A mechanic’s lien may be obtained for the production of any material or labor for any building or land for improvement, alteration or repair thereof. Iowa Code section 572.2(1).
To obtain a mechanic’s lien, a person must strictly adhere to the Iowa Code:
1. The person or company must produce material for or labor upon any building or land for improvement, alteration or repair thereof. Iowa Code section 572.2(1). There must be visible improvement or there is no lien. Gollechon, Schemmer Assoc. v. Fareway-Bettendorf Assoc., 268 N.W.2d 200, 201 (Iowa 1978).
2. The person or company must have a contract with the owner, contractor, or subcontractor of the improved property. Iowa Code section 572.2(1).
3. The person or company must perfect the lien in order to obtain a priority claim. Iowa Code section 572.8. 90 days for perfection is often used as a cutoff from the last day that material or labor is provided. If the lien is not perfected within 90 days, the lienholder has the burden of notifying the owner of the property of the lien. The lien does not extend to the whole property, but only to the balance due at the time of notice.
Within the 90 day period, the owner is not required to pay the contractor for work done, unless the contractor furnishes the owner with either receipts and waivers of claims for mechanic’s liens by all persons providing labor and materials or a good and sufficient bond approved by the owner. If the owner pays the contractor within the 90 day period, the owner is still liable to the subcontractor for full value of material and labor if the subcontractor perfects its lien within the 90 days. Iowa Code section 572.14(1).
Perfection of the lien is accomplished by filing with the clerk of court in the county where the land or building is situated, a verified statement of account on demand due (minus credits) and including the time when material was furnished and labor performed and date of completion; description of property to be charged with lien; and name and last known mailing address of owner, agent or trustee. If filed within 90 days, the clerk mails a copy of the lien to the owner, agent or trustee. After 90 days, the contractor must serve written notice on the owner, agent or trustee, and the subcontractor’s lien is enforced only to the extent of the balance due from the owner to the contractor at the time of service, unless bond was given by the contractor. Iowa Code section 572.11.
Failure to perfect the lien within 90 days does not preclude enforcement of the lien, merely the priority of the claim and likelihood of satisfaction. Priority is determined by first to file, wins. Iowa Code section 572.17. Mechanic’s liens have priority over all other liens that attach to the building except for liens recorded prior to commencement of work. Iowa Code section 572.18. Construction mortgages have priority over all mechanic’s liens for work commenced after the filing of the construction mortgage. Iowa Code section 572.18. Purchase money mortgages have priority over subsequently filed mechanic’s liens and liens filed more than 90 days after date in which the claimant’s last material was furnished or labor performed. Iowa Code section 572.8 - 572.10, 572.18. Mechanic’s liens have priority over garnishments of owner without regard to date of filing. Iowa Code section 572.19.
4. The person or company must provide notice of the lien. There are different notice requirements for residential and commercial property. Iowa Code sections 572.13, 572.14, and 572.33.
If a contractor enters into a contract with an owner-occupied dwelling and intends to contract with subcontractors, notice must be provided in the contract with the owner per Iowa Code section 572.13(2). If there is no contract, the contractor the owner written notice within 10 days of commencement of work with the names and addresses of all subcontractors, a statement that subcontractors may have lien rights if not paid, and must be updated as additional subcontractors are used. Iowa Code section 572.14(2).
The subcontractor is also required to provide an owner of an owner-occupied dwelling with notice of a lien providing name of owner; address of property; name, address and phone number of lien claimant, and a statement per Iowa Code section 572.14(3).
If the property is not an owner-occupied dwelling, contractors and subcontractors do not have notice requirements beyond perfecting the lien. Sub-subcontractors must notify the principal contractor in writing within 30 days of first furnishing labor or materials of name, mailing address, and phone number of the person furnishing labor or materials; and the name of the subcontractor to whom labor or materials were furnished. Iowa Code section 572.33(1)(a). Failure to comply precludes the sub-subcontractor from obtaining a lien.
5. The person or company cannot obtain collateral security on the contract until after the work is completed. Iowa Code section 572.2(3).
Duration of lien: In Iowa, a mechanic’s lien is only enforceable for 2 years after the expiration of the 90 days. Iowa Code section 572.27.
Action to enforce lien. After the mechanic’s lien is perfected, action by the lien holder may be brought to enforce the lien. This is an equitable action in the district court in the county where the property is situated. No other actions may be joined with this action. Iowa Code section 572.26.
The property owner, its agent, holder of a security interest, contractor, or another interested person may serve upon a lien holder written demand to commence suit to enforce a lien. The lien holder must then commence suit within 30 days or forfeit all rights derived from the lien. Iowa Code 572.28(1). If an action is not filed, the owner or contractor may file a copy of demand with proofs of service. This serves as constructive notice of the forfeiture and cancellation of the lien. Iowa Code section 572.28(2).
A prevailing plaintiff who furnished labor or materials directly to the defendant may be awarded reasonable attorney fees. Iowa Code 572.32(1). Attorney fees however have been determined to be mandatory in actions to enforce a mechanic’s lien. Schaffer v. Frank Moyer Const. Inc., 628 N.W.2d 11 (Iowa 2001).
Action by Contractor against owner or owner against contractor:
Generally a contractor must pay a subcontractor in full within 30 days of receipt by the contractor of payment in full from the owner. Iowa Code section 572.30. The notice must be written and be reasonable delivered and identify the property and nonpayment. Actual damages may be awarded, plus exemplary damages may be awarded unless the contractor proves the proceeds received have been applied to the cost of labor or material, or gives a bond in the amount of nonpayment or more within 15 days of receiving notice.
Challenges to Mechanic’s Lien filings:
An action to challenge mechanic’s lien may be brought in district court or small claims court and any permissible claim or counterclaim may be joined. Owner-occupied dwelling cases allow the prevailing challenger to be awarded reasonable attorney fees and actual damages. If the lien was filed in bad faith, the court may award the owner reasonable attorney fees plus not less than $500 or the amount of lien, whichever is less. Iowa Code section 572.32(2).
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