Senate File 2155 - Reprinted SENATE FILE 2155 BY COMMITTEE ON STATE GOVERNMENT (SUCCESSOR TO SSB 3059) (As Amended and Passed by the Senate February 24, 2014 ) 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 SF 2155 (4) 85 je/rj/jh

S.F. 2155 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- SF 2155 (4) 85 je/rj/jh 1/ 3

S.F. 2155 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- SF 2155 (4) 85 je/rj/jh 2/ 3

S.F. 2155 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 do not apply to single-family 24 residential housing and multifamily residential housing of four 25 units or less. The provisions of this chapter shall not apply 26 to public works, public utility as defined in section 476.1, 27 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 -3- SF 2155 (4) 85 je/rj/jh 3/ 3