It was a great day today for our membership and we’re holding our official pens from the signing ceremony. Thanks to a few of the leaders who made it happen, from left to right: Senator Brad Zaun (Urbandale), BUILD PAC Trustee Rich Fitch, past HBAI President Mike Far, current HBAI President Tim Ruth, LaDonna Gratias, Senator Jake Chapman (Adel), Des Moines HBA Executive Officer Dan Knoup, HBAI Executive Officer Jay Iverson, and Representative Kevin Koester (Ankeny).
Order Doug Mayo Golf Outing Apparel Now/Sponsors Still Needed
The golf portion of the 4th Annual Doug Mayo Golf Outing, which benefits students entering the building trades, is sold out. We are still in need of sponsors though. Official apparel needs to be ordered now to look super fashionable on our event, which is Friday June 30th, 2017. Click here for you to be a sponsor. Click here to order super awesome clothing with our Doug Mayo Golf Outing logo.
HF586 – Mechanic’s Lien Changes – Commencement of Work
All contractors who directly work for a homeowner should read through this note from Construction Law Attorney Jodie McDougal – or you could lose your right to file a lien. On March 30, 2017, the Iowa Senate passed House File 586. This legislation included a provision expanding the category of residential general contractors who are required to timely file a “Commencement of Work” Notice (or C.O.W. Notice) at the outset of a project to preserve their right to later file a mechanic’s lien. Specifically, for those who are required to file them, C.O.W. Notices must be filed on the online MNLR registry no later than 10 days of commencement of work on a residential project for one to preserve their mechanic’s lien rights on such project.
This legislation was introduced by the Iowa Finance Authority and had support from the banking industry, closing companies, and Iowa Title Guaranty, while most within the residential construction industry opposed the legislation.
The bill was passed by both the House and Senate, and is now on to the Governor to be reviewed and likely signed into law in the near future. The effective date of the new law will be July 1, 2017.
What was the Prior/Current Law on this Issue?
Prior law (including both statutory and case law) only required general contractors with subcontractors to file a C.O.W. Notice on the MNLR no later than 10 days from the start of every residential construction project in order to preserve their lien rights. This interpretation of the law was affirmed by the Iowa Court of Appeals in 2016 in the mechanic’s lien case of Standard Water v. Jones in which Jodie McDougal represented a residential contractor.
It should be noted that Iowa statute defines general contractors as contractors who have direct contracts with homeowners. Also, per Iowa statute, the general contractor’s C.O.W. Notice, as well as the related notice sent by the MNLR administrator to homeowners, generally inform homeowners that subcontractors not directly hired by them have the right to file liens against their property if not properly paid for their work by the general contractor and otherwise advises homeowners of the lien law.
Thus, under the prior law, it was only residential general contractors with subcontractors who were required to file a C.O.W. Notice, which therefore excluded (1) contractors and remodelers who self perform all work without any “subcontractors” (as defined under Iowa statute), and (2) suppliers who supply directly to homeowners. These two categories of companies did not previously have any pre-lien requirements. Unfortunately for those residential contractors and suppliers, this bill extinguishes those exclusions.
What Does the New Law Mean for My Construction Company?
By extinguishing those exclusions, as of July 1, 2017, the law will require all general contractors (that is, all contractors who directly work for a homeowner) to timely file a C.O.W. Notice at the start of every residential construction project to preserve their lien rights, regardless of whether or not a general contractor uses subcontractors on the project. Thus, even contractors who self perform all work without any “subcontractors,” as well as suppliers who supply directly to homeowners, will now have to timely file this C.O.W. Notice.
Will There Be Any Other Practice Changes?
As noted, the bill was introduced by the Iowa Finance Authority and had support from the lending and closing industries, as the bill will positively affect those industries and streamline their loan closing practices.
After the bill becomes effective (and after 90 days following the effective date), lenders and closing agents will likely no longer ask for all lien waivers. Instead, they will check the MNLR registry and only be concerned with general contractors and subcontractors who have properly preserved their lien rights through their timely filing of their pre-lien notices.
Is There Anything Else I Should Know About Pre-Lien Notices?
The bill also does not change the definitions under the law. Among other things, contractors who work for an “owner-builder,” as opposed to a true owner, are considered to be subcontractors for pre-lien notice purposes. The typical “owner-builder” is a spec homebuilder who builds a spec house on a builder-owned lot.
What is the Bottom Line for Residential Iowa Contractors?
All general contractors, subcontractors, and suppliers who want to preserve their mechanic’s lien rights on residential projects must timely file their C.O.W. Notice (for general contractors) and Preliminary Notice (for subcontractors) on all residential projects. Otherwise, all lien rights are lost.
How the Silica Rule Impacts Your Bottom Line
Nothing underscores the value of your membership quite like cash savings. NAHB economists recently tallied it up and confirmed just how much our members are saving this year. The combined effect of our legislative victories and program initiatives from the past year amount to an average savings of nearly $6,000 per builder for each housing start in 2017.
One prime example of a victory that’s positively impacting builders’ bottom lines is the delay of OSHA’s proposed rule regarding the release of silica on job sites. Our experts determined the delay amounts to an estimated savings of $1,500 per builder, per start. And that was before OSHA recently announced the rule’s enforcement would be delayed an additional 90 days (currently set to begin Sept. 23, 2017), meaning builders are likely to save even more.
