Posted on 10/01/2018 at 02:05 PM by John Lande
Contractors hired to work on Mandelbaum’s new tower—“The Fifth”—need to be familiar with Iowa’s mechanics’ lien law if they want to protect their mechanics’ lien rights. The Des Moines Register reports that construction may begin soon on the proposed 33 story tower at 5th Avenue between Walnut Street and Court Avenue. Many contractors will be involved in construction, and contractors will need to be careful to ensure that they protect their mechanics’ lien rights.
This blog recently reviewed a case where a contractor lost its mechanics’ lien rights on a commercial construction project, because the contractor did not provide the proper notice to protect its lien rights. In that case, a contractor was a subcontractor of a subcontractor (a “sub-subcontractor”). The sub-subcontractor was owed approximately $100,000, and could not depend on mechanics’ lien rights to guarantee payment, because it didn’t send a notice to the project’s general contractor.
Under Iowa law, before a sub-subcontractor can file a mechanics’ lien, it has to provide the general contractor, or owner-builder, with written notice within 30 days of the sub-subcontractor commencing work on the project. The notice must include the name, mailing address, and telephone number of the sub-subcontractor, and the name of the subcontractor to whom the sub-subcontractor is providing labor or materials.
The problem for many contractors is it can often be difficult to figure out who the general contractor or owner-builder of the project is. Construction contracts often don’t help, because they can refer to a subcontractor as a “general contractor” even though they are really a subcontractor. Under Iowa law, the only contractors who are “general contractors” are those who have a contract directly with the property owner. “Owner-builders” are defined as the owners of the property who are also serving as the general contractor and intend to sell the property. “Subcontractors” are defined as anyone who has a contract with a general contractor or owner-builder. Because of these definitions, contractors who are hired to work on a project like The Fifth have to ask a lot of questions to determine who the true general contractor is. Once they figure that out, contractors should provide the general contractor written notice.
The Fifth Tower will be a great opportunity for contractors. However, contractors should also be diligent about protecting their mechanics’ lien rights, so they are protected if a dispute over payment ever arises. Unless a contractor has a contract directly with the property owner, they are a subcontractor. Anyone who contracts with a subcontractor is a sub-subcontractor. Contractors should spend time to determine where they fit in the project’s hierarchy so they can take the necessary steps to protect their mechanics’ lien rights.
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