of a progress payment lien waiver. Never sign a final lien waiver while retainage remains outstanding, unless the final lien waiver is specifically conditioned on receipt of retainage as part of the final payment amount.

Retainage + Lien Rights — The Clock Keeps Running: Your 90-day lien deadline under MCL 570.1111 runs from your last day of furnishing labor or materials. Not from the date retainage is supposed to be released. Do not let a retainage dispute push you past your lien deadline. If retainage is not released within a reasonable period after substantial completion, file a construction lien for the retainage amount and pursue payment through lien foreclosure. Waiting for the retainage release process to play out is not a reason to miss the lien deadline.

Lien Waivers and Bond Claims: Does Signing a Waiver Kill Your Bond Claim?

On public construction projects in Michigan (state, county, school, and municipal work) the property itself cannot be liened. Payment protection comes instead from payment bonds required under Michigan’s Little Miller Act (MCL Act 213 of 1963). On private projects, GCs and owners sometimes also require payment and performance bonds.

Does signing a lien waiver eliminate your bond claim rights? The answer depends entirely on the waiver language. A lien waiver that releases only “lien rights” under the Michigan Construction Lien Act does not release a bond claim, because a bond claim is a separate legal remedy against the surety, but not a right against the real property.

A lien waiver that releases “all claims against the owner, contractor, and their sureties” may release your bond claim. A waiver covering “all rights under the project” may be interpreted to include bond rights. On any public project or bonded private project, have a construction attorney review the lien waiver language before signing. The combination of releasing lien rights (which did not exist anyway on a public project) and bond rights (your only real remedy) through a single broadly drafted document is a trap that can cost a subcontractor on a Michigan public project.

Signed Under Pressure: Can You Challenge a Lien Waiver in Michigan?

Michigan contractors report being told: “Sign the waiver or we won’t process your payment” — or more aggressively, “Sign or you are off this job.” Does economic pressure constitute duress sufficient to void a lien waiver in Michigan?

Legal duress, the kind that can void a contract under Michigan law, requires more than hard bargaining or economic pressure. Michigan courts have held that the threat must be wrongful or unlawful and must leave the party with no reasonable alternative. A GC conditioning payment on a lien waiver, while unfair, may not meet the threshold for legal duress sufficient to void the waiver in court.

The practical implication: do not sign an improper lien waiver intending to challenge it later on duress grounds. The better approach is to protect yourself before signing. Add carve-outs, use conditional language, and refuse to sign unconditional waivers for amounts not yet received. After-the-fact challenges to signed lien waivers are expensive and very uncertain.

AIA Forms and Lien Waivers on Michigan Projects

On projects using AIA contract documents, lien-waiver practice usually arises through the payment-application and closeout provisions rather than through a standalone statutory form. AIA G702 and G703 are payment-application forms; they are not themselves lien waivers. Under AIA A201-2017, progress-payment applications may be supported by data the Owner or Architect require, including releases and waivers of liens from subcontractors and suppliers, and § 9.10.2 expressly provides that final payment and any remaining retainage do not become due until the contractor provides specified closeout materials and, if required by the owner, receipts, releases, and waivers of liens, claims, security interests, or encumbrances.

Michigan contractors working on AIA projects should review any lien waiver exhibit or addendum at the time of contract execution, not at the first payment application. Negotiating waiver language before the project starts is easier than fighting over it during a live payment dispute.

What to Do When You Are Presented With a Lien Waiver Form You Should Not Sign

The practical scenario: you are at the GC’s office to pick up a check. The project manager hands you an unconditional final lien waiver that releases all claims, includes retainage not yet paid, and waives bond rights, or any variation of that situation. The following protocol applies:

1. Do not sign under time pressure. “I need to review this with my attorney” is a complete and appropriate response. A reasonable GC will likely allow 24–48 hours for review. A GC who refuses is creating a pressure situation that itself may warrant immediate legal consultation.
2. Identify what you are being asked to release: lien rights only, or all claims? What billing period? Does it include retainage? Does it release bond claims?
3. Identify what you are receiving in exchange: a specific check amount, a wire transfer, or a promise of future payment?
4. If the payment is by check, sign only a conditional waiver — effective upon receipt of cleared funds — and note the check number on the waiver.
5. Add a handwritten carve-out for any outstanding retainage, disputed change orders, or unresolved claims before signing.
6. Keep a signed copy of every waiver you sign, including your handwritten modifications. Do not allow only the GC to retain a copy.
7. If the GC insists on an unconditional waiver or refuses your carve-out, call a Michigan construction attorney before proceeding. This is the scenario where legal advice is cheapest: before you sign, not after.

Common Michigan Contractor Lien Waiver Mistakes — and How to Avoid Them

After years of representing contractors in lien enforcement and payment disputes throughout Metro Detroit, the following lien waiver mistakes are not unusual:

• Signing an unconditional partial lien waiver in exchange for a check before the check clears. The most common and most preventable mistake.
• Signing a final lien waiver while retainage remains outstanding. Retainage is your money. Never release it before you have it.
• Signing a lien waiver form that releases “all claims” without reading the scope of the release. The title says “Lien Waiver.” The language may release your change order claims, delay claims, and everything else.
• Failing to carve out disputed change orders from progress payment waivers. Once signed without a carve-out, the argument that the waiver did not cover the disputed change order becomes much harder to make.
• Not keeping copies of signed waivers. When a payment dispute arises, the GC’s copy of what you signed may look different from what you remember signing.
• Signing a lien waiver on a public project without realizing it includes a release of bond claim rights — the only real payment remedy on a public job.
• Waiting until after the lien deadline to consult an attorney about a signed waiver. If the waiver was conditional and the condition was never met, you may still have lien rights, but only if you act before the 90-day clock expires.

Frequently Asked Questions About Michigan Construction Lien Waivers

What is the difference between a conditional and unconditional lien waiver in Michigan?

A conditional lien waiver is effective only upon actual receipt of the payment specified. If payment is not received, the waiver is void and lien rights are intact. An unconditional lien waiver is effective immediately upon signing, regardless of whether payment is received. Always use conditional waivers on Michigan construction projects unless payment has already been confirmed in cleared funds.

Can a GC in Michigan require me to sign a lien waiver before paying me?

