H.F. 381 Section 1. NEW SECTION . 573B.1 Title. 1 This chapter shall be known as the “Iowa Fairness in Private 2 Construction Contracts Act” . 3 Sec. 2. NEW SECTION . 573B.2 Definitions. 4 For the purposes of this chapter: 5 1. “Construction” means furnishing labor, equipment, 6 material, or supplies used or consumed for the design, 7 construction, alteration, renovation, repair, or maintenance of 8 a building, structure, appurtenance, or other improvement to 9 real property, including any moving, demolition, or excavation. 10 2. “Contract” means a contract or agreement concerning 11 construction entered into by and between an owner and 12 a contractor, a contractor and a subcontractor, or a 13 subcontractor and another subcontractor. 14 3. “Contractor” means a person or entity that engages in 15 the business of construction and has a contract with an owner 16 of the real property or with a trustee, agent, or spouse of an 17 owner. 18 4. “Owner” means the record titleholder or a person or 19 entity for whose use or benefit any construction is undertaken, 20 who has the capacity to contract, including a guardian. 21 5. “Private construction” means construction of or on 22 private property. 23 6. “Retainage” means money earned by a contractor or 24 subcontractor but withheld to ensure proper performance by the 25 contractor or subcontractor. 26 7. “Subcontractor” means a person or entity that engages 27 in the business of construction, except a person or entity 28 entering into a contract directly with the owner of the real 29 property. 30 Sec. 3. NEW SECTION . 573B.3 Private construction contracts 31 —— payment —— provisions against public policy —— failure to pay. 32 1. A person or entity that enters into a contract for 33 private construction shall make all payments pursuant to the 34 terms of the contract and in accordance with this chapter. 35 -1- LSB 2215YH (7) 84 je/rj 1/ 12

H.F. 381 2. The following provisions in a contract for private 1 construction are void and unenforceable as contrary to public 2 policy: 3 a. A provision that purports to waive, release, or 4 extinguish the right to resolve disputes through litigation 5 in court or substantive or procedural rights in connection 6 with such litigation. However, a contract may require 7 binding arbitration as a substitute for litigation or require 8 nonbinding alternative dispute resolution as a prerequisite to 9 litigation. 10 b. A provision that purports to waive, release, or 11 extinguish rights provided by chapter 660, except that a 12 contract may require a contractor or subcontractor to provide a 13 waiver or release of such rights as a condition for payment, 14 but only to the extent of the amount of payment received. 15 c. A provision that purports to waive, release, or 16 extinguish rights of subrogation for losses or claims covered 17 or paid by liability or workers’ compensation insurance unless 18 permitted under chapter 87 or Title XIII, subtitle 1. 19 3. A provision in a contract for private construction 20 providing that a payment from a contractor or subcontractor 21 to a subcontractor is contingent or conditioned upon receipt 22 of a payment from any other private party is no defense to a 23 claim to enforce a mechanic’s lien or bond to secure payment of 24 claims pursuant to chapter 660. 25 4. A contract for private construction shall provide that 26 payment of amounts due a contractor from an owner, except 27 retainage, shall be made within thirty days after the owner 28 receives a timely, properly completed request for an undisputed 29 payment. 30 5. If the owner fails to pay a contractor within thirty 31 days pursuant to subsection 4, the owner shall pay interest to 32 the contractor beginning on the thirty-first day after receipt 33 of the request for payment, computed at the rate of eighteen 34 percent per annum on the undisputed payment. 35 -2- LSB 2215YH (7) 84 je/rj 2/ 12

