In California, the down payment on a home improvement contract cannot exceed $1,000 or 10 percent of the contract price, whichever is less, and every payment after that must follow the work: a contractor may not collect for work not yet completed or materials not yet delivered. Both rules are in Business and Professions Code section 7159, apply to any home improvement contract over $500, and are enforced by the Contractors State License Board. Green Design and Build is a licensed, bonded and insured general contractor (CSLB #1110975) based in Van Nuys, serving homeowners across Los Angeles County, Orange County, Ventura County, western Riverside County and western San Bernardino County (Ontario, Rancho Cucamonga and neighbouring cities), and this guide explains how a legal payment schedule works, what a red flag looks like, and how we structure ours.
Who we are
Green Design and Build is led by Dekel Sofer. We hold a 4.7-star rating across 146 Yelp reviews and have completed hundreds of projects. Every one of them was paid for under the rules below, so we know them from the contractor’s side as well as the homeowner’s.
The $1,000 rule: what the law actually says
Business and Professions Code section 7159 governs every home improvement contract in California where the total price is more than $500. It requires the contract to be in writing, signed by both parties, with a copy handed to you before any work starts. On the money, three of its requirements matter most.
The down payment. The contract must state, in 12-point boldface, that “THE DOWNPAYMENT MAY NOT EXCEED $1,000 OR 10 PERCENT OF THE CONTRACT PRICE, WHICHEVER IS LESS.” The arithmetic is unforgiving: on a $6,000 bathroom refresh the cap is $600; on a $60,000 kitchen it is $1,000; on a $250,000 ADU it is still $1,000. There is no exception for custom cabinets, windows on order, or “materials.” The only contractors exempt from the cap are those who furnish a blanket