Senate File 417 - Introduced SENATE FILE 417 BY COMMITTEE ON COMMERCE (SUCCESSOR TO SSB 1156) 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 1944SV (2) 90 ko/ns
S.F. 417 Section 1. NEW SECTION . 558B.1 Definitions. 1 As used in this chapter, unless the context otherwise 2 requires: 3 1. a. Common interest community means real estate 4 described in a declaration with respect to which a person, 5 by virtue of the persons ownership of a unit, is obligated 6 to pay for a share of real estate taxes, insurance premiums, 7 maintenance, or improvement of, or services or other expenses 8 related to, common elements, other units, or other real estate 9 described in the declaration. Common interest community 10 includes a planned community, a cooperative under chapter 499A, 11 and a horizontal property regime under chapter 499B. 12 b. Common interest community does not include any of the 13 following: 14 (1) A covenant that requires the owners of separate parcels 15 of real estate to share costs or other obligations related to a 16 wall, driveway, well, or other similar structure, unless all 17 such owners consent in writing to the creation of a common 18 interest community. 19 (2) Real estate described in paragraph a if all units are 20 owned by a single owner. 21 2. Consumer means a natural person being provided a 22 service under a service agreement, or the natural persons 23 legal representative. 24 3. Record means presentation of a document to a county 25 recorder in this state for official placement in the public 26 land records. 27 4. Residential real estate means real property located 28 in this state which is used primarily for personal, family, 29 or household purposes and is improved by one to four dwelling 30 units. 31 5. Service agreement means a contract under which a person 32 agrees to provide a service in connection with the maintenance 33 of, the purchase of, or the sale of, residential real estate. 34 Sec. 2. NEW SECTION . 558B.2 Unfair service agreements 35 -1- LSB 1944SV (2) 90 ko/ns 1/ 5
S.F. 417 penalties. 1 1. A service agreement shall be considered unfair under this 2 section if a service that is covered by the service agreement 3 is not required to be completely performed within one year 4 after the date on which the service agreement is executed, and 5 the service agreement has any of the following characteristics: 6 a. The service agreement purports to run with the land or 7 to be binding on future owners of interests in the residential 8 real estate that is the subject of the service agreement. 9 b. The service agreement permits assignment of the right to 10 provide service under the service agreement without requiring 11 notice to, and the consent of, the owner of the residential 12 real estate that is the subject of the service agreement. 13 c. The service agreement purports to create a lien, 14 encumbrance, or other real property security interest on the 15 residential real estate that is the subject of the service 16 agreement. 17 2. If a service agreement is unfair under this section, the 18 service agreement shall be unenforceable. 19 3. If a person enters into an unfair service agreement 20 with a consumer, the person commits an unlawful practice under 21 section 714.16. 22 4. a. A person shall not cause an unfair service agreement, 23 or a notice or memorandum of an unfair service agreement, to 24 be recorded. 25 b. A person who causes an unfair service agreement, or a 26 notice or memorandum of an unfair service agreement, to be 27 recorded commits an aggravated misdemeanor. 28 c. A county recorder may refuse to record an unfair service 29 agreement. 30 d. If an unfair service agreement is recorded, the recorded 31 service agreement shall not provide actual or constructive 32 notice against an otherwise bona fide purchaser or creditor, 33 or actual or constructive notice against heirs or other 34 successors-in-interest to the residential real estate that is 35 -2- LSB 1944SV (2) 90 ko/ns 2/ 5
