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Senate Study Bill 1066 - 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
12an owner. “Contractor” does not mean a person or entity who
13provides architectural, landscape architectural, or engineering
14design services.
154. “Owner” means the same as defined in section 103A.3.
165. “Prime rate” means the prime rate charged by banks
17on short-term business loans, as determined by the board of
18governors of the federal reserve system and published in the
19federal reserve bulletin.
206. “Private construction” means construction of or on
21private property.
227. “Retainage” means money earned by a contractor or
23subcontractor but withheld to ensure proper performance by the
24contractor or subcontractor.
258. “Subcontractor” means a person or entity that engages
26in the business of construction, except a person or entity
27entering into a contract directly with the owner of the real
28property. “Subcontractor” does not mean a person or entity who
29provides architectural, landscape architectural, or engineering
30design services.
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.
63. A provision in a contract for private construction
7providing that a payment from a contractor or subcontractor
8to a subcontractor is contingent or conditioned upon receipt
9of a payment from any other private party is no defense to a
10claim to enforce a mechanic’s lien or bond to secure payment of
11claims pursuant to chapter 572.
124. A contract for private construction shall provide that
13payment of amounts due a contractor from an owner, except
14retainage, shall be made within thirty days after the owner
15receives a timely, properly completed, undisputed request for
16payment. If an owner fails to pay a contractor by the date
17payment is due, the owner shall pay interest to the contractor
18beginning on the first business day after payment is due,
19computed at the prime rate plus one percent per year.
205. For a contract for private construction, a contractor
21shall pay a subcontractor any amounts due within ten business
22days of whichever of the following is later:
23a. Receipt of payment by the contractor from the owner,
24including payment of retainage, if retainage is released by the
25owner.
26b. The date payment to the subcontractor is due pursuant to
27the contract.
286. If a contractor fails to pay a subcontractor pursuant
29to subsection 5, the contractor shall pay interest to the
30subcontractor beginning on the first business day after payment
31becomes due, computed at the prime rate plus one percent per
32year.
337. The provisions of subsections 5 and 6 shall apply to a
34payment from a subcontractor to its subcontractor.
35 Sec. 4. NEW SECTION. 573B.4 Retainage.
-2- 11. An owner, contractor, or subcontractor may withhold
2no more than five percent retainage from the amount of any
3undisputed payment due.
42. If an owner, contractor, or subcontractor fails to pay
5retainage pursuant to the terms of a contract for private
6construction or as required by this chapter, the owner,
7contractor, or subcontractor shall pay interest to the
8contractor or subcontractor to whom payment was due, beginning
9on the first business day after the payment was due, at the
10prime rate plus one percent per year.
11 Sec. 5. NEW SECTION. 573B.5 Action or arbitration to
12enforce.
13Venue of any action to enforce the provisions of this
14chapter, including arbitration, shall be in the county where
15the applicable real property is located. The hearing in such
16an arbitration shall be held in the county where the applicable
17real property is located.
18 Sec. 6. NEW SECTION. 573B.6 Waiver or variance prohibited.
19The rights and duties prescribed by this chapter shall not be
20waived or varied under the terms of a contract. The terms of a
21contract waiving or varying the rights and duties prescribed by
22this chapter shall be unenforceable.
23 Sec. 7. NEW SECTION. 573B.7 Applicability.
24The provisions of this chapter shall not apply to
25single-family residential housing and multifamily residential
26housing of four units or less. The provisions of this chapter
27shall not apply to public works, a public utility as defined in
28section 476.1, or public improvement projects.
29 Sec. 8. APPLICABILITY. This Act applies to construction
30contracts entered into on or after the effective date of this
31Act.
32EXPLANATION
33The inclusion of this explanation does not constitute agreement with
34the explanation’s substance by the members of the general assembly.
35This bill creates the “Iowa fairness in private construction
-3-1contracts Act”. The bill requires a person or entity that
2enters into a contract for private construction to make
3all payments pursuant to the terms of the contract and in
4accordance with the bill. The bill provides that a provision
5in a private construction contract that waives, releases, or
6extinguishes the right to resolve disputes through litigation
7is void as contrary to public policy.
