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Senate File 456 - IntroducedA Bill ForAn Act 1relating to registration and bonding requirements for
2contractors, and providing criminal and civil penalties.
3BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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,
4an 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. NEW SECTION. 91C.5A Registered contractors —
11unpaid court orders.
121. The labor commissioner shall make available on the
13division of labor services of the department of workforce
14development’s internet site a searchable database of all
15contractors registered under this chapter with unpaid court
16orders.
172. The labor commissioner shall adopt rules to implement
18this section.
19 Sec. 3. Section 91C.6, Code 2019, is amended to read as
20follows:
2191C.6 Rules.
22The labor commissioner shall adopt rules, pursuant to
23chapter 17A, determined to be reasonably necessary for phasing
24in, administering, and enforcing the system of contractor
25registration and bonding established by this chapter.
26 Sec. 4. NEW SECTION. 91C.6A State contracts with
27unregistered contractors prohibited.
28A contractor who is not registered with the labor
29commissioner as required by this chapter shall not be awarded
30a contract to perform work for the state or an agency of the
31state.
32 Sec. 5. NEW SECTION. 91C.6B Home improvement contractor
33performance bond — penalty.
341. For purposes of this section:
35a. “Division” means the division of labor services of the
-1-1department of workforce development.
2b. “Home improvement contract” means any contract for the
3improvement or repair of existing residential property and the
4appurtenances of such property, including but not limited to
5landscaping, garages, storage sheds, sidewalks, driveways, and
6retaining walls, but does not include contracts for less than
7two hundred dollars in the aggregate.
82. Any contractor, prior to entering into a home improvement
9contract in Iowa, shall file with the division a surety bond.
10The bond shall be in the amount of seventy-five thousand
11dollars and shall be for the benefit of any person who, in
12connection with a home improvement contract with a contractor,
13is damaged by the contractor’s breach of the home improvement
14contract or by the contractor’s violation of section 714.16,
15regardless of whether the person has a direct cause of action
16pursuant to section 714.16. Any person so damaged may bring
17suit directly on the bond without assignment, and may recover
18from bond proceeds actual damages, court costs, and reasonable
19attorney fees.
203. A person filing suit pursuant to this section shall
21notify the division at the time the suit is filed, and the
22division shall maintain a record, available for public
23inspection and copying, of all suits commenced. Notification
24is not a precondition to the filing of a suit, and failure to
25notify the division shall in no way affect the validity of a
26lawsuit. However, notification pursuant to this section must
27be completed prior to payout of any bond proceeds pursuant to
28this section.
294. The attorney general may make a direct claim on a
30bond or bring an action in equity on behalf of the state
31to recover bond proceeds for persons who incur damage due
32to a contractor’s breach of a home improvement contract or
33violation of section 714.16 in connection with a person’s home
34improvement contract with a contractor.
355. Priority for payment of the proceeds of a bond filed
-2-1pursuant to this section shall be based upon the time of filing
2a notice of suit with the division, except that any claim or
3action by the attorney general to recover bond proceeds shall
4take precedence over all other claims on the bond, regardless
5of the time of filing.
66. The issuer of a surety bond filed pursuant to this
7section shall notify the labor commissioner upon the
8cancellation of such bond. If a surety bond filed pursuant to
9this section is canceled or otherwise ceases to be in effect,
10the contractor’s registration pursuant to this chapter shall be
11void. The failure of a contractor to have a valid surety bond
12on file with the division as of the date of a home improvement
13contract shall make the contract and any note, instrument, or
14other evidence of indebtedness executed or entered into in
15connection with the contract voidable, and shall constitute a
16complete defense in any action based on the contract, note,
17instrument, or other evidence of indebtedness brought by the
18contractor or the contractor’s successors or assigns.
197. a. A contractor who violates any provision of this
20section is guilty of a simple misdemeanor.
21b. A violation of this section is an unlawful practice
22pursuant to section 714.16.
23 Sec. 6. Section 91C.7, subsection 1, Code 2019, is amended
24by striking the subsection.
25EXPLANATION
26The inclusion of this explanation does not constitute agreement with
27the explanation’s substance by the members of the general assembly.
28This bill relates to contractor registration and bonding
29requirements.
30The bill requires the labor commissioner of the division of
31labor services of the department of workforce development to
32make available on the division’s internet site a searchable
33database of all contractors registered under Code chapter
3491C with unpaid court orders. The bill requires the labor
35commissioner to adopt rules to implement this requirement.
-3- 1The bill requires in new Code section 91C.6B that a
2contractor, prior to entering into a home improvement contract
3in Iowa, obtain a surety bond of $75,000. The new bond is in
4addition to any other bond requirements in Code chapter 91C.
