5 construction legal trends to watch in 2026

Contractors have plenty of legal issues to ponder in 2026. 

Whether they’re confronting immigration, tariffs, the opportunities — and risks — of the data center construction boom or how artificial intelligence is winding its way into every aspect of business, builders need to make sure their contracts can meet today’s shifting legal landscape.  

First and foremost among those concerns is immigration and increased enforcement during President Donald Trump’s second term, said attorney Trent Cotney, construction team leader for Adams & Reese in Tampa, Florida.

“ICE raids and I-9 audits have severely impacted crews,” Cotney said. “Nobody wants illegal workers, but as you remove the potential workforce, whether voluntarily because they’re leaving or involuntarily because they’re being detained and deported, it shrinks the total number of workers available.”

Here’s a look at five of the top construction legal issues attorneys say contractors need to track in 2026. 

Labor cost increases

With fewer workers on jobsites due to immigration enforcement, the workers who remain can demand higher pay, Cotney said. Among his clients, he’s seeing labor pay rates increase anywhere from 4% to 10%. He advises builders to push for strong language in their contracts to recoup that increased overhead. 

“I’m always a big advocate of including a price escalation provision in your contract,” Cotney said. “It’s simple and it will work regardless of what the basis is for escalating the price. I’ve used it during hurricanes. I’ve used it during COVID. I’ve used it during fires. I’ve used it and it works.”

Along with price, contractors should write provisions into their contracts to get more time on projects for delays caused by labor constraints, said construction attorney Carol Sigmond. 

“What happens if I can’t get enough labor in a particular area?” said Sigmond, a partner and member of the Infrastructure Group in the New York City office of Nossaman. “I need a time extension because I need everybody to recognize I can’t control the labor market.”

Tariff impacts

The tariffs Trump has imposed in his second term will also need careful consideration. A pending U.S. Supreme Court ruling will determine whether those tariffs are constitutional. If they’re struck down, billions of dollars in rebates would be owed by the government. Contractors should prepare regardless of the outcome, Sigmond said.  

“People are starting to try to adjust for that both ways,” Sigmond said. “In other words, if there are new tariffs, what do they do? And what do they do if the tariffs go down?”

From a contractual perspective, the key is determining who bears the costs of tariffs that are in place and who would get any refunds via a rebate clause.

“Owners are starting to ask the contractors, if these costs go away, can they get their money back?” Sigmond said. In that case, owners and contractors are putting clauses in contracts to say “this has to be rebated back to us,” Sigmond said.

 She cautions that the chain of owed refunds from the government could get complicated fast, however. The process will likely involve importers, contractors and owners, all of whom may try to claw back a piece of the pie.

Data center construction

With $3 trillion in projected global spending for data center development by 2030, builders have an opportunity to profit from the boom around these facilities. 

“Right now, there’s money to be made,” Cotney said. “If you’re a contractor, it’s definitely worth pursuing.”

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“Usually the first sign that you’ve got a problem is they start to fight about change orders or they start to slow the payments down. Make sure if you’re seeing those triggers, you’re reacting appropriately.” 

Carol Sigmond

Partner, Nossaman

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But as with any development cycle, contractors need to look at that opportunity with wary eyes, attorneys say, and be prepared to cope with a downturn should the music suddenly stop. At the end of 2025, fears around an AI bubble forming similar to the dot-com bust of the early 2000s roiled the stock market. 

Although those concerns seem to have subsided in early 2026 — observers say demand for data centers seems healthy through at least next year — contractors should make sure they have language in their contracts to protect them should things go sideways. 

One way to do that is to limit the scope of the termination for convenience clause, a contractual catchall that usually lets either party walk for almost any reason. While these clauses are common in construction contracts, contractors should make sure they can recover as much as possible, should a deal go belly up due to funding or lending hurdles, for example. 

Cotney said the termination for convenience clause contained in the American Institute of Architects’ standard contract documents is widely recognized as fair to both parties. Contractors should also strive for language that allows them to recover as much as possible in terms of what they’ve put into a project to a given point. 

But some data center contracts he’s seen have attempted to hold more of those outlays back. 

“Traditional termination for convenience means typically you’re entitled to all your costs and reasonable profit and overhead on what you did to date, but not future profit and overhead,” Cotney said. “With these that I’ve been seeing, it’s more you’re only entitled to certain costs. They’re very specific and the owner is entitled to back-charge things for incomplete work.”

In addition to those clauses, Sigmond pointed to early warnings that a once-high-flying data center project may be facing new financing hurdles. 

“Usually the first sign that you’ve got a problem is they start to fight about change orders or they start to slow the payments down,” Sigmond said. “Make sure if you’re seeing those triggers, you’re reacting appropriately.” 

That means making sure payments are tracking to predetermined project completion milestones and ensuring payment bonds are in place to make a contractor whole. It’s also important to file any liens against a project that’s in default within the allotted time specified in the contract, usually 90 days. 

Scope creep

As builds become more complex, contractors are often being asked to do more than they signed up for. That may even include a request to perform or warranty work that’s beyond a contractor’s area of expertise. 

“You’ve got contractors that are having to become architects, engineers and lawyers all at the same time,” Cotney said. “The reason that has occurred is that the systems we use for construction have become more complicated.” 

Examples where builders may be asked to provide insight beyond their own competencies include building performance specifications, R values for insulation, fire codes and product manufacturer specifications. Though contractors are usually good at defining what they will do within the scope of a given job, it’s becoming increasingly important to put in writing what they won’t do, as well. 

“If you’re not engaging in design, why not have a design waiver that says if you’re providing suggestions in that area, that’s all they are, suggestions,” Cotney said. “You want to put something in there that says a design professional must sign off on these before it becomes the Bible.”

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“The question isn’t whether AI will be part of construction, it’s whether you’re using it intentionally or letting it happen without guardrails.”

Nate Simon

Founder, Simon Law

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AI in contracts

Any discussion of legal issues for contractors in 2026 would be incomplete without looking at the impacts of AI, both in construction contracts and on jobsites.  

“If you don’t think your team members are using AI, they are,” said Nate Simon, former in-house counsel for Gray Construction and founder of Simon Law in Lexington, Kentucky. “The question isn’t whether AI will be part of construction, it’s whether you’re using it intentionally or letting it happen without guardrails.”

Attorneys largely agree that AI still isn’t the right tool for creating construction contracts. Simon also said the tech isn’t right for reviewing entire contracts, though it does better when focused on individual clauses. Where it truly shines, he said, is helping contractors understand what’s in a contract in the first place. 

“Summarizing an existing contract into plain English so your project team can actually use it; Helping draft a notice letter when you already know the deadline and the delivery requirements; Comparing two versions of a subcontract to see what changed in the redline,” Simon wrote via email. “These are tasks where AI saves time and you can catch mistakes because you know what right looks like.”

But the technology doesn’t — and shouldn’t — make contractors into lawyers. 

“Understanding what a clause does is different from deciding whether to accept it, price it or push back on it,” Simon said. 

This last point is especially important as contractors use AI to answer questions from project owners and other stakeholders, according to Cotney. He said he’s started drafting AI disclaimers in contracts to ensure contractors don’t overpromise only to underdeliver. 

“We had to develop a contract provision that basically says, to the extent that artificial intelligence is used for purposes of scheduling or preliminary estimates, the customer cannot rely on those until such time as boots on the ground have determined whether those field measurements are accurate.