S.F. 456 Section 1. Section 91C.2, subsection 3, Code 2019, is 1 amended to read as follows: 2 3. An In addition to any bond required by section 91C.6B, 3 an out-of-state contractor shall either file a surety bond, 4 as provided in section 91C.7 , with the division of labor 5 services in the amount of twenty-five thousand dollars or 6 shall provide a statement to the division of labor services 7 that the contractor is prequalified to bid on projects for the 8 department of transportation pursuant to section 314.1 . 9 Sec. 2. NEW SECTION . 91C.5A Registered contractors —— 10 unpaid court orders. 11 1. The labor commissioner shall make available on the 12 division of labor services of the department of workforce 13 development’s internet site a searchable database of all 14 contractors registered under this chapter with unpaid court 15 orders. 16 2. The labor commissioner shall adopt rules to implement 17 this section. 18 Sec. 3. Section 91C.6, Code 2019, is amended to read as 19 follows: 20 91C.6 Rules. 21 The labor commissioner shall adopt rules, pursuant to 22 chapter 17A , determined to be reasonably necessary for phasing 23 in, administering, and enforcing the system of contractor 24 registration and bonding established by this chapter . 25 Sec. 4. NEW SECTION . 91C.6A State contracts with 26 unregistered contractors prohibited. 27 A contractor who is not registered with the labor 28 commissioner as required by this chapter shall not be awarded 29 a contract to perform work for the state or an agency of the 30 state. 31 Sec. 5. NEW SECTION . 91C.6B Home improvement contractor 32 performance bond —— penalty. 33 1. For purposes of this section: 34 a. “Division” means the division of labor services of the 35 -1- LSB 2669XS (3) 88 gh/rn 1/ 5

S.F. 456 department of workforce development. 1 b. “Home improvement contract” means any contract for the 2 improvement or repair of existing residential property and the 3 appurtenances of such property, including but not limited to 4 landscaping, garages, storage sheds, sidewalks, driveways, and 5 retaining walls, but does not include contracts for less than 6 two hundred dollars in the aggregate. 7 2. Any contractor, prior to entering into a home improvement 8 contract in Iowa, shall file with the division a surety bond. 9 The bond shall be in the amount of seventy-five thousand 10 dollars and shall be for the benefit of any person who, in 11 connection with a home improvement contract with a contractor, 12 is damaged by the contractor’s breach of the home improvement 13 contract or by the contractor’s violation of section 714.16, 14 regardless of whether the person has a direct cause of action 15 pursuant to section 714.16. Any person so damaged may bring 16 suit directly on the bond without assignment, and may recover 17 from bond proceeds actual damages, court costs, and reasonable 18 attorney fees. 19 3. A person filing suit pursuant to this section shall 20 notify the division at the time the suit is filed, and the 21 division shall maintain a record, available for public 22 inspection and copying, of all suits commenced. Notification 23 is not a precondition to the filing of a suit, and failure to 24 notify the division shall in no way affect the validity of a 25 lawsuit. However, notification pursuant to this section must 26 be completed prior to payout of any bond proceeds pursuant to 27 this section. 28 4. The attorney general may make a direct claim on a 29 bond or bring an action in equity on behalf of the state 30 to recover bond proceeds for persons who incur damage due 31 to a contractor’s breach of a home improvement contract or 32 violation of section 714.16 in connection with a person’s home 33 improvement contract with a contractor. 34 5. Priority for payment of the proceeds of a bond filed 35 -2- LSB 2669XS (3) 88 gh/rn 2/ 5

