California changed a core part of private-project payment administration this year. For contracts entered into on or after Jan. 1, 2026, Senate Bill 440 creates a mandatory process for construction claims tied to private works. The process affects notices, response deadlines, payment, mediation, passthrough claims, and work-suspension rights.
SB 440 Starts a Statutory Claims Clock
The Private Works Change Order Fair Payment Act, codified as Civil Code section 8850, applies to most California private works, excluding residential projects that are four stories or less or otherwise. Public projects are unaffected. It excludes public entities and residential projects (non-mixed use) that are four stories or less. The law went into effect on Jan. 1, 2026, and will sunset Jan. 1, 2030.
While the statute generally makes these rights nonwaivable, the parties may agree in writing to bypass some steps in writing after a claim arises.
What Has Changed for California Change Orders?
The legislation creates a formal, structured process for change orders in California. To start the process, a contractor must send a claim by registered or certified mail with return receipt requested. The owner then has 30 days to provide a written statement identifying approved and disputed portions. The owner may also request additional information or documentation prior to deciding.
The owner must pay undisputed amounts within 60 days of issuing the statement. Notably, late payments accrue interest at 2% per month for both:
- Undisputed amounts
- Disputed amounts that are later proven to be due
If the initial response doesn’t resolve the claim, the contractor may demand an informal meet-and-confer conference. The owner must schedule the conference within 30 days. Within 10 business days after the conference is held, the owner must issue another written response to the claim. Any newly undisputed amounts must be paid within 60 days. If there are any claims still unresolved, the parties go to mediation. The owner and contractor have 10 business days to agree on a mediator. If they don’t agree, the contractor selects one.
Work Suspension Rights
The act also creates a work-suspension remedy. After notifying the owner that payment is due, a contractor or subcontractor may send a second notice stating its intent to stop work in 30 days. At the end of the 30 days, the contractor or sub must provide a second warning that work will stop in 10 days. At the end of those 10 days, work may be suspended.
Subcontractors’ Passthrough Claims
Subcontractors, by definition, don’t have a contract with the owner, which means they can’t bring direct contractual claims against them either. Subcontractor passthrough claims work to remedy this gap.
Under SB 440, contractors must present their subcontractors’ (or sub-subcontractors’) claims to the owner through the above process. For the subcontractors’ part, these claims must be supported by timely and reasonable documentation to support the claims. Lien rights and stop work notice rights are still available to these parties as well.
What To Update in Your Contract and Workflow
California private-project teams should evaluate notice timelines, assign responsibility for each deadline, and create a claim calendar that reaches legal, finance, and project personnel. Subcontracts should understand and mirror the upstream process so pass-through claims and retention requirements don’t create avoidable gaps.
Clear change documentation can keep a pricing disagreement from becoming a statutory claim. Review the roles, approvals, and AIA G701® – Change Order before updating California notice, payment, and escalation procedures with project-specific counsel.
Learn more about how agreed changes to the work, contract sum, and contract time fit into the larger administration process.