H.F. 381 6. A contractor shall pay its subcontractors any amounts 1 due within seven business days of receipt of payment from the 2 owner, including payment of retainage, if retainage is released 3 by the owner, if the subcontractor has provided a timely, 4 properly completed request for an undisputed payment to the 5 contractor. 6 7. If a contractor fails to pay a subcontractor within 7 seven business days pursuant to subsection 6, the contractor 8 shall pay interest to the subcontractor beginning on the eighth 9 business day after receipt of payment by the contractor, 10 computed at the rate of eighteen percent per annum on the 11 undisputed payment. 12 8. The provisions of subsections 6 and 7 apply to a payment 13 from a subcontractor to its subcontractor. 14 Sec. 4. NEW SECTION . 573B.4 Retainage. 15 1. An owner, contractor, or subcontractor may withhold 16 no more than ten percent retainage from the amount of any 17 undisputed payment due. 18 2. If an owner, contractor, or subcontractor fails to pay 19 retainage pursuant to the terms of a contract for private 20 construction or as required by this chapter, the owner, 21 contractor, or subcontractor shall pay interest to the 22 contractor or subcontractor to whom payment was due, beginning 23 on the first business day after the payment was due, at a rate 24 of eighteen percent per annum. 25 Sec. 5. NEW SECTION . 573B.5 Suspension of performance. 26 If any undisputed payment is not made within seven business 27 days after the payment date established in a contract for 28 private construction or in this chapter, the contractor and any 29 subcontractors may provide written notice to the owner and, in 30 the case of a subcontractor, written notice to the contractor. 31 Seven business days after the provision of the written notice, 32 the contractor or subcontractor, without prejudice to any 33 other available remedy, may suspend further performance 34 until payment, including applicable interest, is made. The 35 -3- LSB 2215YH (7) 84 je/rj 3/ 12

H.F. 381 contract period for each contract affected by the suspension 1 shall be extended for a period equal to the duration of the 2 suspension, and the contract sum for each affected contract 3 shall be increased by the suspending party’s reasonable costs 4 of demobilization, delay, and remobilization. 5 Sec. 6. NEW SECTION . 573B.6 Action or arbitration to 6 enforce. 7 In any action to enforce the provisions of this chapter, 8 including arbitration, the court or arbitrator shall award 9 costs and reasonable attorney fees to the prevailing party. 10 Venue of such an action shall be in the county where the 11 applicable real property is located. The hearing in such an 12 arbitration shall be held in the county where the applicable 13 real property is located. 14 Sec. 7. NEW SECTION . 573B.7 Waiver or variance prohibited. 15 The rights and duties prescribed by this chapter shall not be 16 waived or varied under the terms of a contract. The terms of a 17 contract waiving or varying the rights and duties prescribed by 18 this chapter shall be unenforceable. 19 Sec. 8. NEW SECTION . 573B.8 Applicability. 20 The provisions of this chapter do not apply to single-family 21 residential housing and multifamily residential housing of four 22 units or less. The provisions of this chapter shall not apply 23 to public works or public improvement projects. 24 Sec. 9. NEW SECTION . 573C.1 Title. 25 This chapter shall be known as the “Iowa Fairness in Public 26 Construction Contracts Act” . 27 Sec. 10. NEW SECTION . 573C.2 Definitions. 28 For the purposes of this chapter: 29 1. “Construction” means furnishing labor, equipment, 30 material, or supplies used or consumed for the design, 31 construction, alteration, renovation, repair, or maintenance of 32 a building, structure, appurtenance, or other improvement to 33 real property, including any moving, demolition, or excavation. 34 2. “Contract” means a contract or agreement concerning 35 -4- LSB 2215YH (7) 84 je/rj 4/ 12

H.F. 381 construction entered into by and between an owner and 1 a contractor, a contractor and a subcontractor, or a 2 subcontractor and another subcontractor. 3 3. “Contractor” means a person or entity that engages in 4 the business of construction and has a contract with an owner 5 of the real property or with a trustee, agent, or spouse of an 6 owner. 7 4. “Owner” means the record titleholder or a person or 8 entity for whose use or benefit any construction is undertaken, 9 who has the capacity to contract, including a guardian. 10 5. “Public construction” means construction under the 11 control of a public entity and paid for in whole or in part with 12 funds of a public entity. 13 6. “Public entity” means the state, an agency of the state, 14 or a political subdivision. 15 7. “Subcontractor” means a person or entity that engages 16 in the business of construction, except a person or entity 17 entering into a contract directly with the owner of the real 18 property. 19 Sec. 11. NEW SECTION . 573C.3 Public construction contracts 20 —— payment —— provisions against public policy —— failure to pay. 21 1. A person or entity that enters into a contract for public 22 construction shall make all payments pursuant to the terms of 23 the contract and in accordance with this chapter. 24 2. The following provisions in a contract for public 25 construction are void and unenforceable as contrary to public 26 policy: 27 a. A provision that purports to waive, release, or 28 extinguish the right to resolve disputes through litigation in 29 court or substantive or procedural rights in connection with 30 such litigation. However, a contract may require nonbinding 31 alternative dispute resolution as a prerequisite to litigation. 32 b. A provision that purports to waive, release, or 33 extinguish rights to file a claim against a payment or 34 performance bond, except that a contract may require a 35 -5- LSB 2215YH (7) 84 je/rj 5/ 12

