As a requirement to getting a builders license in Michigan, builders are required to pay into the Home Owner Construction Lien Recovery Fund (“HOCLRF”). This fund is for the protection of home owners who pay contractors to make improvements to their home and fail to do so. The fund also protects contractors, supplies and laborers who have provided materials or labor during the construction of improvements to a home.

Claims against the HOCLRF are overlooked by both homeowners and subcontractors who sue builders that have collected money that was earmarked for that tradesperson. One interesting feature of this statute is that when a homeowner has paid the full amount of the contract to the general contractor, the homeowner becomes lien-proof with respect to who worked for the general contractor.

The HOCLRF provides an excellent avenue of protection for homeowners and subcontractors in Michigan. These kinds of claims should always be reviewed when a homeowner or subcontractor files a lawsuit against a general contractor.

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