By attorney Sam McMichael
During the 2026 legislative session, the Iowa Legislature enacted SF 2365, an amendment to Iowa Code Chapter 573 imposing new notice obligations on government bodies following final acceptance of public improvement projects.
Iowa Code Chapter 573 regulates contracts for the construction of public improvements by requiring general contractors to furnish performance bonds and mandating public entities maintain retainage funds during construction. Providers of labor or materials on a public improvement project may assert claims against the retainage fund or the contractor’s performance bond if payment disputes arise. Iowa Code Section 573.16 requires that any action to adjudicate rights to retainage funds or to enforce liability on a performance bond must be brought within a narrow statutory filing window that begins thirty (30) days after final acceptance of the project and expires sixty (60) days after final acceptance. In effect, parties generally have a thirty-day period in which to commence litigation once final acceptance occurs.
While the Legislature left that statutory filing period unchanged, the amendment to Section 573.16 now requires government bodies to provide written notice of the date of final acceptance of the public improvement project within fourteen (14) days after final acceptance. The notice must be sent to: (1) the principal contractor, (2) the surety on any performance bond issued for the project, and (3) any claimant for labor or materials that has filed a claim under Chapter 573.
Importantly, the Legislature also included language limiting government liability related to the new notice requirement. Specifically, the amended statute expressly provides that a government body is not liable for claims or damages based on or arising out of the government body’s failure to comply with its notice requirement. As a result, although government bodies are now statutorily obligated to send notice following final acceptance, the amendment limits the ability of independent claims against the government body based solely on an alleged failure to properly provide that notice.
This amendment to Chapter 573 will take effect on July 1, 2026. In light of these changes, government bodies should review and update their project closeout procedures before the July 1, 2026 effective date to ensure compliance with 573.16’s new notice mandates, and make sure to maintain records showing when and how notice is being transmitted.
Public owners with questions on the new notice requirements are advised to consult with their legal counsel.
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