Senate File 317 - Introduced



                                       SENATE FILE       
                                       BY  WOOD


    Passed Senate, Date               Passed House,  Date             
    Vote:  Ayes        Nays           Vote:  Ayes        Nays         
                 Approved                            

                                      A BILL FOR

  1 An Act requiring in=state home improvement contractors to obtain
  2    surety performance bonds, and providing a criminal penalty.
  3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
  4 TLSB 2425SS 82
  5 ak/es/88

PAG LIN



  1  1    Section 1.  NEW SECTION.  91C.6A  REGISTRATION REQUIRED ==
  1  2 IN=STATE CONTRACTS.
  1  3    A contractor who is not registered with the labor
  1  4 commissioner as required by this chapter shall not be awarded
  1  5 a contract to perform work for the state or an agency of the
  1  6 state.
  1  7    Sec. 2.  NEW SECTION.  91C.6B  HOME IMPROVEMENT CONTRACTOR
  1  8 PERFORMANCE BOND.
  1  9    1.  a.  A contractor shall file with the division of labor
  1 10 services of the department of workforce development a surety
  1 11 bond.  The bond shall be in the amount of seventy=five
  1 12 thousand dollars and shall be for the benefit of any person
  1 13 who, in connection with a home improvement contract with a
  1 14 contractor, is damaged by a contractor's breach of the home
  1 15 improvement contract or by a contractor's violation of section
  1 16 714.16, subsection 2, paragraph "a".  Any person so damaged
  1 17 may bring suit directly on the bond without assignment, and
  1 18 may recover from bond proceeds actual damages, court costs,
  1 19 and reasonable attorney fees.
  1 20    b.  A person filing suit pursuant to this section shall
  1 21 notify the division of labor services of the department of
  1 22 workforce development at the time suit is filed, and the
  1 23 division of labor services of the department of workforce
  1 24 development shall maintain a record, available for public
  1 25 inspection and copying, of all suits commenced.  Notification
  1 26 is not a precondition to the filing of a suit, and failure to
  1 27 notify the division of labor services of the department of
  1 28 workforce development shall in no way affect the validity of a
  1 29 lawsuit.
  1 30    2.  The attorney general may bring an action in equity on
  1 31 behalf of the state to recover bond proceeds for persons who
  1 32 incur damage due to a contractor's breach of a home
  1 33 improvement contract or violation of section 714.16,
  1 34 subsection 2, paragraph "a", in connection with a person's
  1 35 home improvement contract with a contractor.
  2  1    3.  Priority for payment of the proceeds of a bond issued
  2  2 pursuant to this section shall be based upon the time of
  2  3 filing notice of suit with the division of labor services of
  2  4 the department of workforce development, except that any
  2  5 action by the attorney general to recover bond proceeds shall
  2  6 take precedence over all other claims on the bond, regardless
  2  7 of the time of filing.
  2  8    4.  The issuer of a bond shall notify the labor
  2  9 commissioner if a bond issued pursuant to this section is
  2 10 canceled.  If a bond issued pursuant to this section ceases to
  2 11 be in effect, the contractor's registration pursuant to this
  2 12 chapter shall be void.  The failure of a contractor to have a
  2 13 valid surety bond on file with the division of labor services
  2 14 of the department of workforce development as of the date of a
  2 15 home improvement contract shall make the contract and any
  2 16 note, instrument, or other evidence of indebtedness executed
  2 17 or entered into in connection with the contract voidable, and
  2 18 shall constitute a complete defense in any action based on the
  2 19 contract, note, instrument, or other evidence of indebtedness
  2 20 brought by the contractor or the contractor's successors or
  2 21 assigns.
  2 22    5.  Any contractor who violates the provisions of this
  2 23 section shall be guilty of a simple misdemeanor.
  2 24    Sec. 3.  Section 91C.7, subsection 1, Code 2007, is amended
  2 25 by striking the subsection.
  2 26                           EXPLANATION
  2 27    This bill requires that in=state contractors who take
  2 28 contracts for home improvement work to obtain a surety bond of
  2 29 $75,000 before accepting contracts.  The bond benefits a
  2 30 person who may be damaged by a contractor's breach of contract
  2 31 or by a contractor's violation of Code section 714.16,
  2 32 subsection 2, paragraph "a", the consumer fraud statute.  Any
  2 33 person damaged in either way may sue directly on the bond and
  2 34 may recover actual damages, court costs, and reasonable
  2 35 attorney fees.  When the suit is filed, the person who sues on
  3  1 the bond shall notify the division of labor services of the
  3  2 department of workforce development, which shall keep a public
  3  3 record of all suits commenced.  However, notification is not a
  3  4 precondition to filing a suit and failure to notify the
  3  5 department does not in any way invalidate the lawsuit.
  3  6    The bill states that the attorney general may also bring an
  3  7 action in equity against the bond on behalf of the state to
  3  8 recover bond proceeds for persons damaged due to a
  3  9 contractor's breach of contract or violation of the consumer
  3 10 fraud statute in connection with a home improvement project
  3 11 contract.
  3 12    The bill provides that damages will be paid from the
  3 13 proceeds of the bond based on the time of filing notice of
  3 14 suit with the division of labor services of the department of
  3 15 workforce development, except that any action by the attorney
  3 16 general to recover damages against the bond shall take
  3 17 precedence over all other claims, no matter the time of
  3 18 filing.
  3 19    The bill requires that when a bond issued pursuant to this
  3 20 section is canceled, notice shall be given to the labor
  3 21 commissioner by the issuer of the bond.  If the bond becomes
  3 22 ineffective, then the contractor's registration pursuant to
  3 23 this chapter becomes void.  The bill provides that the failure
  3 24 of a contractor to have a valid surety bond on file as of the
  3 25 date of a home improvement contract makes the contract and any
  3 26 note or instrument of indebtedness executed or entered into in
  3 27 connection with the contract voidable, and shall be a complete
  3 28 defense in any action brought based on the contract or
  3 29 evidence of indebtedness by the contractor or the contractor's
  3 30 successors or assigns.
  3 31    The first section of the bill moves a current provision of
  3 32 law that requires a contractor to be registered with the state
  3 33 prior to being awarded a contract from the state to a separate
  3 34 section so that it applies to all contractors.
  3 35    The bill provides that a contractor who violates the
  4  1 provisions of this Code section is guilty of a simple
  4  2 misdemeanor.  A simple misdemeanor is punishable by
  4  3 confinement for no more than 30 days or a fine of at least $65
  4  4 but not more than $625 or by both.
  4  5 LSB 2425SS 82
  4  6 ak:rj/es/88.1