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Senate Study Bill 1092 - IntroducedA Bill ForAn Act 1relating to mechanics’ liens and public construction
2liens.
3BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 26.3, subsection 3, Code 2017, is amended
2to read as follows:
33. Sections 26.4 through 26.13 26.12 and section 573.28
4 apply to all competitive bidding pursuant to this section.
5 Sec. 2. Section 314.1, subsection 2, Code 2017, is amended
6to read as follows:
72. Notwithstanding any other provision of law to the
8contrary, a public improvement that involves the construction,
9reconstruction, or improvement of a highway, bridge, or culvert
10and that has a cost in excess of the applicable threshold in
11section 73A.18, 262.34, 297.7, 309.40, 310.14, or 313.10, as
12modified by the bid threshold subcommittee pursuant to section
13314.1B, shall be advertised and let for bid, except such public
14improvements that involve emergency work pursuant to section
15309.40A, 313.10, or 384.103, subsection 2. For a city having
16a population of fifty thousand or less, a public improvement
17that involves the construction, reconstruction, or improvement
18of a highway, bridge, or culvert that has a cost in excess of
19twenty-five thousand dollars, as modified by the bid threshold
20subcommittee pursuant to section 314.1B, shall be advertised
21and let for bid, excluding emergency work. However, a public
22improvement that has an estimated total cost to a city in
23excess of a threshold of fifty thousand dollars, as modified by
24the bid threshold subcommittee pursuant to section 314.1B, and
25that involves the construction, reconstruction, or improvement
26of a highway, bridge, or culvert that is under the jurisdiction
27of a city with a population of more than fifty thousand,
28shall be advertised and let for bid. Cities required to
29competitively bid highway, bridge, or culvert work shall do so
30in compliance with the contract letting procedures of sections
3126.3 through 26.13 26.12 and section 573.28.
32 Sec. 3. Section 572.7, Code 2017, is amended to read as
33follows:
34572.7 In case of internal improvement.
35When the lien is for material furnished or labor performed in
-1-1the construction, repair, or equipment of any railroad, canal,
2viaduct, or other similar improvement, said the lien shall
3attach to the erections, excavations, embankments, bridges,
4roadbeds, rolling stock, and other equipment and to all land
5upon which such improvements or property may be situated,
6except including the easement or right-of-way.
7 Sec. 4. Section 572.10, Code 2017, is amended to read as
8follows:
9572.10 Perfecting lien after lapse of ninety days.
10A general contractor or a subcontractor may perfect a
11mechanic’s lien pursuant to section 572.8 beyond ninety days
12after the date on which the last of the material was furnished
13or the last of the labor was performed by posting a lien to the
14mechanics’ notice and lien registry internet site and giving
15written notice thereof to the owner. Such notice may be served
16by any person in the manner original notices are required to be
17served. If the party to be served is out of the county wherein
18the property is situated, a return of that fact by the person
19charged with making such service shall constitute sufficient
20service from and after the time it was posted to the mechanics’
21notice and lien registry internet site.
22 Sec. 5. Section 572.25, Code 2017, is amended to read as
23follows:
24572.25 Place of bringing action.
25An A court or arbitration action to enforce a mechanic’s
26lien shall be brought in the county in which the property to be
27affected, or some part thereof, is situated.
28 Sec. 6. Section 572.26, Code 2017, is amended to read as
29follows:
30572.26 Kinds of action — amendment.
311. An action to enforce a mechanic’s lien shall be by
32equitable proceedings, and no other cause of action shall be
33joined therewith.
342. a. Any A lien statement may shall not be amended except
35 by leave of court in furtherance of justice, except as to the
-2-1amount demanded or to decrease the amount demanded.
2b. A lien statement amended without leave of court to
3decrease the amount demanded shall be effected through the
4mechanics’ notice and lien registry.
5c. A lien statement amended pursuant to this section shall
6not affect the priority of the lien statement.
7 Sec. 7. Section 572.28, subsection 1, Code 2017, is amended
8to read as follows:
91. Upon the written demand of the owner or general
10contractor served on the claimant requiring the claimant to
11commence action to enforce the lien, such action shall be
12commenced within thirty days thereafter, or the lien and all
13benefits derived therefrom shall be forfeited.
14 Sec. 8. Section 572.32, Code 2017, is amended to read as
15follows:
16572.32 Attorney fees — remedies.
171. In a court action to enforce a mechanic’s lien, a the
18court may award the prevailing plaintiff may be awarded party
19 reasonable attorney fees to be taxed as part of the costs in
20the case.
