Mechanics liens are very effective in helping you recover your payment from non-paying clients in construction. Liens are attached to a property’s public records, so potential buyers and financiers can learn about the property owner’s unsettled obligations. Owners, therefore, would opt to settle a payment dispute to get rid of a mechanics lien.
In order to protect property owners from fraudulent and abusive lien claims, every state sets strict rules and requirements for potential lien claimants. In Iowa, for instance, certain construction participants are required to serve preliminary notices to preserve their lien rights. There are also deadlines that must be met; otherwise, a mechanics lien will be deemed invalid.
This guide explains everything you need to know – from the deadlines to the best practices – when filing a mechanics lien in Iowa.
Who can file a mechanics lien in Iowa?
Iowa is fairly lenient on which construction participants have lien rights. Generally speaking, parties such as general contractors, subcontractors, and material suppliers are allowed to record an Iowa mechanics lien.
Note, however, that if you are working on repairs that are initiated by a tenant and not by the actual property owner, you may not have lien rights in Iowa.
Preliminary notices in Iowa
As mentioned earlier, Iowa requires its potential lien claimants to serve preliminary notices to preserve their lien rights. There are two Iowa preliminary notices that you should know about: the Iowa Notice to Owner and the Iowa Notice to Prime Contractor.
Notice to Owner
Who must serve an Iowa Notice to Owner?
Parties working on residential projects are required to serve a Notice to Owner in Iowa. These parties include general contractors, subcontractors, and material suppliers.
What must be in the Notice to Owner?
If you are a general contractor, your Notice to Owner must contain a list of the names and addresses of the subcontractors and suppliers working for you. This list must be updated throughout the project if you continually hire new subcontractors and material suppliers.
Note that your Notice to Owner should either be part of your contract or subsequently served as a written document on the property owner.
If you are a subcontractor or a material supplier, your Notice to Owner is filed through the mechanics’ notice and lien registry (MNLR). You need the following information:
- The name of the owner
- The mechanics’ notice and lien registry (MNLR) number
- Your name, address, and telephone number
- The name and address of the person who contracted with you
- The name of the general contractor or owner-builder under whom you are performing or will perform the work
- The address of the property or a description of the location of the property if the property cannot be reasonably identified by an address
- The legal description that adequately describes the property to be charged with the lien
- The date the material or materials were first furnished or the labor was first performed
- The tax parcel identification number
- Any other information required by the administrator pursuant to rule
When do you serve a Notice to Owner?
General contractors must serve the Notice to Owner as part of the contract or within 10 days of the date when they begin providing services to a project.
Subcontractors and material suppliers must file the Notice to Owner in the MNLR when they begin working on a project. There is no set deadline, but you have to keep in mind that the amount that you can claim on a mechanics lien is limited to the amount that is yet to be paid to the general contractor at the time of filing your Notice to Owner.
It is then best practice to file the Notice to Owner early to ensure that you can recover your full payment in case payment disputes come up later on in the project.
What happens if you do not serve a Notice to Owner?
You will lose your lien rights over the project in question if you do not serve or file the Notice to Owner in Iowa.
Notice to Prime Contractor
Who must serve an Iowa Notice to Prime Contractor?
Parties who have no direct contract with the property owner or the general contractor of a non-residential project must serve an Iowa Notice to Prime Contractor. These parties include sub-subcontractors.
What must be in the Notice to Prime Contractor?
You need to supply the following details in your Notice to Prime Contractor:
- Your name, mailing address, and telephone number
- The name of the subcontractor to whom the labor or materials were furnished
You can also add a statement saying that you may enforce your lien rights if you do not receive your payment. Also note that the Notice to Prime Contractor is a physical document that is served on both the owner and the general contractor, preferably via certified mail with return receipt requested.
When do you serve a Notice to Prime Contractor?
The Notice to Prime Contractor in Iowa must be served within 30 days of the first day you start furnishing labor or suppliers to a property. Late submissions are not allowed.
What happens if you do not serve a Notice to Prime Contractor?
