California SB 440: a claim process for change orders and disputed payments on private jobs

What changed: a claim process with deadlines

The act adds a new article to the Civil Code, and says how it may be cited:

SB 440 as chaptered, title

An act to add and repeal Article 4 (commencing with Section 8850) of Chapter 8 of Title 2 of Part 6 of Division 4 of the Civil Code, relating to works of improvement.

SB 440, section 1

This act may be cited as the Private Works Change Order Fair Payment Act.

The Legislative Counsel's digest is a summary, not the law. Its only paragraph on existing law:

Legislative Counsel's digest of SB 440, on existing law

Existing law contains various provisions relating to contracts for the performance of private works of improvement, including provisions applicable to a retention withholding by an owner from a direct contractor or by a direct contractor from a subcontractor.

And what it says the bill does:

Legislative Counsel's digest of SB 440, in part

This bill would establish, until January 1, 2030, for contracts entered into on or after January 1, 2026, a claim resolution process, as specified, applicable to any claim by a contractor or subcontractor, as described, in connection to a work of improvement or site improvement, except as specified.

The Legislature's reason, among the findings at the top of the section:

Civil Code 8850(a)(3)

(3) The lack of clear procedures for resolving disputes related to change orders often leads to costly litigation where a predetermined method could avoid such costs.

The section reaches any claim of this kind:

Civil Code 8850(b)

(b) Notwithstanding any other law, this section shall apply to any claim by a contractor, or where authorized pursuant to this article, a subcontractor, in connection to a work of improvement or site improvement.

A claim is defined by what it asks for and how it is sent:

Civil Code 8850(c)(1)

(1) “Claim” means a separate demand by a contractor, or where authorized pursuant to this article, a subcontractor, sent by registered mail or certified mail with return receipt requested, for one or more of the following:

Civil Code 8850(c)(1)(A)

(A) A time extension, including, without limitation, for relief from damages or penalties for delay assessed by an owner under contract for a work of improvement or site improvement.

Civil Code 8850(c)(1)(B)

(B) Payment by the owner of money or damages arising from work done by, or on behalf of, the contractor pursuant to the contract for a work of improvement or site improvement project and payment for which is not otherwise expressly provided or to which the claimant is not otherwise entitled.

Civil Code 8850(c)(1)(C)

(C) Payment of an amount that is disputed by the owner.

So a request for more time, money for work the contract does not otherwise expressly pay for, and a payment the owner disputes can each be a claim, if it goes as a separate demand by registered or certified mail with a return receipt requested.

Who it covers: private owners, not public bodies

The claim runs against the owner, and the section takes public bodies out of that word:

Civil Code 8850(c)(2)(B)

(B) “Owner” shall not include a state agency, department, office, division, bureau, board, or commission, the California State University, the University of California, a city, including a charter city, county, including a charter county, city and county, including a charter city and county, district, special district, public authority, political subdivision, public corporation, or nonprofit transit corporation wholly owned by a public agency and formed to carry out the purposes of the public agency.

Some residential work is out as well:

Civil Code 8850(o)

(o) This section shall not apply to the construction of a residential project if the project is not mixed use and does not exceed four stories.

Where a sub has no contract with the owner, the contractor carries the claim for it:

Civil Code 8850(j)(1)

(1) If a subcontractor or a lower tier subcontractor lacks legal standing to assert a claim against an owner because privity of contract does not exist, except as provided in paragraph (4), the contractor shall present to the owner a claim on behalf of a subcontractor or lower tier subcontractor.

What the text leaves open: the section does not define contractor, subcontractor, residential project or mixed use, and this page did not read the definitions elsewhere in the Civil Code. It does not say how stories are counted, or whether a remodel of a residential building is the construction of a residential project.

From when, and until when

The section reaches contracts by the date they were entered into:

Civil Code 8850(n)

(n) This section shall apply to contracts entered into on or after January 1, 2026.

The Governor approved the bill, and the section carries this history note:

SB 440 as chaptered, approval lines

Approved by Governor October 10, 2025. Filed with Secretary of State October 10, 2025.

