SF 2106 (LSB 5238XS (4) 91)

SENATE FILE 2106

BY  STAED, DONAHUE, PETERSEN, BENNETT, and WAHLS

A BILL FOR

An Act relating to residential rental property price fixing, and providing civil penalties.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  562C.1  Short title.
   This chapter shall be known and may be cited as the “Iowa Residential Rent Fairness and Anticollusion Act”.
    Sec. 2.  NEW SECTION.  562C.2  Definitions.
   As used in this chapter, unless the context otherwise requires:
   1.  “Algorithmic rent-setting system” means software, machine learning, artificial intelligence, or any other automated tool used by a landlord to set, recommend, or adjust rent levels or occupancy levels for residential rental property, based in whole or in part on nonpublic competitor data, without independent individualized human review or decision making.
   2.  “Landlord” means any person that owns, leases, subleases, or otherwise controls five or more residential rental properties in the state, or that manages or operates residential rental properties on behalf of the person.
   3.  “Nonpublic competitor data” means data regarding rent levels, lease terms, occupancy rates, or other proprietary information of other landlords or rental properties that is not publicly disclosed or available.
   4.  “Price fixing” means any agreement, arrangement, or understanding among two or more landlords or agents of the landlords that does any of the following:
   a.  Fixes, stabilizes, raises, or maintains the level of rent charged for residential rental property.
   b.  Limits or restricts competition by controlling rent setting or terms of tenancy.
   c.  Uses shared nonpublic competitor data, algorithmic tools, or software to coordinate rent levels or occupancy terms across multiple landlords.
   5.  “Provider of an algorithmic rent-setting system” means a person who designs, develops, markets, sells, licenses, or operates an algorithmic rent-setting system.
   6.  “Rent” means all payments or charges, however designated, that a landlord demands or receives from a tenant in return for occupancy of a residential rental property, including any fees, parking, utilities, or other services tied to the tenancy.
   7.  “Residential rental property” means a parcel of land or a building or portion thereof occupied or intended for occupancy as a home, mobile home, residence, or sleeping place by a person, and offered or used for rent in the state.
   8.  “Tenant” means the same as defined in section 562A.6 or 562B.7.
    Sec. 3.  NEW SECTION.  562C.3  Price fixing —— prohibited acts.
   1.  Any landlord, or any person acting on behalf of a landlord, shall not enter into or engage in any price fixing with another landlord regarding rent for residential rental property.
   2.  A landlord shall not use an algorithmic rent-setting system that relies on nonpublic competitor data or coordinates pricing with other landlords to set or adjust rent or occupancy levels for residential rental property.
   3.  A provider of an algorithmic rent-setting system shall not do any of the following:
   a.  Provide an algorithmic rent-setting system that uses or incorporates nonpublic competitor data in a manner that fixes, stabilizes, raises, or maintains the level of rent or occupancy for residential property.
   b.  Provide an algorithmic rent-setting system that the provider of an algorithmic rent-setting system knew or reasonably should have known would be used for price fixing.
   c.  Enter into any agreement with two or more landlords to limit or restrain competition in setting rent or terms of tenancy using the algorithmic rent-setting system.
    Sec. 4.  NEW SECTION.  562C.4  Enforcement.
   1.  The attorney general, or any county attorney or city attorney in this state may bring a civil action for a violation of this chapter. Upon finding that a landlord or a provider of an algorithmic rent-setting system violated this chapter, a court may order any of the following:
   a.  Civil penalties of up to five thousand dollars per rental unit per month for each month a violation continues, or such higher amount as determined by rulemaking, to be deposited into the general fund of the state.
   b.  Injunctive relief as necessary to enforce compliance with this chapter.
   c.  Restitution to aggrieved tenants who paid rent in excess of what would have been charged in a competitive market absent the violation.
   d.  Reasonable attorney fees and costs to the attorney general, county attorney, or city attorney, as applicable.
   2.  A tenant harmed by a violation of this chapter may bring a civil action, and upon finding that a landlord or a provider of an algorithmic rent-setting system violated this chapter, a court may order the following:
   a.  Injunctive relief as necessary to enforce compliance with this chapter.
   b.  Damages.
   c.  Reasonable attorney fees.
   3.  An action brought under this section may be commenced within two years of a violation, and not afterward.
    Sec. 5.  NEW SECTION.  56C.5  Affirmative defenses.
   1.  It is an affirmative defense to any claim or action alleging that a landlord or a provider of an algorithmic rent-setting system violated this chapter, if all of the following apply:
