Friday, February 19, 2010

New Bills Would Abolish Michigan Homeowner Construction Lien Recovery Fund

Just a few months ago, we reported that the Michigan Homeowner Construction Lien Recovery Fund was almost out of money and had no means to replenish its depleted coffers without action by the Michigan Legislature. I expected something to happen, but not this.

On February 17, 2010, Rep. Richard Hammel (D. Mt. Morris Twp) and Rep. Fred Durhal  (D. Detroit) introduced a series of connected (tie-barred) bills -- H.B 5830, H.B. 5831, H.B. 5832, H.B. 5833, H.B. 5834, and H.B. 5835 -- that would abolish the Lien Fund and delete references to the Fund from a variety of related states, but not fix the broken funding mechanism.
  •  H.B. 5830 would repeal Sections 201 to 207, 303, and 304 of the Construction Lien Act (MCL 570.1201 to 1207, 1303, and 1304), which established the Homeowner Construction Lien Recovery Fund, and related administration and funding.
  • H.B. 5831 would strike references to the Lien Fund from the Electrical Administrative Act (MCL 338.883b, et seq), which governs licensing of electrical contractors.
  • H.B. 5832 would strike references to the Lien Fund from the Forbes Mechanical Contractors Act (MCL 338.976, et seq), which governs licensing of mechanical contractors.
  • H.B. 5833 would remove references to the Lien Fund from the  State Plumbing Act (MCL 338.3531, et seq), which governs licensing of plumbing contractors.
  • H.B. 5834 would amend the Michigan Occupational Code (MCL 339.2404, et seq), to remove references to the Lien Fund, including removal of enforcement provisions for residential builders who fail to pay a lien claim that resulted in payment from the Lien Fund. While the Bill does not significantly affect the remaining enforcement provisions , but removing the Lien Fund significantly weakens enforcement of complaints against residential builders who don't pay their subcontractors and suppliers resulting in residential liens. The complaint procedure against residential builders is a notoriously slow and ultimately unsatisfactory process.
  • H.B. 5835 would amend the Michigan penal code (MCL 777.15b) to reflect repeal of the Michigan Homeowner Construction Lien Recovery Fund.
I'll update this posting as soon as I can determine the rationale for these bills, but I think that homeowners are the ultimate losers if this bill becomes law.

Update: The Detroit Legal News picked up on this story in its March 15, 2010 issue (here).  Apparently, the Michigan Association of Home Builders and the State of Michigan DELEG are behind this legislation. And a lack of political will to confront the problem (money) is the driving factor:
“The problem with the fund is that it is supported by fees that builders pay but those fees are at the same level they were 30 years ago,” said [Rep. Richard] Hammel [D-Mt. Morris Twp]. “No one wants the fees raised and if we keep them at the level they are, we can’t possibly pay for the fund with inflation.”