California Contractor Down Payment Limits: How Much Can You Collect Upfront?

California contractors can’t collect more than $1,000 or 10% of the contract price upfront, whichever is less, on a covered home improvement job.

A $6,000 painting job? Maximum deposit is $600. A $50,000 kitchen remodel? Still $1,000.

That’s the rule under California Business and Professions Code Section 7159.5.

It applies to covered home improvement contracts, including work performed by general contractors and specialty contractors. A qualifying blanket performance and payment bond on file with the Contractors State License Board (CSLB) provides an exception. An ordinary contractor license bond doesn’t count.

The law also restricts progress payments. You can’t collect the deposit on Monday and bill for unfinished work on Tuesday.

How much can a contractor ask for upfront in California?

The maximum down payment is the smaller of:

• 10% of the contract price
• $1,000

Once the contract reaches $10,000, the normal deposit limit stays at $1,000.

On a $40,000 kitchen remodel, you can collect $1,000 before starting. The remaining $39,000 must be billed under a compliant payment schedule, with payments supported by completed work or delivered materials.

The cap applies to covered home improvement work and swimming pool contracts, excluding finance charges. The CSLB’s home improvement contract guide confirms the limit.

Which California construction jobs are covered?

The deposit restriction applies to home improvement contracts covered by California Business and Professions Code Sections 7159 and 7159.5.

Home improvement includes work to repair, remodel, alter, convert, modernize, or improve existing residential property and certain noncommercial property.

Common examples include:

• Kitchen and bathroom remodeling
• Residential roofing and painting
• Window and door replacement
• Electrical and plumbing improvements
• Landscaping and swimming pool construction
• Residential solar energy system installation

Both general contractors and specialty contractors are covered when the job falls under the home improvement contract rules.

The CSLB specifically includes solar energy systems in its definition of home improvement work. Solar contractors don’t get a separate deposit limit simply because equipment costs are high.

See CSLB Industry Bulletin #22-14, issued November 22, 2022.

When is a written home improvement contract required?

California requires a written home improvement contract for covered projects over $500 in combined labor and materials costs.

A $750 residential painting job needs a written contract. So does a $25,000 bathroom remodel.

The contract must contain the required information and notices. An estimate with a price and signature isn’t automatically a compliant home improvement contract.

Certain service and repair contracts have separate requirements. Don’t use the standard home improvement contract rules as a substitute for checking which type of contract the job requires.

See the CSLB’s contract guidance.

What about commercial jobs and new construction?

Commercial-only construction generally falls outside the home improvement contract rules. New construction that doesn’t qualify as home improvement is also treated differently.

Don’t assume the $1,000 cap applies to every construction contract in California. Check the contract classification before setting the deposit.

Can a contractor ask for 50% upfront in California?

No, not on a standard covered home improvement contract.

Take an $18,000 roof replacement:

• Contract price: $18,000
• Requested 50% deposit: $9,000
• Legal maximum without an applicable exception: $1,000
• Amount over the limit: $8,000

Even if the homeowner agrees to pay $9,000, that doesn’t make the deposit legal.

The same applies to a customer who offers to pay more upfront. Customer approval doesn’t override the statutory limit.

A qualifying blanket performance and payment bond can provide an exception, but most contractors don’t have one.

Can contractors collect extra money upfront for materials?

No. Special-order materials don’t create an exception to the down payment cap.

Ordering $8,000 worth of custom windows doesn’t let you collect an additional $8,000 before work begins.

The CSLB says this explicitly in its Terms of Agreement guide.

Calling the money a materials deposit, mobilization fee, or setup charge doesn’t automatically get around the limit.

That can create a cash flow problem.

Say you’ve signed a $25,000 window replacement job. The supplier wants a substantial payment before manufacturing the windows. Your customer deposit is still capped at $1,000 unless an applicable exception applies.

You may need to negotiate supplier terms or use working capital to cover the order. Lawful progress payments can then be tied to work performed or materials delivered.

A supplier invoice isn’t proof that materials have been delivered to the job. Placing an order doesn’t entitle you to collect the full materials cost from the customer.

How do progress payments work after the deposit?

California allows progress payments. But apart from the permitted down payment, a contractor can’t request or accept more than the value of work performed or materials delivered.

Sections 7159 and 7159.5 require contracts with progress payments to include a schedule in dollars and cents, identifying the work, services, materials, or equipment associated with each payment.

You can’t divide a $30,000 remodel into three $10,000 payments and collect them on fixed dates regardless of how much work has been completed.

Example: $20,000 bathroom remodel

This is an example, not an approved contract template. Each progress payment must be supported by the actual value of work performed or materials delivered when payment is requested.

“Tile installation completed” identifies work the homeowner can inspect.

“Payment 3 due” doesn’t.

If the contract calls for $5,000 after rough plumbing and electrical work, but that milestone hasn’t been completed and the value of work and materials doesn’t support the payment, you can’t collect it just because the scheduled date arrived.

