Iowa Prompt Payment Overview

Iowa does not have statute that explicitly addresses prompt payment for private projects. It does address prompt payment for public projects.

Iowa Prompt Payment for Public Projects FAQs

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.

Prompt Payment Frequently Asked Questions

Do I Have To Send A Letter or File Anything To Qualify For Prompt Payment Penalties or Remedies in Iowa?

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. Applicability of the statute to payment to subs requires satisfactory performance of the subcontractor’s work. In order to recover attorneys’ fees, the party requesting payment must initiate an action to recover late payment, and (at least in part) establish a claim.

Can I Include Prompt Payment Fees In My Iowa Mechanics Liens Claim or Bond Claim?

No. Iowa law does not allow for the recovery of miscellaneous amounts in a bond claim.

If I am paid late according to prompt payment statutes, can I obtain interest or other penalty payments?

If payment is not made timely, an Iowa GC is entitled to interest at the statutory rate. There is not a specific rate of interest applicable to late payments to subcontractors, but subs must share proportionately in any interest payment made to the GC on a project.

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

Iowa does not specifically define reasons for which payment may be withheld past the date upon which it would otherwise be due pursuant to the prompt payment statutes.

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 are reproduced below.

Prompt Payment Statute on Private Projects

N/A

Indiana 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. 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. However, institutions governed pursuant to chapter 262 may, on contracts where a bond is required under section 573.2, make payments under this section without retention until ninety-five percent of the contract amount has been paid and the remaining five percent of the contract amount shall be paid as provided under section 573.14.

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. 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: (1)  Seven days after the contractor receives payment for that subcontractor’s work. (2)  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.

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

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.

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 paragraph 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. This paragraph 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.