8The bill provides that a provision in a contract for
9private construction making a payment from a contractor or
10subcontractor to a subcontractor contingent or conditioned upon
11receipt of a payment from any other private party is no defense
12to a claim to enforce a mechanic’s lien or bond to secure
13payment of claims pursuant to Code chapter 572.
14The bill requires that a contract for private construction
15provide that payment of amounts due a contractor from an owner,
16except retainage, shall be made within 30 days after the owner
17receives a timely, properly completed, undisputed request for
18payment. The bill provides that if an owner fails to pay a
19contractor by the date payment is due, the owner must pay
20interest to the contractor beginning the first business day
21after payment is due, at the prime rate plus 1 percent per
22year.
23The bill provides that for a contract for private
24construction, a contractor must pay a subcontractor any
25amounts due within 10 business days of the later of either
26the receipt of payment by the contractor from the owner,
27including retainage, if released, or the date payment to the
28subcontractor is due pursuant to the contract. The bill
29provides that if a contractor fails to pay a subcontractor in
30this way, the contractor must pay interest to the subcontractor
31beginning the first business day after payment is due, at the
32prime rate plus 1 percent per year.
33The bill defines “retainage” for the purposes of the “Iowa
34fairness in private construction contracts Act” as money
35earned by a contractor or subcontractor but withheld to ensure
-4-1proper performance by the contractor or subcontractor. The
2bill provides that an owner, contractor, or subcontractor may
3withhold no more than 5 percent retainage from the amount of
4any undisputed payment due. The bill provides that if an
5owner, contractor, or subcontractor fails to pay retainage
6as required, they must pay interest beginning on the first
7business day after the payment was due, at the prime rate plus
81 percent per year.
9The bill provides that any action to enforce the provisions
10of the bill, including arbitration, will take place in the
11county where the applicable real property is located.
12The bill provides that the rights and duties prescribed
13by the bill cannot be waived or varied under the terms
14of a contract, and a provision of a contract doing so is
15unenforceable.
16The bill does not apply to single-family residential housing
17and multifamily residential housing of four units or less or
18public works, a public utility, or public improvement projects.
19The bill applies to construction contracts entered into on
20or 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
12an owner. “Contractor” does not mean a person or entity who
13provides architectural, landscape architectural, or engineering
14design services.
154. “Owner” means the same as defined in section 103A.3.
165. “Prime rate” means the prime rate charged by banks
17on short-term business loans, as determined by the board of
18governors of the federal reserve system and published in the
19federal reserve bulletin.
206. “Private construction” means construction of or on
21private property.
227. “Retainage” means money earned by a contractor or
23subcontractor but withheld to ensure proper performance by the
24contractor or subcontractor.
258. “Subcontractor” means a person or entity that engages
26in the business of construction, except a person or entity
27entering into a contract directly with the owner of the real
28property. “Subcontractor” does not mean a person or entity who
29provides architectural, landscape architectural, or engineering
30design services.
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.
63. A provision in a contract for private construction
7providing that a payment from a contractor or subcontractor
8to a subcontractor is contingent or conditioned upon receipt
9of a payment from any other private party is no defense to a
10claim to enforce a mechanic’s lien or bond to secure payment of
11claims pursuant to chapter 572.
124. A contract for private construction shall provide that
13payment of amounts due a contractor from an owner, except
14retainage, shall be made within thirty days after the owner
15receives a timely, properly completed, undisputed request for
16payment. If an owner fails to pay a contractor by the date
17payment is due, the owner shall pay interest to the contractor
18beginning on the first business day after payment is due,
19computed at the prime rate plus one percent per year.
205. For a contract for private construction, a contractor
21shall pay a subcontractor any amounts due within ten business
22days of whichever of the following is later:
23a. Receipt of payment by the contractor from the owner,
24including payment of retainage, if retainage is released by the
25owner.
26b. The date payment to the subcontractor is due pursuant to
27the contract.
286. If a contractor fails to pay a subcontractor pursuant
29to subsection 5, the contractor shall pay interest to the
30subcontractor beginning on the first business day after payment
31becomes due, computed at the prime rate plus one percent per
32year.
337. The provisions of subsections 5 and 6 shall apply to a
34payment from a subcontractor to its subcontractor.
