Private Works Change Order Fair Payment Act
SB 440 became effective this January and is intended to streamline-line private project construction change order claims. SB 440 applies to construction contracts entered on or after January 1, 2026, and creates a non-waivable change order dispute resolution procedure. Owners, developers, contractors, and subcontractors should review their contract language to ensure the new requirements are met.
The following summarizes several key provisions of the new procedure:
- Direct contractors (i.e., contractor directly engaged by an owner) and subcontractors on private projects may submit a claim to a project owner for additional time and related damages and/or payments.
- On receipt of the claim, the owner must review and respond to the claim within 30 days (unless extended by mutual agreement of the parties), identifying the disputed and undisputed portions of the claim.
- Undisputed portions of the claim must be paid within 60 days after owner’s written response.
- If disputed portions remain, or if the owner fails to timely respond, the claimant may demand an informal meet and confer conference to settle the matter.
- The owner must schedule the conference within 30 days of receipt of the demand, and within 10 business days following the conference, issue a written statement of any remaining disputed items.
- Remaining disputed items are then subject to nonbinding mediation, and, if those disputes remain unsettled, they are to be resolved by the dispute resolution forum selected in the contract.
The parties may agree to waive the meet and confer and/or mediation requirements noted in (4), (5) and (6), above, and proceed directly to arbitration (if agreed upon or required by contract) or litigation.
- Interest on Unpaid Amounts: Undisputed amounts due and not timely paid under SB 440 accrue interest at 2% per month.
- Right to Stop Work: If a direct contractor or subcontractor follows the applicable procedural requirements under SB 440, such party may stop work on the project, without penalty, until payment is received.
- Exception: SB 440 does not apply to the construction of a residential project if the project is not mixed-use and does not exceed four stories.
- Sunset: This law expires January 1, 2030, unless otherwise extended by the legislature.
Practical Tip: We recommend reviewing your existing construction contract forms for consistency with this new law.
