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PAG LIN 1 1 Section 1. Section 91C.8, subsection 5, Code 1995, is 1 2 amended to read as follows: 1 3 5. The administrative penalties which may be imposed under 1 4 this section shall be not more thanfive hundredone thousand 1 5 dollars in the case of a first violation and not more than 1 6 five thousand dollars for each violation in the case of a 1 7 second or subsequent violation. All administrative penalties 1 8 collected pursuant to this chapter shall be deposited in the 1 9 general fund of the state. 1 10 Sec. 2. NEW SECTION. 714C.1 TITLE. 1 11 This chapter shall be known as and may be cited as the 1 12 "Home Improvement Contractor Act". 1 13 Sec. 3. NEW SECTION. 714C.2 DEFINITIONS. 1 14 As used in this chapter, unless the context otherwise 1 15 requires: 1 16 1. "Contractor" means a person who owns or operates a home 1 17 improvement business or who undertakes, offers to undertake, 1 18 or agrees to perform a home improvement. "Contractor" does 1 19 not include a person who only performs work or has work 1 20 performed on the person's own property. The state, its 1 21 boards, commissions, agencies, departments, and political 1 22 subdivisions, including school districts and other special 1 23 purpose districts, are not contractors for purposes of this 1 24 chapter. 1 25 2. "Home improvement" includes, but is not limited to, the 1 26 repair, replacement, remodeling, alteration, conversion, 1 27 modernization, improvement, rehabilitation, or sandblasting 1 28 of, or addition to, any building, or land, if applicable, or 1 29 that portion thereof which is used or designed to be used as a 1 30 private residence, or the construction, replacement, 1 31 installation, or improvement of driveways, swimming pools, 1 32 porches, garages, roofs, siding, insulation, solar energy 1 33 systems, heating systems, central air conditioning, flooring, 1 34 patios, landscaping, fences, doors and windows, and 1 35 waterproofing in connection with such building, or land, if 2 1 applicable, or that portion thereof which is used or designed 2 2 to be used as a private residence. "Home improvement" does 2 3 not include any of the following: 2 4 a. The construction of a new home. 2 5 b. The sale of goods or materials by a seller who neither 2 6 arranges to perform nor performs, directly or indirectly, any 2 7 work or labor in connection with the installation or 2 8 application of the goods or materials. 2 9 c. The sale of goods or services furnished for commercial 2 10 or business use or for resale. 2 11 d. The sale of appliances, including but not limited to 2 12 stoves, refrigerators, freezers, and room air conditioners, 2 13 which are designed for and are easily removable from the 2 14 premises without material alteration of the premises. 2 15 3. "Home improvement contract" means an agreement between 2 16 a contractor and an owner for the performance of a home 2 17 improvement in which the total price for all work agreed upon 2 18 between the contractor and owner is three thousand dollars or 2 19 greater, except as provided in section 714C.4. 2 20 4. "Owner" means a person who owns or resides in a private 2 21 residence and includes any agent of the person. 2 22 5. "Person" means as defined in section 714.16. 2 23 6. "Private residence" means a single family dwelling or a 2 24 multifamily dwelling consisting of not more than six units. 2 25 Sec. 4. NEW SECTION. 714C.3 BOND REQUIRED. 2 26 1. In addition to any requirement of chapter 91C, a 2 27 contractor doing business in this state, before offering or 2 28 accepting a home improvement contract, shall furnish a surety 2 29 bond to the attorney general, executed by the contractor as 2 30 principal and executed by a corporate surety company licensed 2 31 and qualified to do business within this state. The bond 2 32 shall not be construed to require any surety to perform a home 2 33 improvement contract entered into by the principal on the 2 34 bond. 2 35 2. The bond shall be in a form approved by the attorney 3 1 general and shall be in the amount of forty thousand dollars 3 2 and for the indemnification of any owner who enters into a 3 3 home improvement contract with the contractor from any loss or 3 4 damage caused by the failure of the contractor to comply with 3 5 the provisions of this chapter, chapter 91C or 537, or section 3 6 714.16, or any rules adopted thereunder. The aggregate 3 7 liability of the surety shall not exceed the amount of the 3 8 bond. 3 9 3. The attorney general may file an action in district 3 10 court to recover bond proceeds on behalf of owners who have 3 11 incurred loss or damage caused by the failure of a contractor, 3 12 required to furnish a bond pursuant to this section, to comply 3 13 with this chapter, chapter 91C or 537, or section 714.16, or 3 14 any rules adopted thereunder. 3 15 4. An owner who has incurred loss or damage caused by the 3 16 failure of a contractor, required to furnish bond pursuant to 3 17 this section, to comply with this chapter, chapter 91C or 537, 3 18 or section 714.16, or any rules adopted thereunder, may file 3 19 an action in district court to recover against the bond an 3 20 amount sufficient to recover such loss or damage. 