A GC may ask for a lien waiver as part of the payment process, but Michigan law does not permit an advance contractual waiver of construction lien rights as part of the underlying improvement contract before work is performed. The safer practice is to use a conditional waiver tied to actual payment, rather than an unconditional waiver signed before funds are received.

Does a lien waiver in Michigan release my right to sue for breach of contract?

It depends on the waiver language. A waiver that releases only “lien rights” under the Construction Lien Act does not release your breach of contract claim. A waiver that releases “all claims” or “all rights against the contractor and owner arising out of the project” may release breach of contract claims. Read the operative language carefully — not just the title.

Can I add carve-outs to a lien waiver form a GC gives me?

Yes. A lien waiver is a contract. You may propose modifications before signing. Add a handwritten carve-out for retainage, disputed change orders, or any other amounts not included in the payment you are receiving. Have the GC’s representative initial your carve-out and keep a copy of the signed, modified form.

What happens if I sign a lien waiver and the check bounces?

If you signed a conditional lien waiver, the bounced check means the condition was never satisfied and the waiver is void. Your lien rights remain intact. If you signed an unconditional lien waiver, the bounced check does not automatically restore your lien rights, and you should consult a Michigan construction attorney immediately while your lien deadline is still open.

Does a lien waiver release my rights under Michigan’s Builders Trust Fund Act?

A standard lien waiver that releases only lien rights under the Construction Lien Act should not release your Builders Trust Fund Act rights under MCL 570.151. However, a broadly drafted waiver releasing “all claims arising out of the project” could potentially be interpreted to include trust fund claims. On any significant payment dispute, have an attorney review the waiver before signing.

Can I include unpaid retainage in a Michigan construction lien even after signing progress payment waivers?

Yes — provided your progress payment waivers expressly excluded retainage, which they should have. If you properly carved retainage out of each progress payment waiver, your lien rights for retainage remain intact. File the lien for the retainage amount within 90 days of your last furnishing under MCL 570.1111.

I signed a lien waiver on a public project and still have not been paid. What are my options?

On a public project, the real property cannot be liened, so the lien waiver may have released rights you did not have anyway. The critical question is whether the waiver also released your bond claim rights under Michigan’s Little Miller Act (MCL Act 213 of 1963). If the waiver language is limited to “lien rights,” your bond claim may still be viable, subject to its own strict notice and filing deadlines. Consult a Michigan construction attorney immediately if you are unpaid on a public project.

How long do I have to file a lien in Michigan if I realize my lien waiver was improper?

The 90-day lien deadline under MCL 570.1111 runs from your last furnishing regardless of any waiver dispute. If your waiver was conditional and the condition was not met, you must file within 90 days of last furnishing. Do not wait for the payment dispute to resolve before filing. The lien deadline does not pause during negotiations or payment disputes.

What should a proper Michigan lien waiver form include?

A proper Michigan construction lien waiver should include: (1) the claimant’s name and address; (2) the project name and address; (3) the specific payment amount being released; (4) the billing period or date through which the waiver applies; (5) an express conditionality provision for conditional waivers; (6) an express exclusion of retainage not yet paid; (7) a carve-out for any disputed claims or change orders; and (8) the date and signature of the claimant.

Protect Your Lien Rights Before You Sign — Contact Szura & Delonis, PLC

A lien waiver is one of the most consequential documents a Michigan contractor signs on any project. Sign the wrong form, at the wrong time, without the right carve-outs, and months of work, material costs, and retainage can disappear permanently, with no lien deadline to save you.

At Szura & Delonis, PLC, our Michigan construction law attorneys help contractors, subcontractors, and suppliers throughout Oakland, Wayne, Macomb, Washtenaw, and Livingston Counties understand what they are signing before they sign it, and protect their payment rights through lien enforcement when payment is withheld.

If you have questions about a lien waiver you have been asked to sign, need to review your payment documentation before a project closeout, or are facing a payment dispute involving a prior lien waiver, call us at (248) 716-3600 or contact us online. We respond quickly because construction payment disputes do not wait.

This article is provided for general educational and informational purposes only. It does not constitute legal advice and does not create an attorney-client relationship between the reader and Szura & Delonis, PLC. Michigan construction law involves complex statutory requirements and fact-specific analysis. Do not rely on this content as legal advice for your specific situation. If you have a time-sensitive construction law matter, consult a qualified Michigan construction attorney immediately.

About the Author

Richard M. Delonis is a Michigan construction, business, and real estate attorney at Szura & Delonis, PLC (Southfield/Metro Detroit). He advises construction managers, general contractors, subcontractors, and property owners on lien rights, collections strategy, contract disputes, and project-risk issues.

Understanding how Michigan law treats change orders, what notice is required before you perform extra work, and what remedies exist when a GC or owner refuses to pay is essential knowledge for every contractor, subcontractor, and supplier working in Metro Detroit and throughout Michigan.

This guide covers Michigan change order law in practical terms, including what happens when there is no signed change order and your legal options when verbal directives go unpaid.

For immediate assistance with a Michigan construction change order dispute, contact the Michigan construction attorneys at Szura & Delonis, PLC. We represent contractors, subcontractors, and suppliers throughout Oakland, Wayne, Macomb, and Washtenaw Counties.

What Is a Construction Change Order in Michigan?

Direct Answer: A constructive change order arises when an owner, GC, or design professional causes a contractor to perform work outside the original contract scope — without issuing a formal change order. Common examples include defective design requiring corrective work, owner-directed acceleration, changed site conditions, and over-inspection that exceeds contract requirements. The contractor is entitled to additional compensation even without a signed change order.

A change order is a written agreement that modifies the scope, price, or schedule of a construction contract. It documents that both parties have agreed to work that is different from — or additional to — the original contract scope.

Michigan construction contracts typically provide a defined change order process: the owner or GC issues a directive, the contractor prices the change, and both parties sign the change order before work begins. Simple in theory. In practice, construction moves faster than paperwork, and work gets done on verbal directives, site superintendent instructions, and implied approvals — all before anyone thinks about a written change order.

That gap between how change orders are supposed to work and how they actually work in the field is where disputes are born.

