House Study Bill 15 - IntroducedA Bill ForAn Act 1relating to registration and bonding requirements for
2contractors, and providing criminal and civil penalties.
1   Section 1.  Section 91C.2, subsection 3, Code 2019, is
2amended to read as follows:
   33.  An In addition to any bond required by section 91C.6B,
out-of-state contractor shall either file a surety bond,
5as provided in section 91C.7, with the division of labor
6services in the amount of twenty-five thousand dollars or
7shall provide a statement to the division of labor services
8that the contractor is prequalified to bid on projects for the
9department of transportation pursuant to section 314.1.
10   Sec. 2.  Section 91C.6, Code 2019, is amended to read as
   1291C.6  Rules.
   13The labor commissioner shall adopt rules, pursuant to
14chapter 17A, determined to be reasonably necessary for phasing
15in, administering, and enforcing the system of contractor
16registration and bonding established by this chapter.
17   Sec. 3.  NEW SECTION.  91C.6A  State contracts with
18unregistered contractors prohibited.
   19A contractor who is not registered with the labor
20commissioner as required by this chapter shall not be awarded
21a contract to perform work for the state or an agency of the
23   Sec. 4.  NEW SECTION.  91C.6B  Home improvement contractor
24performance bond — penalty.
   251.  For purposes of this section:
   26a.  “Division” means the division of labor services of the
27department of workforce development.
   28b.  “Home improvement contract” means any contract for the
29improvement or repair of existing residential property and the
30appurtenances of such property, including but not limited to
31landscaping, garages, storage sheds, sidewalks, driveways, and
32retaining walls, but does not include contracts for less than
33two hundred dollars in the aggregate.
   342.  Any contractor, prior to entering into a home improvement
35contract in Iowa, shall file with the division a surety bond.
-1-1The bond shall be in the amount of seventy-five thousand
2dollars and shall be for the benefit of any person who, in
3connection with a home improvement contract with a contractor,
4is damaged by the contractor’s breach of the home improvement
5contract or by the contractor’s violation of section 714.16,
6regardless of whether the person has a direct cause of action
7pursuant to section 714.16. Any person so damaged may bring
8suit directly on the bond without assignment, and may recover
9from bond proceeds actual damages, court costs, and reasonable
10attorney fees.
   113.  A person filing suit pursuant to this section shall
12notify the division at the time the suit is filed, and the
13division shall maintain a record, available for public
14inspection and copying, of all suits commenced. Notification
15is not a precondition to the filing of a suit, and failure to
16notify the division shall in no way affect the validity of a
17lawsuit. However, notification pursuant to this section must
18be completed prior to payout of any bond proceeds pursuant to
19this section.
   204.  The attorney general may make a direct claim on a
21bond or bring an action in equity on behalf of the state
22to recover bond proceeds for persons who incur damage due
23to a contractor’s breach of a home improvement contract or
24violation of section 714.16 in connection with a person’s home
25improvement contract with a contractor.
   265.  Priority for payment of the proceeds of a bond filed
27pursuant to this section shall be based upon the time of filing
28a notice of suit with the division, except that any claim or
29action by the attorney general to recover bond proceeds shall
30take precedence over all other claims on the bond, regardless
31of the time of filing.
   326.  The issuer of a surety bond filed pursuant to this
33section shall notify the labor commissioner upon the
34cancellation of such bond. If a surety bond filed pursuant to
35this section is canceled or otherwise ceases to be in effect,
-2-1the contractor’s registration pursuant to this chapter shall be
2void. The failure of a contractor to have a valid surety bond
3on file with the division as of the date of a home improvement
4contract shall make the contract and any note, instrument, or
5other evidence of indebtedness executed or entered into in
6connection with the contract voidable, and shall constitute a
7complete defense in any action based on the contract, note,
8instrument, or other evidence of indebtedness brought by the
9contractor or the contractor’s successors or assigns.
   107.  a.  A contractor who violates any provision of this
11section is guilty of a simple misdemeanor.
   12b.  A violation of this section is an unlawful practice
13pursuant to section 714.16.
14   Sec. 5.  Section 91C.7, subsection 1, Code 2019, is amended
15by striking the subsection.
17The inclusion of this explanation does not constitute agreement with
18the explanation’s substance by the members of the general assembly.
   19This bill relates to contractor registration and bonding
   21The bill requires in new Code section 91C.6B that a
22contractor, prior to entering into a home improvement contract
23in Iowa, obtain a surety bond of $75,000. The new bond is in
24addition to any other bond requirements in Code chapter 91C.
25The bond benefits a person who is damaged by the contractor’s
26breach of contract or by the contractor’s breach of Code
27section 714.16, the consumer fraud statute, regardless of
28whether the person has a direct cause of action under that Code
29section. Any person damaged in either way may sue directly
30on the bond and may recover actual damages, court costs, and
31reasonable attorney fees. The bill defines “home improvement
32contract” to mean any contract for the improvement or repair
33of existing residential property and the appurtenances of such
34property, as specified in the bill, but not including contracts
35of less than $200 in total.
   1The bill provides that when a suit is filed, the person who
2sues on the bond shall notify the division of labor services of
3the department of workforce development, which shall maintain
4a public record of all suits commenced. Notification is not
5a precondition to filing a suit and failure to notify the
6division does not in any way invalidate a lawsuit. However,
7bond proceeds cannot be paid out to anyone who has not filed
   9The bill provides that the attorney general may also make
10a direct claim on a bond or bring an action in equity against
11the bond on behalf of the state to recover bond proceeds for
12persons damaged due to a contractor’s breach of contract or
13violation of the consumer fraud statute in connection with a
14home improvement contract. The attorney general’s action shall
15take precedence over all other claims on the bond regardless
16of the time of filing.
   17The bill requires the issuer of a bond to notify the labor
18commissioner upon the cancellation of the bond. If a bond is
19canceled or otherwise ceases to be in effect, the contractor’s
20registration pursuant to Code chapter 91C shall be void. The
21failure of a contractor to have a valid bond on file as of the
22date of a home improvement contract makes the contract and any
23note or instrument of indebtedness executed or entered into
24in connection with the contract to the contractor voidable,
25and shall be a complete defense in any action based on the
26contract or evidence of indebtedness by the contractor of the
27contractor’s successors or assigns.
   28The bill provides that a contractor who violates any
29provision of new Code section 91C.6B is guilty of a simple
30misdemeanor. A simple misdemeanor is punishable by confinement
31for no more than 30 days or a fine of at least $65 but
32not more than $625 or by both. The bill further provides
33that a violation of new Code section 91C.6B is an unlawful
34practice pursuant to Code section 714.16, which allows the
35attorney general to investigate, issue subpoenas, and commence
-4-1civil proceedings seeking restraining orders or injunctions
2prohibiting persons from engaging in unlawful practices
3or seeking termination of the business affairs of a person
4engaging in unlawful practices. A court may also impose a
5civil penalty of up to $40,000 per violation against a person
6found to have committed an unlawful practice.