Great news for construction businesses in California! Governor Gavin Newsom recently signed Senate Bill 440- also known as the Private Works Change Order Fair Payment Act- into law. This new legislation aims to simplify and speed up the process of handling change-order and time-extension claims on private construction projects.
Mark your calendars! The law law applies to contracts entered into on or after January 1, 2026. So now’s the time to start updating your contracts and internal processes.
Why the Change?
If you’ve spent any time on a construction site, you know surprises happen- delays, scope changes, you name it. Until now, resolving those changes on California private projects has often been a slow, expensive mess. Cue the “Private Works Change Order Fair Payment Act.”
SB 440 doesn’t replace any current prompt payment or dispute resolution laws. Rather, it adds a structured claims process to make things run faster, fairer, and less litigious. The goal is to get everyone paid on time and keep the projects moving.
Read the full text of California Senate Bill 440 here
What the New Process Looks Like
Here’s a quick breakdown of how SB 440 structures the process for change-order and time-extension claims:
1. Submitting a Claim
Contractors or subs must submit a detailed, documented claim if they’re requesting extra time or payment.
2. Owner’s Response Timeline
The new law requires a timely response from the property owner:
- 30 Days to Meet and Confer: After receiving the claim, the owner must meet and confer with the contractor/sub within 30 days.
- 10 Days to Identify Disputed/Undisputed Portions: Within 10 days of that meeting, the owner must provide a written statement identifying which portions of the claim are disputed and which are undisputed.
- Note: If the owner fails to issue a written confirmation within those 10 days, it’s assumed the entire claim is disputed.
3. Payment and Penalties
The new law introduces stronger leverage for contractors:
- 60 Days for Payment: Any undisputed portions of the claim must be processed and paid within 60 days after the owner issues their written statement.
- Steep Interest Penalty: If undisputed amounts aren’t paid on time, they are subject to a hefty interest rate of 2% per month (24% annual rate)- including those later deemed owed after the dispute.
What if There’s Still a Dispute?
If parts of the claim remain disputed after the meet and confer, SB 440 requires that those portions proceed to non-binding mediation before any litigation or arbitration. The owner and claimant share the mediation costs equally.
Stop Work Option
If an owner ignores the timelines or refuse to engage in mediation, contractors can issue a stop work notice. If things don’t move forward, work can be suspended 40 days after that notice.
Action Plan: What to Do Before January 1, 2026
To ensure your business is ready for the new law, here are some steps you can take:
- Review and Update Contracts: Examine your contract templates for compliance with SB 440’s new change order procedures.
- Train Your Team: Ensure your project managers and team members are fully trained on the new 30, 10, and 60-day deadlines and the required documentation standards.
- Improve Documentation: Clear, detailed evidence remains your best defense. Standardize your claim documentation for both time extensions and payments.
- Check Subcontractor Procedures: If you’re a general contractor, make sure your contracts clearly lay out expectations for handling subcontractors’ claims against the owner, as you may be required to present the claim on their behalf.
SB 440 is all about fairness, speed, and clarity. It encourages better communication and faster resolutions- something everyone in the construction industry can appreciate.