Prompt Payment

Section 8800§Sections

(a) Except as otherwise agreed in writing by the owner and direct contractor, the owner shall pay the direct contractor, within 30 days after notice demanding payment pursuant to the contract is given, any progress payment due as to which there is no good faith dispute between them. The notice given shall comply with the requirements of Chapter 2 (commencing with Section 8100) of Title 1.

(b) If there is a good faith dispute between the owner and direct contractor as to a progress payment due, the owner may withhold from the progress payment an amount not in excess of 150 percent of the disputed amount.

(c) An owner that violates this section is liable to the direct contractor for a penalty of 2 percent per month on the amount wrongfully withheld, in place of any interest otherwise due. In an action for collection of the amount wrongfully withheld, the prevailing party is entitled to costs and a reasonable attorney’s fee.

(d) This section does not supersede any requirement of Article 2 (commencing with Section 8810) relating to the withholding of a retention.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8802§Sections

(a) This section applies to a contract between a public utility and a direct contractor for all or part of a work of improvement.

(b) Unless the direct contractor and a subcontractor otherwise agree in writing, within 21 days after receipt of a progress payment from the public utility the direct contractor shall pay the subcontractor the amount allowed the direct contractor on account of the work performed by the subcontractor to the extent of the subcontractor’s interest in the work. If there is a good faith dispute over all or part of the amount due on a progress payment from the direct contractor to a subcontractor, the direct contractor may withhold an amount not in excess of 150 percent of the disputed amount.

(c) A direct contractor that violates this section is liable to the subcontractor for a penalty of 2 percent of the disputed amount due per month for every month that payment is not made. In an action for collection of the amount wrongfully withheld, the prevailing party is entitled to costs and a reasonable attorney’s fee.

(d) This section does not limit or impair a contractual, administrative, or judicial remedy otherwise available to a contractor or subcontractor in a dispute involving late payment or nonpayment by the contractor or deficient performance or nonperformance by the subcontractor.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8810§Sections

This article governs a retention payment withheld by an owner from a direct contractor or by a direct contractor from a subcontractor.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8811§Sections

(a) This section is applicable to a contract relating to a private work of improvement entered into on or after January 1, 2026.

(b) (1) (A) A retention payment withheld from a payment by an owner from the direct contractor, by the direct contractor from any subcontractor, and by a subcontractor from any subcontractor thereunder, for a private work of improvement, shall not exceed 5 percent of the payment.

(B) In no event shall the total retention proceeds withheld exceed 5 percent of the contract price.

(C) In a contract between the direct contractor and a subcontractor, and in a contract between a subcontractor and any subcontractor thereunder, the percentage of the retention payment withheld shall not exceed the percentage specified in the contract between the owner and the direct contractor.

(2) Paragraph (1) does not apply to a direct contractor or subcontractor if the direct contractor or subcontractor provides written notice to a subcontractor before, or at, the time that the bid is requested that a faithful performance and payment bond shall be required, and a subcontractor subsequently fails to furnish to the direct contractor or subcontractor a performance and payment bond issued by an admitted surety insurer.

(3) Paragraph (1) does not apply to an owner, direct contractor, or subcontractor on a residential project if the project is not mixed-use and does not exceed four stories.

(c) In any action to enforce the provisions of this section, a court shall award reasonable attorney’s fees to the prevailing party.

(Added by Stats. 2025, Ch. 49, Sec. 1. (SB 61) Effective January 1, 2026.)

Section 8812§Sections

(a) If an owner withholds a retention from a direct contractor, the owner shall, within 45 days after completion of the work of improvement, pay the retention to the contractor.

(b) If part of a work of improvement ultimately will become the property of a public entity, the owner may condition payment of a retention allocable to that part on acceptance of the part by the public entity.

(c) If there is a good faith dispute between the owner and direct contractor as to a retention payment due, the owner may withhold from final payment an amount not in excess of 150 percent of the disputed amount.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8814§Sections

(a) If a direct contractor has withheld a retention from one or more subcontractors, the direct contractor shall, within 10 days after receiving all or part of a retention payment, pay to each subcontractor from whom retention has been withheld that subcontractor’s share of the payment.

(b) If a retention received by the direct contractor is specifically designated for a particular subcontractor, the direct contractor shall pay the retention payment to the designated subcontractor, if consistent with the terms of the subcontract.

