Stormchaser Legislation and Mechanic’s Liens

by Davis Brown Law Firm

April 17 marks the end of legislators’ per diem, but session will continue beyond that date as budget and property tax negotiations continue. Progress has been made however, with most budget bills being assigned to conference committees and the passage by the Senate of the contentious Health and Human Services budget bill. The Capitol is finally starting to have that “shut down mode” feeling.

Just prior to the weekends round of dangerous storms, an insurance industry bill was passed by the Senate this week - for the second time in this General Assembly. SF466 is in response to unscrupulous residential contractors which chase major storms from state to state and prey on home owners who have suffered damage to their roof or other exterior parts of their home. These contractors typically suggest repairs beyond what are needed, demand up-front payments, perform poor quality work and leave the state before any action can be taken. The bill prohibits a residential contractor from holding itself out as an insurance adjustor and from promising to pay the home owners deductible. It also requires a residential contractor to give its customer a notice that its contract at the signing of the contract the makes clear the contract is binding whether or not the customer’s insurance company agrees to pay for the repairs. Failure to give the notice voids the contract. The bill passed the Senate in 2011 with a vote of 48-2. The House added the contract voiding language, passed the amended bill 95-1 and sent it back to the Senate. The Senate refused to consider the bill without amending it to include language proposed by the State Attorney General reinforcing that the Iowa Consumer Fraud Act applied to the residential contractor’s behavior. After the insurance industry agreed to the AG’s proposed language the Senate passed the amended bill 47-2 and returned it to the House. The House generally does not favor consumer legislation such as SF466 or the Iowa Consumer Fraud Act and is negotiating with the AG and the insurance industry over the notice requirement. The outcome of the negotiations will be clear this coming week.

HF675 changes Iowa’s mechanic’s lien statute by creating a state construction registry internet website administered by the Secretary of State’s where persons’ who furnished materials or labor can post their mechanic’s lien electronically. Currently mechanic’s liens are filed with the district court of the county in which the project is located. The registry will allow interested parties to check it to determine if notice has been given and then obtain lien waivers from sub-contractors prior to closing a sale or financing. The bill also requires (i) a general contractor or owner-builder to post to the state construction registry internet website a notice of commencement of work, and (ii) a subcontractor to post to the registry a preliminary notice relating to the materials or labor to be provided. If the sub-contractor does not file the notice, they are not entitled to a lien. The bill was prompted by bankruptcy of the several homebuilders in Iowa during the recent recession and the confusion surrounding the filing of hundreds of mechanic’s liens with the district courts in multiple counties in addition to the county in which the homebuilder’s home office was located.

A Tax Increment Finance (TIF) reform bill supported by Farm Bureau passed the House, 54-43, despite opposition from many economic development groups, chambers of commerce and cities. The Senate circulated its new TIF bill language late Thursday, which differs greatly from the House version. More action will ensue on this issue, with a subcommittee scheduled on Tuesday morning.

Thomas E. Stanberry & Jessica S. Harder
Government Relations Report

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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