Below is a summary of the new laws relating to the construction industry that came out of the 2019 Iowa Legislative Session, most of which went into effect on July 1, along with commentary on a few construction-related bills that did not pass this session.
BILLS THAT PASSED
SF 532 - Right-to-Repair Statute for Class Actions. This law, commonly known as a right-to-repair statute, establishes a mandatory process for resolving disputes over construction defects in class action matters prior to any lawsuit or arbitration claim being filed. The statute provides full details of this process, but, in short, before an owner or homeowners association is able to file a class action suit or arbitration claim against a contractor based upon an alleged construction defect, the contractor has a mandatory right to notice from the claimant of the alleged defect, right to inspect the property, and right to cure the alleged defect. Often, homeowners are quick to file suit against contractors before even notifying contractors of the alleged defect or allowing them time to inspect the property and possibly repair the defect, forcing all to spend substantial attorney fees. This new law will prevent this situation with regard to class action suits.
To confirm, this law has a more limited applicability, as it only applies as a prerequisite to litigation
(1) alleging defects in new construction, and not remodels or renovations, and
(2) involving a class action as defined under the law.
Though, the hope is that this right-to-repair statute in Iowa will be broadened in later years to apply to all construction defect litigation. The law became effective, to the applicable class actions, May 1, 2019.
SF412 - Post-Loss Assignment of Insurance Benefits from Homeowners to Contractors: This law, the “Insured Homeowner’s Protection Act” under Section 515.137A, imposes various new requirements upon certain residential remodelers where the exterior work performed is covered by the homeowner’s property insurance policy.
- This Act applies to the same group of residential contractors for which Section 103A.71 applies: contractors who perform roofing or other exterior repair/replacement work on residential property (i.e., a single-family home, duplex, or four-plex) due to damage caused by flooding/rain, hail storm, windstorm, tornado, fire, or other natural occurrences.
- This Act provides that if a homeowner-insured makes a post-loss assignment of benefits to the contractor, then the Assignment of Benefits shall:
- only authorize the contractor to be named as a co-payee for the payment of benefits;
- include an itemized description of the materials, labor, and fees for the work to be performed by the contractor, as well as a total amount to be paid for such work;
- include a disclaimer that no assurances have been made that the loss will be covered;
- include (in capitalized and 14-point font) certain statutorily mandated language;
- include a 5-day right to rescind/cancel the Assignment of Benefits; and
- not prevent or inhibit the insurer from communicating with the homeowner-insured.
A copy of the executed Assignment of Benefits shall be provided to the insurer within five business days. Any assignment entered into with a contractor is void if the contractor falls to follow this statute. The law is effective on July 1, 2019.
SF93 - Abandoned Building/Nuisance Abatement. This law relates to abandoned structures and abatement of public nuisances. This law makes certain changes regarding the procedures as to when a governmental entity may declare a structure abandoned and/or a public nuisance, hearings on abatement actions, and the rights an owner has in response to governmental action against their property. The law became effective on July 1, 2019.
SF 567 - Professional Licensing Restrictions. This law relates to professional licensing requirements and qualification. This law prohibits the Electrical Examining and Plumbing Boards from denying licenses to felons, but also provides exceptions for individuals who committed violent, sexual, or other related felonies. The law became effective on July 1, 2019.
SF570 - Architect Emergency Immunity. This act establishes immunity provisions for licensed architects and professional engineers who perform inspections and other related services at the request of government officials during a declared state of emergency. However, this liability shield from civil damages does not apply if their actions constitute reckless or willful and wanton misconduct. This law became effective on May 10, 2019.
HF650 - Negligent Hiring: This law specifies that the tort of negligent hiring/supervision cannot be brought against private employers, general contractors, and premises owners solely due to a prior conviction of an employee of a public offense. This law became effective July 1, 2019.
BILLS THAT DID NOT PASS
SF458 - Homestead Sales/Mechanics Liens (pro-contractor bill): This was a pro-industry bill, which would have confirmed that a contractor’s mechanic’s lien, including all principal, interest, attorney fees, and costs, applies to a homestead such that the homestead may be sold to satisfy the entire mechanic’s lien. Unfortunately, despite efforts by Jay Iverson, Chief Lobbyist of the HBA of Iowa, and Davis Brown attorney and industry expert, Jodie McDougal, in which they spoke to various subcommittees educating them on the issue addressed by this bill, it did not pass. The hope is that the bill may fare better next year.
SSB1244 - Culvert/Public Improvement Assessment Bill (bill negatively impacts developers): This bill related to special assessments for the cost of public improvements and the collection of connection fees for the connection of property to certain city utilities. This bill did not pass.
SF6 - Contractor Warranties (bill negatively impacts contractors): This bill would have had a negative impact upon most of the construction industry by mandating that all contractors’ written/express warranties would, by operation of law, pass to all subsequent equitable and legal owners of the property. The bill did not pass. During the 2019 session, Jay Iverson, Chief Lobbyist of the HBA of Iowa, and Davis Brown attorney, Jodie McDougal, spoke at the subcommittee meeting to educate Senators on the negative impact of this bill.
HSB2 - Project Delivery Methods (bill impacts contractors vs. architects in different manners): This bill--which would have allowed government entities to utilize certain alternative project delivery contract methods without competitive bidding--did not pass. Such project delivery methods included design-build projects and construction manager-at-risk projects, which would have been a substantial change for public projects. Opinions within the design industry versus the construction industry differed regarding this bill.
HSB15, HF 602, and HSB41: Home Improvement Contractor Bills (bills negatively impact residential contractors, including storm response contractors): The aforementioned three bills, targeting residential contractors, including storm response contractors, did not pass.
However, we may see similar bills in the 2020 Legislative Session, as the Iowa Attorney General Office has focused on a few bad-apple residential contractors who are alleged to have defrauded homeowners out of thousands of dollars. A recent Des Moines Register article detailed the issue.
If you have any questions, please contact your attorney.
Jodie McDougal | 515.288.500 | firstname.lastname@example.org
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