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Mechanic's Lien Rights on Residential Projects addressed by the Iowa Supreme Court and at the Iowa State Capitol - February 14, 2020

On February 7, 2020, the Iowa Supreme Court issued a final decision in Standard Water v. Jones, a long-standing residential mechanic’s lien case stemming back to a 2013 mechanic’s lien. Davis Brown Law Firm attorneys, Jodie McDougal and Elizabeth Meyer, represent the mechanic’s lien claimant in this case, Standard Water Control Systems, Inc., owned by Mike Hogenson.

 

Case Background

In a 2014 trial, Standard Water successfully obtained a favorable judgment on a mechanic’s lien lawsuit filed against homeowners who had not fully paid their bill for Standard’s installation of a waterproofing system within their house. The judgment amount included the principal debt owed, plus attorney’s fees, costs, and interest.  Since trial, the homeowners have filed three sets of appeals.

 

In this third appeal, the homeowners claimed that their house, which is their homestead, should be protected against certain portions of Standard Water’s mechanic’s lien, including the attorney’s fees awarded under the mechanic’s lien. The Iowa Court of Appeals initially ruled that Standard Water was not entitled to sell the homeowners’ homestead to recover its attorney fees and other amounts and that a homestead is only liable, and could be sold for, the principal debt owed under a mechanic’s lien, not any other fees or costs.

 

Recent Iowa Supreme Court Decision

On February 7, 2020, the Iowa Supreme Court reversed that Court of Appeals’ decision and, in its decision, affirmed Standard Water’s original judgment that the homeowners’ homestead was liable, and could be foreclosed and sold, for the entire mechanic’s lien amount, including attorney’s fees, costs, and interest. The Iowa Supreme Court concluded that the homeowners had waived their right to assert their homestead protection argument due to not timely raising such an argument earlier in the litigation.

 

In addition, in the decision the Iowa Supreme Court analyzed the interplay between mechanic’s lien rights under Chapter 572 and homestead exemptions under Chapter 561, ultimately concluding that the homestead exemption statute, as currently written, prohibits a contractor from recovering its attorney fees in a mechanic’s lien foreclosure action involving a homestead. However, because the homeowners waived their right to assert their homestead protection, the Supreme Court’s aforementioned analysis did not apply in this case.

 

Recent Legislative Activities at the Iowa State Capitol

Fortunately for contractors, the HBA of Iowa continues to engage in substantial efforts to pass SF458, a pending bill that would amend the aforementioned homestead exemption statute under Chapter 561 to expressly provide that a homestead is liable for the entire mechanic’s lien, including attorney’s fees. The language of this bill is below:

 

Those incurred secured by a mechanic’s lien under chapter 572, including principal, interest, attorney fees, and costs, or those otherwise incurred for work done or material furnished exclusively for the improvement of the homestead.

 

On January 21, 2020, the HBA of Iowa and its counsel, attorney Jodie McDougal, provided statements to the House Subcommittee handling the bill. The bill passed the subcommittee and has been placed on the House calendar. Further updates on this bill will be provided in the future.

 

What the Case Means for Residential Contractors:

As of now, and unless and until SF458 is passed by Iowa lawmakers, contractors who foreclose their mechanic’s liens on the homesteads of their customers are advised that only certain portions of their mechanic’s lien--that is, the principal debt owed, interest, and cost--will apply against the homestead, while the attorney’s fees portion of the mechanic’s lien will likely not apply against the homestead. Particularly for subcontractors, their right to recover attorney’s fees against the owner and/or the owner’s homestead would be gone.

 

Contractors are encouraged to speak with their attorney on how they handle mechanic’s liens, specifically if they currently have a mechanic’s lien against a homestead.



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