Iowa Construction Lien Basics: 10 Questions Answered
Construction liens, sometimes called mechanic’s liens, are useful tools to secure payment for unpaid services and materials under a contract to improve real estate in Iowa. Liens operate by encumbering a property such that it is difficult to sell or re-finance the property without first removing the lien. In some cases the person filing the lien may be given the authority to sell the property and receive payment out of the proceeds of the sale. However, construction liens do not automatically attach to the property, and the provider of services or materials under a construction contract must take steps to ensure that lien rights are protected. This article will address the basics of Iowa law governing construction liens.
1. Who can file a lien?
Generally, every person who contracted with the owner, owner-builder, general contractor, or subcontractor to furnish materials or labor for, or performed any labor upon, any building or land for improvement, alteration, or repair has a right to post a lien on such building or improvement. Additionally, the land or lot belonging to the owner on which the building or improvement is located is also subject to a lien. An owner-builder is not entitled to a lien as to work the owner-builder performs, or is contractually obligated to perform, prior to transferring title to the buyer.
2. When is a lien allowed?
Generally, Iowa allows mechanic’s liens to be filed when an agreement exists for services or materials to be furnished for the purpose of improving or producing a change in real property.
A mechanic’s lien can be posted to secure payment by a person who contracted with the owner, owner-builder, general contractor, or subcontractor to furnish materials or labor. Labor may include those engaged in construction or repair whether internal or external improvements. Further labor may include, among other things, grading, landscaping, sidewalk building, and installation of fencing. Materials, among other things, may includes machinery, tools, fixtures, trees, plants, hedges, bushes, sod, soil, dirt, mulch, peat, fertilizer, fence material, tile, and the use of forms, accessories, and equipment furnished by the claimant. If equipment/machinery is rented by a person to the owner, general contractor, or subcontractor, the person can file a lien upon the building, improvement, or land to secure payment for the equipment/machinery rental. The lien is for the reasonable rental value during the period of actual use of the equipment/material and any reasonable periods of nonuse of the equipment/material taken into account in the rental agreement.
3. Where do I file the lien?
Liens, and all lien related documents, must be posted to Iowa’s centralized computer database called the Mechanic’s Notice and Registry (MNLR). The Iowa’s Mechanic’s Notice and Lien Registry can be found here.
4. What do I put in the lien?
When posting a mechanic’s lien it must have: (a) the name of the person by whom posted; (b) the date and hour of posting; (c) the amount thereof; (d) the name of the person against whom the lien is posted; (e) the legal description of the property to be charged with the lien; (f) the tax parcel identification number of the property to be charged with the lien; and (g) the address of the property or a description of the location of the property if the property cannot be reasonably identified by an address.
Further, a claimant perfects a mechanic’s lien by posting to the MNLR internet site a verified statement of account of the demand due the person, after allowing all credits, setting forth: (a) the date when such material was first furnished or labor first performed, and the date on which the last of the material was furnished or the last of the labor was performed; (b) the legal description that adequately describes the property to be charged with the lien; (c) the name and last known mailing address of the owner; (d) the address of the property or a description of the location of the property if the property cannot be reasonably identified by an address; and (e) the tax parcel identification number.
5. What is the amount of the lien?
In Iowa, as a very broad generalization and subject to certain exceptions, a mechanic’s lien is for the unpaid part of his or her contract price.
Owners have an incentive not to pay a general contractor until: (a) 90 days have passed since the last materials were provided or labor was performed; (b) the general contractor provides receipts and waivers of claims for mechanic’s liens, signed by all persons who furnished material or performed labor for the improvement; or (c) the general contractor provides a bond to be approved by the owner, conditioned that the owner shall be held harmless from any loss which the owner may sustain by reason of the posting of mechanic’s liens by subcontractors. This is because subcontractors have a 90 day window in which to assert mechanic’s liens against owners, and they can, in certain circumstances, enforce such rights even after the owner has paid the general contractor in full.
6. What is the deadline to file the lien?
Iowa is unique in its timing requirements for filing a mechanics lien. For full protection, an Iowa mechanics lien should be filed within 90 days after the date of last furnishing labor and/or materials to the project. If that deadline is missed, however, a general contractor or subcontractor may still perfect a mechanic’s lien because Iowa allows a lien to be filed after the 90-day deadline for a period of two years. Note, however, that a lien filed after the expiration of the 90-day period only protects the lien claimant to the extent that the owner has not yet paid the general contractor.
General contractors working on residential projects must post a notice of commencement and provide a notice to owners within 10 days of commencing work or their lien rights are lost. Subcontractors working on residential projects must post a preliminary notice and provide notice to owners before the owner pays the general contractor in full or the subcontractor’s lien rights are lost.
7. What is the priority of my lien?
Iowa has fairly complex rules regarding the priority or lack of priority of liens over other types of encumbrances against property. Beyond the general rules below, the priority rules of Iowa are beyond the scope of this article.
In relation to other liens of the same type and on the same property, the time of posting of the verified statement of account dictates priority.
8. How can I enforce my lien?
A claimant may bring a civil lawsuit to enforce the mechanic’s lien after the lien has been perfected. The lawsuit should be filed in the county in which the property is located. An action to enforce a lien must be brought within two years from the expiration of the 90 day period following the last date material was furnished or the last date the labor was performed. If the owner of the real property makes a written demand that the claimant commence action to enforce the lien, the claimant has 30 days to enforce the lien.
9. Can I waive or assign my lien?
A lien may be released by a bond, by the payment of the claim, or by the failure of the claimant to bring suit to enforce the lien within thirty days of written demand. Iowa allows contractors to waive or assign their lien rights.
10. Can I discharge or release a lien against my property?
Liens may be discharged at any time by the depositing of a bond with the administrator for 200% of the lien amount.
This article is meant to provide a general understanding of lien rights in Iowa. However, there are many nuances to the filing of liens and Iowa, in certain instances, has authority to punish misconduct associated with lien filing. For that reason, please do not hesitate to contact one of the members of Koley Jessen’s Construction Industry Practice area if you need to file a lien or if a lien is filed against your property.