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Senate Study Bill 1156 - IntroducedA Bill ForAn Act 1relating to unfair residential real estate service
2agreements, providing penalties, and making penalties
3applicable.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 558B.1 Definitions.
2As used in this chapter, unless the context otherwise
3requires:
41. a. “Common interest community” means real estate
5described in a declaration with respect to which a person,
6by virtue of the person’s ownership of a unit, is obligated
7to pay for a share of real estate taxes, insurance premiums,
8maintenance, or improvement of, or services or other expenses
9related to, common elements, other units, or other real estate
10described in the declaration. “Common interest community”
11includes a planned community, a cooperative under chapter 499A,
12and a horizontal property regime under chapter 499B.
13b. “Common interest community” does not include any of the
14following:
15(1) A covenant that requires the owners of separate parcels
16of real estate to share costs or other obligations related to a
17wall, driveway, well, or other similar structure, unless all
18such owners consent in writing to the creation of a common
19interest community.
20(2) Real estate described in paragraph “a” if all units are
21owned by a single owner.
222. “Consumer” means a natural person being provided a
23service under a service agreement, or the natural person’s
24legal representative.
253. “Record” means presentation of a document to a county
26recorder in this state for official placement in the public
27land records.
284. “Residential real estate” means real property located
29in this state which is used primarily for personal, family,
30or household purposes and is improved by one to four dwelling
31units.
325. “Service agreement” means a contract under which a person
33agrees to provide a service in connection with the maintenance
34of, the purchase of, or the sale of, residential real estate.
35 Sec. 2. NEW SECTION. 558B.2 Unfair service agreements —
-1-1penalties.
21. A service agreement shall be considered unfair under this
3section if a service that is covered by the service agreement
4is not required to be completely performed within one year
5after the date on which the service agreement is executed, and
6the service agreement has any of the following characteristics:
7a. The service agreement purports to run with the land or
8to be binding on future owners of interests in the residential
9real estate that is the subject of the service agreement.
10b. The service agreement permits assignment of the right to
11provide service under the service agreement without requiring
12notice to, and the consent of, the owner of the residential
13real estate that is the subject of the service agreement.
14c. The service agreement purports to create a lien,
15encumbrance, or other real property security interest on the
16residential real estate that is the subject of the service
17agreement.
182. If a service agreement is unfair under this section, the
19service agreement shall be unenforceable.
203. If a person enters into an unfair service agreement
21with a consumer, the person commits an unlawful practice under
22section 714.16.
234. a. A person shall not record, or cause to be recorded,
24an unfair service agreement, or a notice or memorandum of an
25unfair service agreement.
26b. A person who records, or causes to be recorded, a
27notice or memorandum of an unfair service agreement commits an
28aggravated misdemeanor.
29c. A county recorder may refuse to record an unfair service
30agreement.
31d. If an unfair service agreement is recorded, the recorded
32service agreement shall not provide actual or constructive
33notice against an otherwise bona fide purchaser or creditor,
34or actual or constructive notice against heirs or other
35successors-in-interest to the residential real estate that is
-2-1the subject of the recorded service agreement.
2e. If an unfair service agreement or a notice or memorandum
3of an unfair service agreement is recorded, any person with an
4interest in the residential real estate that is the subject
5of the service agreement may apply to a district court in the
6county in which the service agreement is recorded for a court
7order declaring the service agreement unenforceable.
8f. If an unfair service agreement or a notice or memorandum
9of an unfair service agreement is recorded, any person with an
10interest in the residential real estate that is the subject
11of the recorded service agreement may recover actual damages,
12costs, and attorney fees as may be proven against the person
13who recorded the service agreement.
145. This section does not apply to any of the following:
15a. A home warranty or similar agreement that covers the
16cost of maintenance for a fixed period of time of a major home
17system including but not limited to plumbing, electrical,
18heating, ventilation, or air conditioning.
19b. An insurance contract.
20c. An option or a right of refusal to purchase residential
21real estate.
22d. A maintenance or repair agreement entered into by the
23homeowners’ association of a common interest community.
24e. A mortgage loan, or a commitment to make or to receive a
25mortgage loan.
26f. A security agreement under the uniform commercial code
27related to the sale or rental of personal property or fixtures.
28g. Water, sewer, electrical, telephone, cable, or any other
29regulated utility service providers.
306. This section shall not be construed to impair a person’s
31rights established by a mechanics’ lien under chapter 572.
32 Sec. 3. Section 714.16, subsection 2, Code 2023, is amended
33by adding the following new paragraph:
34 NEW PARAGRAPH. q. It shall be an unlawful practice for a
35person to violate section 558B.2, subsection 3.
-3-1EXPLANATION
2The inclusion of this explanation does not constitute agreement with
3the explanation’s substance by the members of the general assembly.