Formal Change Orders vs. Constructive Changes

A formal change order is a written modification signed by both parties. A constructive change is different: it arises when a contractor is required to perform extra or changed work without a formal change order being issued — typically because of owner conduct, design errors, changed conditions, or directives from the architect or project manager.

Constructive changes may be compensable under Michigan law even without a signed change order. The contractor must still prove the change occurred and what it cost — but the absence of a written change order does not necessarily automatically end the claim.

The Legal Difference Between a Change Order and Extra Work

Extra work refers to work that is genuinely outside the original contract scope. Changed work is work within the scope that must be done differently than specified. Both can give rise to additional compensation claims in Michigan. Courts look to the contract documents — drawings, specifications, scope of work definitions — to determine whether challenged work was truly ‘extra’ or was already included in the original contract price.

Are Verbal Change Orders Enforceable in Michigan?

Direct Answer: Yes, Michigan courts will sometimes enforce verbal change orders despite written-notice requirements in the contract, particularly when the evidence shows that the owner or GC directed the work, accepted the benefit of the work, and the contractor can prove the directive through contemporaneous documentation. Written change orders are always better, but oral directives supported by solid documentation are not automatically unenforceable.

This is the question every subcontractor with an outstanding extra work invoice wants answered. The honest answer: it depends on the facts, the contract language, and the evidence you have.

Michigan courts apply general contract law principles to change order disputes. Where a written change order requirement exists in the contract, courts will look first at whether the requirement was a strict condition precedent to any recovery, or whether it was something the parties agreed to do but whose breach does not automatically eliminate the claim.

When Michigan Courts Have Enforced Oral Directives

Michigan appellate courts have, in appropriate circumstances, enforced oral change orders despite written-notice provisions in the contract when the evidence established that: (1) the GC or owner clearly directed the extra work; (2) the contractor reasonably relied on the directive; (3) the owner or GC accepted the benefit of the completed work; and (4) enforcing the written requirement would result in unjust enrichment.

EXAMPLE SCENARIO: A Livonia mechanical subcontractor receives a verbal directive from the site superintendent to relocate $40,000 worth of ductwork because the architect’s drawings contained a coordination error. The GC later denies authorization and refuses to issue a change order. The subcontractor has emails from the superintendent confirming the relocation, daily logs showing when the work was performed and by whose direction, and photos of the pre-existing conflict and completed relocation. With this documentation, the subcontractor has a strong claim to recover, either through a constructive change order claim or quantum meruit, even without a signed change order.

Waiver of Written Change Order Requirements in Michigan

Michigan contract law recognizes that a party can waive a written notice or change order requirement through conduct. Waiver requires proof that the party entitled to written change orders accepted verbal directives and paid for them — or accepted the work without objection — such that enforcing the written requirement would be inequitable. Courts will require clear and convincing evidence to demonstrate the waiver of a written change order, and the presence of restrictive clauses in the contract, such as anti-waiver provisions, may increase the evidentiary burden to establish waiver.

A GC who has paid three prior verbal change orders without requiring written documentation has a difficult argument that the fourth identical directive required a written change order. Courts look at the parties’ course of dealing — how they actually behaved on this project — not just what the contract says in the abstract.

Why Relying on Verbal Directives Is Always Dangerous

Even if you can ultimately win a verbal change order claim, the litigation is far more expensive, uncertain, and time-consuming than it would have been with a signed written change order. The default rule is that verbal change orders are not enforceable. You are fighting against the contract language every step of the way. Winning requires strong contemporaneous documentation on your side. Start from a position of strength: get it in writing before you start the work.

Written Notice Requirements: What Your Contract Probably Says

Most Michigan construction contracts, including AIA A201-2017, standard subcontract forms used by major GCs in Metro Detroit, and custom owner-drafted agreements — include provisions requiring written notice as a condition of recovering for change order work. These provisions can vary significantly in their language and legal effect.
 

Condition Precedent vs. Covenant — The Critical Distinction

If the written notice requirement is a ‘condition precedent,’ failure to serve it on time eliminates the claim entirely, and the contractor’s right to recover never materializes. Courts strictly enforce conditions precedent when the language is unambiguous.

If the requirement is a ‘covenant’ — a promise to provide notice, breach of which entitles the other party to damages — the analysis is different. The contractor has breached the contract by failing to give notice, but the claim for extra work itself may survive. The other party may be required to show actual prejudice from the lack of notice to reduce or eliminate the contractor’s recovery.

This distinction is frequently litigated in construction disputes. Contract language like ‘as a condition precedent to any recovery’ signals strict enforcement. Language like ‘contractor shall give written notice’ without that qualifier may be interpreted as a covenant. Every contract requires individual analysis.

AIA A201 Change Order Procedures in Michigan

AIA A201-2017, the most widely used general conditions document on Michigan commercial projects, provides a detailed change order and claim procedure. Under AIA A201:

• The Owner may direct changes to the Work through Change Orders (Article 7).
• A Claim — including for additional compensation for changed work — must be made within 21 days of the occurrence of the event giving rise to the claim.
• Construction Change Directives allow owners to direct change work before agreement on price.
• Contractors who fail to submit a timely Claim may waive the right to additional compensation.

Michigan contractors and subcontractors working under AIA contracts should assume the 21-day notice requirement will be enforced. Give notice early, in writing, even if you are not certain a claim will develop. You can always withdraw a claim; you cannot revive one that expired because you waited too long.

Subcontract Flow-Down Provisions and Notice Requirements

Many GC subcontracts flow down the notice requirements from the prime contract — meaning a subcontractor may be bound by AIA A201’s 21-day notice requirement even if the subcontract does not explicitly state a deadline. Read your subcontract carefully for flow-down language and always give notice upstream consistent with the prime contract timeline.
 

Constructive Change Orders: Getting Paid Without a Signed Change Order

Direct Answer: A constructive change order arises when an owner, GC, or design professional causes a contractor to perform work outside the original contract scope — without issuing a formal change order. Common examples include defective design requiring corrective work, owner-directed acceleration, changed site conditions, and over-inspection that exceeds contract requirements. The contractor is entitled to additional compensation even without a signed change order.

What Makes a Change Order ‘Constructive’ in Michigan?