3 21 Sec. 5. NEW SECTION. 714C.4 REQUIREMENTS FOR UNBONDED 3 22 CONTRACTORS. 3 23 1. All home improvement contracts in which the total price 3 24 for all work agreed upon between the contractor and owner is 3 25 at least five hundred dollars, but less than three thousand 3 26 dollars, and for which the contractor has not obtained a bond 3 27 under this chapter shall provide the following notice to the 3 28 owner in at least 10-point boldfaced type before the owner 3 29 signs or otherwise agrees to the home improvement contract: 3 30 NOTICE TO OWNER 3 31 Iowa law requires certain home improvement contractors to 3 32 obtain a $40,000 bond. The bond provides protection to 3 33 consumers who suffer losses due to specified violations of 3 34 law. The bond is not required in connection with certain home 3 35 improvement situations. PLEASE NOTE THAT THE CONTRACTOR IN 4 1 THIS HOME IMPROVEMENT CONTRACT HAS NOT OBTAINED A BOND, AND IS 4 2 THEREFORE REQUIRED TO PROVIDE THIS NOTICE. A consumer who 4 3 suffers losses in connection with a home improvement may 4 4 pursue other legal remedies if no bond is available. 4 5 2. Compliance with this section shall not exempt a 4 6 contractor from compliance with section 714C.3, if that 4 7 section applies. 4 8 Sec. 6. NEW SECTION. 714C.5 BUILDING PERMITS AND PUBLIC 4 9 CONTRACTS. 4 10 A contractor who has not registered as required under 4 11 chapter 91C and posted a bond or provided a notice to 4 12 consumers as required under this chapter shall not seek or 4 13 obtain a permit issued by the state or its political 4 14 subdivisions to perform a home improvement contract and shall 4 15 not enter into a contract to perform construction contracting 4 16 work on behalf of the state, its boards, commissions, 4 17 agencies, departments, and its political subdivisions 4 18 including school districts and other special purpose districts 4 19 until such time as the contractor has registered as required 4 20 under chapter 91C and posted a bond or provided notices to 4 21 consumers as required under this chapter. 4 22 Sec. 7. NEW SECTION. 714C.6 CERTAIN CONTRACTS VOIDABLE. 4 23 A home improvement contract shall be voidable by the owner 4 24 if entered into by a contractor who, at the time of the 4 25 execution of the contract, is not in compliance with this 4 26 chapter or chapter 91C or 555A. 4 27 Sec. 8. NEW SECTION. 714C.7 EFFECT ON INDEBTEDNESS. 4 28 Rescission of any home improvement contract pursuant to 4 29 this chapter or the failure of a home improvement contractor 4 30 to comply with this chapter or chapter 91C or 555A, at the 4 31 time of execution of the contract shall void any contract, 4 32 note, instrument, or other evidence of indebtedness executed 4 33 or entered into in connection with the contract and shall 4 34 constitute a complete defense in any action based on the 4 35 contract, note, instrument, or other evidence of indebtedness 5 1 brought by the contractor or the contractor's successors or 5 2 assigns unless a successor or assign has detrimentally relied 5 3 upon a representation directly from the owner to the successor 5 4 or assign that the contract has not been rescinded. This 5 5 section shall not affect the rights of holders in due course 5 6 of checks made by the owner. 5 7 Sec. 9. NEW SECTION. 714C.8 RULEMAKING. 5 8 The attorney general may adopt rules pursuant to chapter 5 9 17A necessary to implement this chapter. 5 10 Sec. 10. NEW SECTION. 714C.9 PRIVATE ACTION. 5 11 In addition to any other remedies, including but not 5 12 limited to those available under chapter 537 or section 5 13 714.16, a person suffering pecuniary loss as a result of a 5 14 violation by a contractor of this chapter or of chapter 91C, 5 15 537, or 555A, or section 714.16, or any rules adopted 5 16 thereunder, may bring an action against the contractor to 5 17 recover all of the following: 5 18 1. The amount of the pecuniary loss. 5 19 2. Costs and reasonable attorney fees. 5 20 3. Bond proceeds, if applicable, as authorized under 5 21 section 714C.3. 5 22 Sec. 11. NEW SECTION. 714C.10 ATTORNEY GENERAL 5 23 ENFORCEMENT. 5 24 A violation of this chapter constitutes a violation of 5 25 section 714.16, subsection 2, paragraph "a". 5 26 Sec. 12. NEW SECTION. 714C.11 EFFECTIVE DATE. 5 27 This Act takes effect January 1, 1996. 5 28 EXPLANATION 5 29 The bill creates a new chapter relating to home improvement 5 30 contracts and requires home improvement contractors to obtain 5 31 a bond. This bill states that the title of the chapter shall 5 32 be the "Home Improvement Contractor Act". 5 33 This bill defines, for the purposes of this new chapter, 5 34 "contractor", "home improvement", "home improvement contract", 5 35 "owner", "person", and "private residence". The definition of 6 1 "home improvement" excludes new home construction, appliance 6 2 sales, and, under certain circumstances, sales of other goods, 6 3 materials, or services. 6 4 The bill requires home improvement contractors who enter 6 5 into home improvement contracts of $3,000 or more to furnish 6 6 $40,000 surety bonds to the attorney general which may be used 6 7 to compensate home owners who suffer losses due to contractor 6 8 violations of the chapter, chapter 91C relating to contractor 6 9 registration, chapter 537 concerning consumer credit 6 10 transactions, and section 714.16 relating to consumer fraud 6 11 violations. 