Serve the Notice on the Correct Parties for Iowa Lien Rights

Serve the Preliminary Notice on the Correct Parties If You Want Mechanic’s Lien Rights in Iowa

Mechanic’s lien rights are available on commercial and residential projects in Iowa, however, securing lien rights requires compliance with statute. One sub-subcontractor failed to serve its preliminary notice on the owner and the GC, as prescribed by statute, and its lien was invalidated.

Mechanic’s Lien Rights & Iowa Commercial Projects

If you are furnishing to a commercial project in Iowa, you should serve the preliminary notice upon the contractor within 30 days after first furnishing materials or services. If you have contracted directly with the owner or prime contractor, the preliminary notice is not required.

Should you need to proceed with a lien, you should post the lien to the Mechanics’ Notice and Lien Registry within 90 days from last furnishing materials or services.  (The administrator will serve a copy of the lien upon the owner.) If posting a lien to the Mechanics’ Notice and Lien Registry after 90 days from last furnishing materials or services, serve a notice of the lien upon the owner.  The lien will be enforceable for the amount owed by the owner to the prime contractor at the time the notice of the lien is served.

To proceed with suit, post suit to enforce the lien on the Mechanics’ Notice and Lien Registry within 2 years from the 90-day lien filing period or within 30 days from the receipt of a demand to commence suit.

Iowa is Specific and a Recent Court of Appeals Decision Confirms It

Iowa statute is quite specific; if you fail to serve a required preliminary notice, you will not have lien rights.

572.33 Requirement of notification for commercial construction.

2. A person furnishing labor or materials to a subcontractor shall not be entitled to a lien under this chapter unless the person furnishing labor or materials does all of the following:

a. Notifies the general contractor or owner-builder in writing with a one-time notice containing the name, mailing address, and telephone number of the person furnishing the labor or materials, and the name of the subcontractor to whom the labor or materials were furnished, within thirty days of first furnishing labor or materials for which a lien claim may be made. Additional labor or materials furnished by the same person to the same subcontractor for use in the same construction project shall be covered by this notice.

b. Supports the lien claim with a certified statement that the general contractor or owner-builder was notified in writing with a one-time notice containing the name, mailing address, and telephone number of the person furnishing the labor or materials, and the name of the subcontractor to whom the labor or materials were furnished, within thirty days after the labor or materials were first furnished, pursuant to paragraph “a”.

John Lande recently wrote a recap of the LM Construction, Inc. v HGIK Hospitality LLC case, in his article Sub-Subcontractor Loses Mechanic’s Lien Rights. In this case, the general contractor was hired to build a hotel. The general contractor hired a subcontractor, who in turn hired a sub-subcontractor to install drywall.

During construction, the subcontractor was removed from the project and the general contractor began working directly with the sub-subcontractor. Once the work was completed, the general contractor refused to pay the sub-subcontractor, and the sub-subcontractor filed a lien.

According to Lande, the sub-subcontractor served its preliminary notice upon the owner but not upon the general contractor.

Iowa statute states “notifies the general contractor or owner-builder in writing” so, the sub-subcontractor tried to argue the notice it served was upon the owner-builder, which would satisfy statutory requirements. Unfortunately for the sub-subcontractor, the court determined the property owner was not an owner-builder, and since the sub-subcontractor did not serve the general contractor with a copy of the notice, no lien rights existed.

There was some confusion between the parties on the ladder of supply, based upon contractual language. Allegedly the subcontract identified the subcontractor as a general contractor, which as Lande observes, is a bit misleading. Because contracts and contractual language can be muddled or misinterpreted, Lande provides the following advice:

“Contractors should take time at the beginning of a project to identify the hierarchy between contractors, and identify the contractor with a contract directly with the property owner. This due diligence will reveal the identities of the parties who need to receive notice to protect a contractor’s mechanics’ lien rights.”

This is good advice for any party on any project in any state. Knowing the parties within the ladder of supply is critical for lien rights, however, it should be equally as important to credit granting decisions. Knowing in advance that the general contractor was tangled up in liens on other projects would alert you to take precautions when contracting for the project – even if your direct contract was with a sub.

Articles, Blogs & Commentary Are No Substitute

Parting advice from Lande “… [K]eep in mind that the mechanics’ lien law is full of traps for the unwary. Articles and blogs about the law are no substitute for consulting with a knowledgeable attorney, because the circumstances of your situation may have a slight difference that has important consequences for your mechanics’ lien rights. You should always consult with an attorney about mechanics’ lien questions.”

I say it often: when in doubt, seek a legal opinion!

Most Recent Resources

Blog

Will Safe Harbor Ever Exist for Florida UCC Filings? Zero Tolerance

Safe Harbor couldn't save this UCC. Florida's 'zero tolerance' policy means you must strictly comply with Article 9-503(a). Learn more here!
Read More
white paper
White Paper

NCS Credit Lien Index 2022 Q3

The Lien Index increased 4 points in Q3 2022, an 11% climb over Q2 2022. As expected, Q3 mechanic's lien activity rose 11% over Q2, and activity remained lower than Q1, which peaked at 43. We anticipate the Index will increase 2%-5% in Q4. Download the full report for details.

Read More
live webinars
Live Webinar

Subchapter V Bankruptcies and Impacts on Trade Creditors (1 hr CLE credit)

New Subchapter V was added to the Bankruptcy Code in 2020 to create a more efficient and economical process for small business debtors to reorganize. But the benefits to a Subchapter V debtor come at a cost to trade creditors.
Read More