Late Sworn Statement Dooms Subcontractor’s Construction Lien Claim

HBA Member  Hilger Hammond  recently posted this on their blog and we felt it was important to share…

By Aileen Leipprandt, Hilger Hammond

A contractor learned a hard lesson in Apache Carpet & Floor Covering, LLC v Banah Corporation (April 2013). In that case, the contractor, Banah, provided extensive improvements to a church construction project. The church secured construction financing through Comerica Bank. When the church failed to pay Banah for its work, Banah filed a lien foreclosure lawsuit. The church allowed a default to be entered against it. Comerica Bank, however, contested Banah’s lien claiming that Banah did not timely provide a sworn statement. The trial court agreed with Comerica and ordered Banah to release its lien.

On appeal, Banah argued that it substantially complied with the Michigan Construction Lien Act because it provided a sworn statement during the course of the litigation. The appellate court disagreed with Banah. Citing the clear language of the Lien Act, the court of appeals noted that the Act specifies that a contractor cannot file suit to enforce its construction lien until it has provided a sworn statement. Banah did not provide a sworn statement until the parties were engaged in litigation. The court reasoned that delaying the statement until after litigation begins does not provide an owner with relevant information that could help avoid the litigation or move it along more quickly.

Lesson learned – contractors must take care to strictly follow all of the requirements of the Michigan Construction Lien Act, otherwise, their lien rights may be lost.