L EG AL ISSUE S SPO T L IGHT


The Private Works Change Order Fair Payment Act and Its Implications for Subcontractor Claims


BY THERESA BECERRA & ZACKARY SMITH, SPENCER FANE LLP T


he Private Works Change Order Fair Payment Act (the “Act”), codified at California Civil Code


section 8850, alters the leverage dynamics in private construction disputes. Effective for most private construction


contracts entered on or after January 1, 2026, the Act mandates a dispute-res- olution procedure and strict timelines for claims involving time extensions, relief from delay damages, or disputed payments. Te Act aims to bypass privity barriers, reduce financial hardships, avoid costly litigation, and pressure owners and contractors to pay subcontractors. Most notably, the Act requires contrac-


tors to present and pursue subcontractor claims against the owner, while imposing deadlines and financial consequences


24


CALIFORNIA CONSTRUCTOR MAY/JUNE 2026


for owners who delay payment or fail to comply with the statutory process. Tese statutory protections are not waivable, and any attempt to insert a waiver of these protections or inconsistent terms in the subcontract is automatically void.


Breaking the Privity Barrier: The Pass-Through Claim Requirement Subcontractors have long been frustrated by the inability to submit claims to the owner due to the lack of privity. Section 8850(j) bridges this gap by statutorily requiring contractors to act on lower-tier claims. Upon receipt of a subcontractor’s


claim, the contractor has 30 days to send the claim via registered/certified mail to the owner and then pursue it in good


faith. Under section 8850(j)(3)(B), the contractor is prohibited from settling a subcontractor’s claim without the sub- contractor’s written consent.


Strict Timelines and the “Deemed Denied” Trap Upon receiving a claim, the owner has 30 days to respond in writing and identify which portions of the claim are disputed and which are undisputed. Te parties may agree in writing to extend the 30- day window for complex claims. Under section 8850(g)(1), the claim is “deemed denied” if the owner fails to respond within the allotted/agreed time. Te owner must pay any undisputed


amount and/or execute a change order agreeing to any undisputed time exten-


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32