California SB 440: the change-order payment statute

The owner directed the extra work. You did it. You submitted the change-order request, and the owner has neither signed it nor said no.

On a private California contract signed on or after 1 January 2026, Civil Code § 8850, added by SB 440, requires the owner to say in writing which part of your claim it disputes, to pay the rest within 60 days, and to mediate the remainder, with interest at 2 percent a month for missed deadlines. This page covers what the section says, what California law already provided, and how it fits with AIA A201–2017. That fit is the part nobody has tested.

Sources. All statutory text here was read from the Legislature's official site. Where commentary differs from it, the text governs and the difference is noted. A201–2017 wording is quoted from AIA's own complete 38-page sample of the form; the shorter sample on AIA's main site contains only Articles 1–3.

The statute

Senate Bill No. 440 (Ochoa Bogh), Stats. 2025, ch. 583, was approved by the Governor and filed with the Secretary of State on 10 October 2025. Section 2 of the Act adds Article 4, "Claims and Disputes" (§§ 8850–8851), to the prompt-payment chapter of the Civil Code's private works title. Section 1, which is not codified, provides that the Act "may be cited as the Private Works Change Order Fair Payment Act." The short title therefore belongs to the Act, not to § 8850. § 8851 is the sunset: the article "shall remain in effect only until January 1, 2030, and as of that date is repealed."

Who and what it covers, from § 8850 and the Part 6 definitions:

• Private owners only. § 8850(c)(2)(B) excludes the state and its agencies, the UC and CSU systems, cities and counties (including charter ones), districts and public authorities from "owner." Public work falls under Public Contract Code § 9204.
• Contracts entered into on or after 1 January 2026 (§ 8850(n)). A 2025 contract is outside the section even if the work runs into 2027.
• Not small residential work. The section does not apply to "a residential project if the project is not mixed use and does not exceed four stories" (§ 8850(o)).
• Contractors and subcontractors. In Part 6, "contractor" includes a direct contractor, a subcontractor, or both (§ 8012). Subcontractors reach the owner through a pass-through procedure (§ 8850(j)).
• Days are calendar days (§ 8058) unless the section says "business days," which it does for two periods.

What counts as a "claim" (§ 8850(c)(1)): "a separate demand … sent by registered mail or certified mail with return receipt requested" for one or more of:

"(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. (B) Payment by the owner of money or damages arising from work done by, or on behalf of, the contractor pursuant to the contract … and payment for which is not otherwise expressly provided or to which the claimant is not otherwise entitled. (C) Payment of an amount that is disputed by the owner."

The definition begins with time and with relief from liquidated damages. Money comes second. The method of service is part of the definition: a demand sent by email or courier is not a "claim" under this section.

The procedure, in order

From § 8850(d)–(h) and (k):

1. Claim. The contractor sends the claim by registered or certified mail, return receipt requested, and "shall furnish reasonable documentation to support the claim" (d)(1)(B).
2. Owner's statement. The owner performs "a reasonable review" and, "within a period not to exceed 30 days," gives a written statement identifying the disputed and undisputed portions (d)(1)(A). The period can be extended only by written mutual agreement made "upon receipt of a claim" (d)(2).
3. Payment of the undisputed portion is due within 60 days after the owner issues that statement (d)(3).
4. Informal conference, if demanded. If the claimant disputes the statement, or the owner has not responded, the claimant may demand a meet-and-confer conference in writing. The demand also goes by registered or certified mail, and the owner must "schedule" the conference within 30 days of receiving it (e)(1)–(2).
5. Second statement. Within 10 business days after the conference ends, the owner identifies what remains in dispute and what does not (e)(3). Any newly undisputed amount is payable within 60 days (e)(4).
6. Mediation. Whatever remains disputed "shall be submitted to nonbinding mediation," with costs split equally (f)(1). The parties have 10 business days to agree a mediator; if they cannot, "the contractor may select the mediator" (f)(2)–(3)(A). If the owner refuses mediation, the contractor may use the stop-work procedure (f)(3)(B).
7. After mediation. Anything still unresolved goes to "the dispute resolution procedures elected in the written contract of the parties," or, if the contract elects none, to final judgment (f)(4).

