Starting January 1, 2026, private construction owners and developers in California must comply with CA Civil Code § 8850, a statute that establishes strict timelines and procedures for handling contractor claims. The law applies broadly to most private construction projects but excludes residential projects that are not mixed-use and are four stories or fewer.
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Under § 8850, when a contractor or subcontractor submits a claim for payment, time extensions, damages, or change orders, the project owner is required to respond in writing within 30 days. This written response must clearly indicate which portions of the claim are disputed and which are undisputed. Owners then have 60 days to pay undisputed amounts. Late payments accrue interest at a rate of 2% per month.
"Owners must provide a transparent and timely response," said Anand O. Gupta, construction law expert at Robinson & Cole LLP. "This statute ensures contractors are not left in limbo while pursuing legitimate claims."
If a dispute persists—or if the owner fails to respond within 30 days—the contractor can request an informal “meet and confer” session. The owner must schedule this conference within 30 days. If the dispute remains unresolved, the owner must provide another written statement within 10 business days identifying disputed and undisputed items.
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Outstanding disputes must then go to nonbinding mediation, with costs split evenly. If a mediator cannot be agreed upon within 10 business days, the contractor may select one independently. Should mediation fail, unresolved issues follow the dispute resolution terms specified in the construction contract.
"The law empowers contractors to suspend work if payments are not made as required," Gupta added, "but they must follow proper notice procedures to do so legally."
Unlike other statutes where contractual waivers of rights may be allowed, § 8850 does not permit parties to waive the statutory rights and responsibilities, and any such waiver is void. While alternative dispute procedures may be agreed upon, they cannot undermine the minimum standards and deadlines required by the law.
This law is a significant shift toward protecting contractors and subcontractors on private projects in California. Owners must now handle claims quickly and transparently, pay undisputed amounts without delay, and participate in structured dispute resolution. Multi-state owners and developers operating in California should adjust contracts accordingly to ensure compliance.
"This statute is a step toward fairness in construction contracts, ensuring owners and contractors understand their obligations and remedies," Gupta said.
Originally reported by Anand O. Gupta, Robinson & Cole LLP- Construction Law Zone.
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