S.F. 497 DIVISION I 1 HOME IMPROVEMENT 2 CONTRACTOR BONDING 3 Section 1. Section 91C.2, Code 2011, is amended by adding 4 the following new subsection: 5 NEW SUBSECTION . 4. The contractor shall be in compliance 6 with section 91C.6A, if applicable. 7 Sec. 2. Section 91C.6, Code 2011, is amended to read as 8 follows: 9 91C.6 Rules. 10 The labor commissioner shall adopt rules, pursuant to 11 chapter 17A , determined to be reasonably necessary for phasing 12 in, administering, and enforcing the system of contractor 13 registration and bonding established by this chapter . 14 Sec. 3. NEW SECTION . 91C.6A Home improvement contractor 15 performance bond —— penalty. 16 1. For purposes of this section, unless the context 17 otherwise requires: 18 a. “Division” means the division of labor services of the 19 department of workforce development. 20 b. “Home improvement contract” means any contract for the 21 performance of improvements or repairs of existing residential 22 property, including appurtenances to the property, or that is 23 related to the use of the residential property, including but 24 not limited to garages, driveways, swimming pools, sidewalks, 25 patios, and fences. 26 2. A contractor, prior to entering into a home improvement 27 contract in this state, shall file a surety bond with the 28 division. The bond shall be in the amount of fifty thousand 29 dollars and shall be for the benefit of any person who, 30 in connection with a home improvement contract with the 31 contractor, sustains damages as the result of the contractor’s 32 breach of the home improvement contract or by the contractor’s 33 violation of chapter 714H. A person sustaining such damages 34 may file a claim against the bond without assignment, and may 35 -1- LSB 1489SV (3) 84 md/sc 1/ 10

S.F. 497 recover from bond proceeds actual damages, court costs, and to 1 such person’s attorney, reasonable attorney fees. 2 3. The surety bond shall be executed by a surety company 3 authorized to do business in this state, and the bond shall 4 be continuous in nature until canceled by the surety with not 5 less than thirty days’ written notice to the contractor and 6 to the division of the surety’s decision to cancel the bond. 7 The surety’s obligation under the bond shall continue until 8 the surety has fully satisfied the notice requirements of this 9 section. 10 4. A person filing a claim against a bond under this 11 section shall notify the division at the time the claim is 12 filed. The division shall maintain a record, available for 13 public inspection and copying of all such claims filed. The 14 requirement to notify the division is not a precondition of 15 filing a claim, and failure to notify the division shall not 16 affect the validity of a claim. However, notification must be 17 provided to the division prior to payout of any bond proceeds 18 under this section. 19 5. The attorney general may bring an action in equity to 20 recover bond proceeds on behalf of persons who have incurred 21 damages as the result of a contractor’s breach of a home 22 improvement contract or for violations of section 714.16 in 23 connection with a home improvement contract. 24 6. Priority of payment of bond proceeds filed pursuant to 25 this section shall be based upon the time of filing a notice 26 of a claim with the division, except that any action by the 27 attorney general to recover bond proceeds shall be superior to 28 all other claims on the bond regardless of the time of filing. 29 7. The failure of a contractor to have a valid surety 30 bond on file with the division at any time a home improvement 31 contract is in effect shall make the contract and any note, 32 instrument, or other evidence of indebtedness executed or 33 entered into in connection with the contract voidable, and 34 the failure to have such a bond shall constitute a complete 35 -2- LSB 1489SV (3) 84 md/sc 2/ 10

