A subcontractor files a lien for $18,000 on a project. The general contractor disputes $6,000 of the claim. What amount should be held in escrow pending resolution?
Correct Answer
C) $18,000
Under Michigan lien law, the full lien amount ($18,000) should be held in escrow until the dispute is resolved, regardless of the disputed portion.
Why This Is the Correct Answer
Under Michigan lien law, when a lien is filed, the full claimed lien amount ($18,000) must be held in escrow or otherwise protected pending resolution. The existence of a dispute over a portion does not reduce the protected amount — the claimant's rights attach to the full filed amount until a court or settlement determines the correct figure.
Why the Other Options Are Wrong
Option A: $6,000
$6,000 represents only the disputed portion. Holding only the disputed amount would leave the undisputed $12,000 unprotected, which is not consistent with Michigan lien law protections.
Option B: $24,000
$24,000 has no basis — it appears to be $18,000 + $6,000, double-counting the disputed amount. There is no legal mechanism that would require holding more than the claimed lien amount.
Option D: $12,000
$12,000 is the undisputed portion of the lien ($18,000 − $6,000). Holding only the undisputed portion would fail to protect the claimant's full legal interest pending resolution.
Memory Technique
Lien filed = Full amount frozen. Think of it as a legal hold on the entire claim until a judge says otherwise. Dispute does not shrink the escrow — it only delays release.
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