S.F. 2129 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 5805SS (4) 84 je/rj 1/ 11

S.F. 2129 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. For a contract for private construction, if the owner 26 fails to pay the contractor by the date payment is due pursuant 27 to the contract, the owner shall pay interest to the contractor 28 beginning on the first business day after payment is due, 29 computed at the rate of eighteen percent per annum. 30 5. For a contract for private construction, a contractor 31 shall pay a subcontractor any amounts due within seven business 32 days of whichever of the following is later: 33 a. Receipt of payment by the contractor from the owner, 34 including payment of retainage, if retainage is released by the 35 -2- LSB 5805SS (4) 84 je/rj 2/ 11

S.F. 2129 owner. 1 b. The date payment to the subcontractor is due pursuant to 2 the contract. 3 6. If a contractor fails to pay a subcontractor pursuant 4 to subsection 5, the contractor shall pay interest to the 5 subcontractor beginning on the first business day after payment 6 becomes due, computed at the rate of eighteen percent per 7 annum. 8 7. The provisions of subsections 5 and 6 shall apply to a 9 payment from a subcontractor to its subcontractor. 10 Sec. 4. NEW SECTION . 573B.4 Retainage. 11 1. An owner, contractor, or subcontractor may withhold 12 no more than ten percent retainage from the amount of any 13 undisputed payment due. 14 2. If an owner, contractor, or subcontractor fails to pay 15 retainage pursuant to the terms of a contract for private 16 construction or as required by this chapter, the owner, 17 contractor, or subcontractor shall pay interest to the 18 contractor or subcontractor to whom payment was due, beginning 19 on the first business day after the payment was due, at a rate 20 of eighteen percent per annum. 21 Sec. 5. NEW SECTION . 573B.5 Suspension of performance. 22 If any undisputed payment is not made within seven business 23 days after the payment date established in this chapter, the 24 contractor and any subcontractors may provide written notice to 25 the owner and, in the case of a subcontractor, written notice 26 to the contractor. Seven business days after the provision of 27 the written notice, the contractor or subcontractor, without 28 prejudice to any other available remedy, may suspend further 29 performance until payment, including applicable interest, 30 is made. The contract period for each contract affected by 31 the suspension shall be extended for a period equal to the 32 duration of the suspension, and the contract sum for each 33 affected contract shall be increased by the suspending party’s 34 reasonable costs of demobilization, delay, and remobilization. 35 -3- LSB 5805SS (4) 84 je/rj 3/ 11

S.F. 2129 Sec. 6. NEW SECTION . 573B.6 Action or arbitration to 1 enforce. 2 In any action to enforce the provisions of this chapter, 3 including arbitration, the court or arbitrator shall award 4 costs and reasonable attorney fees to the prevailing party. 5 Venue of such an action shall be in the county where the 6 applicable real property is located. The hearing in such an 7 arbitration shall be held in the county where the applicable 8 real property is located. 9 Sec. 7. NEW SECTION . 573B.7 Waiver or variance prohibited. 10 The rights and duties prescribed by this chapter shall not be 11 waived or varied under the terms of a contract. The terms of a 12 contract waiving or varying the rights and duties prescribed by 13 this chapter shall be unenforceable. 14 Sec. 8. NEW SECTION . 573B.8 Applicability. 15 The provisions of this chapter do not apply to single-family 16 residential housing and multifamily residential housing of four 17 units or less. The provisions of this chapter shall not apply 18 to public works or public improvement projects. 19 Sec. 9. NEW SECTION . 573C.1 Title. 20 This chapter shall be known as the “Iowa Fairness in Public 21 Construction Contracts Act” . 22 Sec. 10. NEW SECTION . 573C.2 Definitions. 23 For the purposes of this chapter: 24 1. “Construction” means furnishing labor, equipment, 25 material, or supplies used or consumed for the design, 26 construction, alteration, renovation, repair, or maintenance of 27 a building, structure, appurtenance, or other improvement to 28 real property, including any moving, demolition, or excavation. 29 2. “Contract” means a contract or agreement concerning 30 construction entered into by and between an owner and 31 a contractor, a contractor and a subcontractor, or a 32 subcontractor and another subcontractor. 33 3. “Contractor” means a person or entity that engages in 34 the business of construction and has a contract with an owner 35 -4- LSB 5805SS (4) 84 je/rj 4/ 11

