On August 20, 2019, Illinois Governor J. B. Pritzker signed SB 1636 (Public Act 101-0432), which limits the amount of retainage that can be withheld on private construction projects.
Public Act 101-0432 includes the following provisions:
- No contract may permit the withholding of retainage in excess of 10% of any payment made prior to completion of 50% of the contract.
- Once a contract is 50% complete, any retainage held to that point must be released so that no more than 5% is being withheld.
- No contract may permit the withholding of retainage in excess of 5% of any payment made subsequent to 50% completion of the contract.
Public Act 101-0432 formally amends the Contractor Prompt Payment Act (815 ILCS 603 et seq.) and applies to all private contracts for the design, construction, alteration, improvement, or repair of Illinois real property, except residential construction of 12 or fewer units in a single building.
Although Public Act 101-0432 became effective as of the date it was signed into law, its text is silent as to whether it may apply retroactively. However, Art. I, § 16 of the Illinois Constitution prohibits laws that retroactively impair the obligations of contracts, which suggests that the changed rules on retention are limited to contracts entered on or after August 20, 2019.
There is a nationwide movement for this type of legislation. The enactment of Public Act 101-0342 brings to nearly 20, the number of states that impose caps on retainage in private contracts.