S.F. 497 defense in any action based on the contract, note, instrument, 1 or other evidence of indebtedness brought by the contractor or 2 the contractor’s successors or assigns. 3 8. A contractor who violates this section is guilty of a 4 simple misdemeanor. 5 Sec. 4. NEW SECTION . 91C.10 Unlawful practice. 6 A violation of this chapter is an unlawful practice pursuant 7 to section 714.16. 8 Sec. 5. EFFECTIVE DATE. This division of this Act takes 9 effect January 1, 2012. 10 DIVISION II 11 HOME INSPECTOR REGISTRATION 12 Sec. 6. NEW SECTION . 104.1 Title. 13 This chapter may be known and cited as the “Iowa Home 14 Inspector Registration and Bonding Act” . 15 Sec. 7. NEW SECTION . 104.2 Definitions. 16 As used in this chapter, unless the context otherwise 17 requires: 18 1. “Registrant” means a person who registers under this 19 chapter. 20 2. “Department” means the Iowa department of public safety. 21 3. “Governmental subdivision” means any city, county, or 22 combination thereof. 23 4. “Home inspection” means the examination and evaluation 24 of the exterior and interior components of residential real 25 property, which includes the inspection of any two or more 26 of the following components of residential real property in 27 connection with or to facilitate the sale, lease, or other 28 conveyance of, or the proposed sale, lease, or other conveyance 29 of, residential real property: 30 a. Heating, ventilation, or air conditioning system. 31 b. Plumbing system. 32 c. Electrical system. 33 d. Structural composition. 34 e. Foundation. 35 -3- LSB 1489SV (3) 84 md/sc 3/ 10

S.F. 497 f. Roof. 1 g. Masonry structure. 2 h. Any other residential real property component established 3 by rule under this chapter. 4 5. “Home inspector” means a person who, for compensation 5 either direct or indirect, performs home inspections. 6 6. “Residential real property” means real property that is 7 an owner-occupied single-family or two-family dwelling located 8 in this state and occupied or used or intended to be occupied 9 or used for residential purposes, including an interest in any 10 real property covered under chapter 499B. 11 Sec. 8. NEW SECTION . 104.3 Rules. 12 The department shall adopt rules necessary to implement this 13 chapter. 14 Sec. 9. NEW SECTION . 104.4 Fees. 15 1. A registrant under this chapter shall pay an annual 16 registration fee of fifty dollars to the department. 17 2. All fees collected under this chapter shall be considered 18 repayment receipts as defined in section 8.2 and shall be 19 retained by the department and shall be used for any of the 20 department’s duties under this chapter. Moneys retained by the 21 department pursuant to this section are not subject to transfer 22 or reversion to the general fund of the state. 23 Sec. 10. NEW SECTION . 104.5 Registration required —— 24 exception. 25 1. A person shall not perform a home inspection without 26 being registered under this chapter. 27 2. Following an initial registration, each registrant shall 28 file an annual registration renewal with the department. 29 3. A person shall not engage in the business of home 30 inspections unless at all times a registered home inspector 31 is employed by the person and is actively in charge of 32 performing the home inspections. An individual who performs 33 home inspections pursuant to a business operated as a sole 34 proprietorship shall be a registered home inspector. 35 -4- LSB 1489SV (3) 84 md/sc 4/ 10

S.F. 497 4. The registration requirements of this chapter shall not 1 apply to any of the following: 2 a. An employee of any unit of state or local government, 3 including but not limited to cities, counties, or school 4 corporations, performing home inspections while acting within 5 the scope of the government employee’s employment. 6 b. An employee or an agent of an insurer organized or 7 operating under chapter 515, 518, or 518A, while acting within 8 the scope of the employee’s or agent’s employment or agency. 9 c. Real estate brokers or salespersons as defined in chapter 10 543B. 11 d. Professional engineers licensed under chapter 542B. 12 e. Architects registered pursuant to chapter 544A. 13 f. Certified real estate appraisers under chapter 543D. 14 g. An employee or agent of a financial institution, as 15 defined in section 527.2, subsection 9, while acting within the 16 scope of the employee’s or agent’s employment or agency. 17 Sec. 11. NEW SECTION . 104.6 Change of residence. 18 If a person registered to perform home inspections under 19 this chapter changes the person’s residence or place of 20 practice, the person shall so notify the department. 21 Sec. 12. NEW SECTION . 104.7 Local licensing or registration 22 requirements. 23 1. The provisions of this chapter regarding the 24 registration of home inspectors shall not be construed to 25 supersede or preempt home inspector licensing or registration 26 provisions of a governmental subdivision. 27 2. Nothing in this chapter shall prohibit a governmental 28 subdivision from assessing and collecting inspection fees 29 related to inspections performed by a registered home 30 inspector. 31 Sec. 13. NEW SECTION . 104.8 Insurance and surety bond 32 requirements. 33 1. A person who registers or renews a registration pursuant 34 to this chapter shall, prior to approval of the registration 35 -5- LSB 1489SV (3) 84 md/sc 5/ 10

