New California Contractor Laws in 2026 — What Homeowners Need to Know

AB 1327 — You Can Now Cancel a Contractor Contract by Email

This is a significant practical improvement for homeowners. Under prior law, if you signed a home improvement contract and changed your mind — or discovered a problem within the cancellation period — you had to mail a physical notice. Delays in mailing could cost you your cancellation rights.

Under AB 1327, contractors must now include their email address and phone number in the home improvement contract and explicitly state that email cancellation is permitted. A contractor who fails to include this information has violated Business and Professions Code §7159 and may be subject to CSLB discipline.

What this means for homeowners: If you signed a contract recently and want to cancel within the allowed window (3 days for most contracts, 5 days for seniors, 7 days for disaster repairs), you can do so by email. Send it to the email address in your contract and keep a copy with timestamp confirmation.

What to do if the contractor's email is not in the contract: This is a contract violation. Include it in a CSLB complaint and contact Bay Legal PC — a missing email address in a 2026 home improvement contract is an independent violation that strengthens your position.

SB 779 — CSLB Fines for Unlicensed Contractors Increase Dramatically

Previously, an unlicensed contractor caught performing construction work faced a minimum civil penalty of just $200 — a trivially small deterrent for someone billing thousands or tens of thousands of dollars for work. SB 779 makes the financial consequences of unlicensed contracting substantially more serious.

This law strengthens the existing remedy homeowners have under Business and Professions Code §7031. Even before this law, unlicensed contractors could not collect payment and homeowners could sue to recover everything paid. Now, unlicensed contractors additionally face mandatory minimum civil penalties that the CSLB can impose administratively.

Why the July 1, 2026 date matters: If you hired an unlicensed contractor before July 1, 2026, the old penalty amounts apply to the contractor's CSLB exposure — but your §7031 disgorgement rights remain the same regardless of date. After July 1, 2026, reports of unlicensed contractor activity are more likely to result in significant penalties.

SB 517 — Contractors Must Now Disclose Subcontractors

This law was enacted specifically to address a problem that has victimized California homeowners for years: a subcontractor who is not paid by the prime contractor places a mechanic's lien on the homeowner's property, even though the homeowner paid the prime contractor in full.

SB 517 does not eliminate mechanic's lien risk — subcontractors can still file liens if unpaid — but it gives homeowners the information they need to monitor the situation. If you know which subcontractors are on your project, you can request lien releases from them as work progresses and before making final payment to the prime contractor.

What to look for in your contract: Any home improvement contract signed on or after January 1, 2026, should list the name, license number, and scope of work for each subcontractor. If subcontractors are added during the project, the contractor should notify you in writing. A contract that lacks this information is non-compliant and should be noted in any CSLB complaint.

Practical protection: Before making any progress payment or final payment, request a conditional lien waiver from the prime contractor and any known subcontractors. Bay Legal PC can advise you on the correct lien waiver language under California Civil Code §8132.

AB 1002 — The California Attorney General Can Now Sue Contractors for Wage Violations

Previously, enforcement of wage violations against contractors was handled primarily by the CSLB and the Labor Commissioner. AB 1002 adds the full weight of the California Attorney General's office as an additional enforcement mechanism, including the ability to seek license suspension or revocation.

For homeowners, this law has an indirect benefit: contractors who are managing their businesses badly enough to have wage violations are also contractors who may be diverting funds from your project, failing to pay subcontractors (creating lien risk), or operating on the edge of financial failure that leads to project abandonment. A contractor with a wage violation record is a significant risk indicator.

How to use this: Before hiring a contractor, check their CSLB record at cslb.ca.gov for any wage-related actions. If your contractor abandons your project mid-work, an Attorney General complaint may now be an option your attorney can pursue in addition to CSLB and civil remedies.

SB 61 — 5% Retention Cap on Private Construction Projects

Retention — also called retainage — is a percentage of each progress payment that is withheld until project completion as a financial incentive for the contractor to finish the work. Prior to SB 61, contractors could withhold 10% or more as retention, which created cash-flow problems for smaller contractors and sometimes led to financial instability and project abandonment.

For homeowners on larger projects with progress payment schedules, SB 61 means the contractor has stronger financial incentive to complete the work — but also that you retain less leverage over the final payment. The attorney's fee provision in SB 61 means contractors who violate the cap can be required to pay your legal fees if you have to sue to enforce it.

Does this apply to your project? SB 61 applies to most private construction contracts entered into on or after January 1, 2026. There are exceptions for certain low-rise residential projects. Review your contract for retention language and consult Bay Legal PC if the retention percentage exceeds 5%.

SB 440 — New Mandatory Change Order Dispute Process

Change order disputes — where a contractor claims additional work was authorized and the homeowner disagrees — are one of the most common sources of construction litigation. SB 440 creates a structured dispute resolution process with specific deadlines.

Under SB 440, a contractor who submits a change order claim must give you 30 days to respond. You must identify undisputed versus disputed amounts in writing within 10 days after that. Undisputed amounts must be paid within 60 days or interest accrues at 2% per month. For truly disputed amounts, non-binding mediation is required before litigation.

This law is primarily protective of contractors on large projects, but homeowners benefit from the forced transparency and timeline structure. A contractor who fails to follow SB 440's process loses certain remedies. SB 440 applies to contracts entered on or after January 1, 2026, and sunsets January 1, 2030 unless extended.

2025 California Building Standards Code — Effective January 1, 2026

The 2025 Title 24 update incorporates new requirements for wildfire safety, energy efficiency, electrification, and accessibility. For homeowners dealing with contractor disputes, this creates a specific issue: work permitted before January 1, 2026 must comply with the prior code; work permitted after that date must comply with the new 2025 code.

If your contractor permitted a project before January 1, 2026, but performed work after that date, there may be a code compliance question about which standards apply. This is an area where legal and construction expert input is important.

Practical impact: Any work performed in 2026 that required a permit under the prior code but was not permitted, or that was permitted but not inspected under the new code, may have code compliance issues. Document all permits and inspection records carefully.