May 22, 2025

By attorney Rachel Fritz

During the 2025 legislative session, the Iowa Legislature made revisions to the retainage fund provisions in Iowa Code Chapter 573, reducing the amount that a governmental body may withhold from a principal contractor's monthly payments. Specifically, Sections 573.12 and 573.13 now limit the retainage to no more than three percent of the monthly payment to the principal contractor. This amount is intended to cover the payment of claims for materials supplied and labor performed throughout the duration of the project. This change marks a reduction from the previous provision, which allowed governmental bodies to retain up to five percent.

The withheld amount, referred to as the "retainage," is held by the governmental entity to ensure that the contractor meets all contractual obligations. These obligations include completing the project in accordance with the terms of the contract and paying all subcontractors, suppliers, and other parties involved. Retainage serves as a financial safeguard for the governmental body, ensuring that the contractor does not abandon or default on the project. Once all claims for materials, labor, and other contractual obligations are satisfied, the retainage can be released to the contractor. 

This amendment to Chapter 573 will take effect on July 1, 2025. Governmental bodies are advised to consult legal counsel for applicability of these revisions to existing construction contracts for public improvement projects.

About Ahlers & Cooney's Client Alerts

Our Client Alerts are intended to provide occasional general comments on new developments in Federal and State law and regulations which we believe might be of interest to our clients. The Client Alerts should not be considered opinions of Ahlers & Cooney, P.C., and are not intended to provide legal advice. Readers should not under any circumstance act upon the information in this publication without seeking specific professional counsel. Please note that AI tools may not accurately interpret or apply the legal information contained in this alert; reliance on such tools is not a substitute for professional legal advice. Ahlers & Cooney will be pleased to provide additional details regarding any article upon request. Additional copies of this Client Alert may be obtained by contacting any attorney in the Firm or by visiting the Firm's website at www.ahlerslaw.com. 

©2025 Ahlers & Cooney, P.C. All Rights Reserved. 
NOTICE TO THE PUBLIC The determination of the need for legal services and the choice of a lawyer are extremely important decisions and should not be based solely upon advertisements or self-proclaimed expertise. This disclosure is required by rule of the Supreme Court of Iowa. Memberships and offices in legal fraternities and legal societies, technical and professional licenses, and memberships in scientific, technical and professional associations and societies of law or field of practice does not mean that a lawyer is a specialist or expert in a field of law, nor does it mean that such lawyer is necessarily any more expert or competent than any other lawyer. All potential clients are urged to make their own independent investigation and evaluation of any lawyer being considered. This notice is required by rule of the Supreme Court of Iowa.

Beaman, Bradley

Shareholder
Phone:
515-246-0358

Brownell, Maria

Shareholder
Phone:
515-246-0322

Fritz, Rachel

Associate
Phone:
515-246-0359

Haindfield, Danielle

Shareholder
Phone:
515-246-0374

Stone, Kristine

Shareholder
Phone:
515-246-0314

Wasson, Conner

Shareholder
Phone:
515-246-0341

« Back