What a contractor can legally ask for up front in California

Someone walked your property, gave you a number, and then asked for half of it before anyone picks up a tool. That request is so common that most homeowners assume it is normal. In California, on a home improvement contract, it is not lawful.

That comes from the Contractors State License Law — Business and Professions Code section 7159 and the sections that follow it, which govern what a home improvement contract has to say and how it is allowed to be paid. It applies to the contractor, not to you: nothing stops you from volunteering more, but a contractor who asks for more, or accepts more, is on the wrong side of the statute.

What "whichever is less" actually means

There are two numbers competing, and the smaller one always wins. Work the arithmetic in both directions and the shape becomes obvious.

On a smaller job, ten percent of the contract price is less than the statutory thousand, so the percentage governs. A modest repair carries a modest deposit, and it scales down with the job rather than sitting at the statutory maximum.

On a larger job, ten percent of the contract price is more than the statutory thousand, so the flat figure governs instead. And it stays flat. The two rules cross over at the contract price where ten percent happens to equal exactly the statutory thousand; above that point, the maximum lawful down payment does not move again no matter how large the project gets.

Which is the part people find hard to believe. The most a contractor may lawfully take up front on a small patio pour and on a whole-house re-roof is the same number. Size does not buy a bigger deposit.

It is a ceiling, not an entitlement. Nothing requires you to pay a deposit at all, and plenty of jobs run without one.

It caps the down payment, not the payment schedule

This is where the misunderstanding usually is. The cap is not a rule that you only ever hand over the statutory maximum for an entire project. Progress payments are legal, normal and expected on any job that runs longer than a day.

The principle underneath the whole scheme is simpler than the statute makes it look. Every payment after the down payment is measured against the value of the work performed or material delivered. Money may follow the work. It may never run in front of it.

So a compliant schedule looks like this:

• Each payment is written into the contract in dollars and cents, not as a percentage you have to compute later.
• Each payment names the work it is buying — the stage that has to be finished, or the material that has to be on site, before it comes due.
• Nothing is due for work that has not happened yet.
• At any moment in the job, you can point at what you have already paid for and see it.

If you can read a payment schedule and cannot tell what each line is buying, that is not a drafting quirk. It is how a schedule that runs ahead of the work gets written.

There is one real exception in the statute, and it is worth knowing precisely because it is so rarely used: a contractor who furnishes a performance and payment bond — or a joint control arrangement approved by the registrar — covering full performance and payment is exempt from the down payment and progress payment restrictions. If a contractor tells you their schedule is exempt, ask to see the bond or the joint control agreement. On ordinary residential work you will almost never be shown one.

What a compliant contract has to contain

Above a small statutory threshold — which essentially every real project clears — a home improvement contract has to be in writing, signed by both parties before work begins, with a copy in your hands before work begins.

In practical terms, look for all of this on the paper in front of you:

• The contractor's business name, address and licence number.
• A description of the project, and of the significant materials and equipment to be used.
• The contract price, in dollars and cents.
• The down payment, stated separately from the contract price rather than folded into it.
• An approximate start date and an approximate completion date.
• The schedule of progress payments, each tied to described work.
• The required notices — your right to cancel, the mechanics lien warning, and how to reach CSLB.
• The date you signed.

Treat that as the working shape of a compliant contract rather than the complete statutory list, which is longer and includes formatting requirements you are not expected to police. CSLB publishes a sample home improvement contract; if what you have been handed looks nothing like it, that is worth a question.

The right to cancel

A home improvement contract signed at your home — rather than at the contractor's place of business — normally carries a three business day right to cancel, and the contract itself has to include the cancellation notice. A contract that is silent about cancellation is a contract missing something the law requires.

Some buyers get longer. Buyers aged 65 and over have a longer window, and contracts to repair or restore property damaged in a declared disaster have a longer window again. The exact number of days depends on which of those you are, and the rules have been amended more than once, so confirm the current window with CSLB rather than with whoever is holding the pen.

The special-order materials argument

Quote the cap to a contractor and this is the answer you will most often get: the materials are custom, the supplier wants paying up front, so the deposit has to be bigger.

That argument is narrower than it sounds, and it is worth reading the statutory language closely. Payments are measured against the value of the work performed or material delivered. Delivered is doing real work in that sentence. Material that is on your site is delivered. Material that has been ordered, or is sitting in a supplier's warehouse with your name on a ticket, has not been.

What the statute does not obviously contain is a blanket special-order carve-out that enlarges the down payment cap itself. Whether any particular arrangement is lawful turns on facts — what was ordered, when it was delivered, how the schedule was written — which is exactly the kind of question to put to CSLB before you agree to it, rather than after. Check the board's current guidance; do not take the contractor's summary of it.

There is also a practical answer that satisfies everybody. If a supplier genuinely needs paying before delivery, a joint check — made out to the contractor and the supplier together, requiring both endorsements — pays for the material without putting cash in front of the job. CSLB itself points homeowners at joint checks, for a related reason we will get to next.

