Iowa Code Chapter 572 governs mechanics’ liens. In accordance with Section 572.13A, a general contractor or owner-builder is required to post a commencement of work notice to the Mechanic’s Notice and Lien Registry (MLNR) website within ten days of starting work on a residential construction project. If the general contractor or owner-builder fails to post this notice within the ten day deadline, they forfeit their right to a lien. For a subcontractor to acquire a lien, it must post a preliminary notice. However, for a preliminary notice to be posted, there must be a commencement of work notice on file. As a result, under Iowa Code Section 572.13A(2), if a general contractor or owner-builder misses the deadline for posting a commencement of work notice, a subcontractor can post a commencement of work notice instead.
However, what timeframe is applicable to a subcontractor’s deadline to post the commencement of work notice when the general contractor or owner-builder failed to do so? This question came before the Iowa Supreme Court in Borst Brothers Construction, Inc. v. Finance of America Commercial, LLC. In Borst, an owner-builder failed to post notices of commencement on the registry for five residential lots that it was developing. Thereafter, two subcontractors did so, several months after the construction work began. When the project went into default, a dispute arose between the two subcontractors and the commercial lender for the project. The commercial lender argued the subcontractors were required to post their notices within the ten day deadline applicable to the owner-builder. The subcontractors disagreed, arguing that deadline did not apply to them.
The Iowa Supreme Court ruled in favor of the subcontractors, holding that the ten day requirement for posting the commencement of work notices applies only to general contractors. A subcontractor can post the commencement of work notice at any time after starting work on a project. The Court explained “It wouldn’t make sense to allow subcontractors to step in only if the general contractor or owner-builder fails to post the notice of commencement within ten days, while requiring the subcontractors to meet the same ten-day deadline. Meeting a missed deadline is impossible.” As a result of the Court’s ruling, subcontractors now have additional time to secure payment under the mechanics’ lien statute in Iowa.
Borst Brothers Construction, Inc. v. Finance of America Commercial, LLC, No. 20-0972 (Iowa, June 17, 2022).