Iowa Code

Iowa Code § 573.12 (2026)

Payments and retention from payments on contracts

✓ current as of July 2026

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1. Retention. a. Payments made under contracts for the construction of public improvements, unless provided otherwise by law, shall be made on the basis of monthly estimates of labor performed and material delivered, as determined by the project architect or engineer. The public corporation shall retain from each monthly payment not more than three percent of that amount that is determined to be due according to the estimate of the architect or engineer. b. The contractor may retain from each payment to a subcontractor not more than the lesser of three percent or the amount specified in the contract between the contractor and the subcontractor. 2. Prompt payment. a. (1) Interest shall be paid to the contractor on any progress payment that is approved as payable by the public corporation’s project architect or engineer and remains unpaid for a period of fourteen days after receipt of the payment request at the place, or by the person, designated in the contract, or by the public corporation to first receive the request, or for a time period greater than fourteen days, unless a time period greater than fourteen days is specified in the contract documents, not to exceed thirty days, to afford the public corporation a reasonable opportunity to inspect the work and to determine the adequacy of the contractor’s performance under the contract. (2) Interest shall accrue during the period commencing the day after the expiration of the period defined in subparagraph (1) and ending on the date of payment. The rate of interest shall be determined as set forth in section 573.14. b. (1) A progress payment or final payment to a subcontractor for satisfactory performance of the subcontractor’s work shall be made no later than one of the following, as applicable: (a) Seven days after the contractor receives payment for that subcontractor’s work. (b) A reasonable time after the contractor could have received payment for the subcontractor’s work, if the reason for nonpayment is not the subcontractor’s fault. (2) A contractor’s acceptance of payment for one subcontractor’s work is not a waiver of claims, and does not prejudice the rights of the contractor, as to any other claim related to the contract or project. 3. Interest payments. a. If the contractor receives an interest payment under section 573.14, the contractor shall pay the subcontractor a share of the interest payment proportional to the payment for that subcontractor’s work. b. If a public corporation other than a school corporation, county, or city retains funds, the interest earned on those funds shall be payable at the time of final payment on the contract in accordance with the schedule and exemptions specified by the public corporation in its administrative rules. The rate of interest shall be determined by the period of time during which interest accrues, and shall be the same as the rate of interest that is in effect under section 12C.6 as of the day interest begins to accrue. [S13, §1989-a57; C24, 27, 31, 35, 39, §10310; C46, 50, 54, 58, 62, 66, 71, 73, 75, 77, 79, 81, §573.12; 81 Acts, ch 127, §3] 87 Acts, ch 155, §1; 90 Acts, ch 1229, §1, 2; 91 Acts, ch 148, §1; 2005 Acts, ch 179, §158; 2013 Acts, ch 30, §261; 2025 Acts, ch 29, §1 Referred to in §573.13, 573.14 Subsection 1, paragraphs a and b amended\n\nTue Dec 09 22:00:41 2025 Iowa Code 2026, Chapter 573 (24, 1) 5 LABOR AND MATERIAL ON PUBLIC IMPROVEMENTS, §573.15

Notes of Decisions

Cited in 14 cases (3 in the last 5 years), 1961–2026 · leading case: Star Equip., Ltd. v. State of Iowa, Iowa Dep't of Transp., 843 N.W.2d 446 (Iowa 2014).

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Star Equip., Ltd. v. State of Iowa, Iowa Dep't of Transp., 843 N.W.2d 446 (Iowa 2014). · cites it 16× “Iowa Code § 573.12 (1). From the amount payable to the general contractor, the public corporation is allowed—but not required—to retain up to five percent of the amount owed.”

T & K Roofing Co. v. Iowa Dep't of Educ., 593 N.W.2d 159 (Iowa 1999). · cites it 2× “Second, T & K claims Brown subsequently served the school district after the contract was awarded by fulfilling the role of the project engineer contemplated under Iowa Code section 573.12. Based on these roles, T & K claims each of the three categories of conflict set forth in…”

Dobbs v. Knudson, Inc., 292 N.W.2d 692 (Iowa 1980). · cites it 2× “16, to determine the rights of the claimants to the retainage held by the Department in accordance with section 573.12. The trusts cross-claimed against Knudson and Universal for judgment on their claims.”

First Fed. State Bank v. Town of Malvern, 270 N.W.2d 818 (Iowa 1978). · cites it 3× “The remaining $4671 was found to be the balance of the funds retained under § 573.12, The Code, for payment of material and labor claims and was therefore awarded to surety.”

Employers Mut. Cas. Co. v. City of Marion, 577 N.W.2d 657 (Iowa 1998). · cites it 4× “See Iowa Code § 573.12 (1) (requiring public corporation to withhold five percent of monthly payment to contractor).”

Accurate Controls, Inc. v. Cerro Gordo Cnty. Bd. of Supervisors, 627 F. Supp. 2d 976 (N.D. Iowa 2009). · cites it 2× “, Iowa Code §§ 573.12 (providing for payments and retention from payments on contract); 573.”

Econ. Forms Corp. v. City of Cedar Rapids, 340 N.W.2d 259 (Iowa 1983). · cites it 2× “In making said payments, there shall be retained ten percent of each said monthly estimate by the public corporation; provided, however, that if the contract is for more than fifty thousand dollars, and if the public corporation at any time after fifty percent of the improvement…”

Nw. Limestone Co. v. State Dep't of Transp., 499 N.W.2d 8 (Iowa 1993). “In the district court, the appellee subcontractors contended that they held valid claims against funds due the general contractor but retained by the public corporation pursuant to Iowa Code sections 573.12, .13, and .14 (1991). In addition, both appel-lees claimed that Great…”

Smith v. Iowa Ass'n of Cmty. Coll. Trs. (Iowa Ct. App. 2024). · cites it 7× “Iowa Code § 573.12 (2022). “From the amount payable to the general contractor, the public [owner] is allowed—but not required—to retain up to five percent of the amount owed.”

Cmty. Sch. Dist. of Eldora v. Employers Mut. Cas. Co. of Des Moines, 194 F. Supp. 733 (N.D. Iowa 1961). · cites it 3× “Sections 573.12, 573.13 and 573.14 of Chapter 573 provide as follows: “573.”

S.M. Hentges & Sons Inc. v. City of Iowa City (Iowa Ct. App. 2020). · cites it 4× “Iowa Code § 573.12 (1) (2019). 3 damages at the site, forcing Henderson to fix the problems and pay the city an amount greater than the amount retained.”

Rochon Corp. of Iowa, Inc. n/k/a Graphite Constr. Grp., Inc. v. Des Moines Area Cmty. Coll. (Iowa 2024). · cites it 3× “” Iowa Code § 573.12 (1)(a). But the public entity must retain up to 5% of the payable amount.”

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— Iowa Code § 573.12(1) — 1 case

Star Equip., Ltd. v. State of Iowa, Iowa Dep't of Transp., 843 N.W.2d 446 (Iowa 2014). “Iowa Code § 573.12 (1). From the amount payable to the general contractor, the public corporation is allowed—but not required—to retain up to five percent of the amount owed.”

— Iowa Code § 573.12(1)(b) — 1 case

Rochon Corp. of Iowa, Inc. n/k/a Graphite Constr. Grp., Inc. v. Des Moines Area Cmty. Coll. (Iowa 2024). “” Iowa Code § 573.12 (1)(a). But the public entity must retain up to 5% of the payable amount.”

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