California Contractor Deposit and Payment Rules
California has strict rules about how much a contractor can collect upfront on a home improvement project. The rules are set by Business and Professions Code Section 7159, and the CSLB enforces them. Violating these rules can result in license discipline and, for specified violations, criminal penalties.
The Deposit Limit
For home improvement contracts, the maximum down payment is $1,000 or 10% of the total contract price, whichever is less. The lower amount applies unless a qualifying exception applies.
Before you pay
Check your contractor's deposit
Enter the home improvement contract price, without finance charges. This checks the ordinary California limit: 10% or $1,000, whichever is lower.
For covered home improvement contracts, including swimming pools. A qualifying bond or approved arrangement can change the rules. This tool does not decide whether an exception applies. Check the exception below.
Ordinary maximum down payment
This is a ceiling, not a recommended deposit or approval of the contractor. Rounded down to the nearest cent so the result never exceeds the limit.
Compare the rest of your quote →On a $25,000 kitchen remodel, the legal maximum deposit is $1,000 (not $2,500). On a $6,000 painting job, the maximum is $600 (10% of $6,000). These examples assume an ordinary covered home improvement contract, without an approved exception.
This limit exists to protect homeowners from paying large sums before any work is performed. It also means that as a contractor, you need working capital or supplier credit to cover early-stage material costs on larger projects.
The Approved-Bond Exception
CSLB describes an exception for contractors with a Blanket Performance and Payment Bond on file. This is not the ordinary contractor license bond. Verify the claimed exception with CSLB before paying more. Section 7159.5(a)(8) also addresses qualifying bonds, bond equivalents and approved joint control.
What Counts as a Home Improvement Contract
The deposit rule applies specifically to home improvement contracts. This covers remodeling, repairs, renovations, additions, and modifications to existing residential property. An ADU conversion can involve home improvement work; confirm the contract category for new detached construction instead of assuming all ADUs use the same rules. It applies to work on the homeowner's primary residence, rental properties, and second homes.
The rule does not apply to new home construction on vacant land, commercial projects, or subcontractor-to-contractor agreements. Those contract types have separate payment structures.
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Progress Payments
After the initial deposit, you can collect progress payments as work is completed. The following describes the ordinary rules without the approved exception above. Each progress payment must be listed in the contract in dollars and cents, tied to a specific phase of work. The contract must describe the type and amount of work included in each phase.
It is illegal for a contractor to collect payment for work not yet completed or materials not yet delivered. This is the rule that catches contractors who ask for large "material deposits" or "mobilization fees" before starting. Ordering custom materials does not by itself create an exception to the deposit limit.
Common Mistakes
Several deposit practices that are common in the field are actually illegal under California law:
- Collecting 10% on a contract over $10,000. On a $30,000 job, 10% is $3,000, but the cap is $1,000.
- Charging a "move-in fee" or "setup fee" on day one that exceeds the deposit limit.
- Taking a separate check for materials before delivering them to the jobsite.
CSLB Enforcement
Payment violations can result in CSLB discipline. Section 7159.5 identifies particular violations that are misdemeanors; it does not make every contract defect the same offense. Keep the signed agreement, receipts and dated records of work and deliveries if a dispute arises.
For contractors, the safest approach is to use a properly formatted home improvement contract that spells out the deposit, each progress payment, and the work tied to each payment. The CSLB publishes a Contracting for Success brochure that walks through the requirements.
For homeowners, if the requested deposit exceeds the lower of $1,000 or 10%, ask for an explanation and verify any claimed exception before paying. Verify their license and check for disciplinary history before proceeding. See our license verification guide for step-by-step instructions.
Compare the Whole Payment Schedule
A small deposit does not make a vague contract a good deal. Use the printable bid-comparison worksheet to compare milestones, exclusions and allowances alongside the total price. Review our home improvement contract checklist before signing.
Source: CSLB contract and payment guidance.
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California contractor licenses generally require a $25,000 contractor bond or accepted alternative. Explore a contractor bond quote.
Updated September 20, 2026. Added the deposit-limit checker; reviewed the ordinary limit and exceptions against CSLB guidance and Section 7159.5.