A constructive change arises when the contractor is required to do more than the original contract requires, but without the formal change order process. The contractor is entitled to compensation as if a formal change order had been issued. Common constructive change triggers on Michigan construction projects can include:

• Defective or conflicting design documents requiring corrective work beyond the original scope
• Owner-furnished materials or equipment that are defective or late, requiring contractor workarounds
• Differing site conditions — concealed conditions materially different from those the contract represented
• Owner-directed acceleration of the schedule without additional compensation
• Rejection of conforming work by the owner or architect without legitimate basis
• Excessive or unreasonable inspection requirements that exceed contract specifications

Cardinal Change: When the Scope Change Is So Large the Contract Is Abandoned

A cardinal change occurs when the cumulative scope modifications are so significant that the project being constructed is fundamentally different from what was bargained for. At that point, the contractor may be entitled to abandon the original contract and pursue recovery in quantum meruit for the full reasonable value of all work performed — not just the specific changes.

Cardinal change is a high threshold and requires careful analysis of the total deviation from the original scope. It is more commonly argued on large commercial and public projects than residential work. If you believe you are facing a cardinal change situation, consult a Michigan construction attorney before making any decisions about contract abandonment. The doctrine of cardinal change is well-established in federal courts, but Michigan courts have not adopted it. Instead, Michigan courts rely on the terms of the contract and statutory provisions governing modifications to address disputes over significant changes in construction projects.

How to Document Extra Work to Maximize Recovery

Whether you end up negotiating a change order, filing a lien, or litigating, your recovery depends almost entirely on your documentation. The contractor with organized, contemporaneous records wins. The contractor relying on memory loses.

The Real-Time Documentation Checklist

When a verbal change order or extra work directive is given, immediately create a record:

1. Send a same-day email to the GC’s project manager or superintendent confirming the directive: ‘Per your direction at the site meeting this morning, we will proceed with [specific work]. Please confirm this is authorized as additional work beyond the original scope.’
2. Record the directive in your daily field report, identifying who gave the instruction, what was directed, the date, and the time.
3. Photograph pre-existing conditions before beginning extra work, and the completed extra work.
4. Segregate labor and material costs for the extra work the moment it begins — do not commingle with base contract costs.
5. Submit a formal written change order request with pricing as soon as the scope is defined. Even if not signed, a submitted and unrejected change order request establishes the claim.
6. Track all communications — texts, voicemails, emails — about the extra work in a single project file.

Pricing Change Order Work: T&M vs. Lump Sum vs. Unit Price

How you price a change order affects how easily it is approved and how well-protected you are if the price is disputed. Time-and-material (T&M) pricing is straightforward but requires rigorous contemporaneous cost records. Lump sum pricing is cleaner and faster to approve but requires careful scope definition. Unit price changes work best for measurable, repetitive work. Whatever method you use, document your cost basis in real time. Reconstructing costs from memory months later is unreliable and less persuasive in litigation.

RFIs as Change Order Triggers — How to Use Them Strategically

A Request for Information (RFI) is one of the most underused tools in change order documentation. When a drawing conflict, design gap, or ambiguous specification requires clarification, submit an RFI immediately. The architect’s or engineer’s response to an RFI — directing a specific approach, confirming a method, or defining work beyond the original specification — is powerful evidence that changed or additional work was required and directed. Date-stamp everything. An RFI log that shows a directive, followed by additional cost, followed by an unpaid invoice can be a strong change order claim.

When the GC Refuses to Sign — Your Legal Remedies in Michigan

When a GC refuses to sign a change order for work you have already completed, you have several legal options. The right strategy depends on the documentation available, the contract language, the dollar amount, and the current status of the project relationship. Szura & Delonis, PLC provides Michigan construction law representation for contractors, subcontractors, and suppliers across Oakland, Wayne, Macomb, and Washtenaw Counties. Our attorneys evaluate extra work claims, analyze contract notice provisions, and pursue or defend change order disputes through negotiation, lien enforcement, and litigation.

Breach of Contract Claims for Authorized Change Work

If a change order was signed and the GC simply refuses to pay, you have a straightforward breach of contract claim. The signed change order is the contract; non-payment is the breach. File your Michigan construction lien for the unpaid change order amount within 90 days of last furnishing and pursue the breach of contract claim simultaneously.

Quantum Meruit: Recovery Without a Signed Change Order

Where no formal change order was signed, quantum meruit provides an equitable alternative. To recover in quantum meruit in Michigan, you must show: (1) you provided labor, materials, or services to the project; (2) the other party accepted the benefit; and (3) allowing non-payment would be unjust. Recovery is measured by the reasonable value of the work — not necessarily the contract rate. Quantum meruit can be pursued alongside breach of contract as an alternative theory.

Including Extra Work in a Michigan Construction Lien

Under Michigan’s Construction Lien Act (MCL 570.1101 et seq.), your lien covers all labor and materials furnished under your contract, including authorized extra work. Do not reduce your lien amount because a change order is disputed. File for the full amount claimed and let the foreclosure proceeding resolve the pricing dispute. Missing the 90-day deadline from last furnishing is not recoverable — the lien right is gone permanently.

Builders Trust Fund Act Implications

If the GC received payment from the owner that included amounts for your extra work and failed to pay those funds to you, the GC may have violated Michigan’s Builders Trust Fund Act (MCL 570.151 et seq.). Fund diversion is a felony under Michigan law and creates parallel civil liability. This is a powerful additional lever, but it requires proof that the GC received construction funds earmarked for the relevant work and diverted them.

Michigan County and Court Context for Change Order Disputes

In Metro Detroit, construction change order litigation is handled in the circuit court of the county where the project is located. Oakland County 6th Circuit Court in Pontiac, Wayne County 3rd Circuit Court in Detroit, and Macomb County 16th Circuit Court in Mt. Clemens all have active construction law dockets. Szura & Delonis, PLC has litigation experience in all three courts.

If your construction contract contains an arbitration clause (common in AIA-based agreements and many major GC subcontracts) change order disputes will typically be decided by an AAA arbitrator under the Construction Industry Arbitration Rules rather than a judge. Both forums require the same documentation quality; arbitration is not more forgiving of poor recordkeeping than court.