Failing to serve a Notice to Prime Contractor is fatal to your lien rights.
When do you file an Iowa mechanics lien?
The Iowa mechanics lien must be filed within 90 days of the date you last furnished labor or materials to a project.
However, Iowa allows its lien claimants to file a mechanics lien after the initial 90-day period, but it should be done no later than 2 years after the original deadline. Late filing comes with a consequence: the amount that you can claim is limited to the amount that is yet to be paid by the owner to the general contractor.
For full protection of your payment rights, it is in your best interest to file a mechanics lien in Iowa on or before the 90-day deadline.
How to file a mechanics lien in Iowa
1. Prepare the Iowa mechanics lien form
In order to file a mechanics lien in Iowa, you need the following information (based on IA Code § 572.8 (2019):
- The date materials were first furnished or labor was first performed, and the date on which the last of the materials was furnished or the last of the labor was performed
- The legal description that adequately describes the property to be charged with the lien
- The name and last known mailing address of the owner of the property
- The address of the property or a description of the location of the property if the property cannot be reasonably identified by an address
- The tax parcel identification number
The mechanics lien form must contain all the information stated above and it must be notarized.
2. File the Iowa mechanics liens
Once you have your Iowa mechanics lien document ready, you may file your lien electronically via the MNLR. Note that you will need to create a user account if you have not already done so. Use the same user account that you have used for filing other documents such as the Notice of Commencement or the Notice to Owner.
After posting your lien in the MNLR, the administrator will mail a copy of the lien to the property owner.
3. Enforce/release the mechanics lien
When the property owner is notified about your posted mechanics lien, they will either pay the outstanding debt or they won’t. Property owners are almost always willing to settle payment debts once a mechanics lien is posted – they are well aware of how a mechanics lien can reduce their property’s market value.
If you get paid, you are required to release the mechanics lien by acknowledging in writing that the mechanics lien has been satisfied. Failing to do this within 30 days after receiving a demand letter from the owner may cause you to be required to pay a $25 penalty and other fees.
If you do not get paid, you have the right to enforce a mechanics lien by initiating a foreclosure lawsuit. If you win this suit, you will recover your payment through the foreclosure sale of the property.
The period for enforcing a mechanics lien in Iowa is within the 2 years and 90 days following the date you last furnished services to a project. Beyond this deadline, your mechanics lien loses its hold on the property as it is no longer enforceable.
Before initiating a lawsuit, consider serving a Notice of Intent to Foreclose on the property owner. Warning them about a potential legal action can finally get them to settle the outstanding debt without actually going through a full-blown lawsuit.
Also note that a property owner can compel you to initiate a lawsuit by giving you a demand letter to enforce your mechanics lien. If you receive a demand letter telling you to commence suit, you must initiate the enforcement lawsuit within 30 days of receiving this letter. Failing to do so within the 30-day deadline will cause your mechanics lien to expire earlier than the original deadline.
Important deadlines to remember when filing a mechanics lien in Iowa
Best practices when filing a mechanics lien in Iowa
1. Serve the required preliminary notices
Many construction participants lose their lien rights over a project for simply failing to serve the right preliminary notice. Keep in mind that lien rights must be “preserved,” even if no payment issues have come up yet. To ensure that your full lien rights are protected, you should make it a point to serve the correct preliminary notice as early as you can.
2. File the mechanics lien promptly
Iowa’s lien deadlines are quite unique because the state allows late filing of a mechanics lien. However, if you want to recover your full payment and not limit the claimable amount to whatever is owed to the general contractor, be sure to file your mechanics lien on time within the initial 90-day deadline.
3. Serve a Notice of Intent to Foreclose before enforcing a mechanics lien
A foreclosure lawsuit will be pricey, and it will take not only a lot of resources but also your valuable time. One way to potentially avoid dealing with a full-blown lawsuit is to warn a property owner about your impending enforcement action by serving a Notice of Intent to Foreclose. They might end up releasing your payment as they, too, can be wary of having to face a legal battle.
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