Michigan construction law requires anyone who builds, remodels, or alters residential structures to hold a state license, use written contracts that treat project payments as trust funds, meet strict deadlines to preserve lien rights, carry the right insurance, and comply with state safety and environmental rules. Getting any of these wrong exposes you to fines, lost payment rights, and in some cases criminal charges. What follows is the working framework a contractor, subcontractor, or homeowner needs before signing anything or breaking ground.
Who Needs a License, and What Happens Without One
Michigan’s Occupational Code requires a Residential Builder license or a Maintenance and Alteration Contractor license before you can perform residential construction work.1Michigan Legislature. Occupational Code (Excerpt) – Act 299 of 1980, Article 24 The Residential Builder license covers new construction and major remodeling. The Maintenance and Alteration Contractor license is limited to repairs and smaller alterations on existing structures. The Department of Licensing and Regulatory Affairs (LARA) administers both.
Before sitting for the exam, applicants must complete 60 hours of approved prelicensure coursework covering business management, design and building science, contracts and risk management, marketing, project management, the Michigan Residential Code, and construction safety. Fail the exam and you cannot retake it until you complete the prelicensure coursework again.2Michigan Legislature. MCL – Section 339.2404b The application fee is $195.3State of Michigan. License Fees Licenses run for three-year terms, and renewal requires at least 21 hours of continuing competency activities per cycle.1Michigan Legislature. Occupational Code (Excerpt) – Act 299 of 1980, Article 24
Penalties for Unlicensed Work
Michigan treats unlicensed residential construction as a criminal offense. A first offense is a misdemeanor carrying a fine of $5,000 to $25,000, up to one year in jail, or both. A second or subsequent offense carries the same fine range and up to two years in jail. If someone is killed or seriously injured, the charge becomes a felony punishable by $5,000 to $25,000 in fines, up to four years in prison, or both. These penalties come from Section 601 of the Occupational Code and apply to the person doing the work, not just the company.4Michigan Legislature. MCL – Section 339.601
For homeowners, hiring an unlicensed contractor creates its own headaches. Your ability to enforce the contract may be limited, and lien protections against unpaid subcontractors become unreliable.
Contracts and the Builders Trust Fund Act
A construction contract in Michigan should spell out the scope of work, a payment schedule tied to milestones, a realistic timeline, and how disputes will be resolved. Vague language on any of these is where most disputes begin. Beyond the contract itself, Michigan imposes a rule that catches contractors off guard: every payment on a project is treated as trust money.
Payments Are Trust Funds
Under the Builders Trust Fund Act (Act 259 of 1931), money paid by an owner to a contractor, or by a contractor to a subcontractor, is held in trust for the laborers, subcontractors, and suppliers who earned it.5Michigan Legislature. Building Contract Fund – Act 259 of 1931 A contractor who diverts those funds while project bills remain unpaid commits a felony punishable by a fine of $100 to $5,000, six months to three years in prison, or both.6Michigan Legislature. Building Contract Fund – Act 259 of 1931
Prosecutors do pursue these cases, especially when subcontractors and suppliers file complaints. The safest practice for a general contractor is a dedicated project account, with subs and suppliers paid before any funds are moved to overhead or profit.
Change Orders and Liquidated Damages
Require written approval before any scope change begins. A verbal agreement to expand the work is a common source of disputes, and without a signed change order a contractor may struggle to collect for the extra effort.
Liquidated damages clauses that set a fixed daily amount for delay are enforceable in Michigan, but only when the amount is a reasonable estimate of the actual harm a delay would cause. A number that is unreasonably large will be struck down as a penalty.7Michigan Legislature. MCL – Section 440.2718 – Uniform Commercial Code (Excerpt)
Bonds on Public Projects
On Michigan public projects with contract values above $50,000, the contractor must furnish a performance bond guaranteeing completion and a payment bond ensuring subcontractors and suppliers get paid. Private projects have no statutory bonding requirement, though owners and lenders often demand them on larger jobs.
