Major Changes to Iowa's Mechanics' Lien Law: Five Years Later

Dickinson, Mackaman, Tyler & Hagen, P.C.

Dickinson, Mackaman, Tyler & Hagen, P.C.

Five years ago, this blog covered major changes to Iowa’s mechanics’ lien law. Five years later, the law is still largely intact, albeit after the legislature added a couple commas to clarify its intention. After five years, it’s a good time to look back at the impact of the substantial changes on contractors and property owners.

The 2013 amendments created a centralized, statewide database for mechanics’ liens that the Secretary of State operates. The website allows people to search for liens by several different parameters such as the address, legal description, owner name, general contractor name, and subcontractor name. This system has made it much easier to locate mechanics’ liens statewide.

The law also imposed new requirements on contractors who want to preserve their lien rights on residential construction. The 2013 amendments define any project involving a single family or two family dwelling, or a condominium, as “residential construction.” Every other kind of construction is non-residential. Any contractor who contracts directly with a residential property owner to provide labor or material to improve property is considered a “general contractor.” To be entitled to a lien, a general contractor must file a commencement notice within 10 days of commencing work on residential construction. If a general contractor does not, then the general contractor can never file a mechanics’ lien on the residential construction. The commencement notice is not a lien. Rather, it preserves the right of the contractor to file a lien. This blog has previously covered tips for preparing the commencement notice.

Any contractor that has a contract with another contractor to work on residential construction is a subcontractor. Subcontractors have to file a preliminary notice. There is no deadline for the preliminary notice per se, but a subcontractor who waits too long may find that their lien rights aren’t worth much because whatever amount the owner owes the general contractor on the date the preliminary notice is posted is the most that a subcontractor can ever recover through a mechanics’ lien. Preliminary notices have to be associated with a commencement notice, and if no commencement notice has been filed then the subcontractor must file both a commencement and preliminary notice.

These changes have had a dramatic impact on residential lien filings. Compliance with the notice requirements has been mixed. Many contractors who have contracts with a residential property owner get tripped up by the 10-day commencement notice requirement. They often do not post the notice, but nevertheless attempt to enforce a mechanics’ lien when they don’t get paid. When they do, however, they expose themselves to potential liability. That’s because the mechanics’ lien law also allows owners to recover attorneys’ fees and actual damages from contractors who post invalid liens. The 2013 lien law changes have given property owners leverage over contractors when the contractors do not file the commencement notice.

On commercial construction, the lien law changes have not had a significant impact on commercial contractor lien rights. The centralized database has, however, made it much easier to understand the status of the project and determine whether there are any pending liens.

Five years on, there is no doubt the 2013 amendments to Iowa’s mechanics’ lien law have had a significant impact on lien filings. The mechanics’ lien law is full of traps for the unwary. Any contractor or property owner that is dealing with a dispute involving real estate construction and mechanics’ liens should consult with a knowledgeable attorney about mechanics’ lien issues, regardless of the type of construction.

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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