Default. If the owner fails to respond on time, or "to otherwise meet the requirements of this section," the claim is "deemed denied in its entirety." That is "not … an adverse finding with regard to the merits" (g).

Interest. Undisputed amounts paid late "shall bear interest at 2 percent per month" (h)(1). So do disputed amounts later found to be owed, "beginning from the date on which those amounts would have been due had they not been disputed" (h)(2). A disputed amount the owner later agrees to pay becomes undisputed from that date (l).

★ Where commentary diverges from the text. The owner need not "meet and confer within 30 days." Its 30-day duty is a written statement, and the conference happens only on demand. Silence is not "treated as disputed": the claim is "deemed denied in its entirety." The post-conference period is 10 business days. "Delay or dilute" is not statutory language. And "24 percent" is arithmetic; the statute states only the monthly rate.

What California law already provided before 1 January 2026

This section exists because the natural way to present SB 440 is to overstate how new it is. Several of its pieces were already in the private-works chapter it joins.

(Inference.) SB 440's definition of "claim," its default rule and its anti-waiver proviso repeat § 9204 almost word for word. (Opinion.) So the accurate headline is not that California has invented a private change-order remedy. California has moved its public-works claim procedure into private work, and has attached to it, without any way to contract out, a 2% penalty and a stop-work right that until now attached to progress, retention and other amounts due under the contract, not to disputed claims.

Nor is California alone. Comparison, labelled. Nevada, NRS 624.610, deems the contract price and time increased by the amounts sought if the owner neither issues a requested change order nor gives written reasons within 30 days. Massachusetts, G.L. c. 149 § 29E, deems a change-order request on a private contract of $3 million or more approved on silence within a period of at most 30 days. SINGLE-SOURCE This page therefore makes no claim that SB 440 is the first US statute of its kind.

What it is not: it is not adjudication

Both California statutes define "claim" to lead with time extensions and relief from delay damages, and both end in non-binding mediation. After mediation, § 8850(f)(4) sends the dispute back to whatever forum the contract chose. § 9204 sends it to "applicable procedures outside this section," and expressly lets a public entity require arbitration.

Neither statute produces a decision on the merits, even an interim one. A deemed denial settles nothing either way. It is not an adverse finding against the contractor, and it gives the contractor no right to be paid. California has not created an adjudication regime.

That is the structural difference from the UK (28-day adjudication under the Housing Grants, Construction and Regeneration Act 1996, s 108, binding until final determination), from the Australian security-of-payment Acts, and from Ontario, where adjudication reaches the money on a change order "whether approved or not, or a proposed change order."

(Opinion.) Elsewhere the contractor gets a decision the owner must pay now. In California it gets a timetable with interest, and an owner who waits it out ends in the same court or arbitration, only later and at a higher cost. The nearest thing to a fast determination is the pre-2026 § 8844 expedited court proceeding, available only after a § 8832 stop-work notice.

§ 9204 has changed since research on this cluster began. It was due to be repealed on 1 January 2027. SB 33 (Cortese), Stats. 2026, ch. 99, approved on 16 July 2026, "would repeal the … January 1, 2027, repeal date, thereby extending the operation of these provisions indefinitely." Section 1 re-enacts § 9204 without its repeal subdivision (i). Under Cal. Const. art. IV, § 8(c)(1), a regular-session statute takes effect on 1 January next following a 90-day period from enactment, so SB 33 takes effect on 1 January 2027, and § 9204(i)'s own condition is met because SB 33 was enacted before that date. The two regimes now differ as follows:

Reconciling SB 440 with AIA A201–2017

There is no case law on any row below, so every "which governs" entry is inference or opinion, with the reasoning shown, except the §15.4 row, which follows from the text of (f)(4). The key text is the anti-waiver clause, § 8850(m). A waiver of the section's rights "is void and contrary to public policy." But the parties "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." Extending the owner's 30 days, and waiving the conference and mediation, can each be agreed only "upon receipt of a claim."