Common Change Order Mistakes Michigan Contractors Make

After years of representing contractors in Metro Detroit and throughout Michigan, the most damaging change order mistakes we see are consistent:

• Performing extra work without any written confirmation of the directive and then being surprised when the GC denies it.
• Waiting until the end of the project to submit all change orders at once — by then, memories have faded, the GC has left the job, and the lien deadline may have passed.
• Including change order amounts in broad, unconditional lien waivers signed during the project without carving out the disputed amounts.
• Signing a subcontract with a pay-if-paid clause and then relying on the GC to fight the change order battle with the owner.
• Failing to segregate extra work costs from base contract costs in real time, making reconstruction of the change order claim nearly impossible.
• Consulting an attorney after the 90-day lien deadline has already passed.

Frequently Asked Questions About Michigan Construction Change Orders

Change order disputes move quickly. By the time a GC or owner formally refuses to pay for extra work, the lien deadline clock is already running, and the evidence supporting your claim is getting colder every day.

At Szura & Delonis, PLC, our Michigan construction law attorneys represent contractors, subcontractors, and suppliers in change order disputes, lien enforcement, and construction litigation throughout Oakland County, Wayne County, Macomb County, and Washtenaw County. We analyze contract notice requirements, evaluate extra work documentation, and pursue full recovery through negotiation, lien foreclosure, and litigation in Michigan circuit courts and AAA arbitration.

Call us at (248) 716-3600 or contact us online. We respond quickly to time-sensitive construction matters — because your lien clock does not wait.

This article is provided for general educational and informational purposes only. It does not constitute legal advice and does not create an attorney-client relationship between the reader and Szura & Delonis, PLC. Michigan construction law involves complex statutory deadlines, procedural requirements, and fact-specific analysis. Do not rely on this content as legal advice for your specific situation. Prior results do not guarantee similar outcomes.

About the Author

Richard M. Delonis is a Michigan construction, business, and real estate attorney at Szura & Delonis, PLC (Southfield/Metro Detroit). He advises construction managers, general contractors, subcontractors, and property owners on lien rights, collections strategy, contract disputes, and project-risk issues.

Example: You just signed a $350,000 subcontract for a commercial build in Oakland County. The owner stops paying after month two. You walk off the job to protect your cash flow. Next thing you know, you’re being sued for breach of contract—and the pay-if-paid clause may mean that you can’t collect a dime until the general contractor gets paid by the bankrupt owner.

Key Takeaways

• Pay-if-paid clauses are enforceable in Michigan—you may not get paid if the owner doesn’t pay the GC, even if you did great work.
• No-damages-for-delay provisions are valid unless the delay was unforeseeable, caused by bad faith, or involved active interference
• Michigan law prohibits indemnifying someone for their sole negligence on construction projects (MCL 691.991), but broader indemnity still exists
• Contracts without written change order requirements expose you to disputes over extra work and unpaid change orders
• Missing suspension-of-work clauses mean walking off a non-paying job can make YOU the breaching party
• Metro Detroit projects across Wayne, Oakland, Macomb, and Washtenaw Counties see these contract disputes frequently

Scenario: The $180,000 Lesson

Mike runs an HVAC company in Southfield, Michigan. He landed a big subcontract for a medical office building in Troy. The contract looked standard—40 pages of dense language he’d seen before. He signed it.

Four months in, the owner stopped paying the general contractor. The GC stopped paying Mike. Mike had $180,000 outstanding—enough to cover his materials, labor, and make payroll for six weeks.

Mike walked off the job. He figured he’d file a construction lien and collect. But when his attorney reviewed the contract, they found three troublesome clauses:

1. Pay-if-paid provision: Mike only gets paid “if and when” the GC receives payment from the owner
2. No-damages-for-delay: Mike can’t claim damages for project delays, even owner-caused ones
3. No suspension-of-work right: The contract gave Mike no right to stop work for non-payment

The result? Mike was found liable for abandoning the project. The owner had gone bankrupt, so the GC never got paid—which meant under the pay-if-paid clause, Mike had no ability to collect payment either. He lost $180,000 and faced a counterclaim for the cost of hiring replacement contractors.

Mike’s mistake wasn’t the work he did. It was the contract he signed.

Clause #1: Pay-If-Paid Provisions

Short answer: Michigan courts enforce pay-if-paid clauses that clearly make the general contractor’s receipt of payment from the owner a “condition precedent” to paying subcontractors. If the owner doesn’t pay the GC—even if the owner goes bankrupt—the subcontractor may get nothing.

How This Clause Works

A pay-if-paid clause can shift all payment risk from the general contractor to you. The contract language typically reads something like:

“Contractor shall pay Subcontractor only if and when Contractor receives payment from Owner for Subcontractor’s work. Receipt of payment by Contractor is a condition precedent to Contractor’s obligation to pay Subcontractor.”

This isn’t just a timing delay—it’s a complete condition. If the owner doesn’t pay (bankruptcy, cash flow problems, disputes), you don’t get paid.

Michigan’s Legal Standard

The Michigan Supreme Court established the rule in Berkel & Co. Contractors v. Christman Co., 210 Mich. App. 416 (1995). For a pay-if-paid clause to work in Michigan, it must:

• Use clear, unambiguous language
• Explicitly state that payment is a “condition precedent”
• Not just suggest payment will be delayed for a “reasonable time”

Michigan courts will enforce these clauses as written. The court in Berkel specifically rejected the argument that the clause merely delayed payment to a “reasonable time” because the contract contained no such limiting language.

Recent Limitation

One important exception: In Macomb Mechanical, Inc. v. LaSalle Group, Inc. (unpublished, 2015), a Michigan Court of Appeals held that pay-if-paid clauses only apply to work covered by the original subcontract. Extra work performed under unsigned change orders might not fall under the pay-if-paid provision.

What This Means for You

Best practice: Before signing any subcontract in Wayne, Oakland, Macomb, or Washtenaw Counties (or anywhere in Michigan), search for these phrases:

• “condition precedent”
• “only if Contractor receives payment”
• “if and when payment is received”
• “payment contingent upon”

If you see these terms, you’re looking at a pay-if-paid clause.

Common mistake: Contractors assume they’ll “just file a lien” if they don’t get paid. But a pay-if-paid clause can limit your lien rights to whatever the owner still owes the GC—which might be zero.