(c) If a good faith dispute exists between the direct contractor and a subcontractor, the direct contractor may withhold from the retention to the subcontractor an amount not in excess of 150 percent of the estimated value of the disputed amount.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8816§Sections

(a) If the direct contractor gives the owner, or a subcontractor gives the direct contractor, notice that work in dispute has been completed in accordance with the contract, the owner or direct contractor shall within 10 days give notice advising the notifying party of the acceptance or rejection of the disputed work. Both notices shall comply with the requirements of Chapter 2 (commencing with Section 8100) of Title 1.

(b) Within 10 days after acceptance of disputed work, the owner or direct contractor shall pay the portion of the retention relating to the disputed work.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8818§Sections

If an owner or direct contractor does not make a retention payment within the time required by this article:

(a) The owner or direct contractor is liable to the person to which payment is owed for a penalty of 2 percent per month on the amount wrongfully withheld, in place of any interest otherwise due.

(b) In an action for collection of the amount wrongfully withheld, the prevailing party is entitled to costs and reasonable attorney’s fees.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8820§Sections

It is against public policy to waive the provisions of this article by contract.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8822§Sections

This article does not apply to a retention payment withheld by a lender pursuant to a construction loan agreement.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8830§Sections

“Stop work notice” means notice given under this article by a direct contractor to an owner that the contractor will stop work if the amount owed the contractor is not paid within 10 days after notice is given.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8832§Sections

If a direct contractor is not paid the amount due pursuant to a written contract within 35 days after the date payment is due under the contract, and there is no dispute as to the satisfactory performance of the contractor, the contractor may give the owner a stop work notice. The notice shall comply with the requirements of Chapter 2 (commencing with Section 8100) of Title 1.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8834§Sections

A direct contractor that gives an owner a stop work notice shall give the following additional notice:

(a) At least five days before giving the stop work notice, the contractor shall post notice of intent to give a stop work notice. The notice shall comply with the requirements of Chapter 2 (commencing with Section 8100) of Title 1. In addition to posting the notice pursuant to Section 8114, the notice shall also be posted at the main office of the site, if one exists.

(b) At the same time the contractor gives the stop work notice, the contractor shall give a copy of the stop work notice to all subcontractors with whom the contractor has a direct contractual relationship on the work of improvement.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8836§Sections

Within five days after receipt of a stop work notice from a direct contractor, the owner shall give a copy of the notice to the construction lender, if any. The copy of the notice shall be given in compliance with the requirements of Chapter 2 (commencing with Section 8100) of Title 1.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8838§Sections

(a) The direct contractor or the direct contractor’s surety, or a subcontractor or a subcontractor’s surety, is not liable for delay or damage that the owner or a contractor of a subcontractor may suffer as a result of the direct contractor giving a stop work notice and subsequently stopping work for nonpayment, if the notice and posting requirements of this article are satisfied.

(b) A direct contractor’s or original subcontractor’s liability to a subcontractor or material supplier after the direct contractor stops work under this article is limited to the amount the subcontractor or material supplier could otherwise recover under this title for work provided up to the date the subcontractor or material supplier ceases work, subject to the following exceptions:

(1) The direct contractor’s or original subcontractor’s liability continues for work provided up to and including the 10-day notice period and not beyond.

(2) This subdivision does not limit liability for custom work, including materials that have been fabricated, manufactured, or ordered to specifications that are unique to the job.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8840§Sections

On resolution of the claim in the stop work notice or the direct contractor’s cancellation of the stop work notice, the contractor shall post, and give subcontractors with whom the contractor has a direct contractual relationship on the work of improvement, notice of the resolution or cancellation. The notice shall comply with the requirements of Chapter 2 (commencing with Section 8100) of Title 1. In addition to posting the notice pursuant to Section 8114, the notice shall also be posted at the main office of the site, if one exists.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8842§Sections

A direct contractor’s right to stop work under this article is in addition to other rights the direct contractor may have under the law.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8844§Sections

(a) If payment of the amount claimed is not made within 10 days after a stop work notice is given, the direct contractor, the direct contractor’s surety, or an owner may in an expedited proceeding in the superior court in the county in which the private work of improvement is located, seek a judicial determination of liability for the amount due.

(b) The expedited proceeding shall be set for hearing or trial at the earliest possible date in order that it shall be quickly heard and determined, and shall take precedence over all other cases except older matter of the same character and other matters to which special precedence has been given.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8846§Sections

It is against public policy to waive the provisions of this article by contract.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8848§Sections

(a) This article applies to a contract entered into on or after January 1, 1999.

