California Civil Code 8850: A New Era for Change Order Claim Resolution

Senate Bill No. 440: The Private Works Change Order Fair Payment Act. Signed into law on October 10, 2025, SB 440, which has been codified as California Civil Code Section 8850 (Act), establishes a mandatory, step-by-step dispute resolution process for change order claims on private construction projects. The Act applies to contracts entered into on or after January 1, 2026. However, it excludes purely residential projects that are four stories or less.

The Act imposes procedural requirements and strict timelines. While parties may agree to bypass the informal conference and mediation steps and proceed directly to litigation or binding arbitration, the Act’s core requirements cannot be waived.

Under the Act, when a contractor or subcontractor submits a change order claim for additional time or compensation, the owner must respond in writing within 30 days, identifying the disputed and undisputed portions of the change order claim. Undisputed amounts must be paid within 60 days after the owner issues that written response, and failure to pay those undisputed amounts triggers interest at 2% per month. If the contractor disputes the owner’s response, or the owner fails to respond at all, the contractor may demand a meet-and-confer conference, followed by mandatory non-binding mediation for unresolved amounts. If the parties cannot agree on a mediator, the contractor has the right to select the mediator. Where the owner refuses mediation, fails to pay undisputed sums, or a claim is deemed denied due to owner non-response, the contractor may exercise its right to suspend work after providing a 30-day payment demand followed by a 10-day stop work notice.

Subcontractors lacking privity of contract with the owner may submit claims through the contractor, who is required to exercise good faith in presenting and resolving those claims on the subcontractor’s behalf.

For owners and developers, the practical imperative is clear: (1) implement internal tracking systems to ensure compliance with the 30-day response and 60-day payment windows, as missed deadlines can trigger stop-work rights; (2) train project management teams on the Act’s requirements; and (3) review existing contract templates to address any conflicts with the Act’s timelines.

Allen Matkins’ construction practice group is prepared to assist clients in navigating these new requirements.