Iowa Lawyers Specializing in Iowa Construction Law

When a bank lends money, it uses a mortgage to allow it to sell the real estate if the borrower fails to pay.  Contractors, subcontractors and material suppliers do the same thing when they perform work or provide materials without receiving an advance payment.  A mechanic’s lien is a cousin to a bank’s mortgage.  The mechanic’s lien allows the contractor to force the real estate to be sold so that the proceeds can be used to pay for the labor and materials that were provided on “credit.” In order to preserve a mechanic’s lien rights on a residential construction project, a general contractor must follow the two requirements found in Iowa Code sections 572.13 and 572.13A.  Failure to file on time, or to use the correct form/information can void the lien.  In order to preserve a mechanic’s lien rights on a residential construction project, a subcontractor must post a preliminary notice on the Mechanic’s Notice and Lien Registry (MNLR) prior to the balance due is paid to the general contractor or the owner-builder. In accordance with Iowa Code chapter 572.13B, a preliminary notice posted before the balance due is paid to the general contractor or the owner-builder is effective as to all labor, service, equipment, and material furnished to the property by the subcontractor.  We can assist you in creating a process for filing the required documents on time and with the correct information.  If you already filed a mechanic’s lien, we can help you get paid. Call us today.

Here are a few reasons to use a basic written contract.  First, in some circumstances, you can be charged criminally for failing to have the correct documents signed by your customer. Second, when things go wrong the insurance carriers often sue the contractors and sub-contractors to recover the funds that were paid.  Your contract is what protects you from those insurance carrier lawsuits.  As an example, if a house catches fire and the homeowner’s insurance pays to rebuild it, the insurance carrier will bring suit against the general contractor and all of the subcontractors who worked on the project.  Your written contracts with the owner and subcontractors (or general if you are a sub) is what will protect you from paying out of your pocket. Finally, clear written contracts prevent fights.  When there is a disagreement, you simply point to the terms in your contract to settle the dispute.

In Iowa, you cannot collect interest without clear terms allowing for interest that are signed by the party who must pay the interest. Simply including interest on an invoice is not enough.  On jobs where you do not use a Basic Iowa Construction Contract, your Estimate can form the terms of your agreement, so why not have terms and conditions that protect you?  They are easy to add in Quickbooks.  What most contractors do not know is that Iowa law can create a 10 year implied warranty on your work.  These terms and conditions can limit or eliminate that 10 year exposure.

When things go wrong the insurance carriers often sue the contractors and sub-contractors to recover the funds that were paid.  Your contract is what protects you from those insurance carrier lawsuits.  As an example, if a house catches fire and the homeowner’s insurance pays to rebuild it, the insurance carrier will bring suit against the general contractor and all of the subcontractors who worked on the project.  As a general contractor, you need a written contract that states that the subcontractor’s insurance carrier must pay your attorney fees and must pay for the damage caused by the subcontractor.  This is known as indemnification.  If you don’t have that in writing, you could end up paying out of pocket for damages that were caused by your subcontractor.  It is so easy to transfer this liability to a subcontractor if you use written contracts.  You trust your subcontractors…do you trust their insurance carriers? If not, then you need a written contract.

If you are going to work as a subcontractor on a project, you need a written contract with the general contractor.  Imagine that the employee of another subcontractor is killed or seriously injured at the jobsite. It is common for the employee to file a lawsuit against the general contractor and all of the other subcontractors.  You need a written contract with the general contractor clearly stating what work you agreed to perform on the project (i.e. you were not involved with this injured employee’s work) and that the general contractors insurance carrier must protect you.

Recently, an Iowa Jury awarded $20M do an injured employee who suffered life altering injuries as a result of a trench collapse.  In the event that a worker is injured or killed on the job, you could be looking at a $20,000 to $100,000+ fine from IOSHA even if it was not your employee.  Plus, that fine is not covered by your insurance.  Let’s make sure that you have the required written policies in place, and that you are conducting regular audits to prevent these out-of-pocket exposures.