Bill Text: IA SF2236 | 2017-2018 | 87th General Assembly | Introduced


Bill Title: A bill for an act relating to mechanics’ liens, public construction liens, and the early release of retained funds. (Formerly SSB 3039.)

Spectrum: Partisan Bill (? 1-0)

Status: (Introduced) 2018-03-27 - Withdrawn. S.J. 784. [SF2236 Detail]

Download: Iowa-2017-SF2236-Introduced.html

Senate File 2236 - Introduced




                                 SENATE FILE       
                                 BY  COMMITTEE ON JUDICIARY

                                 (SUCCESSOR TO SSB
                                     3039)

                                      A BILL FOR

  1 An Act relating to mechanics' liens, public construction liens,
  2    and the early release of retained funds.
  3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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PAG LIN



  1  1    Section 1.  Section 26.3, subsection 3, Code 2018, is amended
  1  2 to read as follows:
  1  3    3.  Sections 26.4 through 26.13 26.12 apply to all
  1  4 competitive bidding pursuant to this section.
  1  5    Sec. 2.  Section 314.1, subsection 2, Code 2018, is amended
  1  6 to read as follows:
  1  7    2.  Notwithstanding any other provision of law to the
  1  8 contrary, a public improvement that involves the construction,
  1  9 reconstruction, or improvement of a highway, bridge, or culvert
  1 10 and that has a cost in excess of the applicable threshold
  1 11 in section 73A.18, 262.34, 297.7, 309.40, 310.14, or 313.10,
  1 12 as modified by the bid threshold subcommittee pursuant to
  1 13 section 314.1B, shall be advertised and let for bid, except
  1 14 such public improvements that involve emergency work pursuant
  1 15 to section 309.40A, 313.10, or 384.103, subsection 2. For a
  1 16 city having a population of fifty thousand or less, a public
  1 17 improvement that involves the construction, reconstruction, or
  1 18 improvement of a highway, bridge, or culvert that has a cost
  1 19 in excess of twenty=five thousand dollars, as modified by the
  1 20 bid threshold subcommittee pursuant to section 314.1B, shall be
  1 21 advertised and let for bid, excluding emergency work. However,
  1 22 a public improvement that has an estimated total cost to a
  1 23 city in excess of a threshold of fifty thousand dollars, as
  1 24 modified by the bid threshold subcommittee pursuant to section
  1 25 314.1B, and that involves the construction, reconstruction, or
  1 26 improvement of a highway, bridge, or culvert that is under the
  1 27 jurisdiction of a city with a population of more than fifty
  1 28 thousand, shall be advertised and let for bid. Cities required
  1 29 to competitively bid highway, bridge, or culvert work shall
  1 30 do so in compliance with the contract letting procedures of
  1 31 sections 26.3 through 26.13 26.12.
  1 32    Sec. 3.  Section 572.26, Code 2018, is amended to read as
  1 33 follows:
  1 34    572.26  Kinds of action ==== amendment.
  1 35    1.  An action to enforce a mechanic's lien shall be by
  2  1 equitable proceedings, and no other cause of action shall be
  2  2 joined therewith.
  2  3    2.  a.  Any lien statement may be amended by leave of court
  2  4 in furtherance of justice, except as to the amount demanded
  2  5  Except as provided in paragraph "b", a claimant may only amend a
  2  6 lien statement by leave of court in furtherance of justice.
  2  7    b.  A lien statement may be amended without leave of court
  2  8 to decrease the amount demanded, and such amendment shall be
  2  9 effected through the mechanics' notice and lien registry.
  2 10 Amendment of a lien statement pursuant to this subparagraph
  2 11 shall not change or otherwise affect its priority.
  2 12    c.  A lien statement shall not be amended to increase the
  2 13 amount demanded.
  2 14    Sec. 4.  Section 573.15, Code 2018, is amended by striking
  2 15 the section and inserting in lieu thereof the following:
  2 16    573.15  Exception.
  2 17    A person, firm, or corporation that has performed labor
  2 18 for or furnished materials, service, or transportation to
  2 19 a subcontractor shall not be entitled to a claim against
  2 20 the retainage or bond under this chapter unless the person,
  2 21 firm, or corporation that performed the labor or furnished
  2 22 the materials, service, or transportation does all of the
  2 23 following:
  2 24    1.  Notifies the principal contractor in writing with a
  2 25 one=time notice containing the name, mailing address, and
  2 26 telephone number of the person, firm, or corporation that
  2 27 performed the labor or furnished the materials, service,
  2 28 or transportation, and the name of the subcontractor for
  2 29 whom the labor was performed or the materials, service, or
  2 30 transportation were furnished, within thirty days of first
  2 31 performing the labor or furnishing the materials, service, or
  2 32 transportation for which a claim may be made. Additional labor
  2 33 performed or materials, service, or transportation furnished by
  2 34 the same person, firm, or corporation to the same subcontractor