S.F. 456 pursuant to this section shall be based upon the time of filing 1 a notice of suit with the division, except that any claim or 2 action by the attorney general to recover bond proceeds shall 3 take precedence over all other claims on the bond, regardless 4 of the time of filing. 5 6. The issuer of a surety bond filed pursuant to this 6 section shall notify the labor commissioner upon the 7 cancellation of such bond. If a surety bond filed pursuant to 8 this section is canceled or otherwise ceases to be in effect, 9 the contractor’s registration pursuant to this chapter shall be 10 void. The failure of a contractor to have a valid surety bond 11 on file with the division as of the date of a home improvement 12 contract shall make the contract and any note, instrument, or 13 other evidence of indebtedness executed or entered into in 14 connection with the contract voidable, and shall constitute a 15 complete defense in any action based on the contract, note, 16 instrument, or other evidence of indebtedness brought by the 17 contractor or the contractor’s successors or assigns. 18 7. a. A contractor who violates any provision of this 19 section is guilty of a simple misdemeanor. 20 b. A violation of this section is an unlawful practice 21 pursuant to section 714.16. 22 Sec. 6. Section 91C.7, subsection 1, Code 2019, is amended 23 by striking the subsection. 24 EXPLANATION 25 The inclusion of this explanation does not constitute agreement with 26 the explanation’s substance by the members of the general assembly. 27 This bill relates to contractor registration and bonding 28 requirements. 29 The bill requires the labor commissioner of the division of 30 labor services of the department of workforce development to 31 make available on the division’s internet site a searchable 32 database of all contractors registered under Code chapter 33 91C with unpaid court orders. The bill requires the labor 34 commissioner to adopt rules to implement this requirement. 35 -3- LSB 2669XS (3) 88 gh/rn 3/ 5

S.F. 456 The bill requires in new Code section 91C.6B that a 1 contractor, prior to entering into a home improvement contract 2 in Iowa, obtain a surety bond of $75,000. The new bond is in 3 addition to any other bond requirements in Code chapter 91C. 4 The bond benefits a person who is damaged by the contractor’s 5 breach of contract or by the contractor’s breach of Code 6 section 714.16, the consumer fraud statute, regardless of 7 whether the person has a direct cause of action under that Code 8 section. Any person damaged in either way may sue directly 9 on the bond and may recover actual damages, court costs, and 10 reasonable attorney fees. The bill defines “home improvement 11 contract” to mean any contract for the improvement or repair 12 of existing residential property and the appurtenances of such 13 property, as specified in the bill, but not including contracts 14 of less than $200 in total. 15 The bill provides that when a suit is filed, the person who 16 sues on the bond shall notify the division of labor services, 17 which shall maintain a public record of all suits commenced. 18 Notification is not a precondition to filing a suit and 19 failure to notify the division does not in any way invalidate a 20 lawsuit. However, bond proceeds cannot be paid out to anyone 21 who has not filed notification. 22 The bill provides that the attorney general may also make 23 a direct claim on a bond or bring an action in equity against 24 the bond on behalf of the state to recover bond proceeds for 25 persons damaged due to a contractor’s breach of contract or 26 violation of the consumer fraud statute in connection with a 27 home improvement contract. The attorney general’s action shall 28 take precedence over all other claims on the bond regardless 29 of the time of filing. 30 The bill requires the issuer of a bond to notify the labor 31 commissioner upon the cancellation of the bond. If a bond is 32 canceled or otherwise ceases to be in effect, the contractor’s 33 registration pursuant to Code chapter 91C shall be void. The 34 failure of a contractor to have a valid bond on file as of the 35 -4- LSB 2669XS (3) 88 gh/rn 4/ 5

S.F. 456 date of a home improvement contract makes the contract and any 1 note or instrument of indebtedness executed or entered into 2 in connection with the contract to the contractor voidable, 3 and shall be a complete defense in any action based on the 4 contract or evidence of indebtedness by the contractor of the 5 contractor’s successors or assigns. 6 The bill provides that a contractor who violates any 7 provision of new Code section 91C.6B is guilty of a simple 8 misdemeanor. A simple misdemeanor is punishable by confinement 9 for no more than 30 days or a fine of at least $65 but 10 not more than $625 or by both. The bill further provides 11 that a violation of new Code section 91C.6B is an unlawful 12 practice pursuant to Code section 714.16, which allows the 13 attorney general to investigate, issue subpoenas, and commence 14 civil proceedings seeking restraining orders or injunctions 15 prohibiting persons from engaging in unlawful practices 16 or seeking termination of the business affairs of a person 17 engaging in unlawful practices. A court may also impose a 18 civil penalty of up to $40,000 per violation against a person 19 found to have committed an unlawful practice. 20 -5- LSB 2669XS (3) 88 gh/rn 5/ 5