Governor Reynolds Signs Three New Laws Affecting the Real Estate and Leasing Industries

Governor Kim Reynolds recently signed three new laws affecting the real estate and leasing industries: HF 2326, which creates new exemptions for non-licensed persons and entities managing Iowa properties; SF 2291, which is intended to provide more transparency in real estate transactions, particularly with respect to a broker’s compensation; and SF 2268, relating to assistance animals and service animals as reasonable accommodations in housing. A summary of each law is contained herein, but readers should review each bill in its entirety.

House File 2326 (Property Management)

HF 2326, signed into law on April 19, 2024, amends certain provisions of Iowa Code Chapter 543B, Iowa’s law regulating real estate brokers and professionals in the sale, purchasing and leasing of real estate. Previously, Iowa law required all individuals who managed property other than their own to either be a real estate broker or a licensed real estate professional under the supervision of a broker. Under the new law, a person, limited liability company or limited partnership (the Agent) may engage in the sale, purchase, leasing or management of real estate on behalf of a partnership, limited partnership, corporation or limited liability company (the Owning Entity) so long as the Agent has an ownership interest in the Owning Entity. The most common example of this is an individual managing a property owned by an LLC that the individual has an ownership interest in, which was not previously permissible. Additionally, the Agent can engage in leasing activity so long as the Agent is a parent or subsidiary of, or under common control with the leasing Owning Entity.

The other major addition to the exceptions under Iowa Code Chapter 543B applies to employees of brokers. Under the new law, a person who is a non-licensed employee of a real estate broker may engage in advertising, showing, listing, collection of rents and deposits, procuring of prospects, completing form agreements and executing form agreements as it relates to the rental of residential properties (under Iowa Code Chapters 562A and 562B), so long as the individual is an employee of a licensed real estate broker.

These changes are effective as of April 19, 2024, and are retroactive. The Iowa Real Estate Commission has indicated that all pending cases, possibly including those in which final settlement has not been signed, will be closed due to a lack of probable cause due to the new changes to Iowa Code Chapter 543B. Past cases will not be impacted.

Senate File 2291 (Real Estate Transactions – Broker Compensation)

On April 19, 2024, Governor Kim Reynolds signed into law Senate File 2291. This new law, SF 2291, is intended to provide more transparency in real estate transactions, particularly with respect to a broker’s compensation.

Senate File 2291 amends existing Iowa Code Chapter 543B, which sets forth the duties of real estate brokers involved in real estate transactions. The new law requires a prospective buyer and the buyer’s real estate broker to both sign a written representation agreement before the buyer makes an offer on a property. Similarly, it requires a seller and the seller’s broker to both sign a written brokerage agreement before the seller’s property is listed on the market. The new law also requires the compensation a broker is to receive from the transaction to be included in the written brokerage agreement and clarifies that the broker’s compensation is negotiable by requiring the broker to review their compensation under the brokerage agreement.

The new law is set to take effect on July 1, 2024.

As those in the industry are keenly aware, there are many more changes on the horizon for real estate brokers as part of the NAR’s settlement in the commission class action lawsuit. More information can be found that National Association of Realtors’ website regarding this settlement.

Senate File 2268 (Assistance Animals)

SF 2268 replaces existing Iowa Code sections 216.8B and 216.8C regulating assistance animals and service animals in the housing context. In many ways, this law simply codifies existing federal fair housing law by more specifically describing when a landlord is and is not required to make accommodations for assistance animals and service animals. In particular, Iowa law will now expressly provide as follows:

“[A landlord] shall make reasonable accommodations in the landlord’s rules, policies, practices and services normally required for pets, for the assistance animal or service animal of a person with a disability when the accommodations are necessary to afford the person equal opportunity to use and enjoy a dwelling.”

The above language both replaces the current language providing that a landlord must waive all “lease restrictions and additional payments” for assistance and service animals and also expressly provides that a landlord shall only make accommodations for assistance and service animals when reasonable and when necessary to afford the person equal opportunity to use and enjoy a dwelling.

The law also expressly sets forth bases for denial of an assistance and service animal, all of which comports with federal fair housing law and the long-standing guidance from HUD:

“[A landlord may] deny a request for an accommodation for an assistance animal or service animal if any of the following are true: 

1. Providing the accommodation would impose an undue financial and administrative hardship on the landlord.
2. Providing the accommodation would fundamentally alter the nature of the landlord’s operations.
3. The assistance animal or service animal would do any of the following:
   1. Pose a direct threat to the safety or health of others that cannot be reduced or eliminated by a reasonable accommodation.
   2. Cause substantial physical damage to the property of others that cannot be reduced or eliminated by a reasonable accommodation.
4. Providing the accommodation is not otherwise reasonable.”

The new law also expressly provides what a landlord can require from a tenant making an accommodation request, providing as follows:

• After receiving a request for an assistance or service animal, a landlord is required to evaluate and respond to the tenant within a reasonable time.
• If a person’s disability or disability-related need for an assistance animal is not readily apparent, the landlord may request supporting information that reasonably supports the person’s need for the particular assistance animal being requested.
• An assistance animal or service animal registration of any kind, including but not limited to an identification card, patch, certificate or similar registration obtained electronically or in person, is not sufficient information to reliably establish that the person has a disability or disability-related need for an assistance animal or service animal.
• A landlord may request information for each assistance animal requested.

In addition, the law revises the requirements placed upon medical professionals who are providing the information or documentation requested by a landlord regarding the person with the disability. Specifically, the medical provider must make a written finding that includes all of the following:

• Whether the tenant has a disability;
• Whether the tenant has a disability-related need for an assistance animal;
• The particular assistance provided by the assistance animal;
• Certification that the provider-patient relationship has existed, in person or telehealth, for at least 30 days;
• Certification that the provider is familiar with the tenant and the disability before making their written findings;
• The date the findings were issued and the date the findings will expire;
• The provider’s license number and type of license; and,
• Whether the provider received a separate or additional fee or other form of compensation solely in exchange for making the written finding.

Finally, the new law provides that the written finding “must be made within 12 months of the start of a rental agreement and is valid for a period of 12 months or the term of the rental agreement, whichever is greater.”

In the future, the Iowa Civil Rights Commission will be providing an updated form in compliance with the new law that will be available on the Commission’s website.

Prior to making a determination on an accommodation request for an assistance animal or service animal, a landlord should consult with their attorney.

If you have questions regarding these new laws, please contact Jodie McDougal at jmcdougal@fredlaw.com or 515.242.8971.