S.F. 2129 of the real property or with a trustee, agent, or spouse of an 1 owner. 2 4. “Owner” means the record titleholder or a person or 3 entity for whose use or benefit any construction is undertaken, 4 who has the capacity to contract, including a guardian. 5 5. “Public construction” means construction under the 6 control of a public entity and paid for in whole or in part with 7 funds of a public entity. 8 6. “Public entity” means the state, an agency of the state, 9 or a political subdivision. 10 7. “Subcontractor” means a person or entity that engages 11 in the business of construction, except a person or entity 12 entering into a contract directly with the owner of the real 13 property. 14 Sec. 11. NEW SECTION . 573C.3 Public construction contracts 15 —— payment —— provisions against public policy —— failure to pay. 16 1. A person or entity that enters into a contract for public 17 construction shall make all payments pursuant to the terms of 18 the contract and in accordance with this chapter. 19 2. The following provisions in a contract for public 20 construction are void and unenforceable as contrary to public 21 policy: 22 a. A provision that purports to waive, release, or 23 extinguish the right to resolve disputes through litigation in 24 court or substantive or procedural rights in connection with 25 such litigation. However, a contract may require nonbinding 26 alternative dispute resolution as a prerequisite to litigation. 27 b. A provision that purports to waive, release, or 28 extinguish rights to file a claim against a payment or 29 performance bond, except that a contract may require a 30 contractor or subcontractor to provide a waiver or release of 31 such rights as a condition for payment, but only to the extent 32 of the amount of payment received. 33 c. A provision that purports to waive, release, or 34 extinguish rights of subrogation for losses or claims covered 35 -5- LSB 5805SS (4) 84 je/rj 5/ 11

S.F. 2129 or paid by liability or workers’ compensation insurance unless 1 permitted under chapter 87 or Title XIII, subtitle 1. 2 d. A provision that purports to waive the right of a party 3 to collect damages for delays caused by another party. 4 3. For a contract for public construction, if the owner 5 fails to pay the contractor by the date payment is due pursuant 6 to the contract, the owner shall pay interest to the contractor 7 beginning on the first business day after payment is due, 8 computed at the rate of eighteen percent per annum. 9 4. For a contract for public construction, a contractor 10 shall pay a subcontractor any amounts due within seven business 11 days of whichever of the following is later: 12 a. Receipt of payment by the contractor from the owner. 13 b. The date payment to the subcontractor is due pursuant to 14 the contract. 15 5. If a contractor fails to pay a subcontractor pursuant 16 to subsection 4, the contractor shall pay interest to the 17 subcontractor beginning on the first business day after payment 18 becomes due, computed at the rate of eighteen percent per 19 annum. 20 6. The provisions of subsections 4 and 5 shall apply to a 21 payment from a subcontractor to its subcontractor. 22 Sec. 12. NEW SECTION . 573C.4 Suspension of performance. 23 If any undisputed payment is not made within seven business 24 days after the payment date established in this chapter, the 25 contractor and any subcontractors may provide written notice to 26 the owner and, in the case of a subcontractor, written notice 27 to the contractor. Seven business days after the provision of 28 the written notice, the contractor or subcontractor, without 29 prejudice to any other available remedy, may suspend further 30 performance until payment, including applicable interest, 31 is made. The contract period for each contract affected by 32 the suspension shall be extended for a period equal to the 33 duration of the suspension, and the contract sum for each 34 affected contract shall be increased by the suspending party’s 35 -6- LSB 5805SS (4) 84 je/rj 6/ 11

S.F. 2129 reasonable costs of demobilization, delay, and remobilization. 1 Sec. 13. NEW SECTION . 573C.5 Action or arbitration to 2 enforce. 3 In any action to enforce the provisions of this chapter, 4 including arbitration, between a contractor and a subcontractor 5 or a subcontractor and a subcontractor, the court or arbitrator 6 shall award costs and reasonable attorney fees to the 7 prevailing party. Venue of such an action shall be in the 8 county where the applicable real property is located. The 9 hearing in such an arbitration shall be held in the county 10 where the applicable real property is located. 11 Sec. 14. NEW SECTION . 573C.6 Waiver or variance prohibited. 12 The rights and duties prescribed by this chapter shall not 13 be waivable or varied under the terms of a contract. The terms 14 of a contract waiving the rights and duties prescribed by this 15 chapter shall be unenforceable. 16 Sec. 15. NEW SECTION . 573C.7 Applicability. 17 This chapter does not apply to retainage or the retention 18 of funds as those terms are used in chapter 573. This chapter 19 shall not be construed to prohibit the parties to a contract 20 for public construction from contracting for the applicability 21 of the provisions of chapter 573A. 22 Sec. 16. APPLICABILITY. This Act applies to construction 23 contracts entered into on or after the effective date of this 24 Act. 25 EXPLANATION 26 This bill relates to the rights of parties to private and 27 public construction contracts. 28 The bill creates the “Iowa Fairness in Private Construction 29 Contracts Act”. The bill requires a person or entity that 30 enters into a contract for private construction to make 31 all payments pursuant to the terms of the contract and in 32 accordance with the bill. The bill provides that certain 33 provisions in a private construction contract are void and 34 unenforceable as contrary to public policy, including a 35 -7- LSB 5805SS (4) 84 je/rj 7/ 11