Civil Code 8850, history note

(Added by Stats. 2025, Ch. 583, Sec. 2. (SB 440) Effective January 1, 2026. Repealed as of January 1, 2030, pursuant to Section 8851.)

The whole article ends on a fixed date. Section 8851 says so, and its own history note repeats it:

Civil Code 8851

This article shall remain in effect only until January 1, 2030, and as of that date is repealed.

Civil Code 8851, history note

(Added by Stats. 2025, Ch. 583, Sec. 2. (SB 440) Effective January 1, 2026. Repealed as of January 1, 2030, by its own provisions. Note: Repeal affects Article 4, commencing with Section 8850.)

What the text leaves open: it does not say whether a change order signed after the start date, on a contract entered into before it, brings that work inside the section. It does not say what becomes of a claim still open on the repeal date.

The steps, in order

When a claim arrives, the owner has to review it and answer in writing, and the claimant has to back it up:

Civil Code 8850(d)(1)(A)

(A) Upon receipt of a claim pursuant to this section, the owner to which the claim applies shall perform a reasonable review of the claim and, within a period not to exceed 30 days, shall provide the claimant a written statement identifying what portion of the claim is disputed and what portion of the claim is undisputed.

Civil Code 8850(d)(1)(B)

(B) The claimant shall furnish reasonable documentation to support the claim.

The owner and the contractor can agree to more time:

Civil Code 8850(d)(2)

(2) Upon receipt of a claim, an owner and a contractor may, by mutual agreement, extend the time period provided in this subdivision in writing.

The part the owner does not dispute has to be paid:

Civil Code 8850(d)(3)

(3) Payment of any undisputed portion of the claim shall be processed and made within 60 days after the owner issues its written statement.

If the claimant disagrees with the answer, or no answer comes, the next step is a meet and confer:

Civil Code 8850(e)(1)

(1) If the claimant disputes all or any portion of the owner’s written response to the claim, or if the owner fails to respond to a claim issued within the timeframe prescribed, the claimant may demand in writing an informal conference to meet and confer for settlement of the issues in dispute.

Civil Code 8850(e)(2)

(2) Upon receipt of a demand in writing sent by registered mail or certified mail, return receipt requested, the owner shall schedule a meet and confer conference with the claimant within 30 days for settlement of the dispute.

Civil Code 8850(e)(3)

(3) Within 10 business days following the conclusion of the meet and confer conference, if the claim or any portion of the claim remains in dispute, the owner shall provide the claimant a written statement identifying the portion of the claim that remains in dispute and the portion that is undisputed.

Civil Code 8850(e)(4)

(4) Payment of any undisputed portion of the claim shall be processed and made within 60 days after the owner issues its written statement.

What is still disputed after that goes to mediation, with the costs shared:

Civil Code 8850(f)(1)

(1) If, following the informal conference, there remains any disputed portion of the claim, the remaining disputed portion of the claim shall be submitted to nonbinding mediation, with the owner and the claimant sharing the associated costs equally.

Civil Code 8850(f)(2)

(2) The owner and claimant shall mutually agree to a mediator within 10 business days after the disputed portion of the claim has been identified in writing.

Civil Code 8850(f)(3)(A)

(A) If the parties cannot agree upon a mediator within the time allotted, the contractor may select the mediator to be used.

Civil Code 8850(f)(3)(B)

(B) If the owner refuses mediation, the contractor may carry out the process described in subdivision (k).

Civil Code 8850(f)(4)

(4) If mediation is unsuccessful, the parts of the claim remaining in dispute shall be subject to the dispute resolution procedures elected in the written contract of the parties, or, if no such election exists, by final judgment or by operation of law.

Silence has a consequence, but it is not an admission either way:

Civil Code 8850(g)(1)

(1) Failure by the owner to respond to a claim within the time periods described in this section or to otherwise meet the requirements of this section shall result in the claim being deemed denied in its entirety.

Civil Code 8850(g)(2)

(2) A claim that is denied by reason of the owner’s failure to have responded to a claim, or its failure to otherwise meet the time requirements of the section, shall not constitute an adverse finding with regard to the merits of the claim or the responsibility or qualifications of the claim.

