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lllinois REALTORS® is urging all members to tell members of the General Assembly that they should vote against SB 3052, which would interfere with private, business-to-business contract negotiations. (Send an email to your state representative here).
The bill sets standards for “retainage ” and will go to the House Executive Committee for a vote on Thursday, and if approved there could be sent to the full House for a vote.
What’s retainage?
A retainage is an agreed-to amount held back by a developer to ensure work is completed according to the terms of a contract.
Currently, contractors and developers negotiate the terms of a construction contract which allow for some money to be paid up front to help a contractor pay for materials or hire labor. This amount can vary from job to job for a variety of reasons, including the complexity of the work or the up front costs needed to begin construction. The developer can hold back an agreed-to amount which will be paid upon successful completion of the job.
Under SB 3052, the state would inject itself into private business agreements in a manner which would unfairly benefit contractors.
Under the bill, a developer would initially be able to hold back no more than 10 percent of the contracted cost of a project as “retainage”. Once 50 percent of the project is complete, the developer would only be able to hold back 5 percent of the cost as retainage.
(See the overview of this bill provided by Illinois REALTORS® government affairs team.)
Why is this a bad bill?
- Developers and contractors have been entering into construction contracts for years. This is a fundamental part of the construction business. Both sides of a project are well aware of what’s needed to get the work done.
- All projects are not equal. Some would require more up-front costs than others. Some contractors have big portions of a project, while others only get a small slice of a project. Under this proposal, it would not matter — the retainage would be set in stone.
- Developers need to have some leverage to get a job done according to the contract. And, if there’s a dispute, there’s already a well-established legal route to resolve disagreements.
The end result of this bill is a process that won’t help developers. They will lose leverage over quality control or getting a project completed in a timely fashion.
Urge your lawmaker to vote against SB3052 today. Take part in the Call for Action.
