Tuesday, April 24, 2012

Electronic, Instantaneous Filing with No Clerk Meddling? A proposal by Iowa Legislators

Iowa is charging into the future, and not by cavalry. The State is considering making Iowa Mechanics Lien Fiing a state function, rather than a county function, and is on the verge of making the filing electronic. Now that's some interesting news. Let's see if it gets passed.

Iowa House Bill HF675 proposes to change the Iowa Mechanics Lien Law in a couple of ways, but the most important is that it seeks to create a statewide construction registry internet website that would be administered by Iowa's Secretary of State. On that construction industry internet website, anyone eligible for a mechanics lien who furnished materials or labor would be able to post their mechanic’s lien electronically online.

As of now, the filing of a mechanics lien is a cumbersome, painful process. The filing is similar to that done in most states: send it to a county clerk or district court, hope they see it and file it, and hope they don't get confused or try to interpret a statute incorrectly and reject the lien. Attempting to file a lien can be pretty nerve racking.

The new registry, however, would allow all interested parties, in fact the public at large, to view the registry and see whether any mechanics liens exist on a certain property. It would also come in handy to owners, subcontractors and suppliers because it would provide real time, up to date information on what mechanics liens are in play, keeping payment flowing to the proper parties. For banks and lenders, it would provide a more accurate way of determining whether liens exist on the property prior to closing a sale or financing.

With every bill, however, comes new requirements. Here are the couple of new requiremets the Iowa Mechanics Lien Bill proposes:

1. The general contractor or owner or developer must post to the state construction registry internet website a notice of commencement of work, and
2. Easch subcontractor must post to the registry an Iowa preliminary notice, or Iowa Notice of Furnishing, informing the owner that materials or labor are being provided. If the sub-contractor does not file the notice, they are not entitled to a lien.

Like many bills passed over the past few years, the Iowa Mechanics Lien bill was the reult of the financial crises. Over past several years numerous developers, construction companies, and homeowners have gone out of business and bankrupt. The filing of mechanics liens in the wrong counties, incorrectly, and the improper recording of the liens by clerks led to numerous litigation, and the statewide system is thought to resolve the issue.

If the bill becomes law, it could be another moment where Iowa takes the lead for other states to follow. A statewide system is aleady used for Judgments in most states...extending it to mechanics liens just makes sense.

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