S.F. _____ H.F. _____ Section 1. Section 91C.1, Code 2022, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 4. The Iowa department of public health, 3 in consultation with the office of the attorney general and 4 the division of labor services of the department of workforce 5 development, shall implement the home improvement contractor 6 bond requirements of this chapter. 7 Sec. 2. Section 91C.2, subsection 3, Code 2022, is amended 8 to read as follows: 9 3. An In addition to any bond required by section 91C.6B, 10 an out-of-state contractor shall either file a surety bond, 11 as provided in section 91C.7 , with the division of labor 12 services in the amount of twenty-five thousand dollars or 13 shall provide a statement to the division of labor services 14 that the contractor is prequalified to bid on projects for the 15 department of transportation pursuant to section 314.1 . 16 Sec. 3. Section 91C.6, Code 2022, is amended to read as 17 follows: 18 91C.6 Rules. 19 The labor commissioner shall adopt rules, pursuant to 20 chapter 17A , determined to be reasonably necessary for phasing 21 in, administering, and enforcing the system of contractor 22 registration and bonding established by this chapter . 23 Sec. 4. NEW SECTION . 91C.6A State contracts with 24 unregistered contractors prohibited. 25 A contractor who is not registered with the labor 26 commissioner as required by this chapter shall not be awarded 27 a contract to perform work for the state or an agency of the 28 state. 29 Sec. 5. NEW SECTION . 91C.6B Home improvement contractor 30 performance bond —— penalty. 31 1. For purposes of this section: 32 a. “Aggregate” means the whole of all verbal or written 33 contracts entered into within thirty days between the same 34 parties, or any agents or associates of the parties, involving 35 -1- LSB 5327DP (4) 89 es/rn 1/ 8

S.F. _____ H.F. _____ the same real property or the same home improvement or repair 1 project. 2 b. “Division” means the division of labor services of the 3 department of workforce development. 4 c. “Home improvement contract” means any contract for the 5 improvement or repair of existing single-family or two-family 6 dwellings occupied or used, or intended to be occupied or 7 used, primarily for residential purposes including real 8 property pursuant to chapter 499B and the appurtenances of such 9 property, including but not limited to landscaping, garages, 10 storage sheds, sidewalks, driveways, and retaining walls, but 11 does not include contracts for less than two hundred dollars 12 in the aggregate. 13 2. A contractor, prior to entering into a home improvement 14 contract in Iowa, shall file with the division a home 15 improvement contractor’s bond. The bond shall be in the 16 amount of seventy-five thousand dollars and shall be for the 17 benefit of any person who is a customer of the contractor or 18 is a construction materials supplier of the contractor and is 19 damaged by the contractor’s breach of the home improvement 20 contract or by the contractor’s violation of section 714.16. 21 a. A person suffering damages as provided in this subsection 22 may bring suit directly on the bond without assignment, and may 23 recover from bond proceeds actual damages, court costs, and 24 reasonable attorney fees. 25 b. The filing of a home improvement contractor bond with 26 the division may satisfy any bonding requirements imposed by 27 a county, city, or other local governmental entity so long as 28 those bonding requirements are used solely for the benefit of 29 a customer of a home improvement contractor or a construction 30 materials supplier under a home improvement contract. A 31 county, city, or other local governmental entity may still 32 require an additional or higher bond to cover the difference 33 between the value of the bond filed with the division and local 34 bond requirements. 35 -2- LSB 5327DP (4) 89 es/rn 2/ 8

S.F. _____ H.F. _____ 3. A person filing suit pursuant to this section shall 1 notify the division at the time the suit is filed, and the 2 division shall maintain a record, available for public 3 inspection and copying, of all suits commenced. Notification 4 is not a precondition to the filing of a suit, and failure to 5 notify the division shall in no way affect the validity of a 6 lawsuit. 7 a. Notification pursuant to this section must be completed 8 prior to payout of any bond proceeds pursuant to this section. 9 In the alternative to bringing suit directly on the bond, any 10 person who is a customer of the contractor or is a construction 11 materials supplier of the contractor and who is damaged by a 12 contractor’s breach of the home improvement contract or by a 13 contractor’s violation of section 714.16 may present proof of a 14 final court judgment on said claims to the division and collect 15 on the bond pursuant to section 91C.2 with no further proof 16 being required. 17 b. Notification shall be submitted to the department through 18 procedures determined by the department. 19 c. Notification shall serve as a method for determining 20 priority among homeowner claims. 21 4. The attorney general may make a direct claim on a 22 bond or bring an action in equity on behalf of the state to 23 recover bond proceeds for persons who incur damage due to 24 a contractor’s breach of a home improvement contract or a 25 violation of section 714.16 in connection with a person’s home 26 improvement contract with a contractor. The labor commissioner 27 or the unemployment insurance tax bureau of the department 28 of workforce development may make a direct claim on the 29 home improvement contractor bond for contributions due under 30 the unemployment compensation insurance system, penalties, 31 interest, and related fees which may accrue to the state of 32 Iowa. 33 5. Any claim or action by the attorney general to recover 34 home improvement contractor bond proceeds shall take precedence 35 -3- LSB 5327DP (4) 89 es/rn 3/ 8

