California home improvement down payment limit, explained

The down payment limit: $1,000 or 10%, whichever is less

California caps the down payment on a home improvement contract at $1,000 or 10% of the contract price, whichever is less. The rule is in Business and Professions Code section 7159.5, and the Contractors State License Board (CSLB) enforces it. The contract price is the whole cost of the job, including profit, labor and materials, but not finance charges.

After the down payment, the rule changes from a cap to a test. You can’t ask for or accept any payment that’s worth more than the work done or the materials delivered. The statement the law makes you print in the contract is blunt: it’s against the law to collect payment for work not yet completed or materials not yet delivered.

Getting this wrong is cause for CSLB discipline. Taking too big a down payment, or payments ahead of the work, is also a misdemeanor under section 7159.5. The penalty is a fine of $100 to $5,000, up to a year in county jail, or both. If the violation happens in an area damaged by a natural disaster, the court must impose the maximum fine. That applies where the Governor proclaimed a state of emergency or the President declared one. This isn’t legal advice, so confirm how the rules apply to your contracts with CSLB or a construction lawyer.

The math has one turning point: $10,000. Below it, 10% is the smaller number. From $10,000 up, the cap is $1,000, however big the job. For example:

• A $4,800 water heater replacement: up to $480 down.
• A $6,500 fence: up to $650 down.
• A $10,000 bathroom refresh: up to $1,000 down.
• A $48,000 kitchen remodel: still up to $1,000 down.

References: California Legislative Information: Business and Professions Code section 7159.5 (opens in a new tab) · California Legislative Information: Business and Professions Code section 7159 (opens in a new tab) · CSLB: Industry Bulletin 22-14, CSLB Reminds Contractors of Progress Payment Restrictions (opens in a new tab)

Which jobs the limit covers, and which follow other rules

The limit applies to home improvement contracts with the owner of a residential property, including a landlord, or with a tenant. It applies whether you hold a general or a specialty license. Section 7151 defines home improvement as repairing, remodeling, altering, converting, modernizing or adding to residential property. It names driveways, pools, spas and hot tubs, patios, fences, landscaping, garages and solar energy systems. It also covers installing goods like heating and air conditioning equipment. And it counts rebuilding a home damaged or destroyed in a natural disaster as home improvement, if the Governor proclaimed a state of emergency or the President declared one. So rebuilding a house lost in a declared wildfire falls under the cap.

CSLB reminded contractors in 2022 that residential solar is included. It also tells homeowners the payment rules cover just about any work at a residence, including building an accessory dwelling unit (ADU). Section 7159.5 applies to every home improvement contract as defined in section 7151.2, which sets no minimum price, so the cap reaches small jobs too. The detailed contract form in section 7159 applies once the price is over $500.

These are state rules. Your city or county runs its own permits and inspections, and those inspections often decide when a phase is really finished.

Some work sits outside these rules or has its own:

• Commercial buildings. Section 7151 is about residential property, so work on a shop, office or warehouse isn’t home improvement.
• A new house for an owner. A contract to build a single-family home the owner will keep for at least a year falls under section 7164, which has its own written-contract rules. Rebuilding a home lost in a declared natural disaster is different: section 7151 makes that home improvement, so the cap applies.
• Some pools. Section 7166 leaves out pools that aren’t for a single-family home, and pools built as part of the original plan by the contractor building the house.
• Small service and repair calls. A job can use the simpler service and repair contract in section 7159.10 if it meets all four conditions. It’s $750 or less, the customer called you, and you sell only what fixes that problem. And no payment is due or accepted until the work is done. Miss any one and the full home improvement rules apply, whatever the price.
• Bonded contractors. Some contractors are exempt from the cap and the progress payment rules. They furnish a performance and payment bond, a lien and completion bond, or a bond equivalent or joint control approved by the CSLB registrar, covering full performance and payment. CSLB calls this an exception for a handful of licensees, and a blanket bond needs at least two years of active licensing first.

References: California Legislative Information: Business and Professions Code section 7151 (opens in a new tab) · California Legislative Information: Business and Professions Code section 7151.2 (opens in a new tab) · California Legislative Information: Business and Professions Code section 7159.5 (opens in a new tab) · California Legislative Information: Business and Professions Code section 7159.10 (opens in a new tab) · California Legislative Information: Business and Professions Code section 7164 (opens in a new tab) · California Legislative Information: Business and Professions Code section 7166 (opens in a new tab) · CSLB: Industry Bulletin 22-14, CSLB Reminds Contractors of Progress Payment Restrictions (opens in a new tab) · CSLB: Don’t Pay Too Much Money Upfront on Home Improvement Projects (opens in a new tab) · CSLB: Terms of Agreement, A Consumer Guide to Home Improvement Contracts (opens in a new tab)

What your contract has to say about payments

If you take only a down payment and one payment when the job is done, the law doesn’t require a progress payment schedule. CSLB’s consumer pages still tell homeowners to expect a written payment schedule in every contract. So write in the down payment and a line like “Balance due when the work is complete: $X.” The moment you want money before the job is finished, you need the full schedule.