Go to nahb.org/savings for more about the financial impact of the delayed silica rule. Additional examples of the value of NAHB membership will also be highlighted throughout the coming months.
Regulatory Reform Quarterly Update
There have been numerous bills introduced in the 115th Congress to reform the regulatory process. Here is an updated list for this first quarter of 2017:
H.R. 21, the Midnight Rules Relief Act of 2017
Would allow Congress to review under the Congressional Review Act multiple regulations rushed out by an outgoing administration. Passed the House on 1/4/17
H.R. 26, Regulations from the Executive in Need of Scrutiny Act
Would restore strong congressional oversight to the federal rulemaking process, ensure that all federal regulations are carefully designed to achieve their intended benefits. Passed the House on 1/5/17
H.R. 5, the Regulatory Accountability Act of 2017
Modernizes the 71 year old Administrative Procedure Act and would make the regulatory process more transparent, agencies more accountable and regulations more cost effective. Passed the House 1/11/27
WOTUS – WIN
On February 28, 2017 President Trump signed an Executive Order directing EPA and U.S. Army Corps of Engineers to begin the process of rescinding or revising WOTUS. The agencies must now review the flawed rule.
What will likely happen next is the EPA and the Crops will issue a proposed rule to rescind/revise WOTUS. It will appear in the Federal Register and be available for comment. After taking the comments into account, the agencies will issue their final rule. If the final rule says WOTUS should be revised, expect a flurry of lawsuits from interest groups afraid any new rule will not adequately protect the nation’s waterways. After that, the agencies will propose a new rule.
OSHA’s Volks Recordkeeping Rule – WIN
The Occupational Safety and Health (OSH) Act of 1970 established that all employers must keep accurate records of employee injuries and illnesses for five years and OSHA has six months to cite an employer for a violation. Subsequent court rulings upheld the six-month statute of limitations. OSHA’s Volks Recordkeeping Rule extended the explicit six-month statute of limitations on recordkeeping violations to five years. This rulemaking went into effect on January 18, 2017.
NAHB key voted H.J. Res. 83, Disapproving the rule submitted by the Department of Labor relating to “Clarification of Employer’s Continuing Obligation to Make and Maintain an Accurate Record of Each Recordable Injury and Illness which disapproved the Volks Rule. H.J. Res. 83 passed House – 3/1/17; Senate – 3/22/17
Originally scheduled to begin June 23, enforcement is now set to begin Sept. 23, 2017 of OSHA’s crystalline silica standard.
OSHA stated in a press release that the delayed implementation is “due to the unique nature of the requirements in the construction standard” and that it would be conducting “additional outreach and provide educational materials and guidance for employers.”
However, the rule will continue to be challenged by NAHB and its fellow members of the Construction Industry Safety Coalition (CISC). Soon after learning of the additional delay, the CISC released this statement:
Association Health Plans – WIN
Association Health plans ensure a level playing field for smaller employers by allowing them to pool together to purchase health insurance plans for their employees. AHPs will grant small businesses access to better and more affordable health care plans, the ability to negotiate lower costs for coverage and the purchasing power of larger companies and organized labor groups.
H.R. 1101, the Small Business Health Care Fairness Act of 2017, AHP legislation was supported and key voted by NAHB. H.R. 1101 passed House – 3/22/17
FHA Mortgage Insurance Premium Cuts
A mortgagee letter was issued on January 9, 2017 that would have reduced the annual mortgage insurance premium (MIP) by 25 basis points to 60 basis points for FHA-insured mortgages with less than a 5% down payment and to 55 basis points for mortgages with a down payment of 5% or more. The changes would have been effective for FHA-endorsed mortgages with a closing date on or after Jan. 27.
The Trump administration indefinitely suspended the MIP cuts.
NAHB strongly supported the reductions issued by the Obama administration, noting that lower premiums would make home loans more affordable, help ease tight credit conditions and represent sound policy given recent actuarial reports showing FHA continues to strengthen its financial reserves.
March 9, 2017 – NAHB sent a letter to HUD Secretary Ben Carson urging him to reinstate the reductions.
President Trump’s fiscal 2018 budget plan put HUD’s funding at $40.7 billion, down $6.2 billion or 13.2% from the $46.9 billion in 2017. The budget eliminates the Community Development Block Grant (CDBG) program, which provides communities with resources to address a wide range of urban renewal projects. This program received $3 billion in funding for 2017. The budget also eliminates the HOME Investment Partnership and Choice Neighborhoods programs. HOME received $950 million in funding for 2017 and is the largest federal block grant to state and local governments designed exclusively to create affordable housing for low-income households. Many multifamily builders often use the HOME program to fund developments in conjunction with the Low Income Housing Tax Credit. There were not specific figures for Project Based Section 8 housing. There was $130 million, an increase of $20 million, provided for the mitigation of lead-based paint and other hazards.
It is important to note this is the first step in the budget process and the president’s budget is meant to serve as a marker, but it is up to Congress to write and submit a federal budget.