On April 25, 2025, Governor Kim Reynolds signed into law SF 574, which amends Iowa Code Chapter 573 to reduce the maximum retainage that may be held by public owners on Iowa public construction projects. It lowers the previous amount of 5% down to 3%. It’s important to note that this change does not impact private negotiated contracts.
Iowa law previously enabled owners to withhold up to 5% of the amount due on each monthly payment to the general/principal contractor. In turn, the general/principal contractor was entitled to withhold from its subcontractors 5% of the amount due on each payment or the amount specified in the subcontract.
This law was a priority of MBI’s this year and was a compromise to what was originally proposed in the session dealing with retention bonds. We are extremely grateful for a bi-partisan vote in both the House and Senate, and the Governor for signing this legislation that provides contractor relief for those waiting for retainage payments.
This new law goes into effect on July 1, 2025, and applies to contracts signed after July 1. If you have questions about project payments overlapping in this timeline, you are encouraged to visit legal counsel.
Leave a Reply