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Senate File 2155 - IntroducedA Bill ForAn Act 1concerning the rights of parties to private construction
2contracts and including applicability provisions.
3BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 573B.1 Title.
2This chapter shall be known as the “Iowa Fairness in Private
3Construction Contracts Act”.
4 Sec. 2. NEW SECTION. 573B.2 Definitions.
5For the purposes of this chapter:
61. “Construction” means the same as defined in section
7103A.3.
82. “Contract” means the same as defined in section 554.1201.
93. “Contractor” means a person or entity that engages in
10the business of construction and has a contract with an owner
11of the real property or with a trustee, agent, or spouse of an
12owner.
134. “Owner” means the same as defined in section 103A.3.
145. “Prime rate” means the prime rate charged by banks
15on short-term business loans, as determined by the board of
16governors of the federal reserve system and published in the
17federal reserve bulletin.
186. “Private construction” means construction of or on
19private property.
207. “Retainage” means money earned by a contractor or
21subcontractor but withheld to ensure proper performance by the
22contractor or subcontractor.
238. “Subcontractor” means a person or entity that engages
24in the business of construction, except a person or entity
25entering into a contract directly with the owner of the real
26property.
27 Sec. 3. NEW SECTION. 573B.3 Private construction contracts
28—— payment —— provisions against public policy —— failure to pay.
291. A person or entity that enters into a contract for
30private construction shall make all payments pursuant to the
31terms of the contract and in accordance with this chapter.
322. A provision in a contract for private construction
33that purports to waive, release, or extinguish the right to
34resolve disputes through litigation in court or substantive or
35procedural rights in connection with such litigation is void
-1-1and unenforceable as contrary to public policy.
23. A provision in a contract for private construction
3providing that a payment from a contractor or subcontractor
4to a subcontractor is contingent or conditioned upon receipt
5of a payment from any other private party is no defense to a
6claim to enforce a mechanic’s lien or bond to secure payment of
7claims pursuant to chapter 572.
84. A contract for private construction shall provide that
9payment of amounts due a contractor from an owner, except
10retainage, shall be made within thirty days after the owner
11receives a timely, properly completed, undisputed request for
12payment. If an owner fails to pay a contractor by the date
13payment is due, the owner shall pay interest to the contractor
14beginning on the first business day after payment is due,
15computed at the prime rate plus one percent per year.
165. For a contract for private construction, a contractor
17shall pay a subcontractor any amounts due within ten business
18days of whichever of the following is later:
19a. Receipt of payment by the contractor from the owner,
20including payment of retainage, if retainage is released by the
21owner.
22b. The date payment to the subcontractor is due pursuant to
23the contract.
246. If a contractor fails to pay a subcontractor pursuant
25to subsection 5, the contractor shall pay interest to the
26subcontractor beginning on the first business day after payment
27becomes due, computed at the prime rate plus one percent per
28year.
297. The provisions of subsections 5 and 6 shall apply to a
30payment from a subcontractor to its subcontractor.
31 Sec. 4. NEW SECTION. 573B.4 Retainage.
321. An owner, contractor, or subcontractor may withhold
33no more than five percent retainage from the amount of any
34undisputed payment due.
352. If an owner, contractor, or subcontractor fails to pay
-2-1retainage pursuant to the terms of a contract for private
2construction or as required by this chapter, the owner,
3contractor, or subcontractor shall pay interest to the
4contractor or subcontractor to whom payment was due, beginning
5on the first business day after the payment was due, at the
6prime rate plus one percent per year.
7 Sec. 5. NEW SECTION. 573B.5 Action or arbitration to
8enforce.
9Venue of any action to enforce the provisions of this
10chapter, including arbitration, shall be in the county where
11the applicable real property is located. The hearing in such
12an arbitration shall be held in the county where the applicable
13real property is located.
14 Sec. 6. NEW SECTION. 573B.6 Waiver or variance prohibited.
15The rights and duties prescribed by this chapter shall not be
16waived or varied under the terms of a contract. The terms of a
17contract waiving or varying the rights and duties prescribed by
18this chapter shall be unenforceable.
19 Sec. 7. NEW SECTION. 573B.7 Applicability.
20The provisions of this chapter do not apply to single-family
21residential housing and multifamily residential housing of four
22units or less. The provisions of this chapter shall not apply
23to public works, public utility as defined in section 476.1,
24or public improvement projects.
25 Sec. 8. APPLICABILITY. This Act applies to construction
26contracts entered into on or after the effective date of this
27Act.
28EXPLANATION
29The inclusion of this explanation does not constitute agreement with
30the explanation’s substance by the members of the general assembly.
