Slow-walking a change order in California just got expensive. A new state law, the Private Works Change Order Fair Payment Act, puts firm deadlines on how fast private owners and contractors have to present and resolve extra-work claims, and it attaches real teeth to missing them.
What the law actually requires
The act applies to private construction contracts entered on or after January 1, 2026, and it’s written into Civil Code Section 8850. It lays out a defined sequence and set of deadlines for submitting a change-order claim, responding to it, and settling the disputed portion. The headline penalty: amounts later determined to be owed can carry interest at 2% per month, running from the date they should have been paid had they not been disputed. That’s 24% annualized on money a party sat on.
The law is set to sunset on January 1, 2030, so the state is treating it as a four-year experiment rather than a permanent fixture.
Why it matters on real projects
Change orders are where construction disputes live. On a big job, unresolved extras pile up into eight-figure claims that don’t get sorted until closeout, sometimes in arbitration years later. Subs float the cost the whole time. By forcing a response clock and pricing delay at 2% a month, the law shifts leverage toward whoever did the work and is waiting to get paid.
Private megaprojects are where this bites hardest. Something on the scale of the $2.62 billion Los Angeles Convention Center expansion processes change orders constantly, and a monthly interest meter changes the calculus on whether to fight one or settle it.
What to do before the next contract
Owners, GCs and subs working in California should treat this as a paperwork problem to solve now, not later. Contract templates, claim logs, and internal approval routes all need to match the statutory deadlines, because the penalty runs whether or not anyone updated their process. Firms that already document change orders cleanly won’t feel much. The ones that rely on informal, drag-it-out negotiation are the ones about to pay interest.