Posted on 07/03/2018 at 09:00 AM by John Lande
The Iowa legislature’s recent changes to Iowa’s mechanics’ lien law took effect on July 1, 2018.
Effective on July 1, Iowa Code § 572.3 is repealed. That section provided that any contractor who took any collateral to guaranty payment of a construction contract was not entitled to a mechanics’ lien. Under § 572.3, if a contractor obtained a guaranty, or some other form of security, then that contractor lost its lien rights. This section created problems for contractors that required owners to guaranty the construction contract, or any other form of security.
The elimination of Iowa Code § 572.3 means that contractors now have the ability to require guaranties and other forms of security as part of their construction contracts. This means that contractors can require owners to provide deposits, guaranty payment, or provide some other form of security. This gives contractors flexibility for guaranteeing payment while still retaining their right to file a mechanics’ lien.
The legislature also amended Iowa Code § 572.26, which governs amendments to mechanic’s liens. Under the old law, a filed lien could only be amended if a court authorized it. Now, after a contractor files a mechanics’ lien the contractor can amend the lien to reduce the amount of the lien. If a contractor receives a partial payment, then they can amend their lien to reduce the amount of the lien. This can help reduce the tensions between property owner, general contractor, and subcontractor, and potentially allow for easier resolution of disputed claims.
The amendment also states that the mechanics’ lien cannot be amended to increase the amount of the lien. Thus, if a contractor files a partial lien prior to completion, completes construction, and is owed additional amounts then the contractor will have to file another lien. The second lien may not have the same priority for payment as the first lien, since priority is based on the time of filing a mechanics’ lien.
As always, it is important to keep in mind that the mechanics’ lien law is full of traps for the unwary. Contractors and property owners should consult with a knowledgeable attorney about any specific questions they may have about how the mechanics’ lien law applies to their particular circumstances.
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.
- John Lande
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