October  2025

On October 10, 2025, Governor Gavin Newsom signed itnto law SB 440 — The Private Works Change Order Fair Payment Act.

Beginning January 1, 2026, this law introduces a structured process to resolve change-order and time-extension claims on private works of improvement—a long-awaited reform for California’s construction industry. SB 440 does not replace existing prompt-payment or dispute-resolution laws under the Civil and Business & Professions Codes. Instead, it adds a clear framework for handling change-order claims that were historically slow and costly to resolve by adding a new Civil Code section 8850 entitled “Claims and Disputes.”

Interestingly, SB 440 passed unanimously—77-0 in the Assembly and 34-0 in the Senate. It was championed by various contractor advocacy groups as a “fair and prudent process” that reduces litigation and ensures timely compensation. Contractors and specialty trade contractors praise SB 440 for offering a fair, enforceable route to payment for change-order work. Prompt payment, interest penalties, and the threat of stop-work finally give leverage to those financing projects from below.

Even owner groups registered no organized opposition to SB 440—signaling consensus that the reform strikes the right balance. For owners and developers, the law requires swift attention to claims and timely payment of undisputed sums. With sound contract management, owners can still protect their interests while avoiding steep penalties and project interruptions.

Key provisions include:

Written Claim: Contractors or subcontractors submit a detailed, documented claim for extra work or schedule relief.
30-Day Owner Response: Owners must meet and confer within 30 days, then identify which portions are disputed or undisputed.
10-Day Follow-Up: After that meeting, owners have 10 days to issue a written confirmation—failure to do so is treated as disputing the claim.
60-Day Payment Window: Undisputed portions must be paid within 60 days, or interest accrues at 2% per month (24% annual).
Mediation Requirement: Disputed items proceed to non-binding mediation before any litigation or arbitration.
Stop-Work Authority: If owners ignore timelines or refuse mediation, contractors may issue a stop-work notice and suspend work 40 days later.
Freedom to Add Reasonable Procedures: Parties may include additional dispute-resolution steps—so long as they don’t delay or dilute SB 440’s protections.

What to Do Before January 1, 2026

Review and update contract templates for compliance with SB 440.
Train project teams on deadlines (30, 10, 60 days) and documentation standards.
Document thoroughly—clear evidence remains the best defense.

SB 440 marks a turning point in California private construction: A faster, fairer process for handling change-order claims that rewards responsiveness and collaboration. In other words, pay promptly, communicate clearly, and keep the project moving.

The full text of the legislation may be viewed here: https://legiscan.com/CA/text/SB440/2025