The Construction Counselor

On February 7, 2020, the Iowa Supreme Court issued a final decision in Standard Water v. Jones, a long-standing residential mechanic’s lien case stemming back to a 2013 mechanic’s lien. Construction attorney Jodie McDougal represented the mechanic’s lien claimant in this case, Standard Water Control Systems, Inc. As a result of that case, new legislation was proposed and passed, with SF458 signed into law on June 25, 2020. This judicial decision and new law, both of which benefit contractors, are discussed below.

The Underlying Trial

In a 2014 trial, Standard Water successfully obtained a favorable judgment on a mechanic’s lien lawsuit filed against homeowners who had not fully paid their bill for Standard’s installation of a waterproofing system within their house. The judgment amount included the principal debt owed, plus attorney’s fees, costs, and interest. Since trial, the homeowners have filed three sets of appeals.

Recent Iowa Supreme Court Decision

In the third and last appeal, the homeowners claimed that their house, which is their homestead, should be protected against certain portions of Standard Water’s mechanic’s lien, including the attorney’s fees awarded under the mechanic’s lien.

On February 7, 2020, the Iowa Supreme Court issued its order on this appeal, affirming Standard Water’s original judgment that the homeowners’ homestead was liable, and could be foreclosed and sold, for the entire mechanic’s lien amount, including attorney’s fees, costs, and interest. The Iowa Supreme Court concluded that the homeowners had waived their right to assert their homestead protection argument due to not timely raising such argument earlier in the litigation.

In addition, in the decision the Iowa Supreme Court analyzed the interplay between mechanic’s lien rights under Chapter 572 and homestead exemptions under Chapter 561, ultimately concluding that the homestead exemption statute, as currently written, prohibits a contractor from recovering its attorney fees in a mechanic’s lien foreclosure action involving a homestead. However, because the homeowners waived their right to assert their homestead protection, the Supreme Court’s aforementioned analysis did not apply in this case.

Subsequent Legislative Activities at the Iowa State Capitol

Subsequent to the case, the HBA of Iowa and other construction groups fought to pass SF458, which was recently signed into law on June 25, 2020. Per this law, the aforementioned homestead exemption statute under Chapter 561 was amended to expressly provide that a homestead is liable for the entire mechanic’s lien, including attorney’s fees. As part of these legislative efforts, the HBA of Iowa and its counsel, attorney Jodie McDougal, provided statements to the House Subcommittee handling the bill.

Contractors are encouraged to speak with their attorney on how they handle mechanic’s liens, specifically if they currently have a mechanic’s lien against a homestead.

If you have questions regarding anything addressed in this article, please contact Jodie McDougal at jmcdougal@fredlaw.com or at 515.242.8971.