Weekly Update: March 30, 2017

Iowa Mechanics Lien Vote No

Call to Action:  HF586 Mechanic’s Liens – Vote NO!

Ready to File a COW Notice as a Supplier or Self Performer?  If Not, Act Fast

With this change, all general contractors/direct contractors will have to post the commencement of work notice, notifying owners of subcontractor rights, within 10 days or otherwise their lien rights are forever lost. This makes no sense for those of you who supply direct or other contractors who self-perform with no subcontractors to file these notices.

This is on the fast track – voted unanimously yesterday by the Senate Commerce Committee to move forward.  It’s very substantive – it’s not a clean up the language sort of bill at all.  It changes everything.  We need for you to reach out and encourage them to vote no.

To find out which senators from your district that you need to reach out to, click here.  This is a new burden on you, far beyond the “it’s only five minutes online and $7” – the main argument in favor of it.  Here is more background – contact your respective senator and personalize it with any of the following information:

 

Explanation:

The Iowa House unanimously passed HF586 regarding “financial matters” on March 22 – section 4 of the bill covers mechanic’s liens.  We’re good with everything else in the bill, just none of Section 4, and would like to see Section 4 stricken in its entirety.  It reads:

Either a general contractor, or an owner-builder who has contracted or will contract with a subcontractor to provide labor or furnish material for the property , shall post a notice of commencement of work to the mechanics’ notice and lien registry internet site no later than ten days after the commencement of work on the property. A notice of commencement of work is effective only as to any labor, service, equipment, or material furnished to the property subsequent to the posting of the notice of commencement of work.

The proposed amendment contained within the bill appears to be a benign punctuation change involving a few additional commas. Presumably, this is why this bill quietly passed, 99-0, through the House File — either no one noticed this last sentence that was added in or the people who did notice the sentence believed it was a benign punctuation change to fix a typographical error.

However, the proposed amendment to Iowa Code section 572.13A, contained within the last sentence of HF586, is anything but benign.  Iowa’s updated Mechanic’s Lien Statute, effective 1/2013, was written to require only general contractors with subcontractors to file a Commencement of Work Notice on the MNLR registry, within 10 days of the start of the project, to preserve its lien rights on residential projects. This type of Commencement of Work Notice provides notice to a homeowner that subcontractors are being used on the project/property. Since the original owner notice concept was enacted within Iowa Code Chapter 572 decades ago, only general contractors with subcontractors were required to provide an owner notice. The aforementioned concept, which has been around for decades, could all change with the inclusion of two commas.

Under the statute, when a contractor self-performs all work without subcontractors, such contractor does not need to file a Commencement of Work Notice on the MNLR registry to preserve its lien rights and obviously the homeowner does not need to be notified about the use of subcontractors through the notice because there are none. Likewise, suppliers who supply directly to homeowners do not need to file a Commencement of Work Notice on the MNLR registry to preserve its lien rights. In HBA member and Davis Brown Construction Attorney Jodie McDougal’s 2015 trial in which she represented HBA member, Standard Water Control Systems (Standard Water Control Systems v. Jones), the trial court agreed that the Mechanic’s Lien statute only requires general contractors with subcontractors to file a Commencement of Work Notice (within 10 days of the start of the project) to preserve its lien rights. In 2016, the Iowa Court of Appeals confirmed the trial court decision in my Standard Water case and confirmed the above-noted principles. Thereafter, the Iowa Supreme Court opted not to hear the case when the homeowners tried to appeal for a second time, presumably because the Iowa Supreme Court agreed with the precedential Iowa Court of Appeals decision.

The bill, if passed, would require all Iowa contractors/suppliers to file this Commencement of Work Notice — a notice which notifies homeowners of subcontractors on the project — even for contractors who self-perform all work and suppliers who supply directly to the homeowner and thus have no subcontractors. That is, this notice of the use of subcontractors would be required even in situations where no subcontractors exist on a project. It makes no sense. This attempted change in the lien law is for the sole benefit of the financial-related industry (i.e., lenders, as well Iowa Title Guaranty/closing companies). There is no additional benefit to homeowners, and the benefit is purely to the lenders and title companies. Such benefit is at the expense of the hundreds of Iowa contractors who self-perform work and Iowa direct suppliers. Further, the bill is directly at odds with the intent and purpose of the Mechanic’s Lien Law set forth in Iowa Code Chapter 572 and is at odds with the decades-old principle regarding owner notice on residential projects.

Statute of Repose Applicability

Here are some notes on what the change to Iowa’s Statute of Repose mean to you – from HBAI member and Davis Brown Construction Attorney Jodie McDougal.

The new 8/10 year statute of repose law, contained within SF413, will take effect on July 1, 2017. The law has an express provision regarding applicability (which trumps the general rules regarding applicability of new laws).  First, there is no retroactive effect for the new statute of repose. Second, in terms of pending projects and general applicability, the law expressly provides as follows:

Sec. 2. APPLICABILITY. This Act does not apply to an improvement to real property in existence prior to the effective date of this Act or to an improvement to real property, whether construction has begun or not, that is the subject of a binding agreement as of the effective date of this Act.