This section covers only the payment wording. Everything else the contract must say, from the signed date and your license number to the right-to-cancel notice, is in our home improvement contract checklist.

Pool builders have more at stake. Under section 7167, a contract mainly for building a swimming pool must substantially follow certain parts of section 7159. If it doesn’t, it’s void and can’t be enforced by the contractor. Those parts are the lien release statement, the change order form, the project description, the down payment statement and the schedule of progress payments.

Section 7159 sets the headings and statements. Every home improvement contract over $500 needs the contract price, the lien release statement and the change order note below. The down payment and schedule pieces apply when you take those payments:

• The heading “Contract Price,” followed by the amount in dollars and cents. Any finance charge goes under its own heading, “Finance Charge,” separate from the price.
• The heading “Downpayment,” a space showing the actual amount, and this statement in at least 12-point bold type: “THE DOWNPAYMENT MAY NOT EXCEED $1,000 OR 10 PERCENT OF THE CONTRACT PRICE, WHICHEVER IS LESS.”
• If any other payment comes before completion, the heading “Schedule of Progress Payments.” Each payment is stated in dollars and cents and names the work, services, materials and equipment it pays for.
• In that section, in at least 12-point bold type, the statement that begins “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 ends: “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.” Copy the full text from section 7159(d)(9).
• A statement that after each satisfactory payment, and before the next one, you’ll give the owner a full and unconditional release from any lien claim for the part of the work that was paid.
• The “Note About Extra Work and Change Orders,” which says each change order must show its effect on the schedule of progress payments.
• Under section 7159.5, if a salesperson’s commission comes out of the price, it’s paid pro rata, in step with the payment schedule.

References: California Legislative Information: Business and Professions Code section 7159 (opens in a new tab) · California Legislative Information: Business and Professions Code section 7159.5 (opens in a new tab) · California Legislative Information: Business and Professions Code section 7167 (opens in a new tab) · CSLB: Contracting for Success, A Contractor’s Guide to Home Improvement Contracts (opens in a new tab) · CSLB: Learn About Home Improvement Contracts (opens in a new tab) · CSLB: Terms of Agreement, A Consumer Guide to Home Improvement Contracts (opens in a new tab)

How to build a progress payment schedule that follows the work

CSLB’s guide for contractors, Contracting for Success, includes a worksheet for this. Start with the total price, take off the down payment, then list each phase of work with the amount due when it’s complete. The progress payments should add up to what’s left after the down payment. Here’s the same idea as steps:

• Start with the full contract price, without finance charges.
• Work out the down payment: 10% of the price or $1,000, whichever is less. You can take less, or none at all.
• Split the job into phases that each end in something you can see or show: demolition done, rough-in passed inspection, cabinets set. Avoid phases like “project start” or “mobilization,” which describe no finished work.
• Price each phase at what its work is worth. If demolition is a tenth of the job’s value, it shouldn’t carry a third of the money.
• Give big material orders their own line, due when they’re delivered, so you’re paid for them without stretching the down payment.
• Keep a final payment for the last phase: punch list done, final inspection passed, site clean.
• Check that the down payment plus every progress payment equals the contract price, to the cent.

References: CSLB: Contracting for Success, A Contractor’s Guide to Home Improvement Contracts (opens in a new tab) · California Legislative Information: Business and Professions Code section 7159 (opens in a new tab)

Example payment schedules by trade

Here’s how that looks on five made-up jobs. The prices are invented to show the shape of a schedule, not what any job should cost. Each schedule adds up to the contract price, and each payment is due only after its phase is done.

• Kitchen remodel, $48,000. Down payment $1,000. Then: demolition done and debris hauled, $4,000; cabinets and appliances delivered to the home, $14,000; rough plumbing and electrical passed inspection, $9,000; drywall patched and painted, $4,500; cabinets installed, $6,000; countertops installed, $5,500; fixtures, backsplash, punch list and final inspection, $4,000.
• Roof replacement, $18,500. Down payment $1,000. Then: tear-off and deck repairs done, $4,000; shingles and underlayment delivered to the site, $7,500; new roof installed, $4,500; cleanup done and final inspection passed, $1,500.
• HVAC replacement, $14,200. Down payment $1,000. Then: new equipment delivered, $7,800; old system removed and new one installed and running, $4,400; final inspection passed, $1,000.
• Fence, $6,500. Down payment up to $650. Then: posts set, $2,600; panels and gates hung and site cleaned, $3,250. Or skip the schedule and bill once when it’s done.
• Repair call, $480. A homeowner calls about a leaking water heater valve, and you fix only that. Under the service and repair rules, nothing is due or accepted until the leak is fixed. If you also sell them a water softener, the job no longer qualifies and the full home improvement rules apply.

References: California Legislative Information: Business and Professions Code section 7159.5 (opens in a new tab) · California Legislative Information: Business and Professions Code section 7159.10 (opens in a new tab)

Special-order and long-lead materials

This is where most contractors feel the squeeze. Custom cabinets, windows or a solar battery may need paying for weeks before anything happens at the house. CSLB says plainly that there are no exceptions for special-order materials.