S.F. 497 or renewal by the department, provide evidence of a public 1 liability insurance policy and surety bond in an amount of not 2 less than fifteen thousand dollars. 3 2. If the registrant performs home inspections individually 4 through a business conducted as a sole proprietorship, the 5 registrant shall personally obtain the insurance and surety 6 bond required by this section. If the registrant is engaged 7 in the home inspection business as an employee or owner of a 8 legal entity, the insurance and surety bond required by this 9 section shall be obtained by the entity and shall cover all 10 home inspections performed by the entity. 11 3. The insurance and surety bond shall be written by 12 an entity licensed to do business in this state and each 13 registered home inspector shall maintain on file with the 14 department a certificate evidencing that the insurance or 15 surety bond shall not be canceled without the entity first 16 giving fifteen days’ written notice to the department. 17 Sec. 14. NEW SECTION . 104.9 Deceptive representations of 18 registration —— violations. 19 1. Only a person who is duly registered pursuant to this 20 chapter may represent in connection with the sale of home 21 inspection services the fact that the person is registered as a 22 home inspector in the state of Iowa. 23 2. A violation of this chapter or a rule adopted pursuant 24 to this chapter is an unlawful practice pursuant to section 25 714.16. The provisions of section 714.16, including but not 26 limited to provisions relating to investigation, injunctive 27 relief, and penalties, shall apply to this chapter. 28 Sec. 15. Section 558A.4, subsection 2, Code 2011, is amended 29 to read as follows: 30 2. The disclosure statement may include a report or written 31 opinion prepared by a home inspector registered under chapter 32 104 or a person qualified to make judgment based on education 33 or experience, as provided by rules adopted by the commission, 34 including but not limited to a land surveyor licensed pursuant 35 -6- LSB 1489SV (3) 84 md/sc 6/ 10

S.F. 497 to chapter 542B , a geologist, a structural pest control 1 operator licensed pursuant to section 206.6 , or a building 2 contractor. The report or opinion on a matter within the scope 3 of the home inspector’s or person’s practice, profession, or 4 expertise shall satisfy the requirements of this section or 5 rules adopted by the commission regarding that matter required 6 to be disclosed. If the report or opinion is in response 7 to a request made for purposes of satisfying the disclosure 8 statement, the report or opinion shall indicate which part of 9 the disclosure statement the report or opinion satisfies. 10 Sec. 16. Section 558A.6, subsection 2, Code 2011, is amended 11 to read as follows: 12 2. The home inspector or person submitting a report or 13 opinion within the scope of the home inspector’s or person’s 14 practice, profession, or expertise, as provided in section 15 558A.4 , for purposes of satisfying the disclosure statement, 16 shall not be liable under this chapter for any matter other 17 than a matter within the home inspector’s or person’s practice, 18 profession, or expertise, and which is required by the 19 disclosure statement, unless the home inspector or person 20 failed to use care ordinary in the home inspector’s or person’s 21 profession, practice, or area of expertise in preparing the 22 information. 23 Sec. 17. EFFECTIVE DATE. This division of this Act takes 24 effect January 1, 2012. 25 EXPLANATION 26 This bill relates to residential property by establishing 27 a home inspector registration program and establishing surety 28 bond requirements for certain contractors. 29 Division I of the bill requires contractors, prior to 30 entering into a home improvement contract, as defined in the 31 bill, to file a surety bond with the division of labor services 32 of the department of workforce development. The bond is 33 required to be in the amount of $50,000 and is for the benefit 34 of any person who, in connection with a home improvement 35 -7- LSB 1489SV (3) 84 md/sc 7/ 10