4This bill relates to unfair residential real estate service
5agreements (agreement).
6An agreement shall be considered unfair under the bill if a
7service that is covered by the agreement is not required to be
8completely performed within one year after the date on which
9the agreement is executed, and the agreement has any of the
10characteristics detailed in the bill. “Service agreement” is
11defined in the bill as a contract under which a person agrees
12to provide a service in connection with the maintenance of,
13the purchase of, or the sale of, residential real estate (real
14estate). “Residential real estate” is also defined in the
15bill.
16If an agreement is unfair, the agreement shall be
17unenforceable. If a person enters into an unfair agreement
18with a consumer, the person commits an unlawful practice.
19Several types of remedies are available if a court finds that a
20person has committed an unlawful practice, including injunctive
21relief, disgorgement of moneys or property, and a civil penalty
22not to exceed $40,000 per violation.
23The bill prohibits a person from recording or causing to be
24recorded an unfair agreement, or a notice or memorandum (memo)
25of an unfair agreement. A person that records, or causes to
26be recorded, a notice or memo of an unfair agreement commits
27an aggravated misdemeanor. An aggravated misdemeanor is
28punishable by confinement for no more than two years and a fine
29of at least $855 but not more than $8,540.
30A county recorder may refuse to record an unfair agreement.
31If an unfair agreement is recorded, the recorded agreement
32shall not provide actual or constructive notice against an
33otherwise bona fide purchaser or creditor, or against heirs
34or other successors-in-interest to the real estate that is
35the subject of the agreement. If an unfair agreement or a
-4-1notice or memo of an unfair agreement is recorded, any person
2with an interest in the real estate that is the subject of
3the agreement may apply to a district court in the county in
4which it is recorded for a court order declaring the agreement
5unenforceable, and any person with an interest in the real
6estate that is the subject of the agreement may recover actual
7damages, costs, and attorney fees as may be proven against the
8person that recorded the agreement.
9The bill does not apply to a home warranty or similar
10agreement, an insurance contract, an option or right of refusal
11to purchase real estate, a maintenance or repair agreement
12entered into by the homeowners’ association of a common
13interest community, a mortgage loan or a commitment to make
14or receive a mortgage loan, a security agreement under the
15uniform commercial code relating to the sale or rental of
16personal property or fixtures, or to regulated utility service
17providers. “Common interest community” is defined in the bill.
18The bill shall also not be construed to impair a person’s
19rights established by a mechanics’ lien.
-5-ko/ns
2agreements, providing penalties, and making penalties
3applicable.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 558B.1 Definitions.
2As used in this chapter, unless the context otherwise
3requires:
41. a. “Common interest community” means real estate
5described in a declaration with respect to which a person,
6by virtue of the person’s ownership of a unit, is obligated
7to pay for a share of real estate taxes, insurance premiums,
8maintenance, or improvement of, or services or other expenses
9related to, common elements, other units, or other real estate
10described in the declaration. “Common interest community”
11includes a planned community, a cooperative under chapter 499A,
12and a horizontal property regime under chapter 499B.
13b. “Common interest community” does not include any of the
14following:
15(1) A covenant that requires the owners of separate parcels
16of real estate to share costs or other obligations related to a
17wall, driveway, well, or other similar structure, unless all
18such owners consent in writing to the creation of a common
19interest community.
20(2) Real estate described in paragraph “a” if all units are
21owned by a single owner.
222. “Consumer” means a natural person being provided a
23service under a service agreement, or the natural person’s
24legal representative.
253. “Record” means presentation of a document to a county
26recorder in this state for official placement in the public
27land records.
284. “Residential real estate” means real property located
29in this state which is used primarily for personal, family,
30or household purposes and is improved by one to four dwelling
31units.
325. “Service agreement” means a contract under which a person
33agrees to provide a service in connection with the maintenance
34of, the purchase of, or the sale of, residential real estate.
35 Sec. 2. NEW SECTION. 558B.2 Unfair service agreements —
-1-1penalties.
21. A service agreement shall be considered unfair under this
3section if a service that is covered by the service agreement
4is not required to be completely performed within one year
5after the date on which the service agreement is executed, and
6the service agreement has any of the following characteristics:
7a. The service agreement purports to run with the land or
8to be binding on future owners of interests in the residential
9real estate that is the subject of the service agreement.
10b. The service agreement permits assignment of the right to
11provide service under the service agreement without requiring
12notice to, and the consent of, the owner of the residential
13real estate that is the subject of the service agreement.
14c. The service agreement purports to create a lien,
15encumbrance, or other real property security interest on the
16residential real estate that is the subject of the service
17agreement.
182. If a service agreement is unfair under this section, the
19service agreement shall be unenforceable.
203. If a person enters into an unfair service agreement
21with a consumer, the person commits an unlawful practice under
22section 714.16.
