Owners and developers building in California must be aware of a new statute, CA Civil Code § 8850, which takes effect for contracts entered into, on, and after January 1, 2026. The statute will likely apply to most private construction projects; however, a carve-out exists for residential projects that are not mixed use and are four stories or less.

When a contractor—or, with proper authorization, a subcontractor—submits a claim related to payment, time extensions, damages, or change orders (encompassing the majority of construction disputes), the owner must provide a written response within 30 days. This response must clearly state which portions of the claim are disputed and which are not. The owner has 60 days from the date of its response to issue payment for those undisputed amounts. Late payments will accrue interest at a rate of two percent per month.