The 21-day bar: the case each way.

For survival. Every § 8850 clock runs after a claim arrives. A deadline for bringing one is a claim "requirement" "in addition to" the section, which (m)(2)(B) expressly permits, and it touches none of those clocks.

Against. (b) applies the section to "any claim … [n]otwithstanding any other law." A clause that extinguishes a claim before it can be presented arguably "impair[s]" the procedure, and a forfeiture is hard to call "reasonable."

(Opinion.) On the text, survival is the better reading, but the word "reasonable" in (m)(2)(B) gives a contractor a foothold against an unusually short or onerous bar. Practical course: meet the 21 days with a single certified-mail, return-receipt document that is at once an A201 Claim and an SB 440 claim. For how the 21-day bar operates generally, see the US change-order hub.

Two things SB 440 does not do. It creates no entitlement. It governs the process for a claim, not its merits, so a claim the contract bars is still barred. Practitioners have asked whether it reaches no-damages-for-delay clauses; on the text it is procedural, so treat those clauses as still in force (see no-damage-for-delay clauses). And it covers only contractor claims. An owner's backcharges and liquidated damages still run on A201, though the contractor's claim for relief from those liquidated damages is inside § 8850(c)(1)(A).

The stop-work right: what it is and what it is not

Under § 8850(k), the contractor and subcontractors "shall have the right to suspend performance of their work, without penalty, until payment is received" if:

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)"; and
2. "Thirty days after the notice … is sent to the owner, the contractor or subcontractor sends a 10-day written notice of intent to stop work," by the same kind of mail.

What it is not. It is not a right to suspend "40 days after a stop-work notice," the figure that circulates: the sequence is a first notice, then 30 days, then a 10-day notice of intent, so at least 40 days from the first notice. Nor is it the § 8832 route. It needs no site posting, lender copy or subcontractor notice, but it has no liability protection to match § 8838 and no expedited court proceeding like § 8844, only the words "without penalty." And it does not release the contractor from directed work generally. It is a suspension "until payment is received."

Where it is risky.

• Payment-due limb: safer. When the owner has identified an undisputed amount and missed the 60-day deadline, suspension follows naturally from the text.
• Deemed-denial limb: the least certain part of the statute. (Inference, with the step shown.) A deemed-denied claim is, by definition, one the owner has not agreed to pay. Suspending "until payment is received" therefore means stopping work over a disputed sum. If a court later finds the claim was bad, the owner will argue that no payment was ever due and that "without penalty" gives no protection. On that argument the suspension becomes a breach, possibly abandonment, with termination under A201 Article 14 and liquidated damages to follow. The risk is highest for a time-only claim, where "until payment is received" has no obvious end point.
• Subcontractors. A subcontractor has no contract with the owner. How its suspension under (k) interacts with its own subcontract is not addressed.

(Opinion.) Treat the deemed-denial limb as leverage to use with care, not a remedy to rely on. Send every notice by registered or certified mail with return receipt, count calendar days, and take legal advice before suspending unless the payment-due limb is clean.

What nobody can tell you yet

NEGATIVE FINDING No reported decision construing § 8850 was located as at 22 September 2026. One case-law search engine was blocked, so this means "none located," not "none exists." The section reaches only contracts signed this year, so few disputes can yet have run through its whole process to a court. Open questions:

• Must the conference be held within 30 days, or only scheduled?
• Does a pay application or an email chain count as a "separate demand"?
• Is "reasonable review" enforceable in its own right?
• How does the (k) suspension work for a time-only claim?
• Does "impair" reach contractual time bars?

Nobody can answer these by citing authority, and this page does not try.

What would change this page: the first appellate decision on § 8850(m) or (k); any amendment to Article 4; extension or repeal of the 2030 sunset. SB 33 did not touch § 8850. Re-check in January 2027, when SB 33 takes effect.

About this material Library content is general information about construction claim practice, not legal advice. Entitlement, deadlines and procedure are governed by your own contract and by the law of the place the work is performed. Reviewed September 22, 2026 · Report a correction