California Contractor Down
Payment Law — What You Can
and Can't Collect

What the Law Actually Says

California Business & Professions Code §7159(d) states that a home improvement contract shall not require a down payment exceeding the lesser of 10% of the contract price or $1,000.

This means:

• On a $3,000 job: maximum down payment = $300 (10%)
• On a $8,000 job: maximum down payment = $800 (10%)
• On a $12,000 job: maximum down payment = $1,000 (10% would be $1,200 — capped at $1,000)
• On a $100,000 job: maximum down payment = $1,000 (the cap)

Why This Law Exists

The down payment limit was created to protect homeowners from contractors who collect large upfront payments and then disappear — or run out of money — before completing the work. It's one of the most important consumer protection provisions in California contractor law.

What Counts as a "Down Payment"?

The down payment limit applies to any payment collected before work begins. This includes:

• Deposits to "hold your spot" on the schedule
• Materials deposits
• Mobilization fees collected before the first day of work
• Any upfront payment, regardless of what it's called

It does NOT apply to progress payments collected after work has begun, as long as those payments are tied to completed phases of work per a written payment schedule.

Consequences of Violating the Down Payment Limit

This is one of the most seriously enforced CSLB violations:

• CSLB disciplinary action — license suspension or revocation
• Criminal charges — collecting excess down payments can be prosecuted as a misdemeanor or felony depending on the amount
• Mandatory restitution — you must repay the excess amount
• Civil lawsuit — homeowners can sue for treble (triple) damages

What To Do When Materials Costs Are High

One of the most common questions: "What if I need more upfront because my materials cost more than $1,000?"

The law does not have a materials exception. However, there are legitimate ways to handle high upfront material costs:

• Structure your payment schedule so the first progress payment is triggered by materials delivery — not just the start of work
• Open a materials account with your supplier and bill the client directly for materials via a separate invoice once they arrive on site
• Use a joint check arrangement where the homeowner pays the supplier directly for materials

What you cannot do is call a materials payment a "deposit" and collect it before any work begins if it exceeds the legal limit.

Does the Down Payment Limit Apply to Commercial Work?

The strict down payment cap under B&P Code §7159 applies specifically to home improvement contracts on residential property. Commercial contracts are governed by different rules — though collecting excessive upfront payments on any project carries risk.

Sources: California Business & Professions Code §7159; CSLB enforcement records. This article is for informational purposes only and is not legal advice.