212. In a court action to challenge a mechanic’s lien
22posted on a residential construction property, if the person
23challenging the lien prevails, the court may award the
24prevailing party reasonable attorney fees and actual damages
25 to be taxed as part of the costs in the case. If the court
26determines that the mechanic’s lien was posted in bad faith or
27the supporting affidavit was materially false, the court shall
28award the owner person challenging the lien reasonable attorney
29fees plus an amount not less than five hundred dollars or the
30amount of the lien, whichever is less.
31 Sec. 9. Section 573.2, unnumbered paragraph 2, Code 2017,
32is amended to read as follows:
33If the requirement for a bond is waived pursuant to section
3412.44, a person, firm, or corporation, having a contract with
35the targeted small business or with subcontractors of the
-3-1targeted small business, for labor performed or materials
2furnished, in the performance of the contract on account of
3which the bond was waived, is entitled to any remedy provided
4under this chapter. When a bond has been waived pursuant to
5section 12.44, or if the public corporation fails to procure
6a bond, the remedies provided for under this paragraph are
7available in an action against the public corporation.
8 Sec. 10. Section 573.15, Code 2017, is amended by striking
9the section and inserting in lieu thereof the following:
10573.15 Exception.
11A person, firm, or corporation that has performed labor
12or furnished materials, service, or transportation to a
13subcontractor shall not be entitled to a claim against the
14retainage or bond under this chapter unless the person,
15firm, or corporation that performed the labor or furnished
16the materials, service, or transportation does all of the
17following:
181. Notifies the principal contractor in writing with a
19one-time notice containing the name, mailing address, and
20telephone number of the person, firm, or corporation that
21performed the labor or furnished the materials, service,
22or transportation, and the name of the subcontractor for
23whom the labor was performed or the materials, service, or
24transportation were furnished, within thirty days of first
25performing the labor or furnishing the materials, service, or
26transportation for which a claim may be made. Additional labor
27performed or materials, service, or transportation furnished by
28the same person, firm, or corporation to the same subcontractor
29for use in the same construction project shall be covered by
30this notice.
312. Supports the claim with a certified statement that
32the principal contractor received the notice described in
33subsection 1.
34 Sec. 11. Section 573.16, unnumbered paragraph 2, Code 2017,
35is amended to read as follows:
-4- 1Upon written demand of the public corporation, principal
2 contractor, or surety on any bond given for the performance
3of the contract served, in the manner prescribed for original
4notices, on the person filing a claim, requiring the claimant
5to commence action in court to enforce the claim, an action
6shall be commenced within thirty days, otherwise the retained
7and unpaid funds due the principal contractor shall be
8released. Unpaid funds shall be paid to the principal
9 contractor within twenty days of the receipt by the public
10corporation of the release as determined pursuant to this
11section. Failure to make payment by that date shall cause
12interest to accrue on the unpaid amount. Interest shall accrue
13during the period commencing the twenty-first day after the
14date of release and ending on the date of the payment. The
15rate of interest shall be determined pursuant to section
16573.14. After an action is commenced, upon the general
17 Upon the surety on any bond given for the performance of
18the contract consenting, in writing, to the release of the
19principal contractor of the unpaid funds, or upon the principal
20 contractor filing with the public corporation or person
21withholding the funds, a surety bond in double the amount of
22the claim in controversy, conditioned to pay upon the payment
23of any final judgment rendered for the claims so filed, the
24public corporation or person shall pay to the contractor the
25amount of funds withheld.
26 Sec. 12. Section 573.21, Code 2017, is amended to read as
27follows:
28573.21 Attorney fees.
29The court or arbitrator may tax, as part of the costs in the
30case, a reasonable attorney fee fees in favor of the prevailing
31party in any claimant for labor or materials who has, in whole
32or in part, established court or arbitration action brought to
33enforce a claim filed pursuant to section 573.7.
34 Sec. 13. NEW SECTION. 573.28 Early release of retained
35funds.
-5- 11. For purposes of this section:
2a. “Authorized contract representative” means the person
3chosen by the governmental entity or the department to
4represent its interests or the person designated in the
5contract as the party representing the governmental entity’s
6or the department’s interest regarding administration and
7oversight of the project.
8b. “Department” means the state department of
9transportation.
10c. “Governmental entity” means the state, political
11subdivisions of the state, public school corporations, and all
12officers, boards, or commissions empowered by law to enter
13into contracts for the construction of public improvements,
14excluding the state board of regents and the department.