Construction Liens: Deadlines That Kill Rights If Missed
The Michigan Construction Lien Act (Act 497 of 1980) gives contractors, subcontractors, suppliers, and laborers the right to place a lien on real property when they provide improvements and are not paid.8Michigan Legislature. Construction Lien Act – Act 497 of 1980 The deadlines are strict. Miss one and the lien right can disappear.
Notice of Commencement
On residential projects, the owner or lessee who contracted for the improvement must issue a notice of commencement when a contractor, subcontractor, supplier, or laborer asks for one in writing. The notice identifies the property, the owner, the designee, and the general contractor. The owner has 10 days to provide it, and failing to do so can result in liability for the requesting party’s expenses in tracking down the information.9Michigan Legislature. MCL – Section 570.1108a
Notice of Furnishing
Subcontractors and suppliers without a direct contract with the owner must serve a notice of furnishing within 20 days of first providing labor or materials, delivered to the designee named in the notice of commencement and to the general contractor, either personally or by certified mail.8Michigan Legislature. Construction Lien Act – Act 497 of 1980 Missing this 20-day window does not automatically eliminate all lien rights, but it can severely limit what you can recover. Treat it as a hard deadline.
Recording the Claim of Lien and Foreclosing
Any lien claimant has 90 days from the last day of furnishing labor or materials to record a claim of lien with the county register of deeds where the property sits.8Michigan Legislature. Construction Lien Act – Act 497 of 1980 The claim must describe the labor or materials provided and the amount owed. Inaccuracies or a missed deadline invalidate the lien.
Recording is not the end. A foreclosure lawsuit must be filed within one year after the date the claim of lien was recorded.10Michigan Legislature. MCL – Section 570.1117 Miss that one-year window and the lien expires. A breach of contract claim may survive, but the leverage that comes with a lien on the property is gone.
Lien Waivers
A contract term that requires waiver of lien rights before performing work is void as against Michigan public policy. A waiver is valid only to the extent payment has actually been made.11Michigan Legislature. MCL – Section 570.1115 The statute recognizes four waiver types: partial conditional, partial unconditional, full conditional, and full unconditional. A conditional waiver takes effect only when the identified payment clears. An unconditional waiver takes effect immediately. Never sign an unconditional waiver until the money is in your account.
A lien claimant who receives full payment must provide a full unconditional waiver, and one who receives partial payment must provide a partial unconditional waiver if the owner requests it. On residential projects, owners and designees cannot rely on a waiver purportedly signed by someone other than the named claimant unless they first verify it directly with the claimant, whether in writing, by phone, or in person.11Michigan Legislature. MCL – Section 570.1115
Workers, Insurance, and Safety
Classifying Workers Correctly
Misclassifying employees as independent contractors is one of the costlier mistakes in construction. The IRS looks at three factors: behavioral control (whether the business controls how the work is done), financial control (who bears the financial risk and investment), and the nature of the relationship (benefits, permanence). A contract labeling someone an “independent contractor” is not the deciding factor. If you set hours, provide tools, direct the work, and pay a regular wage rather than a project fee, the IRS is likely to treat that person as an employee.
The exposure is significant: the IRS can assess 100% of unpaid payroll taxes plus interest, penalties for unfiled W-2s, 1.5% of wages for failure to withhold income tax, and accuracy-related penalties. If you pay a subcontractor $600 or more in a year, Form 1099-NEC is due by January 31 of the following year.12Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
Workers’ Compensation
Michigan requires workers’ compensation coverage for any private employer who regularly employs one or more people at 35 or more hours per week for 13 or more weeks, or who employs three or more people at any one time, including part-time workers.13Workers’ Disability Compensation Agency. Employer Insurance Requirements Sole proprietors with no employees are not required to carry coverage for themselves, but that changes the moment they hire.
If a subcontractor lacks workers’ compensation insurance and has no exclusion form on file with the Workers’ Disability Compensation Agency, injury claims by that subcontractor’s employees become the general contractor’s responsibility, and the general contractor’s own policy covers them by default.13Workers’ Disability Compensation Agency. Employer Insurance Requirements Demand certificates of insurance from every sub before letting them on site.