(b) This article does not apply to a retention withheld by a lender pursuant to a construction loan agreement.

(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section 8850§Sections

(a) The Legislature finds and declares all of the following:

(1) It is in the best interests of the state and its citizens to ensure that all construction business performed on a private works project in the state that is complete and not in dispute is paid in full and in a timely manner.

(2) Delays in payment for works of improvement and site improvements impose significant financial hardships on contractors, particularly small businesses, disadvantaged business enterprises, and disabled veteran business enterprises.

(3) The lack of clear procedures for resolving disputes related to change orders often leads to costly litigation where a predetermined method could avoid such costs.

(4) Prompt and fair payment promotes economic stability within the construction industry and ensures efficient project completion.

(b) Notwithstanding any other law, this section shall apply to any claim by a contractor, or where authorized pursuant to this article, a subcontractor, in connection to a work of improvement or site improvement.

(c) For purposes of this section, the following terms apply:

(1) “Claim” means a separate demand by a contractor, or where authorized pursuant to this article, a subcontractor, sent by registered mail or certified mail with return receipt requested, for one or more of the following:

(A) A time extension, including, without limitation, for relief from damages or penalties for delay assessed by an owner under contract for a work of improvement or site improvement.

(B) Payment by the owner of money or damages arising from work done by, or on behalf of, the contractor pursuant to the contract for a work of improvement or site improvement project and payment for which is not otherwise expressly provided or to which the claimant is not otherwise entitled.

(C) Payment of an amount that is disputed by the owner.

(2) (A) “Owner” means the owner who causes a building, improvement, or structure to be constructed, altered, or repaired, or that person’s successor in interest at the date a notice of completion is recorded, whether the interest or estate of the owner be in fee, as vendee under a contract of purchase, as lessee, or other interest or estate less than the fee. Where the interest or estate is held by two or more persons as joint tenants or tenants in common, any one or more of the cotenants may be deemed to be the “owner” within the meaning of this section.

(B) “Owner” shall not include a state agency, department, office, division, bureau, board, or commission, the California State University, the University of California, a city, including a charter city, county, including a charter county, city and county, including a charter city and county, district, special district, public authority, political subdivision, public corporation, or nonprofit transit corporation wholly owned by a public agency and formed to carry out the purposes of the public agency.

(C) An owner shall have the right to a designated representative.

(3) (A) “Project manager” means a person, partnership, corporation, or other legal entity that is designated by the owner to direct construction and represent the owner during the performance of the services covered under the construction contract and is authorized to make changes, adjustments, and interpretations of the contract in order to facilitate the completion of the project.

(B) In the absence of the appointment of a project manager by the owner, the owner shall serve as project manager on a project.

(d) (1) (A) Upon receipt of a claim pursuant to this section, the owner to which the claim applies shall perform a reasonable review of the claim and, within a period not to exceed 30 days, shall provide the claimant a written statement identifying what portion of the claim is disputed and what portion of the claim is undisputed.

(B) The claimant shall furnish reasonable documentation to support the claim.

(2) Upon receipt of a claim, an owner and a contractor may, by mutual agreement, extend the time period provided in this subdivision in writing.

(3) Payment of any undisputed portion of the claim shall be processed and made within 60 days after the owner issues its written statement.

(e) (1) If the claimant disputes all or any portion of the owner’s written response to the claim, or if the owner fails to respond to a claim issued within the timeframe prescribed, the claimant may demand in writing an informal conference to meet and confer for settlement of the issues in dispute.

(2) Upon receipt of a demand in writing sent by registered mail or certified mail, return receipt requested, the owner shall schedule a meet and confer conference with the claimant within 30 days for settlement of the dispute.

(3) Within 10 business days following the conclusion of the meet and confer conference, if the claim or any portion of the claim remains in dispute, the owner shall provide the claimant a written statement identifying the portion of the claim that remains in dispute and the portion that is undisputed.

(4) Payment of any undisputed portion of the claim shall be processed and made within 60 days after the owner issues its written statement.

(f) (1) If, following the informal conference, there remains any disputed portion of the claim, the remaining disputed portion of the claim shall be submitted to nonbinding mediation, with the owner and the claimant sharing the associated costs equally.

(2) The owner and claimant shall mutually agree to a mediator within 10 business days after the disputed portion of the claim has been identified in writing.

(3) (A) If the parties cannot agree upon a mediator within the time allotted, the contractor may select the mediator to be used.

(B) If the owner refuses mediation, the contractor may carry out the process described in subdivision (k).