Late money carries interest:

Civil Code 8850(h)(1)

(1) Undisputed amounts not paid in a timely manner as required by this section shall bear interest at 2 percent per month.

Civil Code 8850(h)(2)

(2) Disputed amounts which are later found to be owed through the dispute resolution procedures elected in the written contract of the parties, or, if no such election exists, by final judgment or by operation of law, shall bear interest at 2 percent per month, beginning from the date on which those amounts would have been due had they not been disputed.

And a disputed amount becomes undisputed when it is agreed or found owing:

Civil Code 8850(l)

(l) Any disputed amount which the owner, at any point, agrees to pay, or is found to owe through dispute resolution, by final judgment, or by operation of law, shall, from the date of the agreement or finding, be considered an undisputed amount for the purpose of any timelines or processes established under this article.

What the text leaves open: the owner's review starts on receipt of the claim, and the section does not say how receipt by mail is proved. It says the claimant shall furnish reasonable documentation, but not by when. It does not say whether the interest in subdivision (h) is simple or compounded.

Subcontractors: the claim goes through the contractor

A sub asks the contractor in writing:

Civil Code 8850(j)(2)

(2) A subcontractor may request in writing, either on their own behalf or on behalf of a lower tier subcontractor, that the contractor present a claim for work that was performed by the subcontractor or by a lower tier subcontractor on behalf of the subcontractor.

Then each side has duties:

Civil Code 8850(j)(3)(A)

(A) The subcontractor requesting that the claim be presented to the owner shall furnish the contractor with timely and reasonable documentation to support the subcontractor’s claim to enable the contractor to meet their obligations under subdivision (d) and shall thereafter cooperate with the contractor in the informal conference, mediation, and dispute resolution processes required pursuant to this section relating to the subcontractor’s claim.

Civil Code 8850(j)(3)(B)

(B) The contractor shall exercise good faith in fulfilling their obligations on behalf of the subcontractor under subdivisions (d), (e), and (f) and shall make no settlement of any claim to which the subcontractor does not approve, in writing.

The contractor has to say whether it passed the claim on:

Civil Code 8850(j)(4)

(4) Within 30 days of receipt of this written request, the contractor shall notify the subcontractor in writing as to whether the contractor presented the claim to the owner and, if the contractor did not present the claim, provide the subcontractor with a statement of the reasons for not doing so.

And the sub keeps its other remedies:

Civil Code 8850(j)(5)

(5) Nothing in this subdivision precludes a subcontractor from exercising its lien rights and its stop work notice rights.

What the text leaves open: beyond the statement of reasons, it does not say what a sub can do when the contractor declines to present the claim, and it sets no deadline for the sub's request.

The right to stop work

Civil Code 8850(k)

(k) The contractor and subcontractors shall have the right to suspend performance of their work, without penalty, until payment is received if the following procedure is followed:

Civil Code 8850(k)(1)

(1) The owner is informed by registered mail or certified mail, return receipt requested, that payment is due pursuant to this section, or where the claim is deemed denied pursuant to subdivision (g).

Civil Code 8850(k)(2)

(2) Thirty days after the notice that payment was due pursuant to paragraph (1) is sent to the owner, the contractor or subcontractor sends a 10-day written notice of intent to stop work to the owner by registered mail or certified mail, return receipt requested.

What the text leaves open: the section names the notice of intent to stop work but does not say, in its own words, on which day work may stop after that notice is sent. It says the suspension is without penalty, and does not say whether that reaches delay damages under the contract or the schedule after work resumes.

The rest of the section, word for word

The rights in the section cannot be signed away in the contract, subject to the exceptions it lists:

Civil Code 8850(m)(1)

(1) A waiver of the rights granted by this section is void and contrary to public policy.

Civil Code 8850(m)(2)

(2) Notwithstanding paragraph (1), all of the following apply:

Civil Code 8850(m)(2)(A)

(A) Upon receipt of a claim, the parties may mutually agree to waive, in writing, the informal conference and mediation provisions in this section and proceed directly to the commencement of a civil action or binding arbitration, as applicable.

