Iowa Title Guaranty issues bulletin modifying policies

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In March, Iowa Title Guaranty issued a March 17, 2021 Bulletin modifying its policies regarding residential prelien notices, i.e., Commencement of Work Notices and Preliminary Notices, on residential projects.

About Iowa Title Guaranty

Iowa Title Guaranty is Iowa’s exclusive title coverage provider, offering lenders and owners low-cost title coverage for Iowa real property. Among other things, on residential real estate sales, Iowa Title Guaranty provides assurance to a lender that the lender’s lien is valid and in the desired lien position. Iowa’s abstract and attorney title opinion system is thorough, but on rare occasions, title defects arise. Iowa Title Guaranty offers lender coverage to protect the lender’s interest from covered title defects.

Modified policy

As part of Iowa Title Guaranty, participating attorneys, abstractors, and others must follow its title search requirements and policy manual.

Per the March 17 Bulletin, Iowa Title Guaranty now requires the following for Commencement of Work and Preliminary Notices:

  • Commencement of Work Notice: (a) obtain final lien waivers from all parties that have posted to the MNLR; and (b) post withdrawal to the MNLR.
  • Preliminary Notice: (a) obtain final lien waivers from all parties that have posted to the MNLR; and (b) post withdrawal to the MNLR.

What this means for contractors

Contractors will (1) receive even more demands that they post withdrawals of their prelien notices on the centralized Mechanic’s Notice and Lien Registry (MNLR) website, and (2) presumably need to comply with the new ITG policy, despite reasonable objection to the contrary.

In particular, many practitioners believe a final lien waiver is all that is needed when a claimant has posted a Commencement of Work Notice or Preliminary Notice and, as such, that the additional posting of a withdrawal of the prelien notice on the MNLR is not legally required. Further, many practitioners view this new Iowa Title Guaranty policy as inconsistent with Iowa Title Standards 1.13, Mechanics Notice and Lien Registry (noting: “A notice of commencement or preliminary notice is not a current cloud on the marketability of title, but might mature into a cloud on title” and “A search of notices of commencement or preliminary notices posted on the Mechanic’s Notice and Lien Registry (MNLR) is not required to be included in an abstract, but the abstract should disclose whether or not a search of the MNLR has been made for notices of commencement, preliminary notices, or mechanic's liens.”)

However, due to this new ITG policy, contractors will likely need to comply, by posting withdrawals of their prelien notices whenever asked.

What this means for owners of residential properties

Owners and lenders will need to ensure they are requesting and receiving final lien waivers and posted withdrawals from each contractor/claimant who has posted a Commencement of Work Notice or Preliminary Notice on the MNLR.

Further information can be found at the following resources:

Contractors with questions about their obligations to provide notices should consult an experienced construction attorney.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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