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House Study Bill 575 - 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 furnishing labor, equipment,
7material, or supplies used or consumed for the design,
8construction, alteration, renovation, repair, or maintenance of
9a building, structure, appurtenance, or other improvement to
10real property, including any moving, demolition, or excavation.
112. “Contract” means a contract or agreement concerning
12construction entered into by and between an owner and
13a contractor, a contractor and a subcontractor, or a
14subcontractor and another subcontractor.
153. “Contractor” means a person or entity that engages in
16the business of construction and has a contract with an owner
17of the real property or with a trustee, agent, or spouse of an
18owner.
194. “Owner” means the record titleholder or a person or
20entity for whose use or benefit any construction is undertaken,
21who has the capacity to contract, including a guardian.
225. “Private construction” means construction of or on
23private property.
246. “Retainage” means money earned by a contractor or
25subcontractor but withheld to ensure proper performance by the
26contractor or subcontractor.
277. “Subcontractor” means a person or entity that engages
28in the business of construction, except a person or entity
29entering into a contract directly with the owner of the real
30property.
31 Sec. 3. NEW SECTION. 573B.3 Private construction contracts
32—— payment —— provisions against public policy —— failure to pay.
331. A person or entity that enters into a contract for
34private construction shall make all payments pursuant to the
35terms of the contract and in accordance with this chapter.
-1- 12. A provision in a contract for private construction
2that purports to waive, release, or extinguish the right to
3resolve disputes through litigation in court or substantive or
4procedural rights in connection with such litigation is void
5and unenforceable as contrary to public policy. However, a
6contract may require binding arbitration as a substitute for
7litigation or require nonbinding alternative dispute resolution
8as a prerequisite to litigation.
93. A provision in a contract for private construction
10providing that a payment from a contractor or subcontractor
11to a subcontractor is contingent or conditioned upon receipt
12of a payment from any other private party is no defense to a
13claim to enforce a mechanic’s lien or bond to secure payment of
14claims pursuant to chapter 572.
154. A contract for private construction shall provide that
16payment of amounts due a contractor from an owner, except
17retainage, shall be made within thirty days after the owner
18receives a timely, properly completed, undisputed request for
19payment. If an owner fails to pay a contractor by the date
20payment is due, the owner shall pay interest to the contractor
21beginning on the first business day after payment is due,
22computed at the rate of twelve percent per annum.
235. For a contract for private construction, a contractor
24shall pay a subcontractor any amounts due within seven business
25days of whichever of the following is later:
26a. Receipt of payment by the contractor from the owner,
27including payment of retainage, if retainage is released by the
28owner.
29b. The date payment to the subcontractor is due pursuant to
30the contract.
316. If a contractor fails to pay a subcontractor pursuant
32to subsection 5, the contractor shall pay interest to the
33subcontractor beginning on the first business day after payment
34becomes due, computed at the rate of twelve percent per annum.
357. The provisions of subsections 5 and 6 shall apply to a
-2-1payment from a subcontractor to its subcontractor.
2 Sec. 4. NEW SECTION. 573B.4 Retainage.
31. An owner, contractor, or subcontractor may withhold
4no more than five percent retainage from the amount of any
5undisputed payment due.
62. If an owner, contractor, or subcontractor fails to pay
7retainage pursuant to the terms of a contract for private
8construction or as required by this chapter, the owner,
9contractor, or subcontractor shall pay interest to the
10contractor or subcontractor to whom payment was due, beginning
11on the first business day after the payment was due, at a rate
12of twelve percent per annum.
13 Sec. 5. NEW SECTION. 573B.5 Action or arbitration to
14enforce.
15In any action to enforce the provisions of this chapter,
16including arbitration, the court or arbitrator shall award
17costs and reasonable attorney fees to the prevailing party.
18Venue of such an action shall be in the county where the
19applicable real property is located. The hearing in such an
20arbitration shall be held in the county where the applicable
21real property is located.
22 Sec. 6. NEW SECTION. 573B.6 Waiver or variance prohibited.
23The rights and duties prescribed by this chapter shall not be
24waived or varied under the terms of a contract. The terms of a
25contract waiving or varying the rights and duties prescribed by
26this chapter shall be unenforceable.
27 Sec. 7. NEW SECTION. 573B.7 Applicability.
28The provisions of this chapter do not apply to single-family
29residential housing and multifamily residential housing of four
30units or less. The provisions of this chapter shall not apply
31to public works or public improvement projects.
32 Sec. 8. APPLICABILITY. This Act applies to construction
33contracts entered into on or after the effective date of this
34Act.
35EXPLANATION
-3-1The inclusion of this explanation does not constitute agreement with
2the explanation’s substance by the members of the general assembly.
3This bill creates the “Iowa Fairness in Private Construction
4Contracts Act”. The bill requires a person or entity that
5enters into a contract for private construction to make
6all payments pursuant to the terms of the contract and in
7accordance with the bill. The bill provides that a provision
8in a private construction contract that waives, releases, or
9extinguishes the right to resolve disputes through litigation
10is void as contrary to public policy, although arbitration
11may be required as a prerequisite to or a substitution for
12litigation.
