A contractor receives a stop payment notice on a project where they are owed $25,000. Under Michigan lien law, what is the maximum amount the property owner can withhold?
Correct Answer
D) $25,000
Under Michigan Construction Lien Act 497, a property owner can withhold up to the amount claimed in the stop payment notice, which in this case is the full $25,000 owed.
Why This Is the Correct Answer
Under the Michigan Construction Lien Act (Act 497), when a stop payment notice is filed, the property owner is authorized to withhold up to the exact amount stated in the notice. Since the stop payment notice reflects $25,000 owed, the owner can withhold exactly $25,000 — no more, no less.
Why the Other Options Are Wrong
Option A: $12,500
$12,500 is incorrect. There is no provision in Michigan lien law to withhold only half the claimed amount. The withholding equals the full amount claimed in the notice.
Option B: $37,500
$37,500 is incorrect. Michigan law does not allow the owner to withhold 150% of the claimed amount via a stop payment notice (150% applies to bond amounts to discharge a lien, not to stop payment withholding).
Option C: $50,000
$50,000 is incorrect. This doubles the actual claim amount and has no basis in the Michigan Construction Lien Act's stop payment notice provisions.
Memory Technique
Stop payment notice = 'Stop right there — hold exactly what you owe.' The owner withholds 100% of what is claimed (dollar for dollar). The bond to discharge a lien is 150% — a premium for releasing the property from encumbrance.
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A Michigan contractor completes $85,000 worth of work but has not been paid. Under the Construction Lien Act 497, what is the maximum lien amount that can be claimed?
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