Who this applies to
Two Illinois statutes carry the same numbers into different settings.
- Private construction contracts. The Contractor Prompt Payment Act, 815 ILCS 603/20, says no construction contract may permit retainage beyond what the section allows [1]. The Act's definition of a construction contract leaves out contracts that require the expenditure of public funds and contracts for single-family homes or for multifamily buildings with 12 or fewer units in a single building [3].
- Local government public works. The Public Construction Bond Act, 30 ILCS 550/1, limits what a local governmental unit may withhold from a contractor who furnishes the bond or bond substitute the Act requires [2]. Contractors and subcontractors are held to the same limits in what they withhold from their own subcontractors [2].
State agency contracts are not yet inside the public limits. That changes on June 1, 2027 [2], as described below.
What the rule says
The rule has two phases, and the dividing line is 50% [1] completion of the contract.
Before that point, retainage may be up to 10% [1] of any payment on a private contract, and no more than 10% [2] of any payment on a local public works contract. When the contract reaches 50% [2] completion, retainage already withheld has to be reduced so that no more than 5% [1] [2] is held. From then on, no more than 5% of any later payment may be withheld [1] [2].
The halfway reduction is not optional under either act. It reaches money already held as well as future pay applications [1] [2].
Neither section sets a trigger or a number of days for releasing the retainage that remains [1] [2]. On private work, the same Act counts a request for release of retainage as a payment application [3]: the owner pays it within 15 calendar days after approval, and it is deemed approved 25 days after the owner receives it unless the owner sends a written statement of the amount withheld and the reason [4].
How to comply
- Read the retainage clause. A private contract or subcontract that allows more than 10% [1] before the halfway point, or more than 5% [1] after it, permits more than 815 ILCS 603/20 allows [1].
- Mark the 50% point. At 50% [1] completion, compare the total retainage then held against 5% [1], and look for the reduction on the next payment.
- Public work. On a local government job, the same 10% [2] and 5% [2] figures apply to a contractor who has furnished the required bond or bond substitute, and to each tier of subcontract beneath it [2].
- Release. On a private job, date the request for release of retainage: it is a payment application [3], paid within 15 calendar days after approval, with approval deemed 25 days after receipt unless the owner states in writing what it withholds and why [4]. A contractor pays a subcontractor whose work has been accepted its share of retainage monies within 15 calendar days of receiving them [4]. On a local public job, 30 ILCS 550/1 fixes no release date [2], so the contract's closeout terms govern.
This page describes what the two sections say. Whether they govern a particular contract, and how, is for the statute text in the Sources below, the contract and a lawyer.
What changed recently
The local public works limits were added to 30 ILCS 550/1 by P.A. 103-570, effective January 1, 2024 [2]. P.A. 104-168, effective June 1, 2027 [2], extends them to the State, except the Department of Transportation, and allows a State agency to withhold retainage only when it finds that satisfactory progress has not been achieved [2]. The private section, 815 ILCS 603/20, stands as amended by P.A. 101-432 [1].
Related
- Retainage calculator: compare the holdback before and after the halfway reduction in dollars.
- Retainage laws by state: Illinois beside other states' caps and release rules.