13The bill provides that a provision in a contract for
14private construction making a payment from a contractor or
15subcontractor to a subcontractor contingent or conditioned upon
16receipt of a payment from any other private party is no defense
17to a claim to enforce a mechanic’s lien or bond to secure
18payment of claims pursuant to Code chapter 572.
19The bill requires that a contract for private construction
20provide that payment of amounts due a contractor from an owner,
21except retainage, shall be made within 30 days after the owner
22receives a timely, properly completed, undisputed request for
23payment. The bill provides that if an owner fails to pay a
24contractor by the date payment is due, the owner must pay
25interest to the contractor beginning the first business day
26after payment is due, at the rate of 12 percent per annum.
27The bill provides that for a contract for private
28construction, a contractor must pay a subcontractor any
29amounts due within seven business days of the later of either
30the receipt of payment by the contractor from the owner,
31including retainage, if released, or the date payment to the
32subcontractor is due pursuant to the subcontract. The bill
33provides that if a contractor fails to pay a subcontractor in
34this way, the contractor must pay interest to the subcontractor
35beginning the first business day after payment is due, at a
-4-1rate of 12 percent per annum.
2The bill defines “retainage” for the purposes of the “Iowa
3fairness in private construction contracts Act” as money
4earned by a contractor or subcontractor but withheld to ensure
5proper performance by the contractor or subcontractor. The
6bill provides that an owner, contractor, or subcontractor may
7withhold no more than 5 percent retainage from the amount of
8any undisputed payment due. The bill provides that if an
9owner, contractor, or subcontractor fails to pay retainage
10as required, they must pay interest beginning on the first
11business day after the payment was due, at a rate of 12 percent
12per annum.
13The bill provides that in any action to enforce the
14provisions of the bill, including arbitration, the court or
15arbitrator will award costs and reasonable attorney fees to the
16prevailing party. The bill provides that such an action will
17take place in the county where the applicable real property is
18located.
19The bill provides that the rights and duties prescribed
20by the bill cannot be waived or varied under the terms
21of a contract, and a provision of a contract doing so is
22unenforceable.
23The bill does not apply to single-family residential housing
24and multifamily residential housing of four units or less or
25public works or public improvement projects.
26The bill applies to construction contracts entered into on
27or 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 furnishing labor, equipment,
7material, or supplies used or consumed for the design,
8construction, alteration, renovation, repair, or maintenance of
9a building, structure, appurtenance, or other improvement to
10real property, including any moving, demolition, or excavation.
112. “Contract” means a contract or agreement concerning
12construction entered into by and between an owner and
13a contractor, a contractor and a subcontractor, or a
14subcontractor and another subcontractor.
153. “Contractor” means a person or entity that engages in
16the business of construction and has a contract with an owner
17of the real property or with a trustee, agent, or spouse of an
18owner.
194. “Owner” means the record titleholder or a person or
20entity for whose use or benefit any construction is undertaken,
21who has the capacity to contract, including a guardian.
225. “Private construction” means construction of or on
23private property.
246. “Retainage” means money earned by a contractor or
25subcontractor but withheld to ensure proper performance by the
26contractor or subcontractor.
277. “Subcontractor” means a person or entity that engages
28in the business of construction, except a person or entity
29entering into a contract directly with the owner of the real
30property.
31 Sec. 3. NEW SECTION. 573B.3 Private construction contracts
32—— payment —— provisions against public policy —— failure to pay.
331. A person or entity that enters into a contract for
34private construction shall make all payments pursuant to the
35terms of the contract and in accordance with this chapter.
-1- 12. A provision in a contract for private construction
2that purports to waive, release, or extinguish the right to
3resolve disputes through litigation in court or substantive or
4procedural rights in connection with such litigation is void
5and unenforceable as contrary to public policy. However, a
6contract may require binding arbitration as a substitute for
7litigation or require nonbinding alternative dispute resolution
8as a prerequisite to litigation.
93. A provision in a contract for private construction
10providing that a payment from a contractor or subcontractor
11to a subcontractor is contingent or conditioned upon receipt
12of a payment from any other private party is no defense to a
13claim to enforce a mechanic’s lien or bond to secure payment of
14claims pursuant to chapter 572.
154. A contract for private construction shall provide that
16payment of amounts due a contractor from an owner, except
17retainage, shall be made within thirty days after the owner
18receives a timely, properly completed, undisputed request for
19payment. If an owner fails to pay a contractor by the date
20payment is due, the owner shall pay interest to the contractor
21beginning on the first business day after payment is due,
22computed at the rate of twelve percent per annum.
235. For a contract for private construction, a contractor
24shall pay a subcontractor any amounts due within seven business
25days of whichever of the following is later:
26a. Receipt of payment by the contractor from the owner,
27including payment of retainage, if retainage is released by the
28owner.