Civil Code 8850(m)(2)(B)

(B) Owners, contractors, and subcontractors may agree to reasonable change order, claim, and dispute resolution procedures and requirements in addition to the provisions of this section, so long as the contractual provisions do not conflict with or otherwise impair the timeframes and procedures set forth in this section.

It leaves an offer to settle under the Code of Civil Procedure alone:

Civil Code 8850(i)

(i) Nothing in this section shall prevent either party from submitting, or otherwise limit the applicability of, a statutory offer of settlement under Section 998 of the Code of Civil Procedure.

Not quoted on this page: the section number at its head, the lead in to subdivision (a) and its findings (1), (2) and (4), the lead in to subdivision (c), the definition of owner in (c)(2)(A), the owner's right to a designated representative in (c)(2)(C), and the definition of project manager in (c)(3). Every other part of section 8850 is quoted above, and section 8851 is quoted whole. Each quote is checked against a saved copy of the Legislature's text when this page is built. Read the sections and the chaptered bill there:

Read the law: Civil Code section 8850, Civil Code section 8851 and SB 440 as chapteredleginfo.legislature.ca.gov

What to do differently

Only what the text supports:

• Start with the contract date. The section applies to “contracts entered into on or after January 1, 2026”, and the article “shall remain in effect only until January 1, 2030”.
• On residential work, check subdivision (o) before relying on any of this. The section does not apply to “a residential project if the project is not mixed use and does not exceed four stories”.
• Send a claim the way the section defines it: as “a separate demand”, “sent by registered mail or certified mail with return receipt requested”. Keep the receipt, and send reasonable documentation with it.
• Put the owner's deadline on the calendar. The written statement comes “within a period not to exceed 30 days”, unless you agree in writing to extend it, and if it does not come, the claim is “deemed denied in its entirety” and you can demand the meet and confer in writing.
• Count the payment clock for the undisputed part from the owner's written statement: it “shall be processed and made within 60 days after the owner issues its written statement”.
• If you are a sub, ask the contractor in writing to present the claim, and give it “timely and reasonable documentation”.
• Before you stop work, follow subdivision (k) step by step, by registered or certified mail, return receipt requested. The right is “without penalty” only “if the following procedure is followed”.
• Read any claim clause in the contract against subdivision (m). A contract can add procedures only “so long as the contractual provisions do not conflict with or otherwise impair the timeframes and procedures set forth in this section”.

Questions people ask

How long does a California owner have to answer a claim under SB 440?

Civil Code 8850(d)(1)(A) says the owner shall provide a written statement of what is disputed and what is not “within a period not to exceed 30 days”. The owner and the contractor can agree in writing to extend it.

When does the owner have to pay the part of the claim it does not dispute?

Payment of the undisputed portion “shall be processed and made within 60 days after the owner issues its written statement”. Undisputed amounts not paid on time “shall bear interest at 2 percent per month”.

Can the owner just ignore the claim?

Silence counts as a denial, not as the end of it. Failure to respond results in the claim “being deemed denied in its entirety”, the claimant may then demand a meet and confer, and that denial “shall not constitute an adverse finding with regard to the merits of the claim”.

Does SB 440 apply to a home remodel?

The section “shall not apply to the construction of a residential project if the project is not mixed use and does not exceed four stories”. It does not define residential project or say whether a remodel counts as construction, so this page cannot say more than that.

Can a contract waive the SB 440 claim process?

Not in general: “A waiver of the rights granted by this section is void and contrary to public policy.” After a claim is received, the parties can agree in writing to skip the meet and confer and mediation, and a contract can add procedures that do not conflict with the section's timeframes.

California lien waiver forms, on the statutory wording

Other state changes to how contractors get paid are on the construction law changes page.

This page quotes California Civil Code sections 8850 and 8851, as added by SB 440 (Statutes of 2025, Chapter 583) and explains what it says. It is not legal advice, and a statute can be amended. Read the linked section before you rely on it.