USA – IOWA Law and Practice Contributed by: David M. Erickson, Christopher S. Talcott, Amy S. Montgomery and Shannon M.H. Hasse, Dentons Davis Brown PC
the outcome of the foreclosure action, whether or not such person is joined as a party to the action. 3.7 Subordinating Existing Debt to Newly Created Debt In general, the priority of debt secured by a mortgage against real estate is determined based on the time of recording the mortgage in the county recorder’s office. One exception to this rule occurs for mechanics liens under Iowa Code Chapter 572, which secure payment for material or labour furnished for the improvement, alteration or repair of real estate. If such material or labour were first furnished prior to the recording of the mortgage, the claimant may obtain a lien with pri - ority ahead of the mortgage (as of the date that the furnishing of material or labour was first commenced), so long as the claimant files its mechanics lien within 90 days after completion of the furnishing of material or labour. A second exception may occur by voluntary agree - ment between the original mortgagee and the holder of a later-recorded mortgage to subordinate the prior - ity of the first mortgage to the second mortgage. 3.8 Lenders’ Liability Under Environmental Laws If the lender has not acted as an owner or operator of the contaminated property prior to becoming the owner by enforcing its mortgage, the lender will not have personal liability for pollution of the real estate by the borrower or previous owners. However, upon foreclosing on the real estate, the lender will be faced with a problem in that the contaminated real estate may be difficult if not impossible to sell, except at a substantially reduced value. 3.9 Effects of a Borrower Becoming Insolvent The insolvency of a borrower will not of itself affect the validity or priority of a lender’s recorded mortgage lien under Iowa state law, unless the mortgage itself was created as part of a fraudulent conveyance. In the event that a borrower files for protection under federal bankruptcy laws, whether before or during an event of default under the mortgage, the lender should appear in, and protect its interests in, the bankruptcy pro - ceedings. In general, the filing of a bankruptcy peti - tion will effect an automatic stay of any proceedings
to enforce a mortgage or other security interest while the bankruptcy action is pending. However, a lender may often successfully request a lifting of the stay with respect to a recorded mortgage, and once this is granted the lender may proceed to foreclose its mortgage during the pendency of the
bankruptcy proceedings. 3.10 Taxes on Loans
No recording fees or similar taxes are charged in connection with mezzanine loans affecting Iowa real estate.
4. Planning and Zoning 4.1 Planning and Zoning Framework
The design, appearance and method of construction of new buildings or refurbishment of existing buildings are controlled by multiple layers of governmental reg - ulations under Iowa law. The applicability and nature vary by municipality and county, but may include state and local building codes, zoning ordinances, subdivi - sion ordinances and site plan ordinances. Building codes address construction requirements designed to address safety concerns. Zoning law involves the division of land within a city or county into districts and regulates uses and developments according to district. Subdivision ordinances govern the landowner’s abil - ity to divide a larger parcel of land into one or more smaller parcels, with the goal of promoting orderly development of the land as a whole. Site plan ordi - nances generally work to ensure that the details of the development of a parcel comply with all applicable laws and promote orderly development at the parcel level. Many counties have adopted standalone ordi - nances governing development of commercial wind or solar energy projects. Local governments, meaning municipal governments and county governments, are responsible for regulat - ing the development and designated use of individual parcels of real estate in Iowa. Local governments must comply with any applicable state law in implement -
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