Illinois’ New Retainage Law Now in Effect for Construction Contracts

Facility Managers, Building Owners and Contractors take note that on August 20, 2019, Illinois Governor Jay Pritzker signed into law SB 1636, the Contractor Prompt Payment Act.

The Act, which became effective the day it was signed has the following requirements:

  • A retainage of 10% of the payment may be withheld from a payment under a construction contract prior to the completion of 50% of the contract.
  • When a construction contract is 50% complete, retainage withheld must be reduced so that no more than 5% is held.
  • It further provides that after 50% of the construction contract is completed, the amount of retainage for any subsequent payments may not exceed 5%.

These differ from previous requirements and generally accepted contractual standards for construction projects in Illinois which upheld a retainage value of 10% throughout the project construction until substantial completion.

All future contracts and subsequent pay applications and approvals associated with construction projects within Illinois limits must ensure these provisions are upheld.

The full Act can be found here.