Remedies In Iowa Mechanic’s Lien Cases

I discussed the basics of Iowa’s mechanic’s lien law in an earlier post.  So let’s say that you, the contractor or homeowner, are now involved in a mechanic’s lien case.  How will the judge decide whether the contractor is entitled to any money?

The general rule is that in order to enforce a mechanic’s lien, the work must be “substantially performed” by the contractor.   A technical, exact, and perfect performance is not necessary in an action to foreclose a mechanic’s lien.  “Substantial performance” permits only such omissions or deviations from the contract as are inadvertent or unintentional, are not due to bad faith, do not impair the structure as a whole, and are remediable without doing material damage to other parts of the building in tearing down and reconstructing.

A contractor that substantially performs under a building or construction contract is entitled to recover the contract price minus the cost of repairing the defects or completing the unfinished part of the work so as to bring the construction up to the level required by the contract.  A contractor that fails to substantially perform under a construction contract still has a right to be paid, but the payment may be much less than the contract called for or the contractor may even end up owing the homeowner money.

Mechanic’s lien cases often devolve into nothing more than an exercise in arithmetic for the judge.  Using the basic principles summarized above, the judge starts by determining whether the contractor has “substantially completed” the work.  If the contractor has substantially completed the work, the judge next considers the contract price for the work and subtracts any amounts the judge believes are appropriate for the cost of repairing or completing the contractor’s work.  The result is the amount that the contractor wins.  It is impossible for a contractor to not recover at least some money as long as it has substantially performed under the contract.

If the contractor has not “substantially completed” the work, the judge might also consider other damages to the homeowner, in addition to the costs of completing or remedying the contractor’s work, as part of the calculation and deduct those extra items of damages from the contract price too.  In theory, a contractor’s lack of substantial performance can cause the contractor to receive little or nothing under the contract, depending on how large the judge’s deductions become.  In fact, if the homeowner’s damages exceed the amount owed the contractor, as determined by the judge, then the contractor will get nothing and will actually owe the homeowner the difference between the homeowner’s damages and the lesser amount that the judge has decided to award the contractor.

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