S.F. 2129 provision that waives, releases, or extinguishes the right 1 to resolve disputes through litigation, although arbitration 2 may be required as a prerequisite to or a substitution for 3 litigation; a provision that waives, releases, or extinguishes 4 rights provided by Code chapter 660 relating to quo warranto 5 rights, although a contractor or subcontractor may be required 6 to waive such rights as a condition for payment, to the extent 7 of the amount of payment received; and a provision that waives, 8 releases, or extinguishes rights of subrogation for losses or 9 claims covered or paid by liability or workers’ compensation 10 insurance unless otherwise permitted under Code chapter 87 11 or Code Title XIII, subtitle 1, relating to regulation of 12 insurance. 13 The bill provides that a provision in a contract for 14 private construction making a payment from a contractor or 15 subcontractor to a subcontractor contingent or conditioned upon 16 receipt of a payment from any other private party is no defense 17 to a claim to enforce a mechanic’s lien or bond to secure 18 payment of claims pursuant to Code chapter 660. 19 The bill provides that for a contract for private 20 construction, if the owner fails to pay the contractor by the 21 date payment is due pursuant to the contract, the owner must 22 pay interest to the contractor beginning the first business day 23 after payment is due, at a rate of 18 percent per annum. 24 The bill provides that for a contract for private 25 construction, a contractor must pay a subcontractor any 26 amounts due within seven business days of the later of either 27 the receipt of payment by the contractor from the owner, 28 including retainage, if released, or the date payment to the 29 subcontractor is due pursuant to the subcontract. The bill 30 provides that if a contractor fails to pay a subcontractor in 31 this way, the contractor must pay interest to the subcontractor 32 beginning the first business day after payment is due, at a 33 rate of 18 percent per annum. 34 The bill defines “retainage” for the purposes of the “Iowa 35 -8- LSB 5805SS (4) 84 je/rj 8/ 11

S.F. 2129 Fairness in Private Construction Contracts Act” as money 1 earned by a contractor or subcontractor but withheld to ensure 2 proper performance by the contractor or subcontractor. The 3 bill provides that an owner, contractor, or subcontractor may 4 withhold no more than 10 percent retainage from the amount 5 of any undisputed payment due. The bill provides that if an 6 owner, contractor, or subcontractor fails to pay retainage 7 as required, they must pay interest beginning on the first 8 business day after the payment was due, at a rate of 18 percent 9 per annum. 10 The bill provides that if an undisputed payment is not 11 made within seven business days after payment is due, the 12 contractor and any subcontractors may provide written notice 13 to the owner and, if payment is not made for another seven 14 business days, may suspend further performance until payment, 15 including applicable interest, is made. The bill provides 16 that the contract period shall be extended for a period equal 17 to the duration of the suspension, and the contract sum will 18 be increased by the suspending party’s reasonable costs of 19 demobilization, delay, and remobilization. The bill provides 20 that in any action to enforce the provisions of the bill, 21 including arbitration, the court or arbitrator will award costs 22 and reasonable attorney fees to the prevailing party. The bill 23 provides that such an action will take place in the county 24 where the applicable real property is located. 25 The bill provides that the rights and duties prescribed 26 by the bill cannot be waived or varied under the terms 27 of a contract, and a provision of a contract doing so is 28 unenforceable. The bill specifies that these provisions of 29 the bill do not apply to single-family residential housing and 30 multifamily residential housing of four units or less or public 31 works or public improvement projects. 32 The bill creates the “Iowa Fairness in Public Construction 33 Contracts Act”. The bill requires a person or entity that 34 enters into a contract for public construction to make 35 -9- LSB 5805SS (4) 84 je/rj 9/ 11

S.F. 2129 all payments pursuant to the terms of the contract and in 1 accordance with the bill. The bill provides that certain 2 provisions in a public construction contract are void and 3 unenforceable as contrary to public policy, including a 4 provision that waives, releases, or extinguishes the right 5 to resolve disputes through litigation, although arbitration 6 may be required as a prerequisite to litigation; a provision 7 that waives, releases, or extinguishes rights to file a claim 8 against a payment or performance bond, although a contractor 9 or subcontractor may be required to waive such rights as a 10 condition for payment, to the extent of the amount of payment 11 received; a provision that waives, releases, or extinguishes 12 rights of subrogation for losses or claims covered or paid by 13 liability or workers’ compensation insurance unless otherwise 14 permitted under Code chapter 87 or Code Title XIII, subtitle 15 1, relating to regulation of insurance; and a provision that 16 waives the right to collect damages for delays caused by 17 another party. 18 The bill provides that for a contract for public 19 construction, if the owner fails to pay the contractor by the 20 date payment is due pursuant to the contract, the owner must 21 pay interest to the contractor beginning the first business day 22 after payment is due, at a rate of 18 percent per annum. 23 The bill provides that for a contract for public 24 construction, a contractor must pay a subcontractor any 25 amounts due within seven business days of the later of either 26 the receipt of payment by the contractor from the owner or 27 the date payment to the subcontractor is due pursuant to the 28 subcontract. The bill provides that if a contractor fails 29 to pay a subcontractor in this way, the contractor must pay 30 interest to the subcontractor beginning the first business day 31 after payment is due, at a rate of 18 percent per annum. 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 -10- LSB 5805SS (4) 84 je/rj 10/ 11

S.F. 2129 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 -11- LSB 5805SS (4) 84 je/rj 11/ 11