Senate
Study
Bill
3059
-
Introduced
SENATE
FILE
_____
BY
(PROPOSED
COMMITTEE
ON
STATE
GOVERNMENT
BILL
BY
CHAIRPERSON
DANIELSON)
A
BILL
FOR
An
Act
concerning
the
rights
of
parties
to
private
construction
1
contracts
and
including
applicability
provisions.
2
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
3
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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.
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2.
A
provision
in
a
contract
for
private
construction
1
that
purports
to
waive,
release,
or
extinguish
the
right
to
2
resolve
disputes
through
litigation
in
court
or
substantive
or
3
procedural
rights
in
connection
with
such
litigation
is
void
4
and
unenforceable
as
contrary
to
public
policy.
However,
a
5
contract
may
require
binding
arbitration
as
a
substitute
for
6
litigation
or
require
nonbinding
alternative
dispute
resolution
7
as
a
prerequisite
to
litigation.
8
3.
A
provision
in
a
contract
for
private
construction
9
providing
that
a
payment
from
a
contractor
or
subcontractor
10
to
a
subcontractor
is
contingent
or
conditioned
upon
receipt
11
of
a
payment
from
any
other
private
party
is
no
defense
to
a
12
claim
to
enforce
a
mechanic’s
lien
or
bond
to
secure
payment
of
13
claims
pursuant
to
chapter
572.
14
4.
A
contract
for
private
construction
shall
provide
that
15
payment
of
amounts
due
a
contractor
from
an
owner,
except
16
retainage,
shall
be
made
within
thirty
days
after
the
owner
17
receives
a
timely,
properly
completed,
undisputed
request
for
18
payment.
If
an
owner
fails
to
pay
a
contractor
by
the
date
19
payment
is
due,
the
owner
shall
pay
interest
to
the
contractor
20
beginning
on
the
first
business
day
after
payment
is
due,
21
computed
at
the
rate
of
twelve
percent
per
annum.
22
5.
For
a
contract
for
private
construction,
a
contractor
23
shall
pay
a
subcontractor
any
amounts
due
within
seven
business
24
days
of
whichever
of
the
following
is
later:
25
a.
Receipt
of
payment
by
the
contractor
from
the
owner,
26
including
payment
of
retainage,
if
retainage
is
released
by
the
27
owner.
28
b.
The
date
payment
to
the
subcontractor
is
due
pursuant
to
29
the
contract.
30
6.
If
a
contractor
fails
to
pay
a
subcontractor
pursuant
31
to
subsection
5,
the
contractor
shall
pay
interest
to
the
32
subcontractor
beginning
on
the
first
business
day
after
payment
33
becomes
due,
computed
at
the
rate
of
twelve
percent
per
annum.
34
7.
The
provisions
of
subsections
5
and
6
shall
apply
to
a
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payment
from
a
subcontractor
to
its
subcontractor.
1
Sec.
4.
NEW
SECTION
.
573B.4
Retainage.
2
1.
An
owner,
contractor,
or
subcontractor
may
withhold
3
no
more
than
five
percent
retainage
from
the
amount
of
any
4
undisputed
payment
due.
5
2.
If
an
owner,
contractor,
or
subcontractor
fails
to
pay
6
retainage
pursuant
to
the
terms
of
a
contract
for
private
7
construction
or
as
required
by
this
chapter,
the
owner,
8
contractor,
or
subcontractor
shall
pay
interest
to
the
9
contractor
or
subcontractor
to
whom
payment
was
due,
beginning
10
on
the
first
business
day
after
the
payment
was
due,
at
a
rate
11
of
twelve
percent
per
annum.
12
Sec.
5.
NEW
SECTION
.
573B.5
Action
or
arbitration
to
13
enforce.
14
In
any
action
to
enforce
the
provisions
of
this
chapter,
15
including
arbitration,
the
court
or
arbitrator
shall
award
16
costs
and
reasonable
attorney
fees
to
the
prevailing
party.
17
Venue
of
such
an
action
shall
be
in
the
county
where
the
18
applicable
real
property
is
located.
The
hearing
in
such
an
19
arbitration
shall
be
held
in
the
county
where
the
applicable
20
real
property
is
located.
21
Sec.
6.
NEW
SECTION
.
573B.6
Waiver
or
variance
prohibited.
22
The
rights
and
duties
prescribed
by
this
chapter
shall
not
be
23
waived
or
varied
under
the
terms
of
a
contract.
The
terms
of
a
24
contract
waiving
or
varying
the
rights
and
duties
prescribed
by
25
this
chapter
shall
be
unenforceable.
26
Sec.
7.
NEW
SECTION
.
573B.7
Applicability.