  2 35 for use in the same construction project shall be covered by
  3  1 this notice.
  3  2    2.  Supports the claim with a certified statement that
  3  3 the principal contractor received the notice described in
  3  4 subsection 1.
  3  5    Sec. 5.  NEW SECTION.  573.28  Early release of retained
  3  6 funds.
  3  7    1.  For purposes of this section:
  3  8    a.  "Authorized contract representative" means the person
  3  9 chosen by the governmental entity or the department to
  3 10 represent its interests or the person designated in the
  3 11 contract as the party representing the governmental entity's
  3 12 or the department's interest regarding administration and
  3 13 oversight of the project.
  3 14    b.  "Department" means the state department of
  3 15 transportation.
  3 16    c.  "Governmental entity" means the state, political
  3 17 subdivisions of the state, public school corporations, and all
  3 18 officers, boards, or commissions empowered by law to enter
  3 19 into contracts for the construction of public improvements,
  3 20 excluding the state board of regents and the department.
  3 21    d.  "Public improvement" means a building or construction
  3 22 work which is constructed under the control of a governmental
  3 23 entity and is paid for in whole or in part with funds of the
  3 24 governmental entity, including a building or improvement
  3 25 constructed or operated jointly with any other public or
  3 26 private agency, but excluding urban renewal demolition and
  3 27 low=rent housing projects, industrial aid projects authorized
  3 28 under chapter 419, emergency work or repair or maintenance
  3 29 work performed by employees of a governmental entity, and
  3 30 excluding a highway, bridge, or culvert project, and excluding
  3 31 construction or repair or maintenance work performed for a city
  3 32 utility under chapter 388 by its employees or performed for a
  3 33 rural water district under chapter 357A by its employees.
  3 34    e.  "Repair or maintenance work" means the preservation of a
  3 35 building, storm sewer, sanitary sewer, or other public facility
  4  1 or structure so that it remains in sound or proper condition,
  4  2 including minor replacements and additions as necessary to
  4  3 restore the public facility or structure to its original
  4  4 condition with the same design.
  4  5    f.  "Substantially completed" means the first date on which
  4  6 any of the following occurs:
  4  7    (1)  Completion of the public improvement project or the
  4  8 highway, bridge, or culvert project or when the work on the
  4  9 public improvement or the highway, bridge, or culvert project
  4 10 has been substantially completed in general accordance with the
  4 11 terms and provisions of the contract.
  4 12    (2)  The work on the public improvement or on the designated
  4 13 portion is substantially completed in general accordance with
  4 14 the terms of the contract so that the governmental entity or
  4 15 the department can occupy or utilize the public improvement or
  4 16 designated portion of the public improvement for its intended
  4 17 purpose. This subparagraph shall not apply to highway, bridge,
  4 18 or culvert projects.
  4 19    (3)  The public improvement project or the highway, bridge,
  4 20 or culvert project is certified as having been substantially
  4 21 completed by either of the following:
  4 22    (a)  The architect or engineer authorized to make such
  4 23 certification.
  4 24    (b)  The authorized contract representative.
  4 25    (4)  The governmental entity or the department is occupying
  4 26 or utilizing the public improvement for its intended purpose.
  4 27 This subparagraph shall not apply to highway, bridge, or
  4 28 culvert projects.
  4 29    2.  Payments made by a governmental entity or the  department
  4 30 for the construction of public improvements and highway,
  4 31 bridge, or culvert projects shall be made in accordance with
  4 32 the provisions of this chapter, except as provided in this
  4 33 section:
  4 34    a.  At any time after all or any part of the work on the
  4 35 public improvement or highway, bridge, or culvert project is
  5  1 substantially completed, the contractor may request the release
  5  2 of all or part of the retained funds owed. The request shall be
  5  3 accompanied by a sworn statement of the contractor that, ten
  5  4 calendar days prior to filing the request, notice was given as
  5  5 required by paragraphs "f" and "g" to all known subcontractors,
  5  6 sub=subcontractors, and suppliers.
  5  7    b.  Except as provided under paragraph "c", upon receipt of
  5  8 the request, the governmental entity or the department shall
  5  9 release all or part of the retained funds. Retained funds that
  5 10 are approved as payable shall be paid at the time of the next
  5 11 monthly payment or within thirty days, whichever is sooner. If
  5 12 partial retained funds are released pursuant to a contractor's
  5 13 request, no retained funds shall be subsequently held based
  5 14 on that portion of the work. If within thirty days of when
  5 15 payment becomes due the governmental entity or the department
