On October 10th, California Governor Gavin Newsom signed Senate Bill 440 into law. S.B. 440 creates a new process for the timely resolution of change order disputes on private works projects.
S.B. 440, known as The Private Works Change Order Fair Payment Act, creates a new system for the prompt resolution of both subcontractor and general contractor change orders on private works projects prior to filing a lawsuit.
S.B. 440 (which passed both houses of the California Legislature unanimously), creates a tiered system of claims resolution:
- First, a subcontractor or general contractor with change orders submits a detailed written claim for extra work, or time extensions. The general contractor may submit its claims directly to the owner; the subcontractor submits the claims through the GC.
- Second, within 30 days, the private works owner must meet and confer with the general contractor and identify which portions of the claim are disputed or undisputed.
- Third, after the meet and confer, owners have 10 days to issue a written confirmation of the claim. Failure to do so is treated as a denial of the claim.
- Undisputed portions of the subcontractor or general contractor claim must be paid within 60 days or are subject to Prompt Payment Penalties of 2% per month.
- Any disputed change orders proceed to non-binding mediation before litigation or arbitration (depending on contract requirements) may occur.
- If the owner ignores these timelines, or refuses to mediate, the affected subcontractor or general contractor may issue a stop-work notice and cease performance 40 days later.
S.B. 440 is effective on January 1, 2026. It will be a powerful tool to ensure that private works change orders are addressed in a timely manner under the threat of stopping project work.
We recommend that all private works contractors amend their contract documents to reflect the new law and adhere to the deadlines set forth therein to ensure prompt payment.