35 Sec. 4. NEW SECTION. 573B.4 Retainage.
-2- 11. An owner, contractor, or subcontractor may withhold
2no more than five percent retainage from the amount of any
3undisputed payment due.
42. If an owner, contractor, or subcontractor fails to pay
5retainage pursuant to the terms of a contract for private
6construction or as required by this chapter, the owner,
7contractor, or subcontractor shall pay interest to the
8contractor or subcontractor to whom payment was due, beginning
9on the first business day after the payment was due, at the
10prime rate plus one percent per year.
11 Sec. 5. NEW SECTION. 573B.5 Action or arbitration to
12enforce.
13Venue of any action to enforce the provisions of this
14chapter, including arbitration, shall be in the county where
15the applicable real property is located. The hearing in such
16an arbitration shall be held in the county where the applicable
17real property is located.
18 Sec. 6. NEW SECTION. 573B.6 Waiver or variance prohibited.
19The rights and duties prescribed by this chapter shall not be
20waived or varied under the terms of a contract. The terms of a
21contract waiving or varying the rights and duties prescribed by
22this chapter shall be unenforceable.
23 Sec. 7. NEW SECTION. 573B.7 Applicability.
24The provisions of this chapter shall not apply to
25single-family residential housing and multifamily residential
26housing of four units or less. The provisions of this chapter
27shall not apply to public works, a public utility as defined in
28section 476.1, or public improvement projects.
29 Sec. 8. APPLICABILITY. This Act applies to construction
30contracts entered into on or after the effective date of this
31Act.
32EXPLANATION
33The inclusion of this explanation does not constitute agreement with
34the explanation’s substance by the members of the general assembly.
35This bill creates the “Iowa fairness in private construction
-3-1contracts Act”. The bill requires a person or entity that
2enters into a contract for private construction to make
3all payments pursuant to the terms of the contract and in
4accordance with the bill. The bill provides that a provision
5in a private construction contract that waives, releases, or
6extinguishes the right to resolve disputes through litigation
7is void as contrary to public policy.
8The bill provides that a provision in a contract for
9private construction making a payment from a contractor or
10subcontractor to a subcontractor contingent or conditioned upon
11receipt of a payment from any other private party is no defense
12to a claim to enforce a mechanic’s lien or bond to secure
13payment of claims pursuant to Code chapter 572.
14The bill requires that a contract for private construction
15provide that payment of amounts due a contractor from an owner,
16except retainage, shall be made within 30 days after the owner
17receives a timely, properly completed, undisputed request for
18payment. The bill provides that if an owner fails to pay a
19contractor by the date payment is due, the owner must pay
20interest to the contractor beginning the first business day
21after payment is due, at the prime rate plus 1 percent per
22year.
23The bill provides that for a contract for private
24construction, a contractor must pay a subcontractor any
25amounts due within 10 business days of the later of either
26the receipt of payment by the contractor from the owner,
27including retainage, if released, or the date payment to the
28subcontractor is due pursuant to the contract. The bill
29provides that if a contractor fails to pay a subcontractor in
30this way, the contractor must pay interest to the subcontractor
31beginning the first business day after payment is due, at the
32prime rate plus 1 percent per year.
33The bill defines “retainage” for the purposes of the “Iowa
34fairness in private construction contracts Act” as money
35earned by a contractor or subcontractor but withheld to ensure
-4-1proper performance by the contractor or subcontractor. The
2bill provides that an owner, contractor, or subcontractor may
3withhold no more than 5 percent retainage from the amount of
4any undisputed payment due. The bill provides that if an
5owner, contractor, or subcontractor fails to pay retainage
6as required, they must pay interest beginning on the first
7business day after the payment was due, at the prime rate plus
81 percent per year.
9The bill provides that any action to enforce the provisions
10of the bill, including arbitration, will take place in the
11county where the applicable real property is located.
12The bill provides that the rights and duties prescribed
13by the bill cannot be waived or varied under the terms
14of a contract, and a provision of a contract doing so is
15unenforceable.
16The bill does not apply to single-family residential housing
17and multifamily residential housing of four units or less or
18public works, a public utility, or public improvement projects.
19The bill applies to construction contracts entered into on
20or after the effective date of the bill.
-5-