29b. The date payment to the subcontractor is due pursuant to
30the contract.
316. If a contractor fails to pay a subcontractor pursuant
32to subsection 5, the contractor shall pay interest to the
33subcontractor beginning on the first business day after payment
34becomes due, computed at the rate of twelve percent per annum.
357. The provisions of subsections 5 and 6 shall apply to a
-2-1payment from a subcontractor to its subcontractor.
2 Sec. 4. NEW SECTION. 573B.4 Retainage.
31. An owner, contractor, or subcontractor may withhold
4no more than five percent retainage from the amount of any
5undisputed payment due.
62. If an owner, contractor, or subcontractor fails to pay
7retainage pursuant to the terms of a contract for private
8construction or as required by this chapter, the owner,
9contractor, or subcontractor shall pay interest to the
10contractor or subcontractor to whom payment was due, beginning
11on the first business day after the payment was due, at a rate
12of twelve percent per annum.
13 Sec. 5. NEW SECTION. 573B.5 Action or arbitration to
14enforce.
15In any action to enforce the provisions of this chapter,
16including arbitration, the court or arbitrator shall award
17costs and reasonable attorney fees to the prevailing party.
18Venue of such an action shall be in the county where the
19applicable real property is located. The hearing in such an
20arbitration shall be held in the county where the applicable
21real property is located.
22 Sec. 6. NEW SECTION. 573B.6 Waiver or variance prohibited.
23The rights and duties prescribed by this chapter shall not be
24waived or varied under the terms of a contract. The terms of a
25contract waiving or varying the rights and duties prescribed by
26this chapter shall be unenforceable.
27 Sec. 7. NEW SECTION. 573B.7 Applicability.
28The provisions of this chapter do not apply to single-family
29residential housing and multifamily residential housing of four
30units or less. The provisions of this chapter shall not apply
31to public works or public improvement projects.
32 Sec. 8. APPLICABILITY. This Act applies to construction
33contracts entered into on or after the effective date of this
34Act.
35EXPLANATION
-3-1The inclusion of this explanation does not constitute agreement with
2the explanation’s substance by the members of the general assembly.
3This bill creates the “Iowa Fairness in Private Construction
4Contracts Act”. The bill requires a person or entity that
5enters into a contract for private construction to make
6all payments pursuant to the terms of the contract and in
7accordance with the bill. The bill provides that a provision
8in a private construction contract that waives, releases, or
9extinguishes the right to resolve disputes through litigation
10is void as contrary to public policy, although arbitration
11may be required as a prerequisite to or a substitution for
12litigation.
13The bill provides that a provision in a contract for
14private construction making a payment from a contractor or
15subcontractor to a subcontractor contingent or conditioned upon
16receipt of a payment from any other private party is no defense
17to a claim to enforce a mechanic’s lien or bond to secure
18payment of claims pursuant to Code chapter 572.
19The bill requires that a contract for private construction
20provide that payment of amounts due a contractor from an owner,
21except retainage, shall be made within 30 days after the owner
22receives a timely, properly completed, undisputed request for
23payment. The bill provides that if an owner fails to pay a
24contractor by the date payment is due, the owner must pay
25interest to the contractor beginning the first business day
26after payment is due, at the rate of 12 percent per annum.
27The bill provides that for a contract for private
28construction, a contractor must pay a subcontractor any
29amounts due within seven business days of the later of either
30the receipt of payment by the contractor from the owner,
31including retainage, if released, or the date payment to the
32subcontractor is due pursuant to the subcontract. The bill
33provides that if a contractor fails to pay a subcontractor in
34this way, the contractor must pay interest to the subcontractor
35beginning the first business day after payment is due, at a
-4-1rate of 12 percent per annum.
2The bill defines “retainage” for the purposes of the “Iowa
3fairness in private construction contracts Act” as money
4earned by a contractor or subcontractor but withheld to ensure
5proper performance by the contractor or subcontractor. The
6bill provides that an owner, contractor, or subcontractor may
7withhold no more than 5 percent retainage from the amount of
8any undisputed payment due. The bill provides that if an
9owner, contractor, or subcontractor fails to pay retainage
10as required, they must pay interest beginning on the first
11business day after the payment was due, at a rate of 12 percent
12per annum.
13The bill provides that in any action to enforce the
14provisions of the bill, including arbitration, the court or
15arbitrator will award costs and reasonable attorney fees to the
16prevailing party. The bill provides that such an action will
17take place in the county where the applicable real property is
18located.
19The bill provides that the rights and duties prescribed
20by the bill cannot be waived or varied under the terms
21of a contract, and a provision of a contract doing so is
22unenforceable.
23The bill does not apply to single-family residential housing
24and multifamily residential housing of four units or less or
25public works or public improvement projects.
26The bill applies to construction contracts entered into on
27or after the effective date of the bill.
-5-