XYZ Contractors failed to pay a subcontractor and the sub filed a construction lien. The project owner wants to release the lien by posting a bond. Under Michigan law, the bond amount must be what percentage of the lien amount?
Correct Answer
B) 150%
Michigan Construction Lien Act 497 requires a bond equal to 150% of the lien amount to discharge a construction lien from the property.
Why This Is the Correct Answer
Under Michigan Construction Lien Act (Act 497), a property owner can discharge a construction lien by posting a surety bond equal to 150% of the lien amount. The extra 50% above the lien amount covers potential legal costs and ensures the claimant's position is adequately protected even after the lien is released from the property.
Why the Other Options Are Wrong
Option A: 125%
125% is incorrect. While this percentage appears in some other states' lien statutes, Michigan Act 497 specifically requires 150% for a lien discharge bond.
Option C: 100%
100% is incorrect. Posting a bond equal to only the lien amount would not adequately protect the claimant against legal fees and interest that may accrue during litigation. Michigan requires the additional 50% cushion.
Option D: 110%
110% is incorrect. This percentage is not specified in Michigan's Construction Lien Act for bond discharge purposes. It may be confused with bond requirements in other contexts or other states.
Memory Technique
Think '150% = Lien Liberation Premium.' To free property from a lien, you pay a premium — 100% of the lien plus a 50% safety buffer (for legal costs). The extra 50% is the 'freedom fee' for releasing the lien from the property before court resolution.
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A subcontractor completes work on March 15th but doesn't file a construction lien until June 20th. The property owner received a Notice of Furnishing on March 10th. Is the lien valid under Michigan law?
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