General Liability, Builder’s Risk, and Professional Liability
General liability insurance covers third-party bodily injury and property damage claims arising during construction, and most project owners and lenders require it. Builder’s risk insurance covers the project itself against fire, storms, vandalism, and similar damage during construction; on larger projects the owner typically procures it, but on smaller residential jobs the contractor may need to. Design-build contractors and those offering engineering or architectural services also need professional liability coverage, which addresses claims from design errors and flawed specifications that general liability policies do not cover.
MIOSHA Safety Standards
The Michigan Occupational Safety and Health Administration enforces workplace safety on construction sites. MIOSHA’s construction standards align with federal OSHA but also address Michigan-specific conditions, covering fall protection, scaffolding, excavation, and hazardous materials.14Legal Information Institute. Mich. Admin. Code R. 408.17502 – MIOSHA Referenced Standards Inspectors can appear on any job site, whether on a scheduled visit or in response to a complaint or accident. Serious violations carry per-violation fines; willful or repeated violations carry substantially higher penalties.
Construction employers with more than 10 employees during the previous calendar year must maintain OSHA injury and illness records. You record an incident on OSHA Form 300 when it results in death, loss of consciousness, days away from work, restricted duty, job transfer, or medical treatment beyond first aid. Significant diagnoses such as fractures, cancer, and chronic irreversible diseases must also be recorded.15Occupational Safety and Health Administration (OSHA). OSHA Forms for Recording Work-Related Injuries and Illnesses Employers with 10 or fewer employees are generally exempt from the recordkeeping rule but must still report fatalities and severe injuries to OSHA.
Environmental and Accessibility Rules
Stormwater
Any project disturbing one or more acres of land and discharging stormwater to state waters needs a National Pollutant Discharge Elimination System (NPDES) permit from the Michigan Department of Environment, Great Lakes, and Energy (EGLE). Sites disturbing one to five acres receive automatic stormwater coverage once the soil erosion permit is in place. Sites disturbing five acres or more must submit a separate application for a Notice of Coverage with a $400 permit fee.16State of Michigan. Construction Stormwater Program Overview Compliance requires weekly inspections and inspections within 24 hours of any significant rain event, conducted by a certified stormwater operator.
Wetlands
Michigan regulates wetlands under Part 303 of the Natural Resources and Environmental Protection Act.17Michigan Legislature. MCL – 451-1994-III-1-INLAND-WATERS-303 Filling, dredging, or construction activity that alters a regulated wetland requires an EGLE permit. Violations can lead to fines, mandatory restoration, and project shutdowns. A site survey early in planning is cheaper than fixing the problem after the ground is broken.
Lead-Based Paint
Federal law requires contractors performing renovations on homes and child-occupied facilities built before 1978 to be EPA-certified under the Renovation, Repair, and Painting Rule.18U.S. EPA. Lead Renovation, Repair and Painting Program The rule covers any renovation that disturbs painted surfaces, including window replacement, demolition, and surface preparation like sanding or scraping. Minor repair and maintenance activities are exempt.19eCFR. Subpart E – Residential Property Renovation Homeowners working on their own homes are generally not covered, but any work done for compensation triggers the certification requirement.
Accessibility
New commercial construction and major alterations must comply with the 2010 ADA Standards for Accessible Design, which set minimum accessibility requirements for public accommodations and commercial facilities.20archive.ada.gov. 2010 ADA Standards for Accessible Design The only exception is where full compliance is structurally impracticable due to rare terrain conditions.
Multi-family housing projects with four or more units also trigger Fair Housing Act design requirements: accessible building entrances, doors wide enough for wheelchairs, accessible routes through each unit, accessible environmental controls, reinforced bathroom walls for future grab bars, and usable kitchens and bathrooms. These apply to all ground-floor units and, in elevator buildings, to every unit. Retrofitting after the fact costs far more than building to the standard the first time.