Iowa Prompt Payment Guide and FAQs

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Iowa Prompt Payment Overview

Iowa Prompt Payment Requirements


  • Private Jobs
  • Public Jobs
  • Top Links
NO
DAYS
Prime Contractors

Not specified in state statutes


NO
DAYS
Subcontractors

Not specified in state statutes


NO
DAYS
Suppliers

Not specified in state statutes


NO
FEES
Interest & Fees

Not specified in state statutes

14
DAYS
Prime Contractors

For Prime (General) Contractors, progress payments due within 14 days of invoice (can be modified by contract up to 30 days after invoice). Final/retainage payment due within 40 days from acceptance of work (can be modified by contract up to 50 days after acceptance).


7
DAYS
Subcontractors

For Subcontractors, payment due within 7 days from receipt of payment from above. Note, only applies to first tie subs.


7
DAYS
Suppliers

For Suppliers, payment due within 7 days from receipt of payment from above. Note, only applies to first tie subs.


Depends
Interest & Fees

Interest is set by the Iowa State Treasury; and attorney fees may be awarded to the prevailing party.

Prompt payment laws are a set of rules that regulate the acceptable amount of time in which payments must be made to contractors and subs. This is to ensure that everyone on a construction project is paid in a timely fashion. These statutes provide a framework for the timing of payments to ensure cash flow and working capital.

Projects Covered by Prompt Payment in Iowa

Indiana’s prompt payment laws, found in Iowa Code §§573.12, 573.14, and 573.21. These regulations only apply to public works projects. There are no prompt payment provisions for private projects.

Payment Deadlines for Public Projects

Once a prime contractor has performed in accordance with the terms of the contract, they may submit a request for progress payment to the contracting government agency. Upon receipt of the request, the public entity must release payment within 14 days. This payment deadline may be extended by contract, but only up to 30 days after receipt. As for final payments to the prime contractor, the entity is required to release payment within 40 days after the completion and final acceptance of the project. Again, this can be modified by the contract between the parties, but cannot exceed 50 days after acceptance.

After a prime contractor has received any type of payment from the public entity, they must make payments to their subcontractors or suppliers within 7 days. This timeline only applies to first-tier project participants, all other payments will be governed by the terms of the contract.

Penalties for Late Payment on Public Projects

If a payment on an Iowa public works project is late, or otherwise wrongfully withheld, interest will begin to accrue on the unpaid balance the day the payment becomes late. The rate of interest will be the rate of published by the Iowa State Treasury for the deposit of public funds for a comparable period of time. In addition to interest penalties, if the dispute goes to court or arbitration, the prevailing party may be awarded attorney fees as well.

Iowa Prompt Payment Frequently Asked Questions

Iowa's prompt payment statutes set forth specific timeframes for when general contractors, subcontractors, suppliers, and others involved with a public construction project must be paid. This page provides an overview of these regulations and addresses frequently asked questions related to the Iowa prompt payment laws.

Iowa Prompt Payment Private Projects FAQs

Does Iowa have prompt payment statutes that apply to private projects?

Iowa’s prompt payment laws do not cover private construction projects. Therefore, the payment schedules and penalties for late payment will be determined by the terms of the contract or subcontract.

To learn more about contractor remedies for nonpayment, visit Iowa Construction Payment & Legal Resources page

What options do I have if the owner or contractor is delaying payment on private projects?

The contract between the parties determines payment timing and remedies, and failure to meet those requirements can lead to a breach of contract. Additionally, if the owner or contractor fails to make payments, contractors still have other remedies to get paid; such as:

  1. Sending invoice reminders
  2. Sending a payment demand letter
  3. Sending a Notice of Intent to Lien
  4. As long as they have protected their lien rights, unpaid contractors may also file a mechanics lien to recover payments.

Iowa Prompt Payment Public Projects FAQs

What types of public projects are subject to Iowa’s prompt payment laws?

The Iowa public prompt payment provisions apply to all projects that are publicly owned or financed by a state, county, city, or any other public corporations that can enter into a public improvement contract.

When do payments become due under Iowa’s prompt pay laws?

Payments to GCs under Iowa’s prompt pay statutes require the approval of the payment by the project architect or engineer or for final payment the completion and acceptance of work under the contract. The applicability of the statute to payment to subs requires the satisfactory performance of the subcontractor’s work.

When is the deadline for payment under Iowa’s prompt payment laws?

Entity → Prime Contractor

Progress payments to the prime contractor must be made within 14 days of receipt of a payment request unless the contract specifies a different time; however, it cannot exceed a maximum of 30 days.

