H.F. _____ 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 the same as defined in section 6 103A.3. 7 2. “Contract” means the same as defined in section 554.1201. 8 3. “Contractor” means a person or entity that engages in 9 the business of construction and has a contract with an owner 10 of the real property or with a trustee, agent, or spouse of 11 an owner. “Contractor” does not mean a person or entity who 12 provides architectural, landscape architectural, or engineering 13 design services. 14 4. “Owner” means the same as defined in section 103A.3. 15 5. “Prime rate” means the prime rate charged by banks 16 on short-term business loans, as determined by the board of 17 governors of the federal reserve system and published in the 18 federal reserve bulletin. 19 6. “Private construction” means construction of or on 20 private property. 21 7. “Retainage” means money earned by a contractor or 22 subcontractor but withheld to ensure proper performance by the 23 contractor or subcontractor. 24 8. “Subcontractor” means a person or entity that engages 25 in the business of construction, except a person or entity 26 entering into a contract directly with the owner of the real 27 property. “Subcontractor” does not mean a person or entity who 28 provides architectural, landscape architectural, or engineering 29 design services. 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 1718YC (2) 86 je/rj 1/ 5

H.F. _____ 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. 5 3. A provision in a contract for private construction 6 providing that a payment from a contractor or subcontractor 7 to a subcontractor is contingent or conditioned upon receipt 8 of a payment from any other private party is no defense to a 9 claim to enforce a mechanic’s lien or bond to secure payment of 10 claims pursuant to chapter 572. 11 4. A contract for private construction shall provide that 12 payment of amounts due a contractor from an owner, except 13 retainage, shall be made within thirty days after the owner 14 receives a timely, properly completed, undisputed request for 15 payment. If an owner fails to pay a contractor by the date 16 payment is due, the owner shall pay interest to the contractor 17 beginning on the first business day after payment is due, 18 computed at the prime rate plus one percent per year. 19 5. For a contract for private construction, a contractor 20 shall pay a subcontractor any amounts due within ten business 21 days of whichever of the following is later: 22 a. Receipt of payment by the contractor from the owner, 23 including payment of retainage, if retainage is released by the 24 owner. 25 b. The date payment to the subcontractor is due pursuant to 26 the contract. 27 6. If a contractor fails to pay a subcontractor pursuant 28 to subsection 5, the contractor shall pay interest to the 29 subcontractor beginning on the first business day after payment 30 becomes due, computed at the prime rate plus one percent per 31 year. 32 7. The provisions of subsections 5 and 6 shall apply to a 33 payment from a subcontractor to its subcontractor. 34 Sec. 4. NEW SECTION . 573B.4 Retainage. 35 -2- LSB 1718YC (2) 86 je/rj 2/ 5

H.F. _____ 1. An owner, contractor, or subcontractor may withhold 1 no more than five percent retainage from the amount of any 2 undisputed payment due. 3 2. If an owner, contractor, or subcontractor fails to pay 4 retainage pursuant to the terms of a contract for private 5 construction or as required by this chapter, the owner, 6 contractor, or subcontractor shall pay interest to the 7 contractor or subcontractor to whom payment was due, beginning 8 on the first business day after the payment was due, at the 9 prime rate plus one percent per year. 10 Sec. 5. NEW SECTION . 573B.5 Action or arbitration to 11 enforce. 12 Venue of any action to enforce the provisions of this 13 chapter, including arbitration, shall be in the county where 14 the applicable real property is located. The hearing in such 15 an arbitration shall be held in the county where the applicable 16 real property is located. 17 Sec. 6. NEW SECTION . 573B.6 Waiver or variance prohibited. 18 The rights and duties prescribed by this chapter shall not be 19 waived or varied under the terms of a contract. The terms of a 20 contract waiving or varying the rights and duties prescribed by 21 this chapter shall be unenforceable. 22 Sec. 7. NEW SECTION . 573B.7 Applicability. 23 The provisions of this chapter shall not apply to 24 single-family residential housing and multifamily residential 25 housing of four units or less. The provisions of this chapter 26 shall not apply to public works, a public utility as defined in 27 section 476.1, or public improvement projects. 28 Sec. 8. APPLICABILITY. This Act applies to construction 29 contracts entered into on or after the effective date of this 30 Act. 31 EXPLANATION 32 The inclusion of this explanation does not constitute agreement with 33 the explanation’s substance by the members of the general assembly. 34 This bill creates the “Iowa fairness in private construction 35 -3- LSB 1718YC (2) 86 je/rj 3/ 5

H.F. _____ contracts Act”. The bill requires a person or entity that 1 enters into a contract for private construction to make 2 all payments pursuant to the terms of the contract and in 3 accordance with the bill. The bill provides that a provision 4 in a private construction contract that waives, releases, or 5 extinguishes the right to resolve disputes through litigation 6 is void as contrary to public policy. 7 The bill provides that a provision in a contract for 8 private construction making a payment from a contractor or 9 subcontractor to a subcontractor contingent or conditioned upon 10 receipt of a payment from any other private party is no defense 11 to a claim to enforce a mechanic’s lien or bond to secure 12 payment of claims pursuant to Code chapter 572. 13 The bill requires that a contract for private construction 14 provide that payment of amounts due a contractor from an owner, 15 except retainage, shall be made within 30 days after the owner 16 receives a timely, properly completed, undisputed request for 17 payment. The bill provides that if an owner fails to pay a 18 contractor by the date payment is due, the owner must pay 19 interest to the contractor beginning the first business day 20 after payment is due, at the prime rate plus 1 percent per 21 year. 22 The bill provides that for a contract for private 23 construction, a contractor must pay a subcontractor any 24 amounts due within 10 business days of the later of either 25 the receipt of payment by the contractor from the owner, 26 including retainage, if released, or the date payment to the 27 subcontractor is due pursuant to the contract. The bill 28 provides that if a contractor fails to pay a subcontractor in 29 this way, the contractor must pay interest to the subcontractor 30 beginning the first business day after payment is due, at the 31 prime rate plus 1 percent per year. 32 The bill defines “retainage” for the purposes of the “Iowa 33 fairness in private construction contracts Act” as money 34 earned by a contractor or subcontractor but withheld to ensure 35 -4- LSB 1718YC (2) 86 je/rj 4/ 5

H.F. _____ proper performance by the contractor or subcontractor. The 1 bill provides that an owner, contractor, or subcontractor may 2 withhold no more than 5 percent retainage from the amount of 3 any undisputed payment due. The bill provides that if an 4 owner, contractor, or subcontractor fails to pay retainage 5 as required, they must pay interest beginning on the first 6 business day after the payment was due, at the prime rate plus 7 1 percent per year. 8 The bill provides that any action to enforce the provisions 9 of the bill, including arbitration, will take place in the 10 county where the applicable real property is located. 11 The bill provides that the rights and duties prescribed 12 by the bill cannot be waived or varied under the terms 13 of a contract, and a provision of a contract doing so is 14 unenforceable. 15 The bill does not apply to single-family residential housing 16 and multifamily residential housing of four units or less or 17 public works, a public utility, or public improvement projects. 18 The bill applies to construction contracts entered into on 19 or after the effective date of the bill. 20 -5- LSB 1718YC (2) 86 je/rj 5/ 5