Observations / july 2018

Summary Iowa Construction Industry Legislation

By Jodie McDougal

With the 2018 legislative session ending earlier this month, it is a good time to review the legislation passed in 2018 relating to the construction industry. Below is a summary of such legislation, with links to the full text of each new law.

Anti-Collateral Provision in Lien Law Repealed

The passage of SF2229 was a great victory for the Iowa construction industry. This bill repealed the so-called “anti-collateral” provision in Iowa’s Mechanic’s Lien Law, which had negatively impacted the construction industry by disallowing mechanic’s liens in instances where material suppliers and other companies utilized personal guarantees and other forms of collateral. This repeal is most impactful to material suppliers, from cabinet and flooring suppliers to lumberyards and larger building material suppliers, in both the residential and commercial construction industry.

Construction attorney Jodie McDougal led the charge to pass this bill, by providing education to industry associations and legislators (see white paper) on this law, while the HBA of Iowa (Jay Iverson) and HBA of Greater Des Moines (Dan Knoup) provided crucial industry support and lobbying for this initiative. Further information on this law can be found here.

Multi-Prong Mechanic’s Lien And Public Projects Law

HF2233 consists of the following three amendments to Iowa Code Chapter 572 regarding mechanic’s liens on private projects and Iowa Code Chapter 573 regarding claims on public projects.

Private Projects: Easier Reduction of Lien Amounts. The new law permits the amount of a mechanic’s lien to be amended downwards without the need for court approval/leave of court and without losing priority, which is advantageous to lien claimants.
Public Projects: New Notice Requirement for All Lower-Tiered Subcontractors. The new law requires, on public projects, a one-time written notification to the principal/general contractor from all lower-tiered subcontractors within 30 days of such subcontractor first commencing work on the project, in order for such subcontractors to later assert Chapter 573 Claims for materials and labor on such project. The prior version of the law only applied to lower-tiered material suppliers on public projects. The new law contains an exception for highway, bridge, and culvert projects as referred to in section 573.28.
The new notice requirement law goes into effect on July 1, 2018, meaning that as of that date, all lower-tiered subcontractors on public projects must timely provide the aforementioned pre-lien/pre-claim notice to the general contractor in order to preserve their Chapter 573 claim rights. Per statute, the notice must contain the name, mailing address, and number of the lower-tiered subcontractor and the name of the applicable higher-tiered subcontractor, and must be sent within 30 days of first performing labor or materials on the project.
Public Projects: Early Release of Retained Funds. The law incorporates into Chapter 573 certain provisions regarding a principal contractor’s ability to request an early release of retained funds.

Competitive Bidding Requirements for Certain Lease-Purchase Projects

HF2253 was signed into law over objections from most construction associations. The law makes amendments to various Chapters of the Iowa Code regarding competitive bidding requirements for certain lease-purchase construction projects. Further details can be found here.

Future Ready Iowa

The Future Ready Iowa Act was a top priority for the Governor and various industry associations this year. Among other things, the Act strengthens the development of the construction workforce in Iowa by establishing a registered apprenticeship development program, a volunteer mentoring program, a summer youth intern program, an employer innovation fund, and various scholarship and grant programs.

Manufacturing Equipment Sales Tax

HF2478 amends the sales tax imposed on certain manufacturing equipment, including certain machinery and equipment used in construction. Please let me know if you have questions about this new law, and one of our tax attorneys will be in touch to further discuss this law with you.

Tax reform

The first overhaul of Iowa’s state tax system in several decades was passed into law this session as SF2417. A detailed summary of the tax reform created by the Fiscal Services Division can be read here. Although the tax reform bill mainly deals with changes to individual tax rates, there are some implications for businesses. If you have questions about what Iowa or Federal tax reform means for your business, please let me know and one of our tax attorneys will assist you.

Construction Vehicles

HF2304 relates to motor vehicles approaching stationary construction vehicles and providing more severe penalties. Advocates for this law believe it will make job sites safer.

Right to Repair Act Failed

The Right to Repair Act, HSB575, which exists in various forms in several other states to protect the rights of the construction industry, failed to garner the necessary support to pass this year, but this issue will likely be on the agenda for various trade groups next year.

Jodie McDougal, Davis Brown Law Firm, 515-288-2500, JodieMcDougal@DavisBrownLaw.com. Jodie is a Construction Law and Real Estate Attorney and serves as the Chair of the Construction Law Department. In her construction law and real estate law work, Jodie represents commercial and residential general contractors and builders, architects and engineers, remodelers, subcontractors, suppliers, and owners. Her work includes contract preparation and negotiation, project administration, mechanic’s liens and public/Chapter 573 claims; warranty claims; loss prevention work; purchase agreement disputes; landlord matters; and various other construction project dispute and litigation matters.