234. a. A person shall not record, or cause to be recorded,
24an unfair service agreement, or a notice or memorandum of an
25unfair service agreement.
26b. A person who records, or causes to be recorded, a
27notice or memorandum of an unfair service agreement commits an
28aggravated misdemeanor.
29c. A county recorder may refuse to record an unfair service
30agreement.
31d. If an unfair service agreement is recorded, the recorded
32service agreement shall not provide actual or constructive
33notice against an otherwise bona fide purchaser or creditor,
34or actual or constructive notice against heirs or other
35successors-in-interest to the residential real estate that is
-2-1the subject of the recorded service agreement.
2e. If an unfair service agreement or a notice or memorandum
3of an unfair service agreement is recorded, any person with an
4interest in the residential real estate that is the subject
5of the service agreement may apply to a district court in the
6county in which the service agreement is recorded for a court
7order declaring the service agreement unenforceable.
8f. If an unfair service agreement or a notice or memorandum
9of an unfair service agreement is recorded, any person with an
10interest in the residential real estate that is the subject
11of the recorded service agreement may recover actual damages,
12costs, and attorney fees as may be proven against the person
13who recorded the service agreement.
145. This section does not apply to any of the following:
15a. A home warranty or similar agreement that covers the
16cost of maintenance for a fixed period of time of a major home
17system including but not limited to plumbing, electrical,
18heating, ventilation, or air conditioning.
19b. An insurance contract.
20c. An option or a right of refusal to purchase residential
21real estate.
22d. A maintenance or repair agreement entered into by the
23homeowners’ association of a common interest community.
24e. A mortgage loan, or a commitment to make or to receive a
25mortgage loan.
26f. A security agreement under the uniform commercial code
27related to the sale or rental of personal property or fixtures.
28g. Water, sewer, electrical, telephone, cable, or any other
29regulated utility service providers.
306. This section shall not be construed to impair a person’s
31rights established by a mechanics’ lien under chapter 572.
32 Sec. 3. Section 714.16, subsection 2, Code 2023, is amended
33by adding the following new paragraph:
34 NEW PARAGRAPH. q. It shall be an unlawful practice for a
35person to violate section 558B.2, subsection 3.
-3-1EXPLANATION
2The inclusion of this explanation does not constitute agreement with
3the explanation’s substance by the members of the general assembly.
4This bill relates to unfair residential real estate service
5agreements (agreement).
6An agreement shall be considered unfair under the bill if a
7service that is covered by the agreement is not required to be
8completely performed within one year after the date on which
9the agreement is executed, and the agreement has any of the
10characteristics detailed in the bill. “Service agreement” is
11defined in the bill as a contract under which a person agrees
12to provide a service in connection with the maintenance of,
13the purchase of, or the sale of, residential real estate (real
14estate). “Residential real estate” is also defined in the
15bill.
16If an agreement is unfair, the agreement shall be
17unenforceable. If a person enters into an unfair agreement
18with a consumer, the person commits an unlawful practice.
19Several types of remedies are available if a court finds that a
20person has committed an unlawful practice, including injunctive
21relief, disgorgement of moneys or property, and a civil penalty
22not to exceed $40,000 per violation.
23The bill prohibits a person from recording or causing to be
24recorded an unfair agreement, or a notice or memorandum (memo)
25of an unfair agreement. A person that records, or causes to
26be recorded, a notice or memo of an unfair agreement commits
27an aggravated misdemeanor. An aggravated misdemeanor is
28punishable by confinement for no more than two years and a fine
29of at least $855 but not more than $8,540.
30A county recorder may refuse to record an unfair agreement.
31If an unfair agreement is recorded, the recorded agreement
32shall not provide actual or constructive notice against an
33otherwise bona fide purchaser or creditor, or against heirs
34or other successors-in-interest to the real estate that is
35the subject of the agreement. If an unfair agreement or a
-4-1notice or memo of an unfair agreement is recorded, any person
2with an interest in the real estate that is the subject of
3the agreement may apply to a district court in the county in
4which it is recorded for a court order declaring the agreement
5unenforceable, and any person with an interest in the real
6estate that is the subject of the agreement may recover actual
7damages, costs, and attorney fees as may be proven against the
8person that recorded the agreement.
9The bill does not apply to a home warranty or similar
10agreement, an insurance contract, an option or right of refusal
11to purchase real estate, a maintenance or repair agreement
12entered into by the homeowners’ association of a common
13interest community, a mortgage loan or a commitment to make
14or receive a mortgage loan, a security agreement under the
15uniform commercial code relating to the sale or rental of
16personal property or fixtures, or to regulated utility service
17providers. “Common interest community” is defined in the bill.
18The bill shall also not be construed to impair a person’s
19rights established by a mechanics’ lien.
-5-ko/ns