Contractor's Lien Against Tenant Doesn't Reach Landlord

What Happened: A restaurant tenant hired a contractor to install kitchen equipment in its leased space. The tenant paid only $60,000 of the contractor’s $274,000 bill. So, the contractor placed a lien on the space to secure the balance. And since the tenant had since been evicted, the contractor named the landlord as owner of the property and went to court to foreclose. The court ruled that the lien applied only to the tenant and didn’t attach to the property. So, the contractor appealed.

Ruling: The Michigan court denied the appeal.

Reasoning: As in most states, under Michigan law, a construction lien to secure a contractor’s right to payment for improvement work generally attaches to the interest of the party who contracted for the improvement, in this case the tenant. Exception: A contractor’s lien may reach the property interest of a noncontracting owner where the owner required the improvement. But the contractor was unable to prove that the landlord was the one that required the improvements in this case. In fact, the evidence suggested just the opposite, the court reasoned. The space wasn’t designed for restaurant use, but the tenant accepted it “as is.” The landlord allowed but didn’t require the tenant to use it as a restaurant as long as it made the necessary improvements and agreed to allow it to remove the improvements later in case the next tenant wanted to use the space for a different purpose.

• Architectural Stainless, Inc. v. Karet Projects, LLC, 2021 Mich. App. LEXIS 3012