6 12 The bill also includes requirements for unbonded 6 13 contractors who perform home improvement contracts of between 6 14 $500 and $3,000. 6 15 Section 6 of the bill also requires that home improvement 6 16 contractors that fail to furnish a bond or provide consumer 6 17 notices as required by the chapter and register under chapter 6 18 91C shall not be eligible to apply for building permits. 6 19 Section 7 of the bill provides that home improvement contracts 6 20 are voidable if the contractor is not in compliance with this 6 21 new chapter or with chapter 91C or 555A at the time of 6 22 execution of the contract. 6 23 The bill provides that rescission of a home improvement 6 24 contract pursuant to this chapter or the failure of the 6 25 contractor to comply with this chapter or with chapter 91C or 6 26 555A at the time of the execution of the contract voids any 6 27 evidence of indebtedness based on the contract and constitutes 6 28 a complete defense to any action to collect such indebtedness 6 29 unless a successor or assign of the contract from the 6 30 contractor has relied on a representation directly from the 6 31 owner that the contract has not been rescinded. The bill also 6 32 provides for rulemaking authority to the attorney general. 6 33 This authority is in addition to the attorney general's 6 34 authority to adopt rules under section 714.16. 6 35 The bill creates a private cause of action for persons who 7 1 suffer pecuniary losses due to violations of new chapter 714C 7 2 or of chapter 91C, 537, or 555A, or section 714.16, or any 7 3 rules adopted thereunder, by a contractor and also provides 7 4 that a violation of the chapter is a violation of section 7 5 714.16 relating to consumer frauds subject to enforcement by 7 6 the attorney general. 7 7 The bill becomes effective January 1, 1996. 7 8 The bill also amends a section of chapter 91C to increase 7 9 the administrative penalty for first-time offenders under that 7 10 chapter from $500 to $1,000. 7 11 BACKGROUND STATEMENT 7 12 SUBMITTED BY THE AGENCY 7 13 Complaints concerning problems with home improvement 7 14 contracts have consistently ranked as one of the top 10 most 7 15 frequent consumer complaints received annually by the attorney 7 16 general. Current law is inadequate to address the losses 7 17 incurred by consumers. For example, chapter 91C requires 7 18 contractors to register with the labor division but provides 7 19 only minor administrative penalties for a first-time failure 7 20 to register. In addition, the labor division lacks sufficient 7 21 staff to fully enforce the registration requirements. 7 22 Homeowner complaints most frequently concern the 7 23 contractor's failure, after receiving payment, to properly 7 24 perform the contracted-for services, to do so in a timely 7 25 manner, or in some instances to even begin the job. The 7 26 attorney general and homeowners have resorted to civil court 7 27 action to attempt to recoup homeowner losses to home 7 28 improvement contractors, only to find the contractor lacks 7 29 sufficient funds to make restitution. 7 30 This problem is not unique to this state. Other states 7 31 have dealt with the problem by requiring contractors to be 7 32 bonded and to make bond proceeds available to redress consumer 7 33 losses. Following that precedent, this bill creates a new 7 34 chapter to protect homeowners against consumer fraud by home 7 35 improvement contractors by requiring contractors to obtain 8 1 $40,000 bonds. Bond proceeds will be used to compensate 8 2 homeowners who incur losses by bonded contractors. The bill 8 3 protects small contractors by requiring the bond only for 8 4 contractors who enter into home improvement contracts of 8 5 $3,000 or more. However, the bill requires contractors to 8 6 disclose to their customers if they are not bonded in all 8 7 contracts between $500 and $3,000. 8 8 The bill contains certain provisions which will ensure 8 9 compliance with the requirements of the bill. For example, 8 10 contractors who fail to comply are required not to seek or 8 11 obtain building permits, the contracts they enter into will be 8 12 voidable by homeowners, and contracts of indebtedness will be 8 13 unenforceable when assigned. The bill provides rulemaking 8 14 authority to the attorney general and permits the attorney 8 15 general to bring action under section 714.16 for violations of 8 16 the chapter. The bill further provides a private cause of 8 17 action to homeowners who suffer pecuniary losses as a result 8 18 of a contractor's violation and permits them to seek the 8 19 amount of that loss, costs and reasonable attorney's fees, and 8 20 bond proceeds, if applicable. The effective date of the bill 8 21 is January 1, 1996, to provide sufficient time to contractors 8 22 to obtain bonds and for the attorney general to prepare to 8 23 administer the bond program. 8 24 LSB 1173DP 76 8 25 ec/sc/14.1
Text: SSB00286 Text: SSB00288 Text: SSB00200 - SSB00299 Text: SSB Index Bills and Amendments: General Index Bill History: General Index
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