31This bill creates the “Iowa fairness in private construction
32contracts Act”. The bill requires a person or entity that
33enters into a contract for private construction to make
34all payments pursuant to the terms of the contract and in
35accordance with the bill. The bill provides that a provision
-3-1in a private construction contract that waives, releases, or
2extinguishes the right to resolve disputes through litigation
3is void as contrary to public policy.
4The bill provides that a provision in a contract for
5private construction making a payment from a contractor or
6subcontractor to a subcontractor contingent or conditioned upon
7receipt of a payment from any other private party is no defense
8to a claim to enforce a mechanic’s lien or bond to secure
9payment of claims pursuant to Code chapter 572.
10The bill requires that a contract for private construction
11provide that payment of amounts due a contractor from an owner,
12except retainage, shall be made within 30 days after the owner
13receives a timely, properly completed, undisputed request for
14payment. The bill provides that if an owner fails to pay a
15contractor by the date payment is due, the owner must pay
16interest to the contractor beginning the first business day
17after payment is due.
18The bill provides that for a contract for private
19construction, a contractor must pay a subcontractor any
20amounts due within 10 business days of the later of either
21the receipt of payment by the contractor from the owner,
22including retainage, if released, or the date payment to the
23subcontractor is due pursuant to the subcontract. The bill
24provides that if a contractor fails to pay a subcontractor in
25this way, the contractor must pay interest to the subcontractor
26beginning the first business day after payment is due.
27The bill provides that an owner, contractor, or
28subcontractor may withhold no more than 5 percent retainage
29from the amount of any undisputed payment due. The bill
30provides that if an owner, contractor, or subcontractor fails
31to pay retainage as required, they must pay interest beginning
32on the first business day after the payment was due. The
33bill defines “retainage” as money earned by a contractor or
34subcontractor but withheld to ensure proper performance by the
35contractor or subcontractor.
-4- 1The bill provides that any action to enforce the provisions
2of the bill, including arbitration, will take place in the
3county where the applicable real property is located.
4The bill provides that the rights and duties prescribed
5by the bill cannot be waived or varied under the terms
6of a contract, and a provision of a contract doing so is
7unenforceable.
8The bill does not apply to single-family residential housing
9and multifamily residential housing of four units or less or
10public works, public utility, or public improvement projects.
11The bill applies to construction contracts entered into on
12or after the effective date of the bill.
-5-
2contracts and including applicability provisions.
3BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 573B.1 Title.
2This chapter shall be known as the “Iowa Fairness in Private
3Construction Contracts Act”.
4 Sec. 2. NEW SECTION. 573B.2 Definitions.
5For the purposes of this chapter:
61. “Construction” means the same as defined in section
7103A.3.
82. “Contract” means the same as defined in section 554.1201.
93. “Contractor” means a person or entity that engages in
10the business of construction and has a contract with an owner
11of the real property or with a trustee, agent, or spouse of an
12owner.
134. “Owner” means the same as defined in section 103A.3.
145. “Prime rate” means the prime rate charged by banks
15on short-term business loans, as determined by the board of
16governors of the federal reserve system and published in the
17federal reserve bulletin.
186. “Private construction” means construction of or on
19private property.
207. “Retainage” means money earned by a contractor or
21subcontractor but withheld to ensure proper performance by the
22contractor or subcontractor.
238. “Subcontractor” means a person or entity that engages
24in the business of construction, except a person or entity
25entering into a contract directly with the owner of the real
26property.
27 Sec. 3. NEW SECTION. 573B.3 Private construction contracts
28—— payment —— provisions against public policy —— failure to pay.
291. A person or entity that enters into a contract for
30private construction shall make all payments pursuant to the
31terms of the contract and in accordance with this chapter.
322. A provision in a contract for private construction
33that purports to waive, release, or extinguish the right to
34resolve disputes through litigation in court or substantive or
35procedural rights in connection with such litigation is void
-1-1and unenforceable as contrary to public policy.
23. A provision in a contract for private construction
3providing that a payment from a contractor or subcontractor
4to a subcontractor is contingent or conditioned upon receipt
5of a payment from any other private party is no defense to a
6claim to enforce a mechanic’s lien or bond to secure payment of
7claims pursuant to chapter 572.
84. A contract for private construction shall provide that
9payment of amounts due a contractor from an owner, except
10retainage, shall be made within thirty days after the owner
11receives a timely, properly completed, undisputed request for
12payment. If an owner fails to pay a contractor by the date
13payment is due, the owner shall pay interest to the contractor
14beginning on the first business day after payment is due,
15computed at the prime rate plus one percent per year.