15d. “Public improvement” means a building or construction
16work which is constructed under the control of a governmental
17entity and is paid for in whole or in part with funds of the
18governmental entity, including a building or improvement
19constructed or operated jointly with any other public or
20private agency, but excluding urban renewal demolition and
21low-rent housing projects, industrial aid projects authorized
22under chapter 419, emergency work or repair or maintenance
23work performed by employees of a governmental entity, and
24excluding a highway, bridge, or culvert project, and excluding
25construction or repair or maintenance work performed for a city
26utility under chapter 388 by its employees or performed for a
27rural water district under chapter 357A by its employees.
28e. “Repair or maintenance work” means the preservation of a
29building, storm sewer, sanitary sewer, or other public facility
30or structure so that it remains in sound or proper condition,
31including minor replacements and additions as necessary to
32restore the public facility or structure to its original
33condition with the same design.
34f. “Substantially completed” means the first date on which
35any of the following occurs:
-6- 1(1) Completion of the public improvement project or the
2highway, bridge, or culvert project or when the work on the
3public improvement or the highway, bridge, or culvert project
4has been substantially completed in general accordance with the
5terms and provisions of the contract.
6(2) The work on the public improvement or on the designated
7portion is substantially completed in general accordance with
8the terms of the contract so that the governmental entity or
9the department can occupy or utilize the public improvement or
10designated portion of the public improvement for its intended
11purpose. This subparagraph shall not apply to highway, bridge,
12or culvert projects.
13(3) The public improvement project or the highway, bridge,
14or culvert project is certified as having been substantially
15completed by either of the following:
16(a) The architect or engineer authorized to make such
17certification.
18(b) The authorized contract representative.
19(4) The governmental entity or the department is occupying
20or utilizing the public improvement for its intended purpose.
21This subparagraph shall not apply to highway, bridge, or
22culvert projects.
232. Payments made by a governmental entity or the department
24for the construction of public improvements and highway,
25bridge, or culvert projects shall be made in accordance with
26the provisions of this chapter, except as provided in this
27section:
28a. At any time after all or any part of the work on the
29public improvement or highway, bridge, or culvert project is
30substantially completed, the contractor may request the release
31of all or part of the retained funds owed. The request shall be
32accompanied by a sworn statement of the contractor that, ten
33calendar days prior to filing the request, notice was given as
34required by paragraphs “f” and “g” to all known subcontractors,
35sub-subcontractors, and suppliers.
-7- 1b. Except as provided under paragraph “c”, upon receipt of
2the request, the governmental entity or the department shall
3release all or part of the retained funds. Retained funds that
4are approved as payable shall be paid at the time of the next
5monthly payment or within thirty days, whichever is sooner. If
6partial retained funds are released pursuant to a contractor’s
7request, no retained funds shall be subsequently held based
8on that portion of the work. If within thirty days of when
9payment becomes due the governmental entity or the department
10does not release the retained funds due, interest shall accrue
11on the amount of retained funds at the rate of interest that is
12calculated as the prime rate plus one percent per year as of
13the day interest begins to accrue until the amount is paid.
14c. If labor and materials are yet to be provided at the
15time the request for the release of the retained funds is made,
16an amount equal to two hundred percent of the value of the
17labor or materials yet to be provided, as determined by the
18governmental entity’s or the department’s authorized contract
19representative, may be withheld until such labor or materials
20are provided.
21d. An itemization of the labor or materials yet to be
22provided, or the reason that the request for release of
23retained funds is denied, shall be provided to the contractor
24in writing within thirty calendar days of the receipt of the
25request for release of retained funds.
26e. The contractor shall release retained funds to the
27subcontractor or subcontractors in the same manner as retained
28funds are released to the contractor by the governmental entity
29or the department. Each subcontractor shall pass through to
30each lower-tier subcontractor all retained fund payments from
31the contractor.
32f. Prior to applying for release of retained funds, the
33contractor shall send a notice to all known subcontractors,
34sub-subcontractors, and suppliers that provided labor or
35materials for the public improvement project or the highway,
-8-1bridge, or culvert project.
2g. The notice shall be substantially similar to the
3following:
4NOTICE OF CONTRACTOR’S REQUEST
5 FOR EARLY RELEASE OF RETAINED FUNDS
6You are hereby notified that [name of contractor] will be
7requesting an early release of funds on a public improvement
8project or a highway, bridge, or culvert project designated as
9[name of project] for which you have or may have provided labor
10or materials. The request will be made pursuant to Iowa Code
11section 573.28. The request may be filed with the [name of
12governmental entity or department] after ten calendar days from
13the date of this notice. The purpose of the request is to have
14[name of governmental entity or department] release and pay
15funds for all work that has been performed and charged to [name
16of governmental entity or department] as of the date of this
17notice. This notice is provided in accordance with Iowa Code
18section 573.28.