S.F. _____ H.F. _____ over all other claims on the bond regardless of the time of 1 filing. Any claim or action by the labor commissioner or 2 the unemployment insurance tax bureau of the department of 3 workforce development shall take precedence over any claim not 4 filed by the attorney general regardless of time of filing. 5 Priority among homeowners or construction materials suppliers 6 for payment of the proceeds of a bond filed pursuant to this 7 section shall be based upon the time of filing a notice of suit 8 with the division. 9 6. The issuer of a home improvement contractor’s bond filed 10 pursuant to this section shall notify the labor commissioner 11 pursuant to section 91C.7, subsection 1, upon the cancellation 12 of such bond. The failure of a contractor to have a valid 13 home improvement contractor’s bond on file with the division 14 as of the date of a home improvement contract commencing shall 15 make the contract and any note, instrument, or other evidence 16 of indebtedness executed or entered into in connection with 17 the contract voidable by the customer of the contractor, and 18 shall constitute a complete defense in any action based on the 19 contract, note, instrument, or other evidence of indebtedness 20 brought by the contractor or the contractor’s successors or 21 assigns against the customer of the contractor. 22 7. a. A contractor who violates this section is guilty of a 23 simple misdemeanor. 24 b. A violation of this section is an unlawful practice 25 pursuant to section 714.16. 26 Sec. 6. Section 91C.7, Code 2022, is amended to read as 27 follows: 28 91C.7 Contracts —— contractor’s bond. 29 1. A contractor who is not registered with the labor 30 commissioner as required by this chapter shall not be awarded 31 a contract to perform work for the state or an agency of the 32 state. 33 2. 1. A surety home improvement contractor bond or an 34 out-of-state contractor bond filed pursuant to section 91C.2 35 -4- LSB 5327DP (4) 89 es/rn 4/ 8

S.F. _____ H.F. _____ this chapter shall be executed by a surety company authorized 1 to do business in this state, and the bond shall be continuous 2 in nature until canceled by the surety with not less than 3 thirty days’ written notice to the contractor and to the 4 division of labor services of the department of workforce 5 development indicating the surety’s desire to cancel the bond. 6 The surety company shall not be liable under the bond for any 7 contract commenced after the cancellation of the bond. The 8 division of labor services of the department of workforce 9 development may increase the bond amount after a hearing. 10 3. 2. Release of the an out-of-state contractor bond 11 shall be conditioned upon the payment of all taxes, including 12 contributions due under the unemployment compensation insurance 13 system, penalties, interest, and related fees, which may accrue 14 to the state of Iowa. If at any time during the term of the 15 bond, the department of revenue or the department of workforce 16 development determines that the amount of the bond is not 17 sufficient to cover the tax liabilities accruing to the state 18 of Iowa, the labor commissioner shall require the bond to be 19 increased by an amount the labor commissioner deems sufficient 20 to cover the tax liabilities accrued and accruing. 21 4. 3. The department of revenue and the department of 22 workforce development shall adopt rules for the collection 23 of the forfeiture on an out-of-state contractor bond. In 24 cooperation with the attorney general, the labor services 25 division shall adopt rules for the collection of the forfeiture 26 on a home improvement contractor’s bond . Notice shall be 27 provided to the surety and to the contractor. Notice to the 28 contractor shall be mailed to the contractor’s last known 29 address and to the contractor’s registered agent for service of 30 process, if any, within the state. The contractor or surety 31 shall have the opportunity to apply to the director of revenue 32 for a hearing within thirty days after the giving of such 33 notice. Upon the failure to timely request a hearing, the bond 34 shall be forfeited. If, after the hearing upon timely request 35 -5- LSB 5327DP (4) 89 es/rn 5/ 8