The law lets you collect for materials once they’re delivered, so make delivery its own line in the schedule, like “Windows delivered to the home: $9,200.” The text doesn’t define where delivery happens. Delivery to the customer’s property, with a signed or photographed delivery ticket, is the easiest to show. If you want to bill for items still at your supplier or in your shop, ask a construction lawyer first.

Labels don’t create exceptions either. A “material deposit” or “mobilization fee” charged on top of the down payment, before that work or delivery happens, isn’t allowed just because of its name. CSLB also tells homeowners to be careful with payments for “plans” or “permits” before work starts, and to ask for an accounting of their cost. If you bill for them, keep the designer’s invoice and the permit receipt with the job.

Customer financing doesn’t get around this. The same limit covers advances from a lender or financier, so their payments can’t run ahead of the work either.

Some ways contractors handle the cash gap:

• Ask suppliers for credit terms, so their bill comes due after your delivery payment comes in.
• Break big jobs into more, smaller phases, so money arrives every week or two instead of in a few large payments.
• Look into the bond exemption described above. Ask a surety broker and CSLB what it takes.

References: CSLB: Learn About Home Improvement Contracts (opens in a new tab) · CSLB: Terms of Agreement, A Consumer Guide to Home Improvement Contracts (opens in a new tab) · California Legislative Information: Business and Professions Code section 7159.5 (opens in a new tab) · CSLB: Don’t Pay Too Much Money Upfront on Home Improvement Projects (opens in a new tab)

Lien releases and change orders move the schedule too

After any payment, and before the next one, the owner can ask you for a full and unconditional release from any potential lien claimant, for the part of the work they’ve paid for. That means releases from the subcontractors and suppliers on that part, not only from you. Until you hand them over, the owner can hold back every further payment.

California’s Civil Code sets the wording for these releases, with separate forms for progress and final payments, conditional and unconditional. Keep a list of who worked on or supplied each phase, so you know whose release to collect. We cover keeping that list in subcontractor license details on file.

Change orders change the money. The note the law requires in your contract says each change order must describe the extra work, the cost added or taken off, and its effect on the schedule of progress payments. If a change adds a phase or makes one bigger, update the schedule in the same signed change order, before that work starts. More on that in change orders signed before the extra work starts.

References: California Legislative Information: Business and Professions Code section 7159.5 (opens in a new tab) · California Legislative Information: Business and Professions Code section 7159 (opens in a new tab) · California Legislative Information: Civil Code section 8132 (conditional waiver and release on progress payment) (opens in a new tab) · California Legislative Information: Civil Code section 8134 (unconditional waiver and release on progress payment) (opens in a new tab) · California Legislative Information: Civil Code section 8136 (conditional waiver and release on final payment) (opens in a new tab) · California Legislative Information: Civil Code section 8138 (unconditional waiver and release on final payment) (opens in a new tab)

Keeping the record: invoices that can’t run ahead of the work

Every rule above turns on dates and amounts. When the schedule sits in a contract PDF, phase photos on a foreman’s phone and invoices in another app, nobody can quickly answer “what have we billed, and what’s actually done?” That’s the question a homeowner, a lender or CSLB may ask.

Some invoicing and field service apps let you split a job into a deposit and progress invoices. Before you rely on one, check whether it ties each invoice to a phase that’s marked done, keeps photos and delivery tickets with that phase, and stops a deposit above the cap. Our guide on how to choose invoicing software has more questions to ask.

Whatever tool you use, each job’s record should hold:

• The contract price, any finance charge, and the down payment, with the cap worked out from the price so nobody types a bigger number.
• The payment schedule as a list of phases, each with its amount and the work, services or materials it covers, matching the signed contract.
• A done date for each phase, who marked it done, photos, and the inspection sign-off where there is one.
• Delivery tickets and photos for any materials billed on delivery.
• Invoices that can only be created for phases marked done or materials marked delivered.
• A running check: progress payments received, not counting the down payment, against the value of work done and materials delivered.
• Lien releases received, each attached to the payment it covers.
• Signed change orders, each one updating the schedule.

Where a custom system fits

If an invoicing or field service app already ties payments to finished phases the way you work, keep it. If your schedule, photos and invoices live in different places, we build custom business software that keeps them on one job record. For example: a contract template that fills in the required headings and caps the down payment, a crew phone app that marks a phase done with photos, and progress invoices that only bill finished phases. We connect it to QuickBooks Online, Stripe or Square, and check anything else before we quote.

A focused fix, like one contract template or one progress-billing report, is typically $750–$3,000 over 1–⁠2 weeks. One business system, like quotes, payment schedules and invoices connected to QuickBooks Online, is $6,000–$18,000 over 6–⁠10 weeks. These are our prices as of October 4, 2026, and what custom software costs explains what moves them. Every launch includes 30 days of fixes.

This isn’t legal advice, and software doesn’t replace a lawyer reading your contract template. Bring your current contract and one recent job’s invoices to our free first call, and you get a fixed price in writing within 48 hours.