The Construction Counselor

On April 25, 2025, Governor Kim Reynolds signed into law Senate File 574, which amends Iowa Code Chapter 573 by, among other things, reducing the maximum retainage that may be held by public owners on Iowa public construction projects from 5% to 3%.

Iowa Code Chapter 573 governs public construction projects in Iowa, including by setting forth certain rights, remedies, restrictions, and protections that apply to owners, contractors, subcontractors, and suppliers on Iowa’s public projects. Specifically, sections 573.12 and 573.13 outline the right of public owners to withhold retainage from payments made to their general/principal contractors, as well as the right of general/principal contractors to withhold retainage from their subcontractors. Previously, these sections 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 downstream subcontractors up to the lesser of 5% of the amount due on each payment or the amount specified in the subcontract.

Senate File 574 made one key adjustment to public owners’ rights under Section 573.12: It lowered the percentage of retainage a public owner can withhold from 5% to 3%.  Similarly, general/principal contractors may now only withhold the lesser of 3% or the subcontract retainage amount to their subcontractors. Corresponding changes were also made to Section 573.13. 

This new law goes into effect on July 1, 2025.

If you have questions regarding anything addressed in this article, please contact Fredrikson attorneys Jodie McDougal or Jack O’Brien.