19 Sec. 14. REPEAL. Section 26.13, Code 2017, is repealed.
20EXPLANATION
21The inclusion of this explanation does not constitute agreement with
22the explanation’s substance by the members of the general assembly.
23This bill relates to mechanics’ liens and public
24construction liens.
25MECHANIC’S LIENS. Under current law, when a mechanic’s
26lien is for material furnished or labor performed in the
27construction, repair, or equipment of any railroad, canal,
28viaduct, or other similar improvement, the lien does not attach
29to an easement or right-of-way. The bill provides that such a
30mechanic’s lien does attach to an easement or right-of-way.
31Under Code section 572.8, a person shall perfect a
32mechanic’s lien by posting to the mechanics’ notice and lien
33registry internet site a verified statement of account of
34the demand due the person setting forth certain specified
35information. Currently, if a general contractor or a
-9-1subcontractor has not posted the mechanic’s lien to the
2registry within 90 days after the date on which the last
3of the material was furnished or the last of the labor was
4performed, the general contractor or subcontractor must post
5the mechanic’s lien on the registry and serve the owner with
6notice of the posting to perfect the lien. The bill provides
7that only a subcontractor must post the mechanic’s lien and
8serve the owner to perfect the mechanic’s lien.
9Under current law, a court action to enforce a mechanic’s
10lien must be brought in the county in which the property to be
11affected is situated. The bill provides that same rule applies
12to arbitration actions.
13Under current law, a lien statement may only be amended by
14leave of court in furtherance of justice or as to the amount
15demanded. The bill provides that a lien statement may only be
16amended by leave of court in further of justice or to decrease
17the amount demanded. An amendment to decrease the amount
18demanded must be accomplished through the mechanics’ notice
19and lien registry. The bill provides that amending a lien
20statement by leave of court in furtherance of justice or to
21decrease the amount demanded does not affect the priority of
22the lien statement.
23Under current law, the owner of property subject to a
24mechanic’s lien may serve written demand on the claimant
25requiring the claimant to commence action to enforce the lien
26within 30 days of the notice. If the claimant fails to do so,
27the lien and all benefits derived therefrom are forfeited.
28The bill provides that, in addition to an owner, a general
29contractor may make such a demand.
30Under current law, in a court action to enforce a mechanic’s
31lien, the court may award a prevailing plaintiff reasonable
32attorney fees. The bill provides that the court may award
33attorney fees to any prevailing party in an action to enforce
34a mechanic’s lien.
35Under current law, in a court action to challenge a
-10-1mechanic’s lien posted on a residential construction property,
2the court may award reasonable attorney fees and actual damages
3to the person challenging the lien if such person prevails.
4The bill provides that the court may award reasonable attorney
5fees to the prevailing party in an action to challenge a
6mechanic’s lien posted on a residential construction property.
7PUBLIC CONSTRUCTION LIENS. Under Code chapter 573 (labor
8and material on public improvements), and subject to certain
9exceptions, contracts for construction of public improvements
10must be accompanied by a bond if the contract price equals
11or exceeds $25,000. The bill provides that if the public
12corporation fails to procure a bond, the public corporation is
13liable to claimants for the contractor’s nonpayment.
14Current Code section 573.15 provides an exception to the
15requirement that a public corporation retain a portion of funds
16due a contractor on a public improvement project in a fund
17for the payment of claims for materials furnished and labor
18performed. The exception provides that a public corporation
19need only retain funds due a supplier of material to a general
20contractor if the supplier provides the general contractor
21with one of two permitted types of notice after the materials
22are supplied. The bill provides that, in addition to claims
23for materials, the exception shall apply to claims for labor,
24service, or transportation. The bill also amends the notice
25requirement to provide that a supplier of labor, materials,
26service, or transportation to a general contractor must give
27only one type of notice, along with a certified statement that
28such notice was given.
29Current Code section 573.16 provides that even if a claimant
30has commenced an action for payment of funds, the public
31corporation shall release the unpaid funds to the contractor if
32the contractor files a surety bond in double the amount of the
33claim in controversy, conditioned upon the payment of any final
34judgment rendered for the claims. The bill provides that the
35unpaid funds shall also be released to the contractor if the
-11-1surety on any bond given for the performance of the contract
2gives written consent to the release of the unpaid funds.
3Current Code section 573.21 provides that if a claimant
4establishes a claim for labor or materials under Code chapter
5573, the court may tax reasonable attorney fees in favor of the
6claimant. The bill provides that a court or arbitrator may tax
7reasonable attorney fees in favor of any prevailing party in
8a court or arbitrarian action brought for labor or materials
9under Code chapter 573.
10The bill repeals Code section 26.13 (public construction
11bidding — early release of retained funds) and creates new
12Code section 573.28 with the same language except for corrected
13internal references.