165. For a contract for private construction, a contractor
17shall pay a subcontractor any amounts due within ten business
18days of whichever of the following is later:
19a. Receipt of payment by the contractor from the owner,
20including payment of retainage, if retainage is released by the
21owner.
22b. The date payment to the subcontractor is due pursuant to
23the contract.
246. If a contractor fails to pay a subcontractor pursuant
25to subsection 5, the contractor shall pay interest to the
26subcontractor beginning on the first business day after payment
27becomes due, computed at the prime rate plus one percent per
28year.
297. The provisions of subsections 5 and 6 shall apply to a
30payment from a subcontractor to its subcontractor.
31 Sec. 4. NEW SECTION. 573B.4 Retainage.
321. An owner, contractor, or subcontractor may withhold
33no more than five percent retainage from the amount of any
34undisputed payment due.
352. If an owner, contractor, or subcontractor fails to pay
-2-1retainage pursuant to the terms of a contract for private
2construction or as required by this chapter, the owner,
3contractor, or subcontractor shall pay interest to the
4contractor or subcontractor to whom payment was due, beginning
5on the first business day after the payment was due, at the
6prime rate plus one percent per year.
7 Sec. 5. NEW SECTION. 573B.5 Action or arbitration to
8enforce.
9Venue of any action to enforce the provisions of this
10chapter, including arbitration, shall be in the county where
11the applicable real property is located. The hearing in such
12an arbitration shall be held in the county where the applicable
13real property is located.
14 Sec. 6. NEW SECTION. 573B.6 Waiver or variance prohibited.
15The rights and duties prescribed by this chapter shall not be
16waived or varied under the terms of a contract. The terms of a
17contract waiving or varying the rights and duties prescribed by
18this chapter shall be unenforceable.
19 Sec. 7. NEW SECTION. 573B.7 Applicability.
20The provisions of this chapter do not apply to single-family
21residential housing and multifamily residential housing of four
22units or less. The provisions of this chapter shall not apply
23to public works, public utility as defined in section 476.1,
24or public improvement projects.
25 Sec. 8. APPLICABILITY. This Act applies to construction
26contracts entered into on or after the effective date of this
27Act.
28EXPLANATION
29The inclusion of this explanation does not constitute agreement with
30the explanation’s substance by the members of the general assembly.
31This bill creates the “Iowa fairness in private construction
32contracts Act”. The bill requires a person or entity that
33enters into a contract for private construction to make
34all payments pursuant to the terms of the contract and in
35accordance with the bill. The bill provides that a provision
-3-1in a private construction contract that waives, releases, or
2extinguishes the right to resolve disputes through litigation
3is void as contrary to public policy.
4The bill provides that a provision in a contract for
5private construction making a payment from a contractor or
6subcontractor to a subcontractor contingent or conditioned upon
7receipt of a payment from any other private party is no defense
8to a claim to enforce a mechanic’s lien or bond to secure
9payment of claims pursuant to Code chapter 572.
10The bill requires that a contract for private construction
11provide that payment of amounts due a contractor from an owner,
12except retainage, shall be made within 30 days after the owner
13receives a timely, properly completed, undisputed request for
14payment. The bill provides that if an owner fails to pay a
15contractor by the date payment is due, the owner must pay
16interest to the contractor beginning the first business day
17after payment is due.
18The bill provides that for a contract for private
19construction, a contractor must pay a subcontractor any
20amounts due within 10 business days of the later of either
21the receipt of payment by the contractor from the owner,
22including retainage, if released, or the date payment to the
23subcontractor is due pursuant to the subcontract. The bill
24provides that if a contractor fails to pay a subcontractor in
25this way, the contractor must pay interest to the subcontractor
26beginning the first business day after payment is due.
27The bill provides that an owner, contractor, or
28subcontractor may withhold no more than 5 percent retainage
29from the amount of any undisputed payment due. The bill
30provides that if an owner, contractor, or subcontractor fails
31to pay retainage as required, they must pay interest beginning
32on the first business day after the payment was due. The
33bill defines “retainage” as money earned by a contractor or
34subcontractor but withheld to ensure proper performance by the
35contractor or subcontractor.
-4- 1The bill provides that any action to enforce the provisions
2of the bill, including arbitration, will take place in the
3county where the applicable real property is located.
4The bill provides that the rights and duties prescribed
5by the bill cannot be waived or varied under the terms
6of a contract, and a provision of a contract doing so is
7unenforceable.
8The bill does not apply to single-family residential housing
9and multifamily residential housing of four units or less or
10public works, public utility, or public improvement projects.
11The bill applies to construction contracts entered into on
12or after the effective date of the bill.
-5-