2026 Construction Law Update

Happy New Year! Hope the holidays were enjoyable for you. 

During the first session of the California Legislature’s 2025-2026 legislative session, 2,350 bills were introduced, of which 917 bills made it to the Governor’s desk, and of which 794 bills were signed into law.

For the design and construction industry the most important bills are a new claims resolution procedure for private works projects, a 5% retention cap on certain private works projects, and a number of changes to home improvement contract requirements.

Contractors State License Board

AB 1002 – Authorizes the Attorney General to bring a civil action for a contractor’s failure to pay its workers the full amount of wages the workers are entitled to under state law or because the contractor has not fulfilled a wage judgment, or is in violation of an injunction or court order regarding the payment of wages to workers.

AB 1327 – Existing law authorizes cancellation of a home of improvement contracts within certain time frames. The bill would require that a notice of cancellation also be delivered via email and require the seller to include in the contract an email address to which a notice of cancellation may be sent and telephone number to assist the buyer in locating and filling out a notice of cancellation.

SB 291 – Requires the CSLB to conduct a verification process or procedure to verify eligibility for exemption from workers’ compensation insurance requirements. The bill also requires a minimum civil penalty of $10,000 per violation for any sole owner licensee found to have employed workers without maintaining workers’ compensation coverage.

SB 517 – Existing law requires licensees include certain provisions in home improvement contracts and that failure to do so is cause for administrative discipline. The bill specifies that, for purposes of administrative discipline, the prime or direct contractor is responsible for completion of the project in accordance with the home improvement contract, plans and specifications. The bill also requires home improvement contracts to disclose whether a subcontractor will. be used on the project.

SB 779 – Increases the minimum civil penalties for violations related to unlicensed persons to at least $1,500 and minimum civil penalties for other violations of at least $500 or $1,500 beginning July 1, 2026 and allows the CSLB to adjust these amounts for inflation every 5 years.

SB 861 – Existing law requires licensees subject to a public complaint requiring a professional or expert investigation or inspection to cover the costs of the investigation or inspection if it resulted in the issuance of a letter of admonition or citation. The bill would require a licensee to pay those fees only if the letter of admonishment or citation has become a final order of the registrar.

Private Works Projects

SB 61 – Prohibits retention withheld by an owner from a direct contractor, by a direct contractor from any subcontractor, and by a subcontractor from any sub-subcontractor, from exceeding 5%. See our article discussing the new law.

SB 440 – Sets forth a required claims resolution process for private works contract entered into after January 1, 2026 through January 1, 2030. See our article discussing the new law.

Public Works Projects

AB 123 – Requires the University of California to fund construction grants for two specified student housing projects.

AB 361 – Extends indefinitely the pilot program authorizing the Los Angeles Unified School District to use, before December 31, 2025, a best value procurement method for bid evaluation and selection for public works projects exceeding $1 million. The bill also authorizes other school districts to use the best value procurement method for public projects that exceed $1 million before December 31, 2030.

AB 518 – Clarifies that a “special occupancy park” – a recreational vehicle park, temporary recreational vehicle park, incidental camping area, or tent camp –  does not include a low-impact camping area located in a county that has enacted an ordinance authorizing low-impact camping.

AB 978 – Extends indefinitely the requirement that local agency’s standard specifications allow for recycled material no less than the level allowed in the California Department of Transportation’s specifications for those specified materials.

SB 78 – Requires the California Department of Transportation to submit a report by January 1, 2027 evaluating current efforts and potential opportunities to streamline the processes and procedures for the delivery of safety enhancement projects on state highway systems.

SB 409 – Exempts from the Public Contract Code, certain alteration or repair work performed on county-owned buildings for counties containing a population of 9 million or more if the cost is under $125,000.

SB 614 – Requires the State Fire Marshal to adopt regulations by July 1, 2025 governing the safe transportation of carbon dioxide in pipelines that are as protective as draft regulations issued by the federal Pipeline and Hazardous and Materials Safety Administration on January 10, 2025.