-12-jh/rh
2liens.
3BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 26.3, subsection 3, Code 2017, is amended
2to read as follows:
33. Sections 26.4 through 26.13 26.12 and section 573.28
4 apply to all competitive bidding pursuant to this section.
5 Sec. 2. Section 314.1, subsection 2, Code 2017, is amended
6to read as follows:
72. Notwithstanding any other provision of law to the
8contrary, a public improvement that involves the construction,
9reconstruction, or improvement of a highway, bridge, or culvert
10and that has a cost in excess of the applicable threshold in
11section 73A.18, 262.34, 297.7, 309.40, 310.14, or 313.10, as
12modified by the bid threshold subcommittee pursuant to section
13314.1B, shall be advertised and let for bid, except such public
14improvements that involve emergency work pursuant to section
15309.40A, 313.10, or 384.103, subsection 2. For a city having
16a population of fifty thousand or less, a public improvement
17that involves the construction, reconstruction, or improvement
18of a highway, bridge, or culvert that has a cost in excess of
19twenty-five thousand dollars, as modified by the bid threshold
20subcommittee pursuant to section 314.1B, shall be advertised
21and let for bid, excluding emergency work. However, a public
22improvement that has an estimated total cost to a city in
23excess of a threshold of fifty thousand dollars, as modified by
24the bid threshold subcommittee pursuant to section 314.1B, and
25that involves the construction, reconstruction, or improvement
26of a highway, bridge, or culvert that is under the jurisdiction
27of a city with a population of more than fifty thousand,
28shall be advertised and let for bid. Cities required to
29competitively bid highway, bridge, or culvert work shall do so
30in compliance with the contract letting procedures of sections
3126.3 through 26.13 26.12 and section 573.28.
32 Sec. 3. Section 572.7, Code 2017, is amended to read as
33follows:
34572.7 In case of internal improvement.
35When the lien is for material furnished or labor performed in
-1-1the construction, repair, or equipment of any railroad, canal,
2viaduct, or other similar improvement, said the lien shall
3attach to the erections, excavations, embankments, bridges,
4roadbeds, rolling stock, and other equipment and to all land
5upon which such improvements or property may be situated,
6except including the easement or right-of-way.
7 Sec. 4. Section 572.10, Code 2017, is amended to read as
8follows:
9572.10 Perfecting lien after lapse of ninety days.
10A general contractor or a subcontractor may perfect a
11mechanic’s lien pursuant to section 572.8 beyond ninety days
12after the date on which the last of the material was furnished
13or the last of the labor was performed by posting a lien to the
14mechanics’ notice and lien registry internet site and giving
15written notice thereof to the owner. Such notice may be served
16by any person in the manner original notices are required to be
17served. If the party to be served is out of the county wherein
18the property is situated, a return of that fact by the person
19charged with making such service shall constitute sufficient
20service from and after the time it was posted to the mechanics’
21notice and lien registry internet site.
22 Sec. 5. Section 572.25, Code 2017, is amended to read as
23follows:
24572.25 Place of bringing action.
25An A court or arbitration action to enforce a mechanic’s
26lien shall be brought in the county in which the property to be
27affected, or some part thereof, is situated.
28 Sec. 6. Section 572.26, Code 2017, is amended to read as
29follows:
30572.26 Kinds of action — amendment.
311. An action to enforce a mechanic’s lien shall be by
32equitable proceedings, and no other cause of action shall be
33joined therewith.
342. a. Any A lien statement may shall not be amended except
35 by leave of court in furtherance of justice, except as to the
-2-1amount demanded or to decrease the amount demanded.
2b. A lien statement amended without leave of court to
3decrease the amount demanded shall be effected through the
4mechanics’ notice and lien registry.
5c. A lien statement amended pursuant to this section shall
6not affect the priority of the lien statement.
7 Sec. 7. Section 572.28, subsection 1, Code 2017, is amended
8to read as follows:
91. Upon the written demand of the owner or general
10contractor served on the claimant requiring the claimant to
11commence action to enforce the lien, such action shall be
12commenced within thirty days thereafter, or the lien and all
13benefits derived therefrom shall be forfeited.
14 Sec. 8. Section 572.32, Code 2017, is amended to read as
15follows:
16572.32 Attorney fees — remedies.
171. In a court action to enforce a mechanic’s lien, a the
18court may award the prevailing plaintiff may be awarded party
19 reasonable attorney fees to be taxed as part of the costs in
20the case.
