Mechanic Lien Need to be filed Properly or they are Defective 

Contractors and subcontractors have likely learned of the dramatic changes to Iowa’s mechanic’s lien law that became effective January 1, 2013. Under the 2013 law mechanic liens are no longer be filed with the county clerk of court.

All mechanic’s liens must be filed with the Secretary of State, preferably via the new online system. Liens on both residential and commercial projects must be filed with the Secretary of State.

As to liens that are to be filed on residential construction, within 10 days of the commencement of a residential project, a general contractor must post a “commencement notice” on the Secretary of State’s website. This notice  filing is to contain basic information about the nature of the project,  the project’s address, contractor’s name, and other information. If a general contractor fails to post the notice within ten days of commencing work then the general contractor forfeits his or her right to a mechanic’s lien. When a general contractor hires a subcontractor to perform work on a residential project, the subcontractor must first run a search through the mechanic’s lien database on the Secretary of State’s website for the specific project the subcontractor will be working on. The subcontractor must then complete a short form linking the subcontractor to the project; a “preliminary notice.” The preliminary notice should be posted as soon as the subcontractor commences work. If the subcontractor fails to post a preliminary notice with the Secretary of State before final payment is made on the project, then the subcontractor will forfeit the opportunity to perfect a mechanic’s lien.

This new rule means that suppliers providing materials for the beginning of a project will have a lot longer to post a preliminary notice than subcontractors doing finishing work such as landscaping. Once a subcontractor posts a preliminary notice, his or her option to perfect a mechanic’s lien is protected. If the subcontractor needs to  perfect a mechanic’s lien then he or she still has 90 days from the end of the project to perfect. Perfection should also be done online. The Secretary of State does provide an option to post and perfect by mailing a paper form. However, using a paper form has drawbacks. Mechanic’s lien priority is determined by the order that the liens are posted to the online Secretary of State database. When a subcontractor posts or perfects a lien through the website then the lien is placed in the database instantly. In contrast, paper filings must first arrive at the Secretary of State. Then, a Secretary of State employee must manually enter the information before it posts to the database  process that could take up to three days from the date the filing arrives at the Secretary of State’s office. The key points for contractors remember are:

Residential Construction:

1. Within 10 days of commencing work on a residential project a general contractor must post a     commencement  notice on the Secretary of State’s website. The general contractor needs to receive a Mechanic’s Notice and Lien Registry (“MNLR”) number and the should provide that number to all subcontractors.

2. When a subcontractor starts work on a project the subcontractor must search for the general contractor’s commencement notice and then post a preliminary notice for the subcontractor’s work. The subcontractor can either use the general contractor’s MNLR number, or the project’s address to find the general contractor’s commencement notice;

3. If the general contractor has not posted a commencement notice then the subcontractor must post a commencement notice before posting a preliminary notice. The subcontractor’s preliminary notice can be converted into a mechanic’s lien if the subcontractor needs to perfect a lien.

4. Priority of mechanics’ liens is determined by the order they are entered into the database;

Commercial Construction:

1. A general contractor on a commercial project does not have to post a commencement notice on the Secretary of State’s website;

2. A subcontractor does not have to post a preliminary notice on the Secretary of State’s website;

3. The old rules for filing mechanic’s liens on commercial projects still apply with one critical exception—liens must be filed with the Secretary of State, preferably using the online system.

At a minimum, every contractor should get on the Secretary of State’s website and create a username and password. As always, contractors and subcontractors should consult legal counsel with specific questions regarding the mechanic’s lien law changes.