5The bond benefits a person who is damaged by the contractor’s
6breach of contract or by the contractor’s breach of Code
7section 714.16, the consumer fraud statute, regardless of
8whether the person has a direct cause of action under that Code
9section. Any person damaged in either way may sue directly
10on the bond and may recover actual damages, court costs, and
11reasonable attorney fees. The bill defines “home improvement
12contract” to mean any contract for the improvement or repair
13of existing residential property and the appurtenances of such
14property, as specified in the bill, but not including contracts
15of less than $200 in total.
16The bill provides that when a suit is filed, the person who
17sues on the bond shall notify the division of labor services,
18which shall maintain a public record of all suits commenced.
19Notification is not a precondition to filing a suit and
20failure to notify the division does not in any way invalidate a
21lawsuit. However, bond proceeds cannot be paid out to anyone
22who has not filed notification.
23The bill provides that the attorney general may also make
24a direct claim on a bond or bring an action in equity against
25the bond on behalf of the state to recover bond proceeds for
26persons damaged due to a contractor’s breach of contract or
27violation of the consumer fraud statute in connection with a
28home improvement contract. The attorney general’s action shall
29take precedence over all other claims on the bond regardless
30of the time of filing.
31The bill requires the issuer of a bond to notify the labor
32commissioner upon the cancellation of the bond. If a bond is
33canceled or otherwise ceases to be in effect, the contractor’s
34registration pursuant to Code chapter 91C shall be void. The
35failure of a contractor to have a valid bond on file as of the
-4-1date of a home improvement contract makes the contract and any
2note or instrument of indebtedness executed or entered into
3in connection with the contract to the contractor voidable,
4and shall be a complete defense in any action based on the
5contract or evidence of indebtedness by the contractor of the
6contractor’s successors or assigns.
7The bill provides that a contractor who violates any
8provision of new Code section 91C.6B is guilty of a simple
9misdemeanor. A simple misdemeanor is punishable by confinement
10for no more than 30 days or a fine of at least $65 but
11not more than $625 or by both. The bill further provides
12that a violation of new Code section 91C.6B is an unlawful
13practice pursuant to Code section 714.16, which allows the
14attorney general to investigate, issue subpoenas, and commence
15civil proceedings seeking restraining orders or injunctions
16prohibiting persons from engaging in unlawful practices
17or seeking termination of the business affairs of a person
18engaging in unlawful practices. A court may also impose a
19civil penalty of up to $40,000 per violation against a person
20found to have committed an unlawful practice.
-5-gh/rn
2contractors, and providing criminal and civil penalties.
3BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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,
4an 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. NEW SECTION. 91C.5A Registered contractors —
11unpaid court orders.
121. The labor commissioner shall make available on the
13division of labor services of the department of workforce
14development’s internet site a searchable database of all
15contractors registered under this chapter with unpaid court
16orders.
172. The labor commissioner shall adopt rules to implement
18this section.
19 Sec. 3. Section 91C.6, Code 2019, is amended to read as
20follows:
2191C.6 Rules.
22The labor commissioner shall adopt rules, pursuant to
23chapter 17A, determined to be reasonably necessary for phasing
24in, administering, and enforcing the system of contractor
25registration and bonding established by this chapter.
26 Sec. 4. NEW SECTION. 91C.6A State contracts with
27unregistered contractors prohibited.
28A contractor who is not registered with the labor
29commissioner as required by this chapter shall not be awarded
30a contract to perform work for the state or an agency of the
31state.
32 Sec. 5. NEW SECTION. 91C.6B Home improvement contractor
33performance bond — penalty.
341. For purposes of this section:
35a. “Division” means the division of labor services of the
-1-1department of workforce development.
2b. “Home improvement contract” means any contract for the
3improvement or repair of existing residential property and the
4appurtenances of such property, including but not limited to
5landscaping, garages, storage sheds, sidewalks, driveways, and
6retaining walls, but does not include contracts for less than
7two hundred dollars in the aggregate.
82. Any contractor, prior to entering into a home improvement
9contract in Iowa, shall file with the division a surety bond.
10The bond shall be in the amount of seventy-five thousand
11dollars and shall be for the benefit of any person who, in
12connection with a home improvement contract with a contractor,
13is damaged by the contractor’s breach of the home improvement
14contract or by the contractor’s violation of section 714.16,
15regardless of whether the person has a direct cause of action
16pursuant to section 714.16. Any person so damaged may bring
17suit directly on the bond without assignment, and may recover
18from bond proceeds actual damages, court costs, and reasonable
19attorney fees.
203. A person filing suit pursuant to this section shall
21notify the division at the time the suit is filed, and the
22division shall maintain a record, available for public
23inspection and copying, of all suits commenced. Notification
24is not a precondition to the filing of a suit, and failure to
25notify the division shall in no way affect the validity of a
26lawsuit. However, notification pursuant to this section must
27be completed prior to payout of any bond proceeds pursuant to
28this section.