212. In a court action to challenge a mechanic’s lien
22posted on a residential construction property, if the person
23challenging the lien prevails, the court may award the
24prevailing party reasonable attorney fees and actual damages
25 to be taxed as part of the costs in the case. If the court
26determines that the mechanic’s lien was posted in bad faith or
27the supporting affidavit was materially false, the court shall
28award the owner person challenging the lien reasonable attorney
29fees plus an amount not less than five hundred dollars or the
30amount of the lien, whichever is less.
31 Sec. 9. Section 573.2, unnumbered paragraph 2, Code 2017,
32is amended to read as follows:
33If the requirement for a bond is waived pursuant to section
3412.44, a person, firm, or corporation, having a contract with
35the targeted small business or with subcontractors of the
-3-1targeted small business, for labor performed or materials
2furnished, in the performance of the contract on account of
3which the bond was waived, is entitled to any remedy provided
4under this chapter. When a bond has been waived pursuant to
5section 12.44, or if the public corporation fails to procure
6a bond, the remedies provided for under this paragraph are
7available in an action against the public corporation.
8 Sec. 10. Section 573.15, Code 2017, is amended by striking
9the section and inserting in lieu thereof the following:
10573.15 Exception.
11A person, firm, or corporation that has performed labor
12or furnished materials, service, or transportation to a
13subcontractor shall not be entitled to a claim against the
14retainage or bond under this chapter unless the person,
15firm, or corporation that performed the labor or furnished
16the materials, service, or transportation does all of the
17following:
181. Notifies the principal contractor in writing with a
19one-time notice containing the name, mailing address, and
20telephone number of the person, firm, or corporation that
21performed the labor or furnished the materials, service,
22or transportation, and the name of the subcontractor for
23whom the labor was performed or the materials, service, or
24transportation were furnished, within thirty days of first
25performing the labor or furnishing the materials, service, or
26transportation for which a claim may be made. Additional labor
27performed or materials, service, or transportation furnished by
28the same person, firm, or corporation to the same subcontractor
29for use in the same construction project shall be covered by
30this notice.
312. Supports the claim with a certified statement that
32the principal contractor received the notice described in
33subsection 1.
34 Sec. 11. Section 573.16, unnumbered paragraph 2, Code 2017,
35is amended to read as follows:
-4- 1Upon written demand of the public corporation, principal
2 contractor, or surety on any bond given for the performance
3of the contract served, in the manner prescribed for original
4notices, on the person filing a claim, requiring the claimant
5to commence action in court to enforce the claim, an action
6shall be commenced within thirty days, otherwise the retained
7and unpaid funds due the principal contractor shall be
8released. Unpaid funds shall be paid to the principal
9 contractor within twenty days of the receipt by the public
10corporation of the release as determined pursuant to this
11section. Failure to make payment by that date shall cause
12interest to accrue on the unpaid amount. Interest shall accrue
13during the period commencing the twenty-first day after the
14date of release and ending on the date of the payment. The
15rate of interest shall be determined pursuant to section
16573.14. After an action is commenced, upon the general
17 Upon the surety on any bond given for the performance of
18the contract consenting, in writing, to the release of the
19principal contractor of the unpaid funds, or upon the principal
20 contractor filing with the public corporation or person
21withholding the funds, a surety bond in double the amount of
22the claim in controversy, conditioned to pay upon the payment
23of any final judgment rendered for the claims so filed, the
24public corporation or person shall pay to the contractor the
25amount of funds withheld.
26 Sec. 12. Section 573.21, Code 2017, is amended to read as
27follows:
28573.21 Attorney fees.
29The court or arbitrator may tax, as part of the costs in the
30case, a reasonable attorney fee fees in favor of the prevailing
31party in any claimant for labor or materials who has, in whole
32or in part, established court or arbitration action brought to
33enforce a claim filed pursuant to section 573.7.
34 Sec. 13. NEW SECTION. 573.28 Early release of retained
35funds.
-5- 11. For purposes of this section:
2a. “Authorized contract representative” means the person
3chosen by the governmental entity or the department to
4represent its interests or the person designated in the
5contract as the party representing the governmental entity’s
6or the department’s interest regarding administration and
7oversight of the project.
8b. “Department” means the state department of
9transportation.
10c. “Governmental entity” means the state, political
11subdivisions of the state, public school corporations, and all
12officers, boards, or commissions empowered by law to enter
13into contracts for the construction of public improvements,
14excluding the state board of regents and the department.
15d. “Public improvement” means a building or construction
16work which is constructed under the control of a governmental
17entity and is paid for in whole or in part with funds of the
18governmental entity, including a building or improvement
19constructed or operated jointly with any other public or
20private agency, but excluding urban renewal demolition and
21low-rent housing projects, industrial aid projects authorized
22under chapter 419, emergency work or repair or maintenance
23work performed by employees of a governmental entity, and
24excluding a highway, bridge, or culvert project, and excluding
25construction or repair or maintenance work performed for a city
26utility under chapter 388 by its employees or performed for a
27rural water district under chapter 357A by its employees.
