House Study Bill 175 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON LUNDGREN) A BILL FOR An Act relating to unfair residential real estate service 1 agreements, providing penalties, and making penalties 2 applicable. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1944YC (2) 90 ko/ns
H.F. _____ Section 1. NEW SECTION . 558B.1 Definitions. 1 As used in this chapter, unless the context otherwise 2 requires: 3 1. Consumer means a natural person being provided a 4 service under a service agreement, or the natural persons 5 legal representative. 6 2. Record means presentation of a document to a county 7 recorder in this state for official placement in the public 8 land records. 9 3. Residential real estate means real property located 10 in this state which is used primarily for personal, family, 11 or household purposes and is improved by one to four dwelling 12 units. 13 4. Service agreement means a contract under which a person 14 agrees to provide a service in connection with the maintenance 15 of, the purchase of, or the sale of, residential real estate. 16 Sec. 2. NEW SECTION . 558B.2 Unfair service agreements 17 penalties. 18 1. A service agreement shall be considered unfair under this 19 section if a service that is covered by the service agreement 20 is not required to be completely performed within one year 21 after the date on which the service agreement is executed, and 22 the service agreement has any of the following characteristics: 23 a. The service agreement purports to run with the land or 24 to be binding on future owners of interests in the residential 25 real estate that is the subject of the service agreement. 26 b. The service agreement permits assignment of the right to 27 provide service under the service agreement without requiring 28 notice to, and the consent of, the owner of the residential 29 real estate that is the subject of the service agreement. 30 c. The service agreement purports to create a lien, 31 encumbrance, or other real property security interest on the 32 residential real estate that is the subject of the service 33 agreement. 34 2. If a service agreement is unfair under this section, the 35 -1- LSB 1944YC (2) 90 ko/ns 1/ 4
H.F. _____ service agreement shall be unenforceable. 1 3. If a person enters into an unfair service agreement 2 with a consumer, the person commits an unlawful practice under 3 section 714.16. 4 4. a. A person shall not record, or cause to be recorded, 5 an unfair service agreement, or a notice or memorandum of an 6 unfair service agreement. 7 b. A person who records, or causes to be recorded, a 8 notice or memorandum of an unfair service agreement commits an 9 aggravated misdemeanor. 10 c. A county recorder may refuse to record an unfair service 11 agreement. 12 d. If an unfair service agreement is recorded, the recorded 13 service agreement shall not provide actual or constructive 14 notice against an otherwise bona fide purchaser or creditor, 15 or actual or constructive notice against heirs or other 16 successors-in-interest to the residential real estate that is 17 the subject of the recorded service agreement. 18 e. If an unfair service agreement or a notice or memorandum 19 of an unfair service agreement is recorded, any person with an 20 interest in the residential real estate that is the subject 21 of the service agreement may apply to a district court in the 22 county in which the service agreement is recorded for a court 23 order declaring the service agreement unenforceable. 24 f. If an unfair service agreement or a notice or memorandum 25 of an unfair service agreement is recorded, any person with an 26 interest in the residential real estate that is the subject 27 of the recorded service agreement may recover actual damages, 28 costs, and attorney fees as may be proven against the person 29 who recorded the service agreement. 30 5. This section does not apply to any of the following: 31 a. A home warranty or similar agreement that covers the 32 cost of maintenance for a fixed period of time of a major home 33 system including but not limited to plumbing, electrical, 34 heating, ventilation, or air conditioning. 35 -2- LSB 1944YC (2) 90 ko/ns 2/ 4
H.F. _____ b. An insurance contract. 1 c. An option or a right of refusal to purchase residential 2 real estate. 3 d. A mortgage loan, or a commitment to make or to receive a 4 mortgage loan. 5 e. A security agreement under the uniform commercial code 6 related to the sale or rental of personal property or fixtures. 7 f. Water, sewer, electrical, telephone, cable, or any other 8 regulated utility service providers. 9 6. This section shall not be construed to impair a persons 10 rights established by a mechanics lien under chapter 572. 11 Sec. 3. Section 714.16, subsection 2, Code 2023, is amended 12 by adding the following new paragraph: 13 NEW PARAGRAPH . q. It shall be an unlawful practice for a 14 person to violate section 558B.2, subsection 3. 15 EXPLANATION 16 The inclusion of this explanation does not constitute agreement with 17 the explanations substance by the members of the general assembly. 18 This bill relates to unfair residential real estate service 19 agreements (agreement). 20 An agreement shall be considered unfair under the bill if a 21 service that is covered by the agreement is not required to be 22 completely performed within one year after the date on which 23 the agreement is executed, and the agreement has any of the 24 characteristics detailed in the bill. Service agreement is 25 defined in the bill as a contract under which a person agrees 26 to provide a service in connection with the maintenance of, 27 the purchase of, or the sale of, residential real estate (real 28 estate). Residential real estate is also defined in the 29 bill. 30 If an agreement is unfair, the agreement shall be 31 unenforceable. If a person enters into an unfair agreement 32 with a consumer, the person commits an unlawful practice. 33 Several types of remedies are available if a court finds that a 34 person has committed an unlawful practice, including injunctive 35 -3- LSB 1944YC (2) 90 ko/ns 3/ 4
H.F. _____ relief, disgorgement of moneys or property, and a civil penalty 1 not to exceed $40,000 per violation. 2 The bill prohibits a person from recording or causing to be 3 recorded an unfair agreement, or a notice or memorandum (memo) 4 of an unfair agreement. A person that records, or causes to 5 be recorded, a notice or memo of an unfair agreement commits 6 an aggravated misdemeanor. An aggravated misdemeanor is 7 punishable by confinement for no more than two years and a fine 8 of at least $855 but not more than $8,540. 9 A county recorder may refuse to record an unfair agreement. 10 If an unfair agreement is recorded, the recorded agreement 11 shall not provide actual or constructive notice against an 12 otherwise bona fide purchaser or creditor, or against heirs 13 or other successors-in-interest to the real estate that is 14 the subject of the agreement. If an unfair agreement or a 15 notice or memo of an unfair agreement is recorded, any person 16 with an interest in the real estate that is the subject of 17 the agreement may apply to a district court in the county in 18 which it is recorded for a court order declaring the agreement 19 unenforceable, and any person with an interest in the real 20 estate that is the subject of the agreement may recover actual 21 damages, costs, and attorney fees as may be proven against the 22 person that recorded the agreement. 23 The bill does not apply to a home warranty or similar 24 agreement, an insurance contract, an option or right of refusal 25 to purchase real estate, a mortgage loan or a commitment to 26 make or receive a mortgage loan, a security agreement under 27 the uniform commercial code relating to the sale or rental of 28 personal property or fixtures, or to regulated utility service 29 providers. The bill shall also not be construed to impair a 30 persons rights established by a mechanics lien. 31 -4- LSB 1944YC (2) 90 ko/ns 4/ 4