   a.  The landlord or provider of an algorithmic rent-setting system set the rent independently and without knowledge of any agreement, coordination, or shared nonpublic competitor data with other landlords.
   b.  The landlord or provider of an algorithmic rent-setting system did not rely on an algorithmic rent-setting system that uses nonpublic competitor data to coordinate pricing.
   c.  The landlord or provider of an algorithmic rent-setting system conducted due diligence to ensure that any algorithmic rent-setting system used was not designed or intended to facilitate coordination among landlords.
   2.  The burden of proof for the affirmative defense lies with the landlord or the provider of an algorithmic rent-setting system.
    Sec. 6.  NEW SECTION.  562C.6  Landlords —— algorithmic rent-setting system providers —— recordkeeping.
   A landlord or a provider of an algorithmic rent-setting system shall retain for five years records concerning the use of rent-setting algorithms, data sources, decisions, and human oversight of algorithmic rent-setting systems.
    Sec. 7.  NEW SECTION.  562C.7  Rules.
   The attorney general may adopt rules pursuant to chapter 17A to administer this chapter, including standards for algorithmic rent-setting systems, recordkeeping requirements, affirmative defense compliance practices, and the form and content of notices to tenants when rent adjustments are based on an algorithmic rent-setting system, that include a summary statement of the landlord’s use of such system and the tenant’s rights under this chapter.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to residential rental properties price fixing.
   The bill defines a “landlord” as any person that owns, leases, subleases, or otherwise controls five or more residential rental properties in the state, or any that manages or operates residential rental properties on behalf of the person. “Algorithmic rent-setting system” (algorithmic system) is defined as software, machine learning, artificial intelligence, or other automated tool used by a landlord to set, recommend, or adjust rent levels or occupancy levels for residential rental properties, based in whole or in part on nonpublic competitor data without independent individualized human review or decision making.
   The bill prohibits any landlord, or any person acting on behalf of a landlord, from entering into or engaging in any price fixing with another landlord regarding rent for residential rental property. The bill also prohibits a landlord from using an algorithmic system that relies on nonpublic competitor data or coordinates with other landlords to set or adjust rent or occupancy levels for residential rental property. A provider of an algorithmic system is prohibited from providing an algorithmic system that uses or incorporates nonpublic competitor data in a manner that fixes, stabilizes, raises, or maintains the level of rent or occupancy for residential property; providing an algorithmic system that the provider of the algorithmic system knew or reasonably should have known would be used for price fixing; and entering into any agreement with two or more landlords to limit or restrain competition in setting rent or terms of tenancy using the algorithmic system.
   The bill provides that the attorney general, or a county attorney or city attorney may bring a civil action for a violation of the bill. Upon finding that a landlord or a provider of an algorithmic system violated the bill, a court may order civil penalties, to be deposited into the general fund of the state, of up to $5,000 per rental unit per month for each month a violation continues, or a higher amount as determined by rulemaking, injunctive relief, restitution, and reasonable attorney fees and costs.
   The bill provides that a tenant harmed by a violation of the bill may bring a civil action. Upon finding that a landlord or a provider of an algorithmic system violated the bill, a court may order injunctive relief, damages, and reasonable attorney fees.
   An action brought under the bill must be commenced within two years of the violation, and not afterward.
   The bill provides an affirmative defense to any claim or action alleging that a landlord or a provider of an algorithmic system violated the bill, if the landlord or a provider of an algorithmic system: (1) set the rent independently and without knowledge of any agreement, coordination, or shared nonpublic competitor data with other landlords; (2) did not rely on an algorithmic system that uses nonpublic competitor data to coordinate pricing; and (3) conducted due diligence to ensure that any algorithmic system used was not designed or intended to facilitate coordination among landlords. The burden of proof for the affirmative defense lies with the landlord or the provider of an algorithmic system.
   The bill requires a landlord or a provider of an algorithmic system to retain for five years records concerning the use of rent-setting algorithms, data sources, decisions, and human oversight of algorithmic rent-setting systems.
   The attorney general may adopt rules to administer the bill.