How to File a Bond Claim in Michigan
Understanding how to file a bond claim is an integral part of working in construction. No one ever plans on having their payment withheld from them, but when it happens, you’ll be glad that bond claims exist: It could be the only way to get the payment you and your company are owed.
One of the most important things to consider when filing a payment bond claim is where the project is taking place. Each state has its own set of rules and deadlines that must be followed in order for your claim to be deemed valid. Michigan builders’ laws and rules are largely dictated by the state’s Little Miller Act.
To help contractors and suppliers struggling to obtain due payment, ConstructionDisputes.com has created a unique communication and document management platform. Using our platform, you’ll be able to best manage the notices and legal documents needed to motivate a project owner or contractor to issue of nonpayment. Should you need to file a bond claim as part of this process, our platform can also be used to manage that process and the documents required.
Learn About the Michigan Little Miller Act and Bond Claim Eligibility
Before beginning the bond claim process, you should first be sure to familiarize yourself with Michigan bond rules under the state’s Little Miller Act. Like in other states, the Michigan Little Miller Act was put in place to protect laborers and material suppliers from nonpayment by a project’s prime contractor. The law requires the prime contractor on any public project valued at $50,000 or more to post both a performance bond and a payment bond worth at least 25% of the contract’s worth.
However, the right to make a claim against these surety bonds does not cover everyone on a project. In Michigan, the Little Miller Act states that anyone who provided labor or materials to a prime contractor or subcontractor has the right to make a claim against a construction bond. Anyone below the third tier, though, such as suppliers to suppliers, is not covered by the Little Miller Act and therefore cannot make a claim against the bond.
File a Notice of Furnishing
Like in most other states, once you’ve determined whether or not you’re eligible to make a claim, the first step is to send a preliminary notice. In Michigan, this is referred to as a Notice of Furnishing. Anyone who didn’t directly contract with the prime contractor, such as suppliers or second-tier laborers, is required to send this notice in order to secure their right to make a claim. Even if you did contract directly with the prime contractor, sending one anyway can help strengthen your claim down the line.
Similar to the process for filing a mechanic’s lien, Michigan bond laws require that you meet certain deadlines in order to file a claim. The Michigan bond statute of limitations states that this notice must be sent to the general contractor within 20 days of the first time you provided either labor or materials to the project. In the notice, be sure to include a description of the project, the labor and/or materials you supplied to the project, and the contact information for the party who hired you.
File a Notice of Intent
Though not technically required in order to file your claim, filing a Notice of Intent is a smart move to make when dealing with a nonpayment situation. It can often prevent you from having to file a claim at all because it tells the surety company, prime contractor, and project owner that unless you receive your payment, you’ll have no choice but to make a claim. They’ll want to avoid claims whenever possible, and this notice serves as the last warning before proceeding to that stage.
Make a Payment Bond Claim in Michigan
If you’ve filed both your Notice of Furnishing and Notice of Intent and still have yet to receive your payment, the next step would be to file the claim itself. In Michigan, your claim must be made within 90 days of the last day you supplied either labor or materials to a project. Missing this deadline could be detrimental to your claim and result in you forfeiting your payment, so be sure to keep a close eye on the calendar.
In your claim, Michigan only requires you to include the unpaid amount you’re claiming and the contact information for the party who hired you. However, it’s wise to also include a description of the project and the labor and/or materials you supplied. Including these details can go a long way in ensuring that your claim is deemed valid.
Once you have your claim filled out, Michigan law only requires you to send it to the project owner and the general contractor. Sending it to the surety company responsible for issuing the bond is recommended as well. The more parties are aware of your situation, the more likely you are to be paid.
Follow Up
In many situations, filing the claim will be enough to receive your payment, but this isn’t always true. Sometimes, even after you make a claim against a bond, the general contractor will still withhold payment from you. When this happens, the next step would be to file a lawsuit.
It’s important to note that a lawsuit does not guarantee payment. A lawsuit requires both time and money, so you should always make sure that there are no other options left before pursuing this course.
Frequently Asked Questions About Michigan Bond Claims
What Is a Surety Bond in Michigan?
A surety bond, in Michigan or elsewhere, acts as an agreement between the surety company, the principal (prime contractor), and an obligee (subcontractor, laborer, or material supplier) to ensure that responsibilities are carried out and payment is made. It states that if the principal fails to meet their contractual duties and fails to pay, the obligee can seek payment by making a claim against the bond.
How Do You Get a Surety Bond in Michigan?
In order to get a surety bond, you first need to apply with Michigan surety bond companies. Following that, a surety bond underwriter will evaluate your application and make a judgment on your amount of risk based on your credit score and other factors. If you are approved, the surety company will provide you with quotes, and you can decide from there whether or not you wish to purchase the bond. Doing so will give you the surety bond title. Michigan law requires you to obtain bonds on any public projects with a contract value of $50,000 or more.
How Much Does a Surety Bond Cost in Michigan?
In the state of Michigan, bonds generally cost between 1% and 15% of the bond’s total value. The price of a surety bond can vary greatly depending on the bond’s value and your amount of risk, as determined by a surety underwriter. In most situations, a good credit score will gain you a lower price, while a bad credit score will result in a higher one.
Can an Unlicensed Contractor File a Lien in Michigan?
No. In order to legally file a Michigan mechanic’s lien form or a release of lien, Michigan contractors must be licensed.
Get Expert Help With Your Michigan Bond Claim
Between the different notices and deadlines involved in the process and differences in state laws, it’s easy for things to slip by when filing your bond claim. But you can take the guesswork and worry out of your claim when you work with ConstructionDisputes.com! Our streamlined bond claim process makes sure that every claim you file is 100% in accordance with all state laws, regulations, and bonding company requirements. We offer several pricing plans so you can pick the one that’s right for you, and best of all, you can file a claim now for free!