27
The
provisions
of
this
chapter
do
not
apply
to
single-family
28
residential
housing
and
multifamily
residential
housing
of
four
29
units
or
less.
The
provisions
of
this
chapter
shall
not
apply
30
to
public
works
or
public
improvement
projects.
31
Sec.
8.
APPLICABILITY.
This
Act
applies
to
construction
32
contracts
entered
into
on
or
after
the
effective
date
of
this
33
Act.
34
EXPLANATION
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The
inclusion
of
this
explanation
does
not
constitute
agreement
with
1
the
explanation’s
substance
by
the
members
of
the
general
assembly.
2
This
bill
creates
the
“Iowa
fairness
in
private
construction
3
contracts
Act”.
The
bill
requires
a
person
or
entity
that
4
enters
into
a
contract
for
private
construction
to
make
5
all
payments
pursuant
to
the
terms
of
the
contract
and
in
6
accordance
with
the
bill.
The
bill
provides
that
a
provision
7
in
a
private
construction
contract
that
waives,
releases,
or
8
extinguishes
the
right
to
resolve
disputes
through
litigation
9
is
void
as
contrary
to
public
policy,
although
arbitration
10
may
be
required
as
a
prerequisite
to
or
a
substitution
for
11
litigation.
12
The
bill
provides
that
a
provision
in
a
contract
for
13
private
construction
making
a
payment
from
a
contractor
or
14
subcontractor
to
a
subcontractor
contingent
or
conditioned
upon
15
receipt
of
a
payment
from
any
other
private
party
is
no
defense
16
to
a
claim
to
enforce
a
mechanic’s
lien
or
bond
to
secure
17
payment
of
claims
pursuant
to
Code
chapter
572.
18
The
bill
requires
that
a
contract
for
private
construction
19
provide
that
payment
of
amounts
due
a
contractor
from
an
owner,
20
except
retainage,
shall
be
made
within
30
days
after
the
owner
21
receives
a
timely,
properly
completed,
undisputed
request
for
22
payment.
The
bill
provides
that
if
an
owner
fails
to
pay
a
23
contractor
by
the
date
payment
is
due,
the
owner
must
pay
24
interest
to
the
contractor
beginning
the
first
business
day
25
after
payment
is
due,
at
the
rate
of
12
percent
per
annum.
26
The
bill
provides
that
for
a
contract
for
private
27
construction,
a
contractor
must
pay
a
subcontractor
any
28
amounts
due
within
seven
business
days
of
the
later
of
either
29
the
receipt
of
payment
by
the
contractor
from
the
owner,
30
including
retainage,
if
released,
or
the
date
payment
to
the
31
subcontractor
is
due
pursuant
to
the
subcontract.
The
bill
32
provides
that
if
a
contractor
fails
to
pay
a
subcontractor
in
33
this
way,
the
contractor
must
pay
interest
to
the
subcontractor
34
beginning
the
first
business
day
after
payment
is
due,
at
a
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rate
of
12
percent
per
annum.
1
The
bill
defines
“retainage”
for
the
purposes
of
the
“Iowa
2
fairness
in
private
construction
contracts
Act”
as
money
3
earned
by
a
contractor
or
subcontractor
but
withheld
to
ensure
4
proper
performance
by
the
contractor
or
subcontractor.
The
5
bill
provides
that
an
owner,
contractor,
or
subcontractor
may
6
withhold
no
more
than
5
percent
retainage
from
the
amount
of
7
any
undisputed
payment
due.
The
bill
provides
that
if
an
8
owner,
contractor,
or
subcontractor
fails
to
pay
retainage
9
as
required,
they
must
pay
interest
beginning
on
the
first
10
business
day
after
the
payment
was
due,
at
a
rate
of
12
percent
11
per
annum.
12
The
bill
provides
that
in
any
action
to
enforce
the
13
provisions
of
the
bill,
including
arbitration,
the
court
or
14
arbitrator
will
award
costs
and
reasonable
attorney
fees
to
the
15
prevailing
party.
The
bill
provides
that
such
an
action
will
16
take
place
in
the
county
where
the
applicable
real
property
is
17
located.
18
The
bill
provides
that
the
rights
and
duties
prescribed
19
by
the
bill
cannot
be
waived
or
varied
under
the
terms
20
of
a
contract,
and
a
provision
of
a
contract
doing
so
is
21
unenforceable.
22
The
bill
does
not
apply
to
single-family
residential
housing
23
and
multifamily
residential
housing
of
four
units
or
less
or
24
public
works
or
public
improvement
projects.
25
The
bill
applies
to
construction
contracts
entered
into
on
26
or
after
the
effective
date
of
the
bill.
27
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