28e. “Repair or maintenance work” means the preservation of a
29building, storm sewer, sanitary sewer, or other public facility
30or structure so that it remains in sound or proper condition,
31including minor replacements and additions as necessary to
32restore the public facility or structure to its original
33condition with the same design.
34f. “Substantially completed” means the first date on which
35any of the following occurs:
-6- 1(1) Completion of the public improvement project or the
2highway, bridge, or culvert project or when the work on the
3public improvement or the highway, bridge, or culvert project
4has been substantially completed in general accordance with the
5terms and provisions of the contract.
6(2) The work on the public improvement or on the designated
7portion is substantially completed in general accordance with
8the terms of the contract so that the governmental entity or
9the department can occupy or utilize the public improvement or
10designated portion of the public improvement for its intended
11purpose. This subparagraph shall not apply to highway, bridge,
12or culvert projects.
13(3) The public improvement project or the highway, bridge,
14or culvert project is certified as having been substantially
15completed by either of the following:
16(a) The architect or engineer authorized to make such
17certification.
18(b) The authorized contract representative.
19(4) The governmental entity or the department is occupying
20or utilizing the public improvement for its intended purpose.
21This subparagraph shall not apply to highway, bridge, or
22culvert projects.
232. Payments made by a governmental entity or the department
24for the construction of public improvements and highway,
25bridge, or culvert projects shall be made in accordance with
26the provisions of this chapter, except as provided in this
27section:
28a. At any time after all or any part of the work on the
29public improvement or highway, bridge, or culvert project is
30substantially completed, the contractor may request the release
31of all or part of the retained funds owed. The request shall be
32accompanied by a sworn statement of the contractor that, ten
33calendar days prior to filing the request, notice was given as
34required by paragraphs “f” and “g” to all known subcontractors,
35sub-subcontractors, and suppliers.
-7- 1b. Except as provided under paragraph “c”, upon receipt of
2the request, the governmental entity or the department shall
3release all or part of the retained funds. Retained funds that
4are approved as payable shall be paid at the time of the next
5monthly payment or within thirty days, whichever is sooner. If
6partial retained funds are released pursuant to a contractor’s
7request, no retained funds shall be subsequently held based
8on that portion of the work. If within thirty days of when
9payment becomes due the governmental entity or the department
10does not release the retained funds due, interest shall accrue
11on the amount of retained funds at the rate of interest that is
12calculated as the prime rate plus one percent per year as of
13the day interest begins to accrue until the amount is paid.
14c. If labor and materials are yet to be provided at the
15time the request for the release of the retained funds is made,
16an amount equal to two hundred percent of the value of the
17labor or materials yet to be provided, as determined by the
18governmental entity’s or the department’s authorized contract
19representative, may be withheld until such labor or materials
20are provided.
21d. An itemization of the labor or materials yet to be
22provided, or the reason that the request for release of
23retained funds is denied, shall be provided to the contractor
24in writing within thirty calendar days of the receipt of the
25request for release of retained funds.
26e. The contractor shall release retained funds to the
27subcontractor or subcontractors in the same manner as retained
28funds are released to the contractor by the governmental entity
29or the department. Each subcontractor shall pass through to
30each lower-tier subcontractor all retained fund payments from
31the contractor.
32f. Prior to applying for release of retained funds, the
33contractor shall send a notice to all known subcontractors,
34sub-subcontractors, and suppliers that provided labor or
35materials for the public improvement project or the highway,
-8-1bridge, or culvert project.
2g. The notice shall be substantially similar to the
3following:
4NOTICE OF CONTRACTOR’S REQUEST
5 FOR EARLY RELEASE OF RETAINED FUNDS
6You are hereby notified that [name of contractor] will be
7requesting an early release of funds on a public improvement
8project or a highway, bridge, or culvert project designated as
9[name of project] for which you have or may have provided labor
10or materials. The request will be made pursuant to Iowa Code
11section 573.28. The request may be filed with the [name of
12governmental entity or department] after ten calendar days from
13the date of this notice. The purpose of the request is to have
14[name of governmental entity or department] release and pay
15funds for all work that has been performed and charged to [name
16of governmental entity or department] as of the date of this
17notice. This notice is provided in accordance with Iowa Code
18section 573.28.
19 Sec. 14. REPEAL. Section 26.13, Code 2017, is repealed.
20EXPLANATION
21The inclusion of this explanation does not constitute agreement with
22the explanation’s substance by the members of the general assembly.
