The process for bonding off a construction lien in Michigan generally involves posting a surety bond for twice the lien amount with the county clerk where the property is located. Cash bonds are permitted, but not common. Once a bond is submitted, and no objections are received, the county clerk will issue a certificate vacating he lien which is then recorded with the register of deeds. The whole process takes about 4-5 weeks.
For lawyers, the process for bonding off a construction lien is governed by Section 116 of the Michigan Construction Lien Act (MCL 570.1116). A bond discharging a lien also acts to discharge any notice of lis pendens which may have been recorded.
Here are the 4 steps for bonding off a construction lien:
Step 1 - Prepare the Lien Discharge Bond
The statute does not specify the language for a lien discharge bond. Many title companies have their own form. At a minimum, the bond must cite the lien, be twice the lien amount, and be conditioned on the payment of any sum for which the lien claimant (also called the obligee) may obtain a judgment on the claim for which the lien was filed.
The bond must be signed by a principal and a surety company authorized to do business in Michigan. See, MCL 570.1116(1). It is good practice to use a surety listed in Treasury Circular 570. Doing so will minimize objections.
To confirm that the surety is licensed in Michigan, check here.
To confirm that the surety is Treasury-listed, check here.
Step 2 - Submit the Bond to the County Clerk
Once the bond is fully executed by the principal and surety, the original bond is submitted to the county clerk. The clerk then sends a written notice to the lien claimant advising them that a bond has been posted to discharge their lien. The lien claimant is notified of the bond, the bond amount, and the name of the surety. Many clerks also notify the owner of the property and other “interested parties” whose names appear in the lien, such as the general contractor and the owner’s designee.
Best Practice: Include a mailing list of the interested parties, with names, and addresses, when you submit the bond to the Clerk’s Office. The clerk will appreciate it and it may shave a day or two off the process.
The clerk’s notice is then sent, usually by certified mail. Upon receipt, the lien claimant has 10 days to file an objection “as to the sufficiency of the surety on the bond.” MCL 570.1116(2).
There are three commons objections: (a) the bond amount is not twice the lien amount; (b) there is a question about the surety; (c) there is a question about the language used in the bond.
If the clerk receives an objection, the clerk will not approve the bond until the surety appears before the county clerk to answer questions under oath by or on behalf of the lien claimant about the surety’s financial responsibility. What this hearing process looks like is unclear from the statute. There are no specified rules. In almost 25 years, we’ve never received an objection to the sufficiency of a lien discharge bond or surety. At least not one that couldn’t be resolved with the lien claimant’s attorney.
Step 3 - Wait Patiently
Plan on the entire process taking 4-5 weeks depending on the number of interested parties and whether the clerk waits for every certified mail green card to be returned before starting the clock on the 10-day objection period. Different counties and different clerks have different practices. Be patient.
Step 4 - Receive and Record Certificate Discharging Lien
Once a lien discharge bond is accepted, the county clerk will issue a certificate that is recorded with the register of deeds. You must record the certificate. If you don’t record it, you haven’t completed the process. The lien will not be discharged.
The county clerk charges a fee for issuing the certificate ($10) and the register of deeds charges a recording fee ($30). Note: Michigan’s recording statute specifies that documents must have a 2.5” top margin. Most lien discharge certificates are issued on the county clerk’s letterhead and don’t provide this much space. This is usually not an obstacle to recording the certificate.
Best Practice: Call Ahead; Get a Name.
The best practice is to call ahead to the county clerk’s office and ask who handles construction lien discharge bonds. Usually, there is one person who knows the procedure. Talk to them; confirm the local practice. Some counties have a special form they want you to complete. Fill it out.
Once you have everything pulled together, hand-deliver the original lien discharge bond to the clerk’s office. Don’t mail it. Walk in and put the bond in the hands of the person you spoke with and who knows the procedure. Confirm their name and phone number. If you do this and thank them for helping you, they will call you when the certificate is ready. You can then pay the clerk’s fee and walk over to the register of deeds and record the certificate. The two offices are usually down the hall or next door. Two birds, one stone.
If you don’t know the clerk handling the process, you will wait for the certificate to be mailed to you. Then you will send someone to the register of deeds or mail the certificate to the register of deeds for recording. And wait longer. This adds more time to the process.
If a construction lien is holding up payment on your project, you need it discharged as soon as possible. Time is of the essence. We can help. Call Peter Cavanaugh or Gary Quesada today – (248) 543-8320.