Clause #2: No-Damages-For-Delay Provisions

Short answer: No-damages-for-delay clauses are enforceable in Michigan, preventing contractors from claiming damages when project delays—even owner-caused delays—impact your schedule and budget. However, four exceptions can void these clauses: unforeseeable delays, abandonment of contract, bad faith, or active interference by the other party.

The Basic Clause

A typical no-damages-for-delay provision reads:

“Contractor’s sole remedy for any delay shall be an extension of time to complete the Work. Contractor waives any claim for delay damages, including but not limited to extended overhead, labor inefficiency, and lost productivity.”

Translation: The owner can delay your work for months, costing you tens of thousands in extended overhead and lost opportunities—and you have zero recourse except more time to finish.

When These Clauses Get Voided

Michigan courts recognize four exceptions where no-damages-for-delay clauses won’t protect owners:

• Delays not contemplated by the parties at contract signing
• Abandonment of the contract by the delaying party
• Bad faith on the part of the contracting authority
• Active interference by the other contracting party

Example

A mechanical contractor in Dearborn (Wayne County) was delayed six months when the owner failed to obtain permits and utilities connections. The contract had a no-damages clause. So the court will likely find that the owner’s failure was “active interference”—they affirmatively prevented the contractor from working. The clause won’t apply, and the contractor will recover $140,000 in extended overhead.

What This Means for You

Best practice: You can’t always strike these clauses, especially on public projects. But you can protect yourself:

• Document everything: Every delay, every communication, every impact
• Send delay notices in writing: Follow contract notice requirements
• Identify the cause: Was it truly unforeseeable? Did it involve bad faith?
• Calculate actual costs: Track daily overhead, labor inefficiency, lost opportunities

If the delay falls under one of the four exceptions, you may have a claim despite the clause.

Common mistake: Accepting verbal time extensions without documenting the cost impact. Always submit a change order for time AND money when delays occur.

Clause #3: Indemnification Provisions

Short answer: Michigan law prohibits contractors from being forced to indemnify others for the other party’s sole negligence (MCL 691.991), but broader “intermediate form” indemnification that includes joint negligence remains enforceable. These clauses can make you liable for accidents and claims you didn’t cause, potentially exceeding your insurance coverage.

What Michigan Law Says

MCL 691.991 states that any provision requiring a contractor to indemnify another party for damages arising out of bodily injury to persons or damage to property “caused by or resulting from the sole negligence” of that other party is against public policy and is “void and unenforceable” in Michigan construction contracts.

BUT —and this is critical— the law doesn’t prohibit intermediate indemnification. You can still be required to indemnify an owner for claims where you’re only 10% at fault and they’re 90% at fault.

Here’s an example of such a “intermediate indemnification” clause:

“Contractor shall indemnify Owner for all claims arising from Contractor’s work, except those caused by Owner’s sole negligence.”

Here’s a better clause for contractors:

“Contractor shall indemnify Owner only for claims arising from Contractor’s own negligence, errors, or omissions.”

The Insurance Problem

Commercial general liability (CGL) policies may exclude coverage for contractual liability beyond what you’d face under common law. If your construction contract requires broad or intermediate indemnity, you might be self-insuring claims without realizing it.

What This Means for You

Best practice:

• Read the indemnity clause carefully: Look for phrases like “arising out of,” “relating to,” or “in connection with” Contractor’s work—these are broad triggers
• Negotiate for proportional liability: Try to add: “but only to the extent caused by Contractor’s negligence”
• Involve your insurance agent: Have them review indemnity requirements before you sign
• Request additional insured status: If you’re indemnifying the owner, they should be listed as additional insureds on your policy

Common mistake: Assuming your insurance “covers everything.” Policies may specifically exclude broad contractual indemnity, leaving your company potentially liable.

Clause #4: Change Order Procedures

Short answer: Contracts requiring written change orders before performing extra work are enforced in Michigan. Verbal approvals don’t satisfy these requirements, and emails, and text messages may not either. If you perform changed work without proper written authorization, you may work for free, even if the owner requested it.

Why Change Orders Matter

Construction projects in metro Detroit rarely go exactly as planned. Conditions change. Owners request upgrades. Design errors emerge. The question isn’t whether you’ll have change orders. It’s whether you’ll get paid for them.

A well-drafted change order clause should specify:

• Who has authority to approve changes
• How changes must be documented
• Timeline for submitting change order requests
• Pricing methodology (time and materials, lump sum, unit prices)
• Impact on project schedule

The Written Requirement

Many contracts include anti-waiver provisions like:

“No change to this Contract shall be valid unless in a written change order signed by Owner’s authorized representative. Contractor’s acceptance of oral directives or unsigned change orders constitutes a waiver of any claim for additional compensation.”

This language is enforceable. Contractors who perform extra work without complying with written change order requirements likely will be told that they can’t recover payment.

The Exception: Waiver by Conduct

Some Michigan courts have found that owners can waive written change order requirements through their conduct—for example, by repeatedly accepting and paying for verbal change orders throughout the project. But this is risky to rely on.

What This Means for You

Best practice:

1. Stop work when changes are requested: Don’t perform any changed work until you have written authorization
2. Submit change order requests immediately: Document the change, your price, and schedule impact within 24-48 hours
3. Follow the contract procedure exactly: If it requires a specific form or signature, get it
4. Track changed work separately: Use different job codes, time sheets, and invoices for changed work
5. Send confirmation emails: Even if you get verbal approval, confirm it in writing

Common mistake: Performing extra work to “keep the project moving” and assuming you’ll “work it out later.” That almost always ends badly for the contractor.

Clause #5: Suspension of Work Rights

Short answer: Michigan construction contracts that don’t include explicit suspension-of-work rights can trap contractors in non-paying projects. Walking off a job without contractual authority to suspend work, even when you’re not being paid, can possibly constitute “abandonment,” making you the breaching party and exposing you to damages claims.

The Problem

When payments stop coming, contractors face a difficult choice:

• Keep working and “hope” to get payment at some point
• Walk off and get sued for abandonment

Without a suspension-of-work clause, you have no good option.