Prevailing Wages

AB 889 – Authorizes an employer to take full credit for hourly amounts contributed to defined contribution pension plans that provide for both immediate participation and essentially immediate vesting even if the employer contributes at a lower rate or does not make contributions to private construction.

Workers

SB 400 – Authorizes a taxpayer, employer, contractor or subcontractor to make an elective wage payment, until January 1, 2029, to workers performing work on a qualified renewable clean energy facility pursuant to the Inflation Reduction Act of 2022 provided that the facility is not a public works project and not otherwise subject to the Davis-Bacon Act.

SB 597 – Existing law makes direct contractors liable for amounts owed to wage claimants or third parties acting on behalf of a wage claimant. This bill would limit a direct contractor’s liability for fringe or other benefit contributions if contribution payments are made by joint check.

Alternative Project Delivery

AB 533 – Authorizes health care districts to use the design-build project delivery method for the construction of hospital and health facility buildings.

SB 272 – Establishes a pilot program authorizing the San Mateo County Transit District to use job order contracting as a procurement method.

SB 598 – Authorizes, until January 1, 2031, local public entities to use the Construction Manager/General Contractor project delivery method for regional recycled water projects or other water infrastructure projects undertaken to alleviate water supply shortages attributable to drought or climate change.

Cal-OSHA

SB 20 – Imposes restrictions on the fabrication of artificial stone by requiring “wet methods” rather than “dry methods” for “high-exposure trigger tasks” and requires fabrication shops to provide certain training beginning July 1, 2026 and annually thereafter.

Permitting

AB 253 – Establishes the California Residential Private Permitting Review Act which requires counties and cities to prepare and post on their websites residential building permit fee schedules if the county or city prescribes residential building permit fees. 

AB 671 – Streamlines approval process for local permits for tenant improvements related to restaurants.

AB 1301 – Requires building departments to conduct inspections for new residential constructions and residential additions within 10 business days of receiving a notice of completion.

ADUs

AB 462 – Requires local governments or the California Coastal Commission, as applicable, to either approve or deny a coastal development permit for an ADU wihthin 60 days of receiving a completed application.

SB 543 – Revises the definition of a “junior accessory dwelling unit” to units with no more than 500 square feet of interior livable space.

Common Interest Developments

AB 1050 – Existing law prohibits CC&R provisions restricting the number, size of locations of residences that may be built on property owned by an affordable housing development. The bill would extend those provisions to housing developments owned or controlled by an entity or individual that has submitted a development project application to redevelop an existing commercial property.

SB 410 – Existing law requires condo associations to conduct a visual inspection, at least every 9 years, of the exterior elevated elements for which the association has maintenance or repair responsibilities. The bill would require inspectors to include in their reports certain information including the total number of units in the condominium project and certification that the inspector has conducted a visual inspection and evaluated a statistically significant sample.

SB 625 – Makes unenforceable CC&R provisions that prohibit a substantially similar reconstruction of a residential structure that was destroyed or damaged in a disaster.

Climate Change

AB 368 – Requires that State Energy Resources Conservation and Development Commission to evaluate the cost-effectiveness of passive house energy efficiency standards by California climate zone.

AB 1104 – Specifies that an entity engaging a contractor for construction of a renewable electrical generation facility and associated battery storage is not an awarding body and that public works project requirements do not apply to that entity.

SB 283 – Requires applicants proposing an energy storage system that is capable of storing 200 megawatt hours or more of energy, to include a certification that at least 30 days before submitting the application, that the applicant met and conferred with the authority having jurisdiction over fire suppression in the area where the energy storage system is proposed.

Miscellaneous

AB 584 – Deems the facilities of firearms dealers as being “secure facilities” if they have doorways with a windowed or windowless steel door that is equipped with panic hardware that operates as a multipoint lock that bolts into the interior frame of the door.