How much deposit can a contractor ask for in California?
On a home improvement contract in California, the maximum legal down payment is $1,000 or 10 percent of the contract price — whichever is less. Whichever is LESS, not greater. That means on any remodel priced above $10,000, the legal ceiling is a flat $1,000, no matter how big the job is. A $250,000 kitchen and addition still has a $1,000 maximum down payment. This is Business and Professions Code section 7159.5, and it is not a guideline or an industry custom. A contractor who demands more is not negotiating hard — they are committing a misdemeanor punishable by a fine of $100 to $5,000, up to a year in county jail, or both.
The rule, stated plainly
California law sets one number for the down payment on a home improvement contract:
$1,000 or 10 percent of the contract price, whichever is less.
The phrase that gets misread is whichever is less. People hear "10 percent" and assume a $150,000 project allows a $15,000 deposit. It does not. The two figures are a ceiling test, and the smaller one wins.
| Contract price | Legal maximum down payment |
|---|---|
| $4,000 | $400 (10% is less than $1,000) |
| $9,000 | $900 |
| $10,000 | $1,000 (the two are equal here) |
| $60,000 | $1,000 |
| $250,000 | $1,000 |
Above $10,000, the answer stops moving. It is $1,000 for every project, forever. A whole-home renovation and a single bathroom have the identical legal down payment limit.
Your contract is also required to say so. The law requires the statement — in at least 12-point boldface type — that the down payment may not exceed $1,000 or 10 percent of the contract price, whichever is less. If that sentence is missing from the contract in front of you, that absence is itself informative.
The second rule nobody mentions
The down payment cap gets all the attention, but the provision that prevents most real losses is the next one. Apart from the down payment, a contractor may neither request nor accept a payment that exceeds the value of the work performed or the materials delivered at that point.
Read that again, because it settles most payment arguments before they start. You do not pay ahead. Ever. Not for materials on order, not for "locking in" a price, not to hold a spot on the schedule. Payment follows work — always trailing it, never leading it.
This is also why the law requires a schedule of progress payments written in dollars and cents, each one referencing the specific work or materials it covers. "50% at start, 50% at completion" is not a compliant payment schedule. It is a red flag wearing a suit.
Why the deposit question is really a solvency question
Here is the part that is worth more than the legal citation. When a contractor pushes for a large deposit, the useful question is not is this allowed — it is why do they need it.
A financially healthy contractor funds the beginning of your job from working capital and gets reimbursed as work completes. That is the normal shape of the business. A contractor who cannot start your job without $20,000 of your money is usually telling you, without meaning to, that they are using your deposit to finish someone else's project. That chain works until it doesn't, and when it breaks it tends to break on whoever paid in most recently.
This is the actual mechanism behind most abandoned-job stories in Los Angeles. Not villainy — cash flow. The deposit cap exists to keep homeowners from being the financing.
The one real exception
There is a legitimate path around the cap, and it is worth knowing so you can recognize the honest version. A contractor who furnishes an approved performance and payment bond, a lien and completion bond, a bond equivalent, or a registrar-approved joint control is exempt from both the down payment limit and the progress payment limit, and may accept payment before completion.
The logic is straightforward: with a bond in place, your protection comes from the surety rather than from the payment timing. It is a real arrangement. It is also uncommon on residential remodels, requires at least two years of active licensure before a contractor can even apply, and is verifiable. Ask for the bond number and confirm it. A contractor who invokes this exemption and cannot document it has simply found a more sophisticated way to ask you to break the law on their behalf.
Why this matters more in Los Angeles right now
The statute carries a specific provision for disaster areas: when a down payment or overpayment violation occurs in a location damaged by a natural disaster under a declared state of emergency, the court shall impose the maximum fine. Not may — shall.
That language exists because rebuilding communities attract people who take deposits and vanish. Homeowners in that situation are exhausted, insurance money has finally landed, and the pressure to move fast is enormous. If you are rebuilding after a disaster, the deposit rule is not bureaucracy. It is the single cheapest piece of protection you have, and the legislature deliberately put teeth behind it for exactly your circumstance.
Before you write the check
- Confirm the license is active and the classification fits the work. Our post on how to check a contractor's license in Los Angeles walks through the CSLB lookup.
- Read the payment schedule. It should be in dollars and cents, tied to identifiable milestones.
- Ask for unconditional lien releases as you pay. You are entitled to request them, and you may withhold further payment until they are furnished.
- Ask where the long-lead items are in the schedule. On a kitchen, cabinet lead times drive everything — and they are a scheduling problem, not a reason for a large deposit.
- Get the contract before you get excited. Every protection above lives in the document.
A contractor who is annoyed by these questions is answering them.
DN Builders Group Inc is a licensed, bonded general contractor based in Burbank (CA Lic. #1139710), working across Greater Los Angeles on kitchen remodeling, bathrooms, additions, and whole-home renovations. This post is general information about California law, not legal advice — for advice on your specific situation, consult an attorney or contact the Contractors State License Board.
Questions
My contractor says they need a large deposit to order materials. Is that a legitimate exception?
No. There is no materials exception in the statute. The law also says that apart from the down payment, a contractor may neither request nor accept payment exceeding the value of work already performed or materials already delivered. So a contractor cannot legally collect for cabinets before the cabinets exist. What a legitimate contractor does instead is write a progress payment schedule in dollars and cents that ties a payment to delivery — you pay for the cabinets when they arrive on site, not twelve weeks earlier. That protects both sides and it is what the law contemplates.
Is there any legal way for a contractor to take more than $1,000 up front?
Yes, exactly one. A contractor who furnishes an approved performance and payment bond, a lien and completion bond, a bond equivalent, or a joint control approved by the CSLB registrar is exempt from the down payment and progress payment limits, and may accept payment before completion. This is a real and legitimate arrangement, not a loophole — the bond is what protects you instead of the payment schedule. But it is uncommon on residential remodels, and a contractor must have held an active California license for at least two years before they can even apply for a blanket bond. If a contractor claims this exemption, ask to see the bond. A verbal claim is not a bond.
Does the $1,000 cap apply to building a brand-new house?
No. The cap applies to home improvement contracts — repairing, remodeling, or adding to existing residential property. Ground-up construction of a new home on a vacant lot is a different contract type and is not governed by section 7159.5, which is why custom home builds legitimately use larger deposits and different draw schedules. The distinction matters because some contractors blur it. An addition to your existing house is home improvement and is capped, even if the addition is larger than the original house.
What can I do if I already paid a large deposit?
Start by putting your request in writing and keeping every receipt, text, and version of the contract. A violation of the down payment rule is grounds for CSLB disciplinary action and is prosecutable as a misdemeanor, so you can file a complaint with the Contractors State License Board. If the contractor is licensed and bonded, you may also have a claim against their license bond. Move reasonably quickly — for a licensed contractor, criminal charges under this section generally must be brought within two years of the contract date, though CSLB administrative action is not bound by that limit.