H.F. 381 contractor or subcontractor to provide a waiver or release of 1 such rights as a condition for payment, but only to the extent 2 of the amount of payment received. 3 c. A provision that purports to waive, release, or 4 extinguish rights of subrogation for losses or claims covered 5 or paid by liability or workers’ compensation insurance unless 6 permitted under chapter 87 or Title XIII, subtitle 1. 7 d. A provision that purports to waive the right of a party 8 to collect damages for delays caused by another party. 9 3. A contract for public construction shall provide that 10 payment of amounts due a contractor from an owner shall be made 11 within thirty days after the owner receives a timely, properly 12 completed request for an undisputed payment according to terms 13 of the contract, unless extenuating circumstances exist which 14 would preclude approval of payment within thirty days. If such 15 extenuating circumstances exist, payment shall be made within 16 forty-five days after the owner receives a payment request. 17 4. The architect or engineer of record or agent of the owner 18 shall review, approve, and forward a request for an undisputed 19 payment to the owner within seven business days of receipt from 20 the contractor. 21 5. If an owner fails to pay a contractor within the time 22 period set forth in subsection 3, the owner shall pay interest 23 computed at the rate of eighteen percent per annum on the 24 undisputed payment to the contractor beginning on the day 25 following the end of the time period set forth in subsection 3. 26 6. A contractor shall pay its subcontractors any amounts 27 due within seven business days of receipt of payment from the 28 owner, if the subcontractor has provided a timely, properly 29 completed request for an undisputed payment to the contractor. 30 7. If a contractor fails to pay a subcontractor within 31 seven business days pursuant to subsection 6, the contractor 32 shall pay interest to the subcontractor beginning on the eighth 33 business day after receipt of payment by the contractor, 34 computed at the rate of eighteen percent per annum on the 35 -6- LSB 2215YH (7) 84 je/rj 6/ 12

H.F. 381 undisputed payment. 1 8. The provisions of subsections 6 and 7 shall apply to a 2 payment from a subcontractor to its subcontractor. 3 Sec. 12. NEW SECTION . 573C.4 Suspension of performance. 4 If any undisputed payment is not made within seven business 5 days after the payment date established in a contract for 6 public construction or in this chapter, the contractor and any 7 subcontractors may provide written notice to the owner and, in 8 the case of a subcontractor, written notice to the contractor. 9 Seven business days after the provision of the written notice, 10 the contractor or subcontractor, without prejudice to any 11 other available remedy, may suspend further performance 12 until payment, including applicable interest, is made. The 13 contract period for each contract affected by the suspension 14 shall be extended for a period equal to the duration of the 15 suspension, and the contract sum for each affected contract 16 shall be increased by the suspending party’s reasonable costs 17 of demobilization, delay, and remobilization. 18 Sec. 13. NEW SECTION . 573C.5 Action or arbitration to 19 enforce. 20 In any action to enforce the provisions of this chapter, 21 including arbitration, between a contractor and a subcontractor 22 or a subcontractor and a subcontractor, the court or arbitrator 23 shall award costs and reasonable attorney fees to the 24 prevailing party. Venue of such an action shall be in the 25 county where the applicable real property is located. The 26 hearing in such an arbitration shall be held in the county 27 where the applicable real property is located. 28 Sec. 14. NEW SECTION . 573C.6 Waiver or variance prohibited. 29 The rights and duties prescribed by this chapter shall not 30 be waivable or varied under the terms of a contract. The terms 31 of a contract waiving the rights and duties prescribed by this 32 chapter shall be unenforceable. 33 Sec. 15. NEW SECTION . 573C.7 Applicability. 34 This chapter does not apply to retainage or the retention 35 -7- LSB 2215YH (7) 84 je/rj 7/ 12

