Getting Paid Faster with Liens, Bonds, and Contracts - Iowa Webinar

No matter the type of construction project—private, public, or federal—there are enforceable rights built into Iowa law that protect your ability to get paid. But those rights come with strict notice requirements and deadlines. This blog dives into Iowa’s lien statutes, bond procedures, and relevant contract clauses to help contractors, subcontractors, and suppliers stay compliant, avoid mistakes, and recover payments with confidence.

Mechanics Liens on Private Projects (Iowa Code Chapter 572)

Mechanics liens are often the most powerful payment protection available on private projects. They offer a legal claim against the property where the work was performed. However, the lien process is deadline-driven, and a small mistake can cause a complete loss of rights.

When a contractor, subcontractor, or supplier performs work or provides materials to improve privately owned property, they have a right to file a mechanics lien. But knowing when and how to file—and whether you qualify—is essential.

Key Lien Deadlines

• Iowa law requires that a mechanics lien to be filed within 90 days of the last date labor or materials were furnished.

• Filing within this 90-day window preserves your full lien rights, including the potential to enforce it for the full unpaid balance.

If the 90-day deadline is missed:

• You may still file within 2 years and 90 days of your last work, but:

• The lien must be served on the property owner.

• Your claim is limited to the amount the owner still owes the general contractor at the time of service—not the full amount owed to you.

Best Practice: Always file within the initial 90 days to avoid weakened rights and reduced recovery.

Foreclosure Lawsuit Deadline

Recording a lien is just the first step. To actually collect on it, you may need to file a foreclosure lawsuit.

• You have 2 years and 90 days from your last day of work to file a lawsuit to foreclose on the lien.

• However, if the property owner or GC issues a 30-day demand to commence suit, you must respond by filing your lawsuit within 30 calendar days—or your lien becomes unenforceable.

This provision allows owners to pressure lien claimants to take legal action promptly and weed out stale or unsupported claims.

Notice Requirements for Subcontractors

If you’re a subcontractor or material supplier without a direct contract with the GC, Iowa law requires you to serve a preliminary notice to preserve your lien rights on commercial projects.

• This notice must be served within 30 days of first furnishing labor or materials.

• It ensures the owner is aware of all parties on the project and helps prevent double payment.

Failing to serve this notice means you lose your lien rights entirely, no matter how much work you’ve completed.

Residential Projects: Stricter Rules

Residential projects are governed by more specific and stricter requirements in Iowa. These projects often involve homeowners who need additional legal protections, so the law places more burden on the lien claimant.

• Residential projects include single- and two-family homes, condominiums, and certain multi-unit properties under Chapter 499B.

• Multiple notices may be required, and each must be properly served and documented.

Notices must be filed in Iowa’s Mechanic’s Notice and Lien Registry (MNLR), an online system that tracks residential project lien notices. Failing to use the system properly can void your lien rights.

Tip: Consult with a construction attorney early in any residential project to ensure proper compliance, especially if you are a lower-tier subcontractor or supplier.

Attorney Fees & Prompt Pay Statute

Attorney fees can make or break a decision to pursue legal action. Here’s how Iowa law treats them:

• Commercial Projects: Only the lien claimant can recover attorney fees. If you prevail, your legal costs may be reimbursed.

• Residential Projects: The prevailing party—whether it’s the owner or contractor—may be awarded attorney fees. This raises the stakes for both sides.

Iowa also has a Prompt Pay Statute (Iowa Code § 572.30) that applies to residential work. While it establishes timeframes for payments, it lacks strong enforcement mechanisms—so relying solely on it isn’t a viable strategy.

Public Projects – Iowa’s Little Miller Act (Chapter 573)

On public projects, mechanics liens are not allowed because public property cannot be liened. Instead, Iowa law requires GCs to provide payment bonds on qualifying public work to protect subcontractors and suppliers.

Bonding Requirements

• Any public contract over $25,000 must include a performance and payment bond.

• The general contractor is responsible for obtaining these bonds.

• These bonds guarantee payment to subcontractors and suppliers who work on the project.

Who Can Make a Bond Claim?

The bond covers:

• Subcontractors and suppliers with a direct or indirect relationship with the GC.