The envelope from a company you never hired

Two weeks into the job, an official-looking notice arrives from a lumberyard, a concrete supplier or a subcontractor you have never spoken to. It mentions your address and the word lien. Most homeowners read it as a bill or an accusation.

It is neither. It is a preliminary notice, and it is the most useful piece of paper in the whole process.

In California, subcontractors and material suppliers who have no contract with you — their contract is with your contractor — have to serve you a preliminary notice in order to preserve the right to record a mechanics lien against your property later. It normally goes out before they start or within about twenty days of first supplying labour or materials. Serving it is a precondition, not a threat. A supplier who never sends one is generally the one giving up lien rights.

Here is why it matters, and it is the part that catches people. Paying your contractor in full does not by itself mean the subcontractors and suppliers were paid. If your contractor took your money and did not pay them, they can record a lien against your property for work you have already paid for once. That is a real risk on any job, and the preliminary notices are your list of who could do it.

Conditional and unconditional releases

California uses four statutory release forms, and the whole system rests on one distinction:

• Conditional waiver and release on progress payment.
• Unconditional waiver and release on progress payment.
• Conditional waiver and release on final payment.
• Unconditional waiver and release on final payment.

A conditional release only takes effect if the payment actually clears. An unconditional release takes effect the moment it is signed, whether or not the money ever arrives.

Which gives you the rule of thumb. Get a conditional release when you hand over the payment; get the unconditional release once the payment has cleared. Never sign or accept an unconditional release for money that has not moved — that is a signature giving away the protection before the payment does the thing it was supposed to protect.

Three habits, none of them adversarial: ask your contractor for a list of the subcontractors and suppliers before work starts, keep every preliminary notice that arrives, and collect releases as you pay. CSLB publishes both the release forms and a homeowner's guide to preventing mechanics liens.

Check the licence — then check the bond

CSLB runs a free licence lookup at cslb.ca.gov. It takes about a minute and it is the single highest-value minute in hiring anyone.

• Is the licence active, rather than expired, suspended or inactive?
• Does the classification actually cover the work you are buying?
• Does the business name on the licence match the name on the contract and on the cheque you are being asked to write?
• Is the contractor's bond on file and current?
• Is there workers' compensation coverage, or a valid exemption?
• Is there disciplinary history, and what was it for?

The name match is the one people skip. A licence number that belongs to somebody else is a licence number that protects somebody else — and handing you a real number attached to a different business is a common move, not an exotic one.

Understand what the bond is, too. The contractor's bond is a consumer protection, but it is not an insurance policy written for you, and the amount available is modest against the cost of a serious project. It is a backstop. It is not a reason to pay ahead of the work.

Red flags

None of these is proof of anything on its own. Two or three together is a pattern.

• Cash only, or a request to make the cheque out to an individual rather than the business on the contract.
• No written contract, or a one-page quote offered as though it were one.
• A large up-front demand — anything above the statutory cap is the clearest signal on this list.
• Pressure to sign today, or a price that expires this afternoon.
• A licence number that does not match the name on the contract.
• A discount for paying the whole job in advance.
• Refusal to put an approximate start date and completion date in writing.
• A door knock after a storm, a fire or an earthquake, from someone who happened to be in the neighbourhood.

The prepayment discount deserves its own sentence, because it is the one that sounds like a favour. Your leverage on a construction job is the money you have not paid yet. Trade all of it away on day one and you have nothing left to say when the crew stops showing up.

If it has already gone wrong

If you have already paid ahead and the work has stalled, the order of operations matters.

1. Stop paying ahead. Do not send more money to restart a job. That is the same problem again, one step further in.
2. Move everything into writing. Confirm phone conversations by text or email so there is a record with a date on it.
3. Document what exists. The contract, every payment and how it was made, texts and emails, dated photos of the site, and every preliminary notice you have received.
4. File a complaint with CSLB. The board investigates, and taking a deposit and abandoning a job is squarely the kind of conduct it acts on.
5. Ask about the contractor's bond, which may be claimable, and about whether the amount at stake belongs in small claims court or with an attorney.

Do not sit on it. Complaint windows, lien deadlines and the statute of limitations all run whether or not anyone is answering your calls, and the evidence gets worse the longer you wait.

How DPOC handles the deposit

The cap is not a policy here. It is arithmetic in the checkout code: the booking deposit is computed as the lesser of ten percent of the project total and the statutory thousand, so the amount you are shown cannot exceed the legal limit even if someone wanted it to. The price is fixed before you book, and the rest is paid as the work is done.

DPOC holds CSLB #999194. Every job runs under this licence — ours, not a subcontractor's — which means your contract is with one licensed, insured company that stays responsible for the outcome, rather than with whichever crew happened to be free that week.