Iowa Gov. Kim Reynolds signed legislation relating to unfair residential real estate service agreements. The bill was introduced as HF 475 by the House Committee on Commerce.
The bill defines a service agreement as “a contract under which a person agrees to provide a service in connection with the maintenance of, the purchase of, or the sale of, residential real estate.”
The bill states, “A service agreement shall be considered unfair under this section if a service that is covered by the service agreement is not required to be completely performed within one year after the date on which the service agreement is executed, and the service agreement has any of the following characteristics:
- “The service agreement purports to run with the land or to be binding on future owners of interests in the residential real estate that is the subject of the service agreement.
- “The service agreement permits assignment of the right to provide service under the service agreement without requiring notice to, and the consent of, the owner of the residential real estate that is the subject of the service agreement.
- “The service agreement purports to create a lien, encumbrance, or other real property securing interest on the residential real estate that is the subject of the service agreement.”
According to the bill, unfair service agreements will be considered unenforceable and anyone who enters into an unfair service agreement with a consumer would commit an unfair practice under section 714.16. It will prohibit people from recording unfair service agreements, or notices or memorandums of unfair service agreements to be recorded. Anyone who records an unfair service agreement, or a notice or memorandum of an unfair service agreement, would commit an aggravated misdemeanor.
A recorded unfair service agreement will not provide actual or constructive notice against any otherwise bona fide purchaser or creditor, or actual or constructive notice against heirs or other successors-in-interest to the residential real estate that is the subject of the recorded service agreement.
If an unfair service agreement or notice or memorandum of an unfair service agreement is recorded, any person with an interest in the residential property subject to the service agreement would be able to apply to a district court for a court order declaring the service agreement unenforceable. A person with interest in the subject property would be authorized to recover actual damages, costs, and attorney fees as may be proven against the person who recorded the unfair service agreement or notice or memorandum of the unfair service agreement.
The bill’s provision won’t apply to:
- A home warranty or similar agreement that covers the cost of maintenance for a fixed period of time of a major home system including but not limited to plumbing, electrical, heating, ventilation, or air conditioning.
- An insurance contract.
- An option or a right of refusal to purchase residential real estate.
- A maintenance or repair agreement entered into by the homeowners’ association of a common interest community.
- A mortgage loan, or a commitment to make or receive a mortgage loan.
- A security agreement under the uniform commercial code related to the sale or rental of personal property or fixtures.
- Water, sewer, electrical, telephone, cable, internet, or any other utility service providers.
The bill will not impair a person’s rights established by a mechanics’ lien under chapter 572.