294. The attorney general may make a direct claim on a
30bond or bring an action in equity on behalf of the state
31to recover bond proceeds for persons who incur damage due
32to a contractor’s breach of a home improvement contract or
33violation of section 714.16 in connection with a person’s home
34improvement contract with a contractor.
355. Priority for payment of the proceeds of a bond filed
-2-1pursuant to this section shall be based upon the time of filing
2a notice of suit with the division, except that any claim or
3action by the attorney general to recover bond proceeds shall
4take precedence over all other claims on the bond, regardless
5of the time of filing.
66. The issuer of a surety bond filed pursuant to this
7section shall notify the labor commissioner upon the
8cancellation of such bond. If a surety bond filed pursuant to
9this section is canceled or otherwise ceases to be in effect,
10the contractor’s registration pursuant to this chapter shall be
11void. The failure of a contractor to have a valid surety bond
12on file with the division as of the date of a home improvement
13contract shall make the contract and any note, instrument, or
14other evidence of indebtedness executed or entered into in
15connection with the contract voidable, and shall constitute a
16complete defense in any action based on the contract, note,
17instrument, or other evidence of indebtedness brought by the
18contractor or the contractor’s successors or assigns.
197. a. A contractor who violates any provision of this
20section is guilty of a simple misdemeanor.
21b. A violation of this section is an unlawful practice
22pursuant to section 714.16.
23 Sec. 6. Section 91C.7, subsection 1, Code 2019, is amended
24by striking the subsection.
25EXPLANATION
26The inclusion of this explanation does not constitute agreement with
27the explanation’s substance by the members of the general assembly.
28This bill relates to contractor registration and bonding
29requirements.
30The bill requires the labor commissioner of the division of
31labor services of the department of workforce development to
32make available on the division’s internet site a searchable
33database of all contractors registered under Code chapter
3491C with unpaid court orders. The bill requires the labor
35commissioner to adopt rules to implement this requirement.
-3- 1The bill requires in new Code section 91C.6B that a
2contractor, prior to entering into a home improvement contract
3in Iowa, obtain a surety bond of $75,000. The new bond is in
4addition to any other bond requirements in Code chapter 91C.
5The bond benefits a person who is damaged by the contractor’s
6breach of contract or by the contractor’s breach of Code
7section 714.16, the consumer fraud statute, regardless of
8whether the person has a direct cause of action under that Code
9section. Any person damaged in either way may sue directly
10on the bond and may recover actual damages, court costs, and
11reasonable attorney fees. The bill defines “home improvement
12contract” to mean any contract for the improvement or repair
13of existing residential property and the appurtenances of such
14property, as specified in the bill, but not including contracts
15of less than $200 in total.
16The bill provides that when a suit is filed, the person who
17sues on the bond shall notify the division of labor services,
18which shall maintain a public record of all suits commenced.
19Notification is not a precondition to filing a suit and
20failure to notify the division does not in any way invalidate a
21lawsuit. However, bond proceeds cannot be paid out to anyone
22who has not filed notification.
23The bill provides that the attorney general may also make
24a direct claim on a bond or bring an action in equity against
25the bond on behalf of the state to recover bond proceeds for
26persons damaged due to a contractor’s breach of contract or
27violation of the consumer fraud statute in connection with a
28home improvement contract. The attorney general’s action shall
29take precedence over all other claims on the bond regardless
30of the time of filing.
31The bill requires the issuer of a bond to notify the labor
32commissioner upon the cancellation of the bond. If a bond is
33canceled or otherwise ceases to be in effect, the contractor’s
34registration pursuant to Code chapter 91C shall be void. The
35failure of a contractor to have a valid bond on file as of the
-4-1date of a home improvement contract makes the contract and any
2note or instrument of indebtedness executed or entered into
3in connection with the contract to the contractor voidable,
4and shall be a complete defense in any action based on the
5contract or evidence of indebtedness by the contractor of the
6contractor’s successors or assigns.
7The bill provides that a contractor who violates any
8provision of new Code section 91C.6B is guilty of a simple
9misdemeanor. A simple misdemeanor is punishable by confinement
10for no more than 30 days or a fine of at least $65 but
11not more than $625 or by both. The bill further provides
12that a violation of new Code section 91C.6B is an unlawful
13practice pursuant to Code section 714.16, which allows the
14attorney general to investigate, issue subpoenas, and commence
15civil proceedings seeking restraining orders or injunctions
16prohibiting persons from engaging in unlawful practices
17or seeking termination of the business affairs of a person
18engaging in unlawful practices. A court may also impose a
19civil penalty of up to $40,000 per violation against a person
20found to have committed an unlawful practice.
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