California SB 440: New Claim Resolution Process for Private Works Contracts

10.14.2025

On October 10, 2025, Governor Newson signed Senate Bill 440 (SB 440) – Private Works Change Order Fair Payment Act – a measure designed to reform the claim resolution process on private construction projects. The bill builds on existing statutory frameworks governing construction contracts, while introducing a new, structured process for claims by contractors and subcontractors.

Under existing California law, contracts for private works of improvement are governed by the Civil Code and Business & Professions Code and already contain requirements for prompt payment and dispute resolution. Many stakeholders argue that the process remains inefficient and costly.

SB 440 requires contracts entered into on or after January 1, 2026, and before January 1, 2030, institute a new claims resolution process for disputes regarding change orders. Under SB 440 a contractor or subcontractor (collectively “contractor(s)”) may notify the owner of a private construction project (“owner”) of a demand for either (1) a time extension on work to be performed, or (2) payment of a change order (“claim”).

Owners are required to meet and confer with contractors in response to such claims within thirty (30) days of receipt and identify the disputed and undisputed claims within ten (10) days of that meeting. Failure to respond within ten days is treated as the equivalent to having disputed the claim.

The undisputed portions of any claim must be paid within sixty (60) days, or they become subject to interest at a rate of two percent (2%) per month. Disputed claims which are later found to have been owed are assessed interest, in the same amount.

SB 440 provides a dispute resolution process, which includes nonbinding mediation, for any disputed claim. Owners that fail to conform to the timelines established under SB 440, or that refuse to engage in mediation, may be issued a stop work notice by contractors. Contractors can stop work forty (40) days after the issuance of a stop work notice.

Owners and contractors, under SB 440, can negotiate contracts which contain “reasonable change order, claim, and dispute resolution procedures and requirements” which are in addition to those established in SB 440, so long as those contracts do not interfere with the timeframes and procedures established under SB 440.

What does this all mean for owners and contractors?

General contractors and owners in the construction industry will need to conduct a review of the change order procedures contained in their construction contracts, prior to January 1, 2026, to ensure that the contracts comply with SB 440.
Contractors should determine how to use SB 440 to improve their collection procedures.
It is important to craft claim resolution language that provides you with as much protection as possible from undue and unauthorized claims.
General contractors must ensure that their contracts clearly lay out expectations regarding the handling of subcontractors’ claims against owners.

Should you have any questions about SB 440’s new claim resolution process for private works contracts, feel free to contact the authors of this alert or your regular AALRR counsel.