What a Good Suspension Clause Looks Like

“If Contractor does not receive payment of undisputed amounts within ten (10) days of the due date, Contractor may, upon seven (7) days’ written notice to Owner, suspend performance of Work until such amounts are paid. Contractor shall not be liable for any delays or damages arising from such suspension, and the Contract Time shall be extended accordingly.”

This clause gives you:

• The right to stop work for non-payment
• A procedure to follow (notice requirement)
• Protection from liability for the work stoppage
• Time extension for the delay

What This Means for You

Best practice:

1. Add suspension language to your contracts: Make it a standard provision in every agreement
2. Follow the notice procedure exactly: If your contract has a suspension clause, comply with all notice requirements
3. Don’t walk off without authority: Even if you’re not getting paid, follow the suspension procedure
4. Secure the jobsite: When you suspend work, remove equipment safely and leave the site in a secure condition
5. Protect your lien rights: File preliminary notices and liens while you’re suspended, don’t wait

Common mistake: Thinking you have a “common law right” to stop work for non-payment. In construction, your contract primarily controls your rights, not general principles.

When to Call a Michigan Construction Lawyer

Contact an experienced construction attorney BEFORE signing a contract if you see:

1. Any pay-if-paid clause on a project where the owner’s or GC’s finances are questionable
2. Broad indemnification language that goes beyond your negligence
3. No change order procedure or vague procedures that don’t specify who can approve changes
4. No suspension-of-work rights and payment terms longer than 30 days
5. Out-of-state venue or arbitration clauses requiring you to litigate elsewhere
6. Liquidated damages that seem disproportionate to actual likely damages
7. Unlimited consequential damages provisions making you liable for lost profits and business interruption

Call a construction attorney DURING a project if:

1. Payment stops and you’re considering walking off the job
2. Significant changes occur without written change orders
3. The owner demands work beyond the contract scope
4. You receive a notice of a mechanics lien from someone you hired
5. A third party is injured on your project
6. You’re asked to waive claims as a condition of payment
7. The project is significantly delayed and you’re facing liquidated damages

Time matters in construction disputes. The Construction Lien Act has strict deadlines, and taking action early can save your payment rights.

Frequently Asked Questions About Michigan Construction Contract Clauses

Protect Your Business: Two Options

These contract clauses can negatively impact profitable projects and put your business at risk. Don’t sign contracts with “dangerous” provisions without understanding what you’re agreeing to.

Option 1: Take action before you sign

Email or call to schedule a contract review. Bring your proposed contract, and we’ll identify the potential “landmines” in the contract and suggest specific language changes to protect your payment rights, limit your liability, and give you the tools you need to collect what you earn.

Option 2: Get help now if you’re already in trouble

If you’re facing non-payment, considering walking off a job, dealing with unsigned change orders, or being blamed for delays you didn’t cause, time matters. Michigan’s lien deadlines don’t wait, and the longer you wait to act, the fewer options you have.

Szura & Delonis, PLC
29777 Telegraph Road #2401
Southfield, MI 48034
(248) 716-3600
admin@szuradelonis.com

We represent contractors, subcontractors, suppliers, and construction managers throughout Oakland County, Wayne County, Macomb County, and Washtenaw County. We understand Michigan construction law, we’ve handled numerous payment disputes and contract claims, and we know how to protect contractors’ rights.

This article is provided for general educational and informational purposes only. It does not constitute legal advice and does not create an attorney-client relationship between the reader and Szura & Delonis, PLC. Michigan construction law involves complex statutory deadlines, procedural requirements, and fact-specific analysis. Do not rely on this content as legal advice for your specific situation. Prior results do not guarantee similar outcomes.

About the Author

Richard M. Delonis is a Michigan construction, business, and real estate attorney at Szura & Delonis, PLC (Southfield/Metro Detroit). He advises construction managers, general contractors, subcontractors, and property owners on lien rights, collections strategy, contract disputes, and project-risk issues.

Key Takeaways

• Michigan liens are powerful only when the notices and dates are right.
• Most subs/suppliers should serve a Notice of Furnishing early (often within 20 days of first furnishing) to fully protect lien rights.
• A Claim of Lien generally must be recorded within 90 days of last furnishing – waiting is how lien rights quietly die.
• Mistakes with sworn statements, waivers, licensing, residential rules, and “last work” dates are common lien-killers – this is where a Michigan construction lawyer can prevent expensive, irreversible errors.

Table: The Deadlines That Matter

The Real-World Problem: Cash Flow and “Slow Pay” on Michigan Jobs

If you build in Michigan long enough, you’ve lived this:

• Work is done.
• Punch list is mostly wrapped.
• The owner or GC is “reviewing paperwork” or “waiting on the lender.”
• Weeks turn into months – and your cash flow takes the hit.

On tight-margin jobs in Metro Detroit and across Michigan, one unpaid project can threaten payroll, bonding capacity, and your ability to bid the next job.

Michigan’s Construction Lien Act (MCL 570.1101 et seq.) is designed to prevent exactly that scenario. But the statute expects a very specific paper trail – and courts can be unforgiving when that trail is wrong.

Step 1: Lock In Project Info and Deadlines on Day One

Short answer: You cannot protect lien rights without accurate project info and a deadline calendar from the moment you start.

What to gather (your “Lien Rights Intake Sheet”)

• Notice of Commencement (if recorded/provided) and all listed contact info
• Exact legal name of the owner/lessee and the owner’s “designee”
• Correct property legal description (not just a street address)
• Your contract, scope, change orders, and extras/credits documentation
• First furnishing date (when you first delivered labor/materials)
• A running log of “last furnishing” activity (see Step 4)

Residential caution: For residential work, confirm licensing and written-contract requirements early. Residential rules can be a trap door if you treat them like commercial work.

Why this matters

Everything that follows depends on:

• Correct owner/designee information
• Correct legal description
• Accurate first/last furnishing dates

Registers of Deeds generally record documents that are properly formatted – they do not police whether your lien is legally valid. So you can record something that looks fine and still lose in court later.

Pro tip: Make “Lien Rights Intake Sheet” completion a non-negotiable part of job setup – just like insurance certificates and W-9s.