Thus, per those express terms of the new law, if the construction project has not begun as of July 1, 2017 and if the construction agreement has not yet been entered into as of July 1, 2017, then the new, shorter statute of repose would apply to that project. Said slightly differently, the new, shorter statute of repose does not apply to (1) any construction project or other improvement to real property that is in existence prior to July 1, 2017 or (2) any construction project or other improvement to real property, whether construction has begun or not, that is the “subject of a binding agreement” as of July 1, 2017. Those projects still fall under the old, 15-year statute of repose.

Also, on certain forthcoming projects some contractors are only entering into letters of understanding and will not be signing the actual construction agreement until July 1st, as a way to have the construction project fall under the new, shorter statute of repose. This is a good course of action assuming the actual construction will not begin until July 1st. In other words, if parties start construction on a new project under only a letter of understanding and then sign the actual construction contract on July 1st, the old, 15-year statute.

Legislative Committee Report for March 24

HF 518 – Workers Comp – It passed the House 55 to 38, with 7 absent or not voting.  It now heads to the Senate as SF435 and we have registered in favor of this bill.  On HF518 and after the amendments were added it will:

  • Intoxication Defense – Puts the burden on the employee who tests positive
  • No Private Cause of Action – Makes clear that employee cannot sue employer for work-related injury outside of work comp statute
  • Date of Injury – Defines date of injury as the date that employee knew or should have known that an injury was work related
  • Suitable Work – Spells out in law as to what should be considered “suitable work”, rather than leaving to court interpretation
  • Permanent Disabilities – Changes the commencement date for permanent disability benefits to the date the employee reaches maximal medical improvement.
  • Shoulder Scheduled Member – Puts shoulder on the list of scheduled member injuries
  • Body as a Whole Injuries – Provides that when an injured employee comes back to work, the employee is compensated for functional loss and not a speculative industrial disability award.
  • Functional Impairment – Clarifies that scheduled member injuries should be compensated pursuant to functional impairment under AMA Guidelines
  • Double Recover prohibited for permanent partial disability benefits and permanent total disability benefits
  • Permanent Total Disability – providing that an employee cannot be adjudicated to be permanently and totally disabled when they remain productively working
  • Credit for Overpayment – In the event of overpayment, employer can take deduct from future benefits for the amount
  • Successive Disabilities – Provides that employers are not liable for pre-existing disabilities, and are only liable for injuries incurred under current job
  • Examination of Injured Employees – If an employee refuses to attend doctor’s appointments, then future benefits could be forfeited
  • Commutations – Changes would provide that both parties must consent to full or partial commutation of weekly indemnity benefits
  • Allowing Commutations with Open Medical
  • Jurisdiction – Restricts those who can claim Iowa benefits to those who actually work in Iowa –
  • Attorney Fees – Provides that an attorney can only take a fee on benefits they secure for injured worker

SF 438 – Project Labor Agreements passed the Senate last week and then was passed by a House subcommittee, which will allow the bill now to be heard by the House Labor Committee.  Representatives Klein (R-Keota) and Highfill (R-Johnston) supported the bill, while Rep. Kirsten Running-Marquardt (D-Cedar Rapids) opposed the bill.

The bill prohibits a public owner from entering into a government mandated project labor agreement (PLA) and it prohibits a public owner from creating any sort of ordinance or rule that would require an interested bidder, as a condition of bidding, to submit a questionnaire that would divulge proprietary and / or confidential information. (For)

Shortfall on Revenues

You’ve probably seen this in the news, but the state’s panel charged with forecasting tax revenue conducted their spring meeting and announced results that lowered Iowa’s expected revenue growth.  The Revenue Estimating Conference reduced the level of state revenue expected to be generated in the current fiscal year (FY 2017) to $7.106 billion.  This is a reduction of $106 million from the panel’s last forecast in December, when they projected General Fund revenue to be $7.2119 billion.  The percent of revenue growth when compared to FY 2016 will be 2.7 percent.  Also, because the revenue figure is below the current expenditure number for FY 2017, the state will have to find $131.1 million for the budget to balance at the end of FY 2017.  In all likelihood, the shortfall will be covered by the state’s rainy day fund to avoid further cuts into state budgets prior to the end of the current fiscal year (June 30, 2017).

For FY 2018, the committee projected that the state will collect $7.3645 billion during the upcoming year, a figure equating to 3.6 percent growth.  The March number is $191.8 million lower than the forecast developed in December 2016, which served as the basis in the development of Governor Branstad’s FY18 budget recommendation.

HF533Unemployment Benefits – Disqualification from eligibility for unemployment benefits. – Passed the House on March 20.

HF603Eminent Domain – Last week we discussed HSB184 and decided to monitor it.  It has changed to HF603 now.  HF603 relates to eminent domain and condemnation, including the authority of acquiring agencies to use eminent domain, the procedures required for the use of eminent domain, and compensation paid to certain property owners

HSB190First Time Homebuyer – We have taken a favorable position on SF425 and HSB190.

4th Annual Doug Mayo Memorial Golf Tourney Registration Nearly Sold Out

We are within a few golfers of being sold out, so make plans to join us for the 4th Annual Doug Mayo Memorial Golf Tournament on Friday June 30th, 2017. Click here to register.  We still are in need of hole sponsors.

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