S.F. 497 contract with the contractor, sustains damages as the result of 1 the contractor’s breach of the home improvement contract or by 2 the contractor’s violation of Code chapter 714H (private right 3 of action for consumer frauds Act). The bill provides that the 4 surety bond requirement is a condition of registration with the 5 labor commissioner for contractors doing business in the state. 6 The bill specifies additional requirements relating to the 7 execution and cancellation of the bond, the claim and notice 8 procedures for seeking recovery of damages against the bond, 9 and the priority of payment of bond proceeds. The bill also 10 specifies that the attorney general may bring an action in 11 equity to recover bond proceeds on behalf of persons who have 12 incurred damages as the result of a contractor’s breach of a 13 home improvement contract or for violations of Code section 14 714.16 (consumer frauds) in connection with a home improvement 15 contract. 16 The bill provides that the failure of a contractor to have a 17 valid surety bond on file with the division of labor services 18 at any time a home improvement contract is in effect shall 19 make the contract and any note, instrument, or other evidence 20 of indebtedness executed or entered into in connection with 21 the contract voidable, and the failure to have such a bond 22 constitutes a complete defense in any action based on the 23 contract, note, instrument, or other evidence of indebtedness 24 brought by the contractor or the contractor’s successors or 25 assigns. 26 The bill provides that a contractor who violates new Code 27 section 91C.6A is guilty of a simple misdemeanor. A simple 28 misdemeanor is punishable by confinement for no more than 30 29 days or a fine of at least $65 but not more than $625 or by 30 both. The bill also provides that a violation of Code chapter 31 91C is an unlawful practice pursuant to Code section 714.16 32 (consumer frauds). 33 Division I of the bill takes effect January 1, 2012. 34 Division II of the bill establishes the Iowa home inspector 35 -8- LSB 1489SV (3) 84 md/sc 8/ 10

S.F. 497 registration and bonding Act in new Code chapter 104. 1 The bill prohibits a person from performing a home 2 inspection without being registered. Following an initial 3 registration, each registrant is required to file an annual 4 registration renewal with the department of public safety. 5 The bill specifies that a person shall not engage in the 6 business of home inspections unless at all times a registered 7 home inspector is employed by the person and is actively in 8 charge of performing the home inspections. An individual who 9 performs home inspections for a business operated as a sole 10 proprietorship shall be a registered home inspector. 11 The bill requires each registrant to pay an annual 12 registration fee of $50 to the department of public safety. 13 All fees collected by the department shall be used for the 14 department’s duties under new Code chapter 104, and such moneys 15 are not subject to transfer or reversion to the general fund 16 of the state. 17 The registration requirements of new Code chapter 104 do not 18 apply to an employee of a unit of state or local government 19 performing home inspections while acting within the scope of 20 the government employee’s employment, an employee or an agent 21 of an insurer organized or operating under Code chapter 515, 22 518, or 518A, while acting within the scope of the employee’s 23 or agent’s employment or agency, real estate brokers or 24 salespersons as defined in Code chapter 543B, professional 25 engineers licensed under Code chapter 542B, architects 26 registered pursuant to Code chapter 544A, certified real estate 27 appraisers under Code chapter 543D, or an employee or agent of 28 a financial institution, as defined in Code section 527.2(9), 29 while acting within the scope of the employee’s or agent’s 30 employment or agency. 31 The bill specifies that the provisions of Code chapter 104 32 shall not be construed to supersede or preempt home inspector 33 licensing or registration provisions of a governmental 34 subdivision and nothing in new Code chapter 104 prohibits 35 -9- LSB 1489SV (3) 84 md/sc 9/ 10

S.F. 497 a governmental subdivision from assessing and collecting 1 inspection fees related to inspections performed by a 2 registered home inspector. 3 The bill establishes certain surety bond requirements for 4 home inspectors required to register under the bill. The bill 5 provides that only a person who is duly registered pursuant 6 to new Code chapter 104 may represent in connection with the 7 sale of home inspection services the fact that the person is 8 registered as a home inspector in the state of Iowa. 9 The bill provides that a violation of new Code chapter 104 or 10 of a rule adopted pursuant to the Code chapter is an unlawful 11 practice pursuant to Code section 714.16 (consumer frauds) 12 and the provisions of Code section 714.16, including but not 13 limited to provisions relating to investigation, injunctive 14 relief, and penalties, apply to new Code chapter 104. 15 Division II of the bill takes effect January 1, 2012. 16 -10- LSB 1489SV (3) 84 md/sc 10/ 10