S.F. 417 the subject of the recorded service agreement. 1 e. If an unfair service agreement or a notice or memorandum 2 of an unfair service agreement is recorded, any person with an 3 interest in the residential real estate that is the subject 4 of the service agreement may apply to a district court in the 5 county in which the service agreement is recorded for a court 6 order declaring the service agreement unenforceable. 7 f. If an unfair service agreement or a notice or memorandum 8 of an unfair service agreement is recorded, any person with an 9 interest in the residential real estate that is the subject 10 of the recorded service agreement may recover actual damages, 11 costs, and attorney fees as may be proven against the person 12 who recorded the service agreement. 13 5. This section does not apply to any of the following: 14 a. A home warranty or similar agreement that covers the 15 cost of maintenance for a fixed period of time of a major home 16 system including but not limited to plumbing, electrical, 17 heating, ventilation, or air conditioning. 18 b. An insurance contract. 19 c. An option or a right of refusal to purchase residential 20 real estate. 21 d. A maintenance or repair agreement entered into by the 22 homeowners association of a common interest community. 23 e. A mortgage loan, or a commitment to make or to receive a 24 mortgage loan. 25 f. A security agreement under the uniform commercial code 26 related to the sale or rental of personal property or fixtures. 27 g. Water, sewer, electrical, telephone, cable, or any other 28 regulated utility service providers. 29 6. This section shall not be construed to impair a persons 30 rights established by a mechanics lien under chapter 572. 31 Sec. 3. Section 714.16, subsection 2, Code 2023, is amended 32 by adding the following new paragraph: 33 NEW PARAGRAPH . q. It shall be an unlawful practice for a 34 person to violate section 558B.2, subsection 3. 35 -3- LSB 1944SV (2) 90 ko/ns 3/ 5
S.F. 417 EXPLANATION 1 The inclusion of this explanation does not constitute agreement with 2 the explanations substance by the members of the general assembly. 3 This bill relates to unfair residential real estate service 4 agreements (agreement). 5 An agreement shall be considered unfair under the bill if a 6 service that is covered by the agreement is not required to be 7 completely performed within one year after the date on which 8 the agreement is executed, and the agreement has any of the 9 characteristics detailed in the bill. Service agreement is 10 defined in the bill as a contract under which a person agrees 11 to provide a service in connection with the maintenance of, 12 the purchase of, or the sale of, residential real estate (real 13 estate). Residential real estate is also defined in the 14 bill. 15 If an agreement is unfair, the agreement shall be 16 unenforceable. If a person enters into an unfair agreement 17 with a consumer, the person commits an unlawful practice. 18 Several types of remedies are available if a court finds that a 19 person has committed an unlawful practice, including injunctive 20 relief, disgorgement of moneys or property, and a civil penalty 21 not to exceed $40,000 per violation. 22 The bill prohibits a person from causing an unfair 23 agreement, or a notice or memorandum (memo) of an unfair 24 agreement, to be recorded. A person who violates this 25 prohibition commits an aggravated misdemeanor. An aggravated 26 misdemeanor is punishable by confinement for no more than two 27 years and a fine of at least $855 but not more than $8,540. 28 A county recorder may refuse to record an unfair agreement. 29 If an unfair agreement is recorded, the recorded agreement 30 shall not provide actual or constructive notice against an 31 otherwise bona fide purchaser or creditor, or against heirs 32 or other successors-in-interest to the real estate that is 33 the subject of the agreement. If an unfair agreement or a 34 notice or memo of an unfair agreement is recorded, any person 35 -4- LSB 1944SV (2) 90 ko/ns 4/ 5
S.F. 417 with an interest in the real estate that is the subject of 1 the agreement may apply to a district court in the county in 2 which it is recorded for a court order declaring the agreement 3 unenforceable, and any person with an interest in the real 4 estate that is the subject of the agreement may recover actual 5 damages, costs, and attorney fees as may be proven against the 6 person that recorded the agreement. 7 The bill does not apply to a home warranty or similar 8 agreement, an insurance contract, an option or right of refusal 9 to purchase real estate, a maintenance or repair agreement 10 entered into by the homeowners association of a common 11 interest community, a mortgage loan or a commitment to make 12 or receive a mortgage loan, a security agreement under the 13 uniform commercial code relating to the sale or rental of 14 personal property or fixtures, or to regulated utility service 15 providers. Common interest community is defined in the bill. 16 The bill shall also not be construed to impair a persons 17 rights established by a mechanics lien. 18 -5- LSB 1944SV (2) 90 ko/ns 5/ 5