• However, suppliers to suppliers are excluded and cannot make a claim under the bond.

Notice Requirements

• Subcontractors without a contract with the GC must serve a notice of furnishing within 30 days of first supplying labor or materials.

• This step preserves your right to file a bond claim if payment issues arise later.

Filing Your Claim

• Claims must be in writing and sent to the public entity that owns the project.

• The deadline is 30 days after the project has been finally accepted.

• If the GC is terminated or abandons the project, the 30-day period begins from that event.

Lawsuit Deadlines

• You must wait at least 30 days after project acceptance to file a lawsuit.

• After that, you must file within 60 days of final acceptance.

Only claimants (not owners or general contractors) can recover attorney fees under Chapter 573.

Federal Projects – The Federal Miller Act

On federal construction projects, mechanics liens are not available, so your only remedy for non-payment is the payment bond required by the Miller Act.

Key Protections and Requirements

• No retainage is held on federal projects.

• Subcontractors and suppliers must rely entirely on the payment bond.

• The bond serves the same function as a lien would on a private job—it guarantees payment for work completed.

Notice Requirement

For second-tier subcontractors and suppliers (those without a direct contract with the GC):

• A written notice must be served within 90 days of your last work or delivery of materials.

• The notice must include:

• Amount due

• Identity of the party you worked under

• Sufficient project identification

Although courts sometimes accept less formal “actual notice,” it’s always safest to follow the statutory procedures.

Deadline to File Suit

• You must file a lawsuit on the bond within 1 year of your last date of work.

• Filing beyond this window could completely bar your claim.

Contract Terms That Impact Payment

Knowing your rights under Iowa law is critical—but so is knowing what your contract says. Many standard construction contracts, like the AIA A201, include specific terms that govern how and when payments are made and disputed.

Architect’s Role in Payments

Under AIA A201:

• The architect reviews payment applications.

• They can approve, delay, or reject payment requests.

• If there are unresolved issues or claims, payment may be withheld.

Tip: Maintain open lines of communication with the architect throughout the project. Their decisions directly affect your cash flow.

Conditional Payment Clauses

Conditional payment clauses are common—and risky for subs.

• Pay-When-Paid: GC must be paid first, but must eventually pay the sub regardless.

• Pay-If-Paid: GC only pays if they are paid—putting the full risk on the sub.

Negotiation Tips:

• Subcontractors should avoid pay-if-paid clauses or negotiate clear “pay-when-paid” alternatives.

• GCs should make these terms explicit and enforceable.

Making a Claim Under AIA A201

Under AIA contracts, any demand for time, money, or changes must be submitted as a “claim.”

• A claim must be submitted in writing to the Initial Decision Maker (usually the architect).

• You must copy the owner on the submission.

• Claims must be filed within 21 days from when the issue occurs.

Failure to meet this 21-day deadline could mean permanent loss of your claim rights.

Final Thoughts

In Iowa, contractors, subcontractors, and suppliers have powerful tools to secure payment—but these tools come with strict requirements. Whether it's serving a notice, filing a lien, asserting a bond claim, or understanding contract terms, timing and strategy are everything.

Mistakes—like missing a notice deadline or misunderstanding a contract clause—can result in losing the right to get paid. That’s why proactive steps, such as using a lien service or consulting legal counsel, are essential for protecting your bottom line.

FAQs: Common Contractor Questions

1. I’m a sub-subcontractor and missed the notice deadline. Do I have any options?
Unfortunately, no. If you don’t serve the required notice on time, your lien rights are limited to what the owner still owes the GC. In many cases, this is zero.

2. Can I amend my lien to increase the amount later?
No. Under Iowa law, you can only reduce the lien amount—not increase it. If you're owed more, your only option is to file a new lien.

3. How does lien priority work in Iowa?

• Filed within 90 days? Your lien relates back to your first date of work.

• Filed after 90 days? Your lien only gains priority from the date of service.

• Competing liens are prioritized by filing date. Mortgages recorded before your lien usually take priority.

4. I received a 30-day demand to sue—do I count calendar or business days?
Calendar days. If your deadline falls on a weekend or holiday, you get until the next business day—but don’t wait until the last minute.