Iowa's mechanic's lien law saw a change in February after an Iowa Supreme Court Ruling. Previously, under Iowa statute, contractors were able to recover attorney's fees for all projects in addition to the amount owed. After the February ruling, this stipulation will no longer be applicable to residential projects, specifically for "homestead" properties, meaning the project serves as a person's primary residence.
Under old the statute, recovering attorney's fees made it easier for contractors to pursue liens on smaller amounts. The opportunity to recover attorney's fees was available, allowing contractors to attempt to recover even small amounts of unpaid debt. At least on homestead properties, contractors may have to think more carefully before attempting to recover debt and attorney's fees.
This change in the Iowa statute will only affect specific cases, and the changes will likely not affect many contractors, said an Iowa construction attorney. And while the change may not cause grief to many contractors or creditors, he warns of the pitfall a creditor can still fall into: relying too heavily on a mechanic's lien. Ignoring proper due diligence practices before filing a lien can leave a creditor in a desperate situation to file—and they may not be able to recover attorney's fees in Iowa now.
"One of the things I always tell people is that the job of collecting for your work doesn't start at the end of the job, it starts the day the phone rings," he said. "Your collection job begins at the get go. You have to think about what the law is in that state. If you wait, then the horse is out of the barn if you haven't been paying attention when you needed to."
Legislation already exists to overturn this change. While it may take up to a year for this to pass—if it passes—it serves as a reminder for creditors to be on their toes regarding changes to lien statutes. Laws in each state can change after new court hearings, and missing news related to these changes can shake up a creditor's approach to filing liens.
"They have to keep their eye on the ball. Things happen," he said. "Practices from last year or five years ago may not be up-to-date. Keep an eye on the literature, watch for changes. If something happens you aren't sure about, you have to check in for information with your local lawyer or with NACM."