  5 16 does not release the retained funds due, interest shall accrue
  5 17 on the amount of retained funds at the rate of interest that is
  5 18 calculated as the prime rate plus one percent per year as of
  5 19 the day interest begins to accrue until the amount is paid.
  5 20    c.  If labor and materials are yet to be provided at the
  5 21 time the request for the release of the retained funds is made,
  5 22 an amount equal to two hundred percent of the value of the
  5 23 labor or materials yet to be provided, as determined by the
  5 24 governmental entity's or the department's authorized contract
  5 25 representative, may be withheld until such labor or materials
  5 26 are provided.
  5 27    d.  An itemization of the labor or materials yet to be
  5 28 provided, or the reason that the request for release of
  5 29 retained funds is denied, shall be provided to the contractor
  5 30 in writing within thirty calendar days of the receipt of the
  5 31 request for release of retained funds.
  5 32    e.  The contractor shall release retained funds to the
  5 33 subcontractor or subcontractors in the same manner as retained
  5 34 funds are released to the contractor by the governmental entity
  5 35 or the department. Each subcontractor shall pass through to
  6  1 each lower=tier subcontractor all retained fund payments from
  6  2 the contractor.
  6  3    f.  Prior to applying for release of retained funds, the
  6  4 contractor shall send a notice to all known subcontractors,
  6  5 sub=subcontractors, and suppliers that provided labor or
  6  6 materials for the public improvement project or the highway,
  6  7 bridge, or culvert project.
  6  8    g.  The notice shall be substantially similar to the
  6  9 following:
  6 10    NOTICE OF CONTRACTOR'S REQUEST
  6 11  FOR EARLY RELEASE OF RETAINED FUNDS
  6 12    You are hereby notified that [name of contractor] will be
  6 13 requesting an early release of funds on a public improvement
  6 14 project or a highway, bridge, or culvert project designated as
  6 15 [name of project] for which you have or may have provided labor
  6 16 or materials. The request will be made pursuant to Iowa Code
  6 17 section 573.28. The request may be filed with the [name of
  6 18 governmental entity or department] after ten calendar days from
  6 19 the date of this notice. The purpose of the request is to have
  6 20 [name of governmental entity or department] release and pay
  6 21 funds for all work that has been performed and charged to [name
  6 22 of governmental entity or department] as of the date of this
  6 23 notice. This notice is provided in accordance with Iowa Code
  6 24 section 573.28.
  6 25    Sec. 6.  REPEAL.  Section 26.13, Code 2018, is repealed.
  6 26                           EXPLANATION
  6 27 The inclusion of this explanation does not constitute agreement with
  6 28 the explanation's substance by the members of the general assembly.
  6 29    This bill relates to mechanics' liens and public
  6 30 construction liens.
  6 31    MECHANIC'S LIENS.  Under current law, a lien statement may
  6 32 only be amended by leave of court in furtherance of justice
  6 33 or as to the amount demanded.  The bill provides that a
  6 34 claimant may only amend a lien statement by leave of court in
  6 35 furtherance of justice or to decrease the amount demanded.  An
  7  1 amendment to decrease the amount demanded must be accomplished
  7  2 through the mechanics' notice and lien registry.  The bill
  7  3 provides that amending a lien statement to decrease the amount
  7  4 demanded does not affect the priority of the lien statement.
  7  5 The bill also provides that a lien statement shall not be
  7  6 amended to increase the amount demanded.
  7  7    PUBLIC CONSTRUCTION LIENS.  Current Code section 573.15
  7  8 provides an exception to the requirement that a public
  7  9 corporation retain a portion of funds due a contractor on a
  7 10 public improvement project in a fund for the payment of claims
  7 11 for materials furnished and labor performed. The exception
  7 12 provides that a public corporation need only retain funds due a
  7 13 supplier of material to a general contractor if the supplier
  7 14 provides the general contractor with one of two permitted types
  7 15 of notice after the materials are supplied. The bill provides
  7 16 that, in addition to claims for materials, the exception shall
  7 17 apply to claims for labor, service, or transportation. The
  7 18 bill also amends the notice requirement to provide that a
  7 19 supplier of labor, materials, service, or transportation to a
  7 20 general contractor must give only one type of notice, along
  7 21 with a certified statement that such notice was given.
  7 22    The bill repeals Code section 26.13 (public construction
  7 23 bidding ==== early release of retained funds), creates new Code
  7 24 section 573.28 with the same language except for corrected
  7 25 internal references, and provides that the Code section no
  7 26 longer applies to all competitive bidding done pursuant to Code
  7 27 section 26.3 or 314.1.
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