Construction Law Update: Iowa Court of Appeals Decision Impacts Mechanic's Lien Rights
On February 6, 2019, the Iowa Court of Appeals issued a decision in the case of Standard Water Control Systems, Inc. v. Jones, 2019 WL 478498 (Iowa Ct. App. 2019) that significantly impacts mechanic's lien rights for contractors who perform work on residential construction projects. Standard Water contracted with the Joneses to perform work on the Joneses’ home. A dispute arose that resulted in Standard Water filing a mechanic’s lien against the home, and the dispute ended up in trial. The trial court issued a decision in favor of Standard Water and awarded it $4,900.00 on its lien claim for work performed on the home. However, a main dispute revolved around attorney fees.
Under Iowa Code Section 572.32(1) of Iowa’s mechanic’s lien statute, a court may award attorney fees to a prevailing plaintiff. Invoking that provision, the trial court awarded Standard Water $44,134.29 in attorney fees and costs on its lien claim. This resulted in Standard Water’s total lien judgment being $49,034.29; only $4,900.00 of that amount was for work performed with the rest being for attorney fees and costs. The Joneses raised as a defense their homestead rights under Iowa Code Chapter 561. They argued that Iowa Code Section 561.21(3) does not allow a home to be sold to satisfy the attorney fee and costs portion of a mechanic's lien judgment, and that a home may only be sold to satisfy the portion of a mechanic's lien judgment for work done on the home. The Iowa Court of Appeals agreed, and ruled that the homestead law “does not allow a homestead to be sold to recover attorney fees entered as part of a judgment against a home in an action to foreclose a mechanic’s lien.”
This is a significant decision adverse to contractors who perform work on “homesteads.” The impact of the decision means Standard Water can only use the sale of the Joneses’ home to recover the $4,900.00 part of the mechanic's lien judgment that was for work performed on the home. The sale of the home cannot be used to recover the remaining $44,134.29 mechanic's lien judgment for attorney fees and costs; that amount can only be recovered through the Joneses’ other assets. Contractors who work on homesteads should be aware of this new decision because it could make recovery of attorney fees and costs on mechanic's lien claims much more difficult. The Iowa Court of Appeals may not have the final say in this case if the Iowa Supreme Court decides to hear it.
Contact attorney Steve Marso at 515-288-6041 for more information about this or other construction matters.