Step 2: Serve a Michigan Notice of Furnishing if You’re Not the Owner’s Contractor

Short answer: In Michigan, most subcontractors and suppliers who do not contract directly with the owner/lessee should serve a Notice of Furnishing early (often within 20 days of first furnishing) to fully protect lien rights. General contractors with a direct owner contract are often treated differently.

Who typically needs it?

• Usually needs NOF: subs and suppliers without a direct contract with the owner/lessee
• Often exempt: prime contractor in direct contract with the owner/lessee (verify on your project facts)

The NOF is typically served on the owner’s designee and parties identified in the Notice of Commencement.

What if it’s late?

Late notice does not always mean “no lien,” but it can shrink what your lien can reach – especially if the owner already paid the GC before receiving your NOF (often relying on sworn statements and waivers). In practice, late NOF often means you’re fighting over leftovers instead of the full balance.

Practical company rule: No mobilization on a new job until (1) Notice of Commencement info is in hand, and (2) the NOF is scheduled or sent (if required).

(If your team started work and you are not sure whether the NOF clock is running – or already ran – a short lien “triage call” can confirm your deadlines and the safest next move before you lose leverage.)

Step 3: Use Sworn Statements and Lien Waivers the Right Way

Short answer: Michigan’s lien framework expects sworn statements and lien waivers to support proper payments. If these documents are wrong or inconsistent, payment disputes escalate fast – and your lien enforcement strategy can get tangled.

What a sworn statement does

A sworn statement generally identifies subcontractors/suppliers and amounts paid/owed so owners and lenders can make informed payments and avoid double-paying.

Why it matters to your lien strategy

Depending on the project and the role you are in, failing to provide a required sworn statement can limit your ability to enforce lien rights until you cure the issue.

Also: an intentionally false sworn statement can create serious civil exposure and may trigger criminal risk in extreme cases.

Best practices that prevent problems

• Use a form that tracks the statutory expectations (or close to it).
• Make sure accounting and field teams agree on who is actually on the job, what has/has not been paid, and what changed via change orders/extras.
• Pair every draw with the right waivers: conditional waivers for payments not yet cleared; unconditional waivers only for funds actually received.

Pro tip: Sworn statements are not just compliance – they are a business tool that reduces “mystery” and helps payments move.

Step 4: Record Your Claim of Lien Within 90 Days of Last Furnishing

Short answer: To preserve lien rights, you generally must record a Claim of Lien in the county Register of Deeds within 90 days after your last furnishing of labor/materials for that improvement. Courts tend to treat the deadline as strict.

The biggest trap: “Last furnishing” arguments

This is where many otherwise-valid liens die – because the claimant assumed a minor return trip extended the deadline.

“Last furnishing” usually counts when:

• It is substantial work within the original scope, or an approved change order
• It is necessary completion work clearly contemplated by the contract
• It is work that meaningfully advances the improvement (not a courtesy visit)

“Last furnishing” usually does not count when:

• Minor punch-list touch-ups that are trivial
• Warranty calls that are separate from contract completion
• Work performed mainly to extend lien time (courts dislike this)

What the Claim of Lien should contain (high level)

• Lien claimant identity
• Owner/lessee identity
• Legal description
• First and last furnishing dates
• Contract amount, amount paid, and balance claimed
• Verification by oath (commonly notarized)

Pro tip: Do not cut it close. If the “last furnishing” date is arguable, record earlier and let counsel help you position the facts.

Step 5: Serve the Recorded Lien and Calendar the One-Year Enforcement Deadline

Short answer: After recording, you generally must serve a copy of the recorded lien within a short statutory window (often 15 days) and file suit to enforce the lien within one year of recording – or the lien can expire.

Service: do it cleanly, document it

Service requirements matter most when a lender, title company, or later purchaser is involved. Follow the statutory method(s), keep proof, and do not improvise. (Certified mail and personal service are common methods, but follow the Act.)

Enforcement: the one-year clock is separate from the 90-day clock

Recording protects your lien on paper. Enforcing it (if necessary) usually means filing a lien foreclosure action in circuit court within one year of recording. Many cases settle before a forced-sale scenario, but the deadline itself is often non-negotiable.

Pro tip: When you record, immediately calendar the service deadline, the one-year lawsuit deadline, and interim check-ins at 30/60/90/180 days to evaluate negotiation, mediation, or filing.

Strategic Pro Tips Michigan Contractors Should Know

1) Watch the residential traps

Residential projects can add extra requirements (licensing, written contract terms, and statutory compliance issues). If you are required to be licensed and are not, it can seriously limit lien and even contract remedies. Do not guess – verify.

2) Condo and multi-building projects can multiply your deadline risk

On phased projects, condos, or multiple buildings, “improvement” timing can get complex – sometimes requiring separate tracking by unit/building/phase. Treat these as landmines and bring in counsel early.

3) Use a Notice of Intent to Lien as a pressure valve

Michigan does not always require a Notice of Intent to Lien, but it can be a smart business move:

• Signals seriousness
• Gives a final off-ramp
• Often gets lender/title attention before you record

4) Align liens with an overall collections strategy

A lien is not your only lever. Depending on the job, you may also consider:

• Contract claims
• Bond claims (public work and bonded private projects)
• Joint checks/direct pay agreements
• Negotiated waiver strategy

Frequently Asked Questions About Michigan Construction Liens

What’s the Next Step?

If you’re a Michigan contractor, subcontractor, or developer and you’re seeing “slow pay,” do not wait until day 89 to get serious.

If you want a practical, fast answer: schedule a lien strategy / deadline triage review so you can confirm:

• Whether a Notice of Furnishing is/was required
• Your defensible first/last furnishing dates
• Whether your sworn statements/waivers help or hurt
• Whether a lien, NOI, bond claim, or contract action is the smartest next lever

About the Author

Richard M. Delonis is a Michigan construction, business, and real estate attorney at Szura & Delonis, PLC (Southfield/Metro Detroit). He advises construction managers, general contractors, subcontractors, developers, and property owners on lien rights, collections strategy, contract disputes, and project-risk issues.

Disclaimer: This article discusses Michigan construction lien concepts in general terms and is not legal advice for your specific project. Deadlines and requirements can change based on project type, notices, contract facts, and “last furnishing” disputes – get Michigan counsel involved if the clock is running.