What if the job is delayed?

A delay doesn’t give the contractor permission to collect money for unfinished work.

If the milestone hasn’t been reached, the payment may not be due.

Document completed work, materials delivered, invoices, and payments received. If the customer changes the scope, record the change and any price adjustment in a properly executed written change order.

The CSLB reinforced these requirements in its November 2022 progress payment bulletin.

What must a California home improvement contract say about the deposit?

California doesn’t leave the deposit language up to the contractor.

Under Business and Professions Code Section 7159, a covered home improvement contract charging a down payment must include a designated down payment section.

Required down payment notice

The contract must include:

• The heading “Downpayment.”
• A space showing the actual down payment amount
• The following statutory notice in at least 12-point boldface type

THE DOWNPAYMENT MAY NOT EXCEED $1,000 OR 10 PERCENT OF THE CONTRACT PRICE, WHICHEVER IS LESS.

That language isn’t optional.

Don’t replace it with “10% deposit required” or bury it in general payment terms. The notice must appear in the required format.

Required progress payment schedule

If the contract calls for progress payments before completion, it must include the heading:

“Schedule of Progress Payments.”

Each payment must be stated in dollars and cents and tied to specific work, services, materials, or equipment.

The contract must also include the following statement in at least 12-point boldface type:

The schedule of progress payments must specifically describe each phase of work, including the type and amount of work or services scheduled to be supplied in each phase, along with the amount of each proposed progress payment. IT IS AGAINST THE LAW FOR A CONTRACTOR TO COLLECT PAYMENT FOR WORK NOT YET COMPLETED, OR FOR MATERIALS NOT YET DELIVERED. HOWEVER, A CONTRACTOR MAY REQUIRE A DOWNPAYMENT.

The statutory wording above follows Section 7159(d)(9), as reproduced in the official 2026 CSLB law book. CSLB Industry Bulletin #22-14 also summarizes this requirement.

Vague milestones don’t satisfy the requirement. A schedule that says “First payment: $5,000; second payment: $10,000” without describing the corresponding work or materials is missing information the law requires.

Unless a larger typeface is specified, contract text must be at least 10-point type and headings at least 10-point boldface type. The notice must be formatted correctly in the actual contract. Bold text on a website doesn’t establish the required printed font size.

Are there exceptions to California’s $1,000 contractor deposit limit?

Yes. The CSLB recognizes an exception for contractors with a qualifying Blanket Performance and Payment Bond on file with the board.

This isn’t the ordinary contractor license bond required for licensure.

A blanket performance and payment bond provides protection covering the contractor’s outstanding work. Contractors with a qualifying bond on file can request more than the normal deposit limit, potentially the entire contract amount upfront.

According to the CSLB, only about two dozen companies have been approved to use this type of bond.

The board also states that contractors operating under this exception aren’t required to provide the usual progress payment schedule or mechanics lien disclosures.

Those are specific exemptions. They don’t mean a contractor can ignore the rest of the contract requirements.

Other qualifying bond or joint-control arrangements require careful review of Section 7159.5 and any applicable registrar approval requirements. An ordinary license bond doesn’t qualify, and putting customer funds into an escrow account doesn’t automatically establish an approved joint-control arrangement.

Contractors shouldn’t claim an exception without confirming that their arrangement meets the law.

Homeowners can verify whether a contractor has a qualifying blanket bond through the CSLB license check.

Source: CSLB Contracts and Binding Agreements.

What happens if a California contractor collects too much upfront?

Collecting more than the permitted deposit can expose a contractor to CSLB disciplinary action and criminal penalties.

Violations of the down payment and progress payment restrictions under Section 7159.5 can be prosecuted as misdemeanors.

The CSLB’s 2022 industry bulletin also identifies enforcement consequences for contractors who violate these requirements.

A signed contract doesn’t make an excessive deposit lawful.

Neither does a supplier invoice.

If you’re a contractor, check the payment terms before requesting money. If you’re a homeowner facing an unusually large deposit request, verify the contractor’s license and any claimed bond exception before paying.

The CSLB license check is a good place to start.

How contractors can manage deposits and progress payments

On a $50,000 remodel, the standard $1,000 down payment leaves $49,000 to collect as the work progresses.

That’s a lot of billing to keep straight.

Set payment milestones before starting the job. Document completed work and delivered materials. Keep a record of every invoice and payment, and put scope changes in writing.

If a customer questions a $7,000 progress invoice, you should be able to show what work and materials support it.

Cinderblock helps contractors manage progress billing, estimates, invoices, and job records. You can create an estimate, convert it into an invoice, and track partial payments without keeping separate records for every stage of the job.

The software doesn’t decide whether a payment request complies with California law. That’s still your responsibility.

Start your 14-day free trial to manage estimates, invoices, and job payments in one place. No credit card required.

This article is for general informational purposes only and does not constitute legal advice. Licensing requirements can change. Consult the relevant licensing authority or a qualified attorney for guidance specific to your situation.