advertisement

Law now requires contractors to be paid more promptly

Q: Our association tries to standardize contractor agreements through the use of a contract rider. One of the issues we address in a rider is the retainage from each contractor payment. One of our contractors says the language of our rider violates Illinois law on retainage, and says there is some new law about this. Can you provide some details?

A: Yes. With commercial construction contracts, it is common for a building owner to retain a portion of the payment(s) to ensure the work is done properly and promptly.

Effective as of Aug. 20, new Section 20 of the Illinois Contractor Prompt Payment Act essentially provides that no construction contract may permit the retainage from any payment in excess of the amounts permitted in that section. Specifically, a construction contract may provide for the withholding of up to 10% of any payment made prior to the completion of 50% of the contract. For example, on a $700,000 project expected to take seven months, requiring seven equal monthly payments of $100,000, the building owner could retain $10,000 from the first monthly payment.

However, when a contract is 50% complete, retainage withheld must be reduced so that no more than 5% is held. After the contract is 50% complete, no more than 5% of the amount of any subsequent payments made under the contract may be held as retainage.

Obviously, when the work has been completed to the owner's satisfaction, the retained money is released to the contractor.

"Construction contract" means a contract or subcontract for the design, construction, alteration, improvement or repair of Illinois real property. It does not include construction contracts for the improvement or repair of single-family homes or multiple-family residences with 12 or fewer units in a single building.

Associations will have to be mindful of these limitations on contract retainage when drafting contracts that fall within this Act.

Q: I serve on the board of my condominium association, and I am the person who takes the minutes of our meetings. Can I be paid to take the meeting minutes?

A: Section 18(b)(13)(d) of the Illinois Condominium Property Act provides that the bylaws of the association must provide for the "election of a secretary from among the board of managers, who shall keep the minutes of all meetings of the board of managers and of the unit owners and who shall, in general, perform all the duties incident to the office of secretary." Keeping the minutes is widely viewed as "taking" the minutes, not just being in custody of the minutes, so that taking the meeting minutes would be a duty of the secretary.

Section 18(a)(3) of the Illinois Condominium Property Act provides that the bylaws of the association shall provide for the compensation, if any, of the members of the board. Therefore, whether the board secretary can be paid to take meeting minutes depends on the specific language in the bylaws for your association.

That said, the typical declaration for associations provides that board members serve without compensation, unless compensation is approved by two-thirds of the owners in the association. If that language is in the association's bylaws, the issue of compensating a board member to take the meeting minutes needs to be submitted to the ownership for approval at a meeting of the owners.

• David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in the Chicago suburbs. Send questions for the column to him at CondoTalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.

Article Comments
Guidelines: Keep it civil and on topic; no profanity, vulgarity, slurs or personal attacks. People who harass others or joke about tragedies will be blocked. If a comment violates these standards or our terms of service, click the "flag" link in the lower-right corner of the comment box. To find our more, read our FAQ.