S.F. _____ H.F. _____ on an out-of-state contractor bond , the department of revenue 1 or the department of workforce development finds that the 2 contractor has failed to pay the total of all taxes payable, 3 the department of revenue or the department of workforce 4 development shall order the bond forfeited. The amount of the 5 forfeiture on an out-of-state contractor bond shall be the 6 amount of taxes payable or the amount of the bond, whichever 7 is less. For purposes of this section “taxes payable” means 8 all tax, penalties, interest, and fees that the department 9 of revenue has previously determined to be due to the state 10 by assessment or in an appeal of an assessment, including 11 contributions to the unemployment compensation insurance 12 system. 13 5. 4. If it is determined that this section may cause 14 denial of federal funds which would otherwise be available, 15 or is otherwise inconsistent with requirements of federal 16 law, this section shall be suspended, but only to the extent 17 necessary to prevent denial of the funds or to eliminate the 18 inconsistency with federal requirements. 19 6. 5. The bond bonds required by this section may be 20 attached by the commissioner for collection of fees and 21 penalties due to the division. 22 Sec. 7. Section 714.16, subsection 2, Code 2022, is amended 23 by adding the following new paragraph: 24 NEW PARAGRAPH . q. It is an unlawful practice for an 25 out-of-state home contractor to commence a home improvement 26 project without entering into a bond pursuant to chapter 91C. 27 Sec. 8. APPLICABILITY. This Act applies to contracts 28 entered into on or after the effective date of the Act. 29 EXPLANATION 30 The inclusion of this explanation does not constitute agreement with 31 the explanation’s substance by the members of the general assembly. 32 This bill relates to home improvement contractor bonding 33 requirements. 34 The bill requires that a contractor, prior to entering 35 -6- LSB 5327DP (4) 89 es/rn 6/ 8

S.F. _____ H.F. _____ into a home improvement contract in Iowa, obtain a home 1 improvement contractor’s bond in the amount of $75,000. The 2 bond benefits a person or materials supplier who is damaged 3 by the contractor’s breach of contract or by the contractor’s 4 breach of the consumer fraud statute. Any client of a home 5 improvement contractor or any materials supplier for a home 6 improvement contractor damaged may sue directly on the bond 7 and may recover actual damages, court costs, and reasonable 8 attorney fees. The bill defines “home improvement contract” 9 to mean any contract in the amount of $200 or more for the 10 improvement or repair of existing residential property and the 11 appurtenances of such property. 12 The bill provides that the filing of the bond with the 13 division may satisfy bonding requirements for local governments 14 so long as the local bond is used solely for the benefit of the 15 homeowner or materials supplier. 16 The bill provides that when a lawsuit is filed, the 17 person who sues on the bond shall notify the division of 18 labor services of the department of workforce development, 19 which shall maintain a public record of all suits commenced. 20 Notification is not a precondition to filing a suit and failure 21 to notify the division does not invalidate a lawsuit. However, 22 bond proceeds cannot be distributed to anyone who has not filed 23 notification and claimants who file notice first have priority 24 over other claimants in the same lawsuit. 25 The bill provides that the attorney general may also make 26 a direct claim on a bond or bring an action in equity against 27 the bond on behalf of the state to recover bond proceeds for 28 persons damaged due to a contractor’s breach of contract or 29 violation of the consumer fraud statute in connection with a 30 home improvement contract. The attorney general’s action shall 31 take precedence over all other claims on the bond regardless 32 of the time of filing. 33 The bill requires the issuer of a bond to notify the labor 34 commissioner upon the cancellation of the bond. If a bond is 35 -7- LSB 5327DP (4) 89 es/rn 7/ 8

S.F. _____ H.F. _____ canceled or otherwise ceases to be in effect, the contractor’s 1 registration shall be void. The failure of a contractor to 2 have a valid bond on file as of the date the home improvement 3 contract is entered into renders the contract and related 4 documents voidable. 5 The bill provides that a home improvement contractor 6 who violates the bill’s provisions is guilty of a simple 7 misdemeanor. A simple misdemeanor is punishable by confinement 8 for no more than 30 days or a fine of at least $65 but not 9 more than $625 or by both. The bill further provides that a 10 violation under this Act is an unlawful practice pursuant to 11 the consumer fraud statute, which allows the attorney general 12 to investigate, issue subpoenas, and commence civil proceedings 13 seeking restraining orders or injunctions prohibiting persons 14 from engaging in unlawful practices or seeking termination 15 of the business affairs of a person engaging in unlawful 16 practices. A court may also impose a civil penalty of up to 17 $40,000 per violation against a person found to have committed 18 an unlawful practice. 19 The bill is applicable to home improvement contracts entered 20 into on or after the bill’s effective date. 21 -8- LSB 5327DP (4) 89 es/rn 8/ 8