Final payments must be released within 40 days within completion and acceptance of the work under the contract; unless the contract specifies a longer period, which cannot exceed 50 days.

Contractor → Subs/suppliers

Payments to subcontractors or suppliers must be made either:

• Within 7 days after the contractor receives payments; or

• A reasonable time after the contractor could have received payment for the sub’s work if the reason for nonpayment isn’t the sub’s fault.

Are there reasons for which payment may be withheld past the general deadline?

The Iowa prompt payment provisions do not provide a specific list of reasons that payments may be withheld. However, since payment becomes due upon satisfactory performance, labor and/or materials not furnished in accordance with the terms of the contract would presumably be at least one reason that payment can be withheld.

If I am paid late according to Iowa’s public prompt payment laws, can I obtain interest or other penalty payments?

A public entity that fails to make payments to a prime contractor in the time specified, will accrue interest at a rate specified in the Iowa State Treasurer’s website for the deposit of public funds, which is currently set at 0.05% per month.

There is no specified rate of interest for late payments to subcontractors. However, when a contractor receives interest payments, subcontractors are entitled to a share of the interest payments proportional to the payment of the sub’s work.

Can I include prompt payment penalties in my Iowa payment bond claim?

No, prompt payment interest cannot be included in an Iowa public payment bond claim. However, in a successful action under the Iowa prompt pay laws, the prevailing party may be awarded attorney’s fees.

What is the best practice for making a demand to a non-paying party to get prompt payment fees?

Sending a Notice of Intent to Make a Bond Claim, along with a Prompt Payment Demand letter is generally the best method for encouraging parties to make payment. If payment still isn’t forthcoming, then a lawsuit may be necessary.

For more on this, see: How to Make a Claim Under State Prompt Payment Laws

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Iowa Prompt Payment Statutes

Getting informed about prompt payment laws is important. An examination of Iowa’s prompt payment laws, the rules and regulations related to payment timing, is important to know your rights and responsibilities as a party on a construction project. Iowa’s specific laws can be found in: Iowa Code §§ 573.12, 573.14, and 573.21, which are reproduced below. Updated as of July 2021.

Prompt Payment Statute on Private Projects

Does Iowa have Prompt Payment Statute on Private Projects?

Iowa law does not address prompt payment for private projects.

Prompt Payment Statute on Public Projects

§ 573.12. Payments and retention from payments on contracts

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 five percent of that amount which 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 five 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.

§ 573.14. Retention of unpaid funds

1. The fund provided for in section 573.13 shall be retained by the public corporation for a period of thirty days after the completion and final acceptance of the improvement. If at the end of the thirty-day period claims are on file as provided the public corporation shall continue to retain from the unpaid funds a sum equal to double the total amount of all claims on file. The remaining balance of the unpaid fund, or if no claims are on file, the entire unpaid fund, shall be released and paid to the contractor.

2. The public corporation shall order payment of any amount due the contractor to be made in accordance with the terms of the contract. Except as provided in section 573.12 for progress payments, failure to make payment pursuant to this section, of any amount due the contractor, within forty days, unless a greater time period not to exceed fifty days is specified in the contract documents, after the work under the contract has been completed and if the work has been accepted and all required materials, certifications, and other documentations required to be submitted by the contractor and specified by the contract have been furnished the awarding public corporation by the contractor, shall cause interest to accrue on the amount unpaid to the benefit of the unpaid party. Interest shall accrue during the period commencing the thirty-first day following the completion of work and satisfaction of the other requirements of this subsection and ending on the date of payment. 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, for a deposit of public funds for a comparable period of time. However, for institutions governed pursuant to chapter 262, the rate of interest shall be determined by the period of time during which interest accrues, and shall be calculated as the prime rate plus one percent per year as of the day interest begins to accrue. This subsection does not abridge any of the rights set forth in section 573.16. Except as provided in sections 573.12 and 573.16, interest shall not accrue on funds retained by the public corporation to satisfy the provisions of this section regarding claims on file. This chapter does not apply if the public corporation has entered into a contract with the federal government or accepted a federal grant which is governed by federal law or rules that are contrary to the provisions of this chapter. For purposes of this subsection, “prime rate” means the prime rate charged by banks on short-term business loans, as determined by the board of governors of the federal reserve system and published in the federal reserve bulletin.

§ 573.21. Attorney fees

The court may tax, as costs, a reasonable attorney fee in favor of any claimant for labor or materials who has, in whole or in part, established a claim.

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