A residential builder completes a $250,000 home addition but the homeowner claims defective work worth $35,000 in repairs. The homeowner has paid $200,000. Under Michigan lien law, what amount can the contractor potentially lien for?
Correct Answer
D) $15,000
The contractor can lien for the unpaid contract amount ($250,000 - $200,000 = $50,000) minus legitimate offsets for defective work ($50,000 - $35,000 = $15,000).
Why This Is the Correct Answer
The lieable amount is the unpaid contract balance minus legitimate offsets for defective work. Step 1: Unpaid balance = $250,000 − $200,000 = $50,000. Step 2: Offset for defective work = $50,000 − $35,000 = $15,000. The contractor can lien for $15,000 — the net amount legitimately owed after the homeowner's valid claim is deducted.
Why the Other Options Are Wrong
Option A: $85,000
$85,000 appears to add the defective work claim to the unpaid balance ($50,000 + $35,000), which is mathematically incorrect and legally unsupported. Defective work is an offset against, not an addition to, the lien amount.
Option B: $35,000
$35,000 is the defective work claim amount alone, not the lien amount. Selecting this ignores the unpaid contract balance calculation entirely.
Option C: $50,000
$50,000 is the raw unpaid balance before subtracting the homeowner's offset for defective work. It is a partial calculation — you must still deduct the $35,000 legitimate offset.
Memory Technique
Two-step offset rule: (1) What's unpaid? Contract − Paid = $50,000. (2) What's disputed? Unpaid − Defect claim = $15,000. Think of it as peeling two layers: first peel away what was paid, then peel away what is legitimately disputed.
More Michigan Questions
A Michigan contractor forms an S-Corporation. What is the maximum number of shareholders allowed?
A contractor's employee is injured on a job site in Michigan. The contractor's workers' compensation insurance has a $500 deductible per claim. The total medical costs are $12,500 and lost wages are $3,200. What is the contractor's out-of-pocket cost for this claim?
What is the minimum general liability insurance coverage amount required for Michigan residential builders?
Under Michigan Act 299, what is the consequence for a contractor who performs work outside the scope of their license classification?
A contractor discovers that a subcontractor has filed a construction lien against their project. The general contractor believes the lien is invalid. What is the primary legal mechanism to challenge the lien in Michigan?
Under Michigan Act 299, what happens if a contractor continues to work without a valid license after it expires?
Which of the following best describes the 'pay when paid' clause limitation under Michigan law?
A project has total costs of $180,000 including $75,000 labor and $105,000 materials. With workers compensation at 7.8% of labor costs and general liability at 0.4% of total costs, what are the combined insurance costs?
A Michigan contractor is forming an LLC. What is the minimum general liability insurance coverage required for residential builders under Michigan law?
Under Michigan Act 299, a contractor's license must be renewed every:
People Also Study
Business & Financial Management
120 questions · 70% to pass
Contract Administration
60 questions · 70% to pass
Project Management
60 questions · 70% to pass