Illinois Retainage Requirements
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Retainage Limit
Retainage is capped at 10% on all private projects. Halfway through the project, this drops to 5%.
Pay Period
There is no provision specifically stating when retainage should be released. However under the IL prompt payment laws, contractors must be paid within 15 days of approval of their payment applications (25 days for approval). Subcontractors must be paid within 15 days of their customer receiving payment.
There's No set Process for Recovery
N/A
Not Held In Escrow
In Illinois, contractors and owners do not need to hold retainage funds in a separate escrow account.
Retainage Amount
Not specified in statute.
Pay Period
Not specified in statute.
There's No Process to Recover
Not specified
Retainage, also called “retention,” is an amount of money “held back” from a contractor or subcontractor during the course of a construction project. In general, retainage serves two main purposes:
- To provide an incentive to the contractor or subcontractor to complete the project; &
- To give the owner some protection against problems like liens, contractual defaults, delays, and more.
In most states, laws exist to regulate how the parties use the retainage concept, mostly protecting some parties against abuse of the tool from others. The following are resources, legal information, and answers to frequently asked questions about Illinois’ retainage requirements.
Illinois’ retainage limits and deadlines
Illinois’s retainage statutes only apply to certain private construction projects as of August 20, 2019 (see: Illinois Introduces Retainage Laws & Caps Retention at 10%), and state highway construction projects. On all other projects, retainage will be governed by the terms of the contract.
On private projects (with the exception of residential projects of 12 units or fewer) the amount of retainage that can be withheld is 10% from each progress payment. Upon 50% completion, the retainage must be reduced to just 5% of the remaining payments.
There are no specific timelines for the release under the retainage statutes, but according to Illinois’ prompt payment laws, retainage and final payment on private projects must be released by the property owner within 40 days of the request for payment is received (25 days for approval, and 15 days to make payment after approval).
