Iowa's mechanics' lien law just got more confusing
Posted on 08/31/2016 at 11:49 AM by John Lande
Today the Iowa Court of Appeals issued a decision that raises more questions than it answers about how to interpret Iowa’s mechanics’ lien law.
The dispute in Standard Water Control Systems, Inc. v. Michael D. Jones and Cori Jones has a familiar fact pattern. The Joneses hired Standard Water Control Systems (“SWCS”) to do work on their basement. During the course of the project one of SWCS’s employees hit a sewer line and water line with a jackhammer. The lines were located in an unusual and unforeseeable place.
SWCS completed approximately 95% of the job, but the Joneses would not allow SWCS to return to finish the work. SWCS sent a bill to the Joneses for $5,600. When the Joneses did not pay, SWCS filed a notice of commencement of work and a mechanics’ lien 16 days after it started work.
This blog has previously covered the significant changes for mechanics’ liens on residential construction. The mechanics’ lien law requires all general contractors to file a notice of commencement of work on residential properties within 10 days of starting work on a project. If the general contractor does not file a commencement notice within 10 days of starting work, then the general contractor cannot later file a mechanics’ lien.
The Joneses argued that SWCS was a general contractor because the mechanics’ lien law defines a general contractor as “every person who does work or furnishes materials by contract, express or implied, with an owner.” Therefore, according to the Joneses, since SWCS did not file a commencement notice within 10 days of starting work SWCS was not entitled to a lien.
SWCS argued in response that the mechanics’ lien law only requires general contractors to file the commencement notice if the general contractor “has contracted or will contract with a subcontractor” during the course of the project. Since SWCS had not contracted with any subcontractor for the job, SWCS was not required to file a commencement notice within 10 days of the commencement of work.
The Iowa Court of Appeals agreed with SWCS’s argument and concluded that a general contractor only has to file a commencement notice on residential construction if the general contractor “has contracted or will contract with a subcontractor.”
The decision raises some significant questions for contractors working on residential construction. For example, a general contractor may start a job without hiring any subcontractors. During the course of the job, however, it may become apparent to the general contractor that a subcontractor is necessary to perform some unanticipated work. If it’s already been more than 10 days since the general contractor commenced work, when should the general contractor have to file the commencement notice?
Under the mechanics’ lien law and the Iowa Court of Appeals decision, a general contractor has to file a commencement notice within 10 days of commencement of work in order to have a lien only if the general contractor has contracted or will contract with a subcontractor. However, in the example above the general contractor did not know about the need for a subcontractor until after the 10 days expired. The mechanics’ lien law does not provide a clear answer and neither does the Iowa Court of Appeals. This is a problem because general contractors that don’t file commencement notices cannot obtain mechanics’ liens on residential property.
The safest route for general contractors working on residential construction continues to be to file the commencement notice as soon as work commences on a property. The commencement notice is not a mechanics’ lien, but it does preserve the right to obtain a mechanics’ lien in the future.
The Iowa Court of Appeals decision may not be the last word on this issue either. The Joneses have the right to ask the Iowa Supreme Court to review the decision, and if they do the Iowa Supreme Court may clarify the rules that apply to commencement notices for general contractors.
Remember, you should always consult with an attorney regarding specific questions about deadlines and applicability of the mechanics’ lien law.
The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.
Categories: Construction Law, John Lande, Real Estate & Land Use, Banking Law
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