(4) If mediation is unsuccessful, the parts of the claim remaining in dispute shall be subject to the dispute resolution procedures elected in the written contract of the parties, or, if no such election exists, by final judgment or by operation of law.

(g) (1) Failure by the owner to respond to a claim within the time periods described in this section or to otherwise meet the requirements of this section shall result in the claim being deemed denied in its entirety.

(2) A claim that is denied by reason of the owner’s failure to have responded to a claim, or its failure to otherwise meet the time requirements of the section, shall not constitute an adverse finding with regard to the merits of the claim or the responsibility or qualifications of the claim.

(h) (1) Undisputed amounts not paid in a timely manner as required by this section shall bear interest at 2 percent per month.

(2) Disputed amounts which are later found to be owed through the dispute resolution procedures elected in the written contract of the parties, or, if no such election exists, by final judgment or by operation of law, shall bear interest at 2 percent per month, beginning from the date on which those amounts would have been due had they not been disputed.

(i) Nothing in this section shall prevent either party from submitting, or otherwise limit the applicability of, a statutory offer of settlement under Section 998 of the Code of Civil Procedure.

(j) (1) If a subcontractor or a lower tier subcontractor lacks legal standing to assert a claim against an owner because privity of contract does not exist, except as provided in paragraph (4), the contractor shall present to the owner a claim on behalf of a subcontractor or lower tier subcontractor.

(2) A subcontractor may request in writing, either on their own behalf or on behalf of a lower tier subcontractor, that the contractor present a claim for work that was performed by the subcontractor or by a lower tier subcontractor on behalf of the subcontractor.

(3) (A) The subcontractor requesting that the claim be presented to the owner shall furnish the contractor with timely and reasonable documentation to support the subcontractor’s claim to enable the contractor to meet their obligations under subdivision (d) and shall thereafter cooperate with the contractor in the informal conference, mediation, and dispute resolution processes required pursuant to this section relating to the subcontractor’s claim.

(B) The contractor shall exercise good faith in fulfilling their obligations on behalf of the subcontractor under subdivisions (d), (e), and (f) and shall make no settlement of any claim to which the subcontractor does not approve, in writing.

(4) Within 30 days of receipt of this written request, the contractor shall notify the subcontractor in writing as to whether the contractor presented the claim to the owner and, if the contractor did not present the claim, provide the subcontractor with a statement of the reasons for not doing so.

(5) Nothing in this subdivision precludes a subcontractor from exercising its lien rights and its stop work notice rights.

(k) The contractor and subcontractors shall have the right to suspend performance of their work, without penalty, until payment is received if the following procedure is followed:

(1) The owner is informed by registered mail or certified mail, return receipt requested, that payment is due pursuant to this section, or where the claim is deemed denied pursuant to subdivision (g).

(2) Thirty days after the notice that payment was due pursuant to paragraph (1) is sent to the owner, the contractor or subcontractor sends a 10-day written notice of intent to stop work to the owner by registered mail or certified mail, return receipt requested.

(l) Any disputed amount which the owner, at any point, agrees to pay, or is found to owe through dispute resolution, by final judgment, or by operation of law, shall, from the date of the agreement or finding, be considered an undisputed amount for the purpose of any timelines or processes established under this article.

(m) (1) A waiver of the rights granted by this section is void and contrary to public policy.

(2) Notwithstanding paragraph (1), all of the following apply:

(A) Upon receipt of a claim, the parties may mutually agree to waive, in writing, the informal conference and mediation provisions in this section and proceed directly to the commencement of a civil action or binding arbitration, as applicable.

(B) Owners, contractors, and subcontractors may agree to reasonable change order, claim, and dispute resolution procedures and requirements in addition to the provisions of this section, so long as the contractual provisions do not conflict with or otherwise impair the timeframes and procedures set forth in this section.

(n) This section shall apply to contracts entered into on or after January 1, 2026.

(o) This section shall not apply to the construction of a residential project if the project is not mixed use and does not exceed four stories.

(Added by Stats. 2025, Ch. 583, Sec. 2. (SB 440) Effective January 1, 2026. Repealed as of January 1, 2030, pursuant to Section 8851.)

Section 8851§Sections

This article shall remain in effect only until January 1, 2030, and as of that date is repealed.

(Added by Stats. 2025, Ch. 583, Sec. 2. (SB 440) Effective January 1, 2026. Repealed as of January 1, 2030, by its own provisions. Note: Repeal affects Article 4, commencing with Section 8850.)