Construction Law Update: Efforts to Legislatively Overturn Iowa Court of Appeal’s Decision Regarding Homestead Rights Die with Close of Legislative Session
As readers of this post will recall, the Iowa Court of Appeals recently held that a mechanic’s lien holder could not look to the execution and sale of homestead property to recover an award of attorney’s fees incurred in the enforcement of its lien. Standard Water Control Systems, Inc. v. Jones, No. 17-2009 (Iowa Ct. App. 2-16-19). The ruling, which is pending further review by the Iowa Supreme Court, will be discussed more below.
Shortly after the ruling, bills were introduced in the Iowa legislature to blunt the effects of the ruling and which would limit homestead protections. See SSB 1147 and HSB 174. The bills would have expanded a contractor’s ability to recover the expenses associated with enforcing a mechanic’s lien against residential property. SSB 1147 (including its successor SF 458) and HSB 174 failed to pass through the legislature. It appears that no other changes were made to Iowa Code Chapter 572 regarding mechanic’s liens on private property. Only technical changes were made to Iowa Code Chapter 573 regarding public improvements.
Iowa law currently provides that a mechanic’s lien holder may only reach the homestead to satisfy debts for work performed or materials furnished in the improvement of the homestead. Under the proposed amendments, a contractor would have the ability to recover the principal, interest, attorney’s fees, and costs, for work performed or materials supplied to improve the homestead. These proposed legislative changes would have expanded upon existing authority and opened the door for the additional collection of attorney’s fees and costs, which can quickly outpace the underlying value of the improvements when enforcement of a mechanic’s lien becomes necessary.
The bills represented yet another instance of legislative scrutiny of Iowa’s mechanic’s lien laws in the wake of the latest chapter of that ongoing litigation regarding the effects of the adoption of the electronic filing regime and the new statute (as of 2012) Iowa Code Chapter 572.
As detailed in the Jones decision, the Joneses successfully argued that their homestead property is protected under Iowa law from judicial sale to satisfy the attorney's fees award. Consequently, the district court was affirmed on the point but reversed on the issue of whether the Joneses had inadvertently waived their homestead rights.
The Court of Appeals, citing the important public purpose of homestead rights, held that the Joneses could not waive these protections by silence or omission. The Court of Appeals found that the Joneses were not required to assert their homestead rights in the underlying lien enforcement action and were not estopped or precluded from doing so in response to a special execution to sell the property at sheriff’s sale.
Notably, the lienholder’s district court attorney’s fees alone in this case exceeded the underlying judgment by more than 800 percent. Jones demonstrates how collecting on a mechanics lien action can prove challenging.
Prepared by John F. Fatino and Alecia A. Meuleners. For further information on mechanic’s liens, contact John F. Fatino 515-288-6041. For further information on real estate matters, contact Alecia A. Meuleners at 515-288-6041.