23This bill relates to mechanics’ liens and public
24construction liens.
25MECHANIC’S LIENS. Under current law, when a mechanic’s
26lien is for material furnished or labor performed in the
27construction, repair, or equipment of any railroad, canal,
28viaduct, or other similar improvement, the lien does not attach
29to an easement or right-of-way. The bill provides that such a
30mechanic’s lien does attach to an easement or right-of-way.
31Under Code section 572.8, a person shall perfect a
32mechanic’s lien by posting to the mechanics’ notice and lien
33registry internet site a verified statement of account of
34the demand due the person setting forth certain specified
35information. Currently, if a general contractor or a
-9-1subcontractor has not posted the mechanic’s lien to the
2registry within 90 days after the date on which the last
3of the material was furnished or the last of the labor was
4performed, the general contractor or subcontractor must post
5the mechanic’s lien on the registry and serve the owner with
6notice of the posting to perfect the lien. The bill provides
7that only a subcontractor must post the mechanic’s lien and
8serve the owner to perfect the mechanic’s lien.
9Under current law, a court action to enforce a mechanic’s
10lien must be brought in the county in which the property to be
11affected is situated. The bill provides that same rule applies
12to arbitration actions.
13Under current law, a lien statement may only be amended by
14leave of court in furtherance of justice or as to the amount
15demanded. The bill provides that a lien statement may only be
16amended by leave of court in further of justice or to decrease
17the amount demanded. An amendment to decrease the amount
18demanded must be accomplished through the mechanics’ notice
19and lien registry. The bill provides that amending a lien
20statement by leave of court in furtherance of justice or to
21decrease the amount demanded does not affect the priority of
22the lien statement.
23Under current law, the owner of property subject to a
24mechanic’s lien may serve written demand on the claimant
25requiring the claimant to commence action to enforce the lien
26within 30 days of the notice. If the claimant fails to do so,
27the lien and all benefits derived therefrom are forfeited.
28The bill provides that, in addition to an owner, a general
29contractor may make such a demand.
30Under current law, in a court action to enforce a mechanic’s
31lien, the court may award a prevailing plaintiff reasonable
32attorney fees. The bill provides that the court may award
33attorney fees to any prevailing party in an action to enforce
34a mechanic’s lien.
35Under current law, in a court action to challenge a
-10-1mechanic’s lien posted on a residential construction property,
2the court may award reasonable attorney fees and actual damages
3to the person challenging the lien if such person prevails.
4The bill provides that the court may award reasonable attorney
5fees to the prevailing party in an action to challenge a
6mechanic’s lien posted on a residential construction property.
7PUBLIC CONSTRUCTION LIENS. Under Code chapter 573 (labor
8and material on public improvements), and subject to certain
9exceptions, contracts for construction of public improvements
10must be accompanied by a bond if the contract price equals
11or exceeds $25,000. The bill provides that if the public
12corporation fails to procure a bond, the public corporation is
13liable to claimants for the contractor’s nonpayment.
14Current Code section 573.15 provides an exception to the
15requirement that a public corporation retain a portion of funds
16due a contractor on a public improvement project in a fund
17for the payment of claims for materials furnished and labor
18performed. The exception provides that a public corporation
19need only retain funds due a supplier of material to a general
20contractor if the supplier provides the general contractor
21with one of two permitted types of notice after the materials
22are supplied. The bill provides that, in addition to claims
23for materials, the exception shall apply to claims for labor,
24service, or transportation. The bill also amends the notice
25requirement to provide that a supplier of labor, materials,
26service, or transportation to a general contractor must give
27only one type of notice, along with a certified statement that
28such notice was given.
29Current Code section 573.16 provides that even if a claimant
30has commenced an action for payment of funds, the public
31corporation shall release the unpaid funds to the contractor if
32the contractor files a surety bond in double the amount of the
33claim in controversy, conditioned upon the payment of any final
34judgment rendered for the claims. The bill provides that the
35unpaid funds shall also be released to the contractor if the
-11-1surety on any bond given for the performance of the contract
2gives written consent to the release of the unpaid funds.
3Current Code section 573.21 provides that if a claimant
4establishes a claim for labor or materials under Code chapter
5573, the court may tax reasonable attorney fees in favor of the
6claimant. The bill provides that a court or arbitrator may tax
7reasonable attorney fees in favor of any prevailing party in
8a court or arbitrarian action brought for labor or materials
9under Code chapter 573.
10The bill repeals Code section 26.13 (public construction
11bidding — early release of retained funds) and creates new
12Code section 573.28 with the same language except for corrected
13internal references.
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