CALIFORNIA'S HOME IMPROVEMENT DOWN-PAYMENT RULE: $1,000 OR 10%, WHICHEVER IS LESS

The Contractors State License Board (CSLB) puts it plainly: “The down payment cannot be more than $1,000 or 10 percent of the contract price, whichever is less, for a home improvement job or swimming pool, excluding finance charges.” State law (Business and Professions Code Section 7159) requires the contract itself to carry the same statement in capitals: “THE DOWNPAYMENT MAY NOT EXCEED $1,000 OR 10 PERCENT OF THE CONTRACT PRICE, WHICHEVER IS LESS.”

CSLB notes one exception: a handful of licensees who carry blanket performance and payment bonds. CSLB also says there are no exceptions for special-order materials.

The arithmetic is simple. Ten percent is the smaller figure on any contract under $10,000, so a $6,000 contract allows a down payment of up to $600. At $10,000 and above the cap is $1,000, whether the contract is for $15,000 or $150,000.

CSLB says “There must be a detailed, written payment schedule in the contract,” and that payments to the contractor “cannot exceed the value of the work performed,” with the down payment as the one exception. Section 7159 requires this notice in the contract: “IT IS AGAINST THE LAW FOR A CONTRACTOR TO COLLECT PAYMENT FOR WORK NOT YET COMPLETED, OR FOR MATERIALS NOT YET DELIVERED.”

In practice, each payment should line up with something you can see: materials delivered, a phase finished, an inspection passed. Hold the final payment until the work is complete.

CSLB says a written contract is required for all home improvement projects over $500, counting labor and materials together. According to CSLB, the contract should include:

• The contractor's name, business address and license number.
• A detailed description of the work, materials and products.
• The price and a written payment schedule.
• Who will get the necessary permits.
• When the job will begin and a date of completion.
• Any warranty the contractor offers for labor and materials, in writing.
• Cleanup and debris removal.

Section 7159 adds that the writing must be legible, and that before any work starts the contractor must give the buyer a copy of the contract signed and dated by both parties.

CSLB's consumer guide says the law gives the buyer “three (3) business days (or five business days if the buyer is 65 or older)” to cancel. To cancel, the buyer gives the contractor written notice, and the guide says there is no penalty or obligation.

• Exception: service and repair contracts that cover emergency repairs or services requested by the consumer on short notice.
• Exception: CSLB's guide says the three- or five-day right to cancel does not apply if the contract is negotiated at the contractor's place of business.
• Longer period: Section 7159 provides a seven-day right to cancel for contracts to repair or restore a home damaged by a sudden or catastrophic event for which a state of emergency has been declared.

Projects change. CSLB's rule is that if the price or scope needs to change, “it MUST be done with a written ‘Change Order,’ signed by the customer and contractor prior to the change, which then becomes a part of the contract.” Keep every change order with your contract.

CSLB's guide describes a mechanics lien as “a claim made against the property by the person who was not paid.” The guide warns that “Even if the contractor is paid in full, unpaid subcontractors, suppliers, and laborers involved in the project may record a mechanics lien.”

• Watch for preliminary notices. CSLB says material suppliers and subcontractors are required to give the property owner one.
• CSLB's advice: “Have subcontractors sign lien releases when their portion of the work is completed.”
• Another option CSLB describes is a joint check payable to both the contractor and the subcontractor or supplier.
• Section 7159, as amended effective January 1, 2026, has the contract state whether subcontractors will be used. If they will, the contractor must provide a list of them on request.

• The down payment is no more than $1,000 or 10% of the price, whichever is less.
• The payment schedule follows the work.
• Start and completion dates are written in.
• The contract names who pulls the permit.
• The cancellation notice is included.
• The license number on the contract matches the CSLB record.

• CSLB: What is a Contract? (opens in a new tab)
• CSLB: A Consumer Guide to Home Improvement Contracts (PDF) (opens in a new tab)
• Business and Professions Code Section 7159 (official text, California Legislative Information) (opens in a new tab)

Sources and dates: CSLB's consumer guide carries the publication code 13P-045/1024. We read CSLB's pages and Section 7159, as amended effective January 1, 2026, on October 2, 2026. This is general information, not legal advice. For a specific dispute, contact CSLB or an attorney.

Golden Empire USA offers a free assessment with a written scope, so you can see the work spelled out before any contract is signed.