In California, the down payment on a home improvement contract cannot exceed $1,000 or 10 percent of the contract price, whichever is less. That is Business and Professions Code section 7159.5. On a $100,000 remodel the legal maximum deposit is $1,000, not $10,000. There is no exception for swimming pools and none for special-order materials.
- Legal maximum
- $1,000 or 10%Whichever is LESS
- On a $100k job
- $1,000Not $10,000
- Pool exception
- NoneThe same cap applies
- Who to tell
- CSLBcslb.ca.gov complaint form
What the law actually says
Business and Professions Code section 7159.5 governs payments on home improvement contracts. The down payment may not exceed $1,000 or 10 percent of the contract price, excluding finance charges, whichever amount is less.
Read that twice, because the "whichever is less" is what people miss. On any contract above $10,000, the cap is a flat $1,000. A $400,000 renovation and a $40,000 kitchen have the same legal maximum deposit.
The only real exception
A contractor who carries an approved bond, specifically a performance and payment bond, a lien and completion bond, or an approved joint control arrangement, is exempt from the deposit limit. The Contractors State Licensing Board publishes the short list of contractors holding blanket performance bonds.
That list is short. If a contractor tells you they are exempt, ask which bond they carry and check the board's list before you write the cheque.
The two myths
- There is no swimming pool exception. The board's own consumer guide applies the same limit to pool contracts.
- There is no special-order materials exception. A contractor who needs cabinets ordered can schedule a progress payment at the point the cabinets are ordered. That is a scheduled payment for work and materials, not a larger deposit.
How payments should actually be structured
After the deposit, payments are tied to milestones that have actually happened. Each one should be for work that is in place and visible, and should come with a conditional lien release from the contractor and from the subcontractors paid out of it.
A reasonable schedule on a kitchen might be: deposit at signing, a payment when demolition and rough plumbing and electrical pass inspection, a payment when cabinets are installed, a payment when counters are in, and a final payment after the punch list is complete and the permit is signed off. You are never paying ahead of the work.
Why the law exists
Large upfront deposits are the single most common pattern in contractor fraud. The money is taken, a small amount of work happens, and the contractor disappears or stalls until the client gives up. The deposit cap limits how much a homeowner can lose before the work has to start.
A contractor asking for 30 or 50 percent up front is either unaware of the law governing their own licence, or is aware and is asking anyway. Neither is a good sign, and both are worth walking away from.
What to do if you have already paid too much
Ask for it in writing: an itemised accounting of what the deposit was applied to, and a corrected payment schedule. Most of the time this resolves it.
If it does not, you can file a complaint with the Contractors State License Board. Keep the written contract, every invoice, every receipt and a dated record of the work actually completed. On larger sums, talk to a construction attorney before the money is gone.
Los Angeles County figures, reviewed 2026-10-29 by America General Contractors, California contractor licence CSLB 1083262. Planning ranges, not a quote, and not legal advice. We confirm the current rules for your parcel before anything is drawn.
Questions
Does this apply to commercial work?
No. Section 7159.5 governs home improvement contracts on residential property. Commercial construction contracts are negotiated between the parties, and larger deposits and mobilisation payments are normal there.
What about a design or architecture agreement?
A design agreement with an architect or designer is a separate contract and is not a home improvement contract, so the cap does not apply to it. Design is usually billed in phases or hourly.
What does America General Contractors ask for?
We follow the statutory limit, then bill against completed milestones with lien releases attached to each payment. You never pay us for work that has not happened.
Is a written contract required?
Yes. California requires home improvement contracts over $500 to be in writing, with specified disclosures including the contractor's licence number, a payment schedule, and a notice about the deposit limit.
Should I pay in cash?
No. Pay by cheque or card so there is a record, make it payable to the business name on the licence, and keep every receipt. A contractor pushing for cash is usually avoiding something.
Related reading
- How do I check a contractor's license in California?
- What is a change order?
- What is a cost-plus contract versus a fixed-price contract?
- What does a general contractor do?