H.F. 381 of funds as those terms are used in chapter 573. This chapter 1 shall not be construed to prohibit the parties to a contract 2 for public construction from contracting for the applicability 3 of the provisions of chapter 573A. 4 Sec. 16. APPLICABILITY. This Act applies to construction 5 contracts entered into on or after the effective date of this 6 Act. 7 EXPLANATION 8 This bill relates to the rights of parties to private and 9 public construction contracts. 10 The bill creates the “Iowa Fairness in Private Construction 11 Contracts Act”. The bill requires a person or entity that 12 enters into a contract for private construction to make 13 all payments pursuant to the terms of the contract and in 14 accordance with the bill. The bill provides that certain 15 provisions in a private construction contract are void and 16 unenforceable as contrary to public policy, including a 17 provision that waives, releases, or extinguishes the right 18 to resolve disputes through litigation, although arbitration 19 may be required as a prerequisite to or a substitution for 20 litigation; a provision that waives, releases, or extinguishes 21 rights provided by Code chapter 660 relating to quo warranto 22 rights, although a contractor or subcontractor may be required 23 to waive such rights as a condition for payment, to the extent 24 of the amount of payment received; and a provision that waives, 25 releases, or extinguishes rights of subrogation for losses or 26 claims covered or paid by liability or workers’ compensation 27 insurance unless otherwise permitted under Code chapter 87 28 or Code Title XIII, subtitle 1, relating to regulation of 29 insurance. 30 The bill provides that a provision in a contract for 31 private construction making a payment from a contractor or 32 subcontractor to a subcontractor contingent or conditioned 33 upon receipt of a payment from any other private party is no 34 defense to a claim to enforce a mechanic’s lien or bond to 35 -8- LSB 2215YH (7) 84 je/rj 8/ 12

H.F. 381 secure payment of claims pursuant to Code chapter 660. The 1 bill provides that a contract for private construction must 2 provide that payment of amounts due to a contractor from an 3 owner, except retainage, must be made within 30 days after 4 the owner receives a timely, properly completed request for 5 an undisputed payment. The bill provides that if the owner 6 of real property subject to a private construction contract 7 fails to pay a contractor within 30 days following receipt of a 8 timely, properly completed request for an undisputed payment, 9 the owner must pay interest to the contractor beginning on the 10 31st day after receipt of the request for payment, at the rate 11 of 18 percent per annum on the undisputed payment. The bill 12 requires a contractor to pay its subcontractors any amounts 13 due within seven business days of receipt of payment from the 14 owner, including payment of retainage, if the subcontractor has 15 provided a timely, properly completed request for an undisputed 16 payment to the contractor. The bill provides that if a 17 contractor fails to pay a subcontractor within seven business 18 days, the contractor must pay interest to the subcontractor 19 beginning on the eighth business day after receipt of payment 20 by the contractor, computed at the rate of 18 percent per annum 21 on the undisputed payment. 22 The bill defines “retainage” for the purposes of the “Iowa 23 Fairness in Private Construction Contracts Act” as money 24 earned by a contractor or subcontractor but withheld to ensure 25 proper performance by the contractor or subcontractor. The 26 bill provides that an owner, contractor, or subcontractor may 27 withhold no more than 10 percent retainage from the amount 28 of any undisputed payment due. The bill provides that if an 29 owner, contractor, or subcontractor fails to pay retainage 30 as required, they must pay interest beginning on the first 31 business day after the payment was due, at a rate of 18 percent 32 per annum. 33 The bill provides that if an undisputed payment is not 34 made within seven business days after payment is due, the 35 -9- LSB 2215YH (7) 84 je/rj 9/ 12

H.F. 381 contractor and any subcontractors may provide written notice 1 to the owner and, if payment is not made for another seven 2 business days, may suspend further performance until payment, 3 including applicable interest, is made. The bill provides 4 that the contract period shall be extended for a period equal 5 to the duration of the suspension, and the contract sum will 6 be increased by the suspending party’s reasonable costs of 7 demobilization, delay, and remobilization. The bill provides 8 that in any action to enforce the provisions of the bill, 9 including arbitration, the court or arbitrator will award costs 10 and reasonable attorney fees to the prevailing party. The bill 11 provides that such an action will take place in the county 12 where the applicable real property is located. 13 The bill provides that the rights and duties prescribed 14 by the bill cannot be waived or varied under the terms 15 of a contract, and a provision of a contract doing so is 16 unenforceable. The bill specifies that these provisions of 17 the bill do not apply to single-family residential housing and 18 multifamily residential housing of four units or less or public 19 works or public improvement projects. 20 The bill creates the “Iowa Fairness in Public Construction 21 Contracts Act”. The bill requires a person or entity that 22 enters into a contract for public construction to make 23 all payments pursuant to the terms of the contract and in 24 accordance with the bill. The bill provides that certain 25 provisions in a public construction contract are void and 26 unenforceable as contrary to public policy, including a 27 provision that waives, releases, or extinguishes the right 28 to resolve disputes through litigation, although arbitration 29 may be required as a prerequisite to litigation; a provision 30 that waives, releases, or extinguishes rights to file a claim 31 against a payment or performance bond, although a contractor 32 or subcontractor may be required to waive such rights as a 33 condition for payment, to the extent of the amount of payment 34 received; a provision that waives, releases, or extinguishes 35 -10- LSB 2215YH (7) 84 je/rj 10/ 12

H.F. 381 rights of subrogation for losses or claims covered or paid by 1 liability or workers’ compensation insurance unless otherwise 2 permitted under Code chapter 87 or Code Title XIII, subtitle 3 1, relating to regulation of insurance; and a provision that 4 waives the right to collect damages for delays caused by 5 another party. 6 The bill provides that a contract for public construction 7 must provide that payment of amounts due a contractor from an 8 owner must be made within 30 days after the owner receives a 9 timely, properly completed request for an undisputed payment, 10 unless extenuating circumstances exist which would preclude 11 approval of payment within 30 days, in which case payment 12 must be made within 45 days. The bill provides that the 13 architect or engineer of record or agent of the owner of a 14 public construction project must review, approve, and forward 15 a request for an undisputed payment to the owner within 16 seven business days of receiving it from the contractor. The 17 bill provides that if the owner of real property subject to 18 a public construction contract fails to pay a contractor 19 within the allotted time period, the owner must pay interest 20 to the contractor beginning on the day after the end of the 21 allotted time period at the rate of 18 percent per annum on the 22 undisputed payment amount. The bill requires a contractor to 23 pay its subcontractors any amounts due within seven business 24 days of receipt of payment from the owner if the subcontractor 25 has provided a timely, properly completed request for an 26 undisputed payment to the contractor. The bill provides 27 that if a contractor fails to pay a subcontractor within 28 seven business days, the contractor must pay interest to the 29 subcontractor beginning on the eighth business day after 30 receipt of payment by the contractor, computed at the rate of 31 18 percent per annum on the undisputed payment amount. 32 The bill provides that if an undisputed payment is not 33 made within seven business days after payment is due, the 34 contractor and any subcontractors may provide written notice 35 -11- LSB 2215YH (7) 84 je/rj 11/ 12

H.F. 381 to the owner and, if payment is not made for another seven 1 business days, may suspend further performance until payment, 2 including applicable interest, is made. The bill provides 3 that the contract period will be extended for a period equal 4 to the duration of the suspension, and the contract sum will 5 be increased by the suspending party’s reasonable costs of 6 demobilization, delay, and remobilization. The bill provides 7 that in any action to enforce the provisions of the bill, 8 including arbitration, between a contractor and a subcontractor 9 or a subcontractor and a subcontractor, the court or arbitrator 10 will award costs and reasonable attorney fees to the prevailing 11 party. The bill provides that such an action will take place 12 in the county where the applicable real property is located. 13 The bill provides that the rights and duties prescribed 14 by the bill cannot be waived or varied under the terms 15 of a contract, and a provision of a contract doing so is 16 unenforceable. The bill specifies that the provisions of the 17 “Iowa Fairness in Public Construction Contracts Act” do not 18 apply to retainage or the retention of funds as those terms are 19 used in Code chapter 573. The bill specifies that the bill is 20 not to be construed to prohibit the parties to a contract for 21 public construction from contracting for the applicability of 22 the provisions of Code chapter 573A, relating to stoppage of 23 public contracts in the event of an emergency. 24 The bill applies to construction contracts entered into on 25 or after the effective date of the bill. 26 -12- LSB 2215YH (7) 84 je/rj 12/ 12