Your inbox has likely been full of messages in the past few weeks informing you that California Senate Bill 61 (Cortese) was recently signed into law by the Governor of California on July 14, 2025, which limits the amount of retention that can be withheld on private works of improvement to five percent (5%). You also have likely read that this is a significant change in the California law affecting many contractors doing business in this State. However, none of these communications likely explain the specific changes that are taking place, the specific types of private works projects to which the new requirement applies, or how the new changes can be addressed once the law takes effect as of January 1, 2026.

Background: California Senate Bill 61, signed into law on July 14, 2025, introduces changes to the California Civil Code by adding section 8811 to cap retention payments on private works projects at five (5%) for contracts entered into on or after January 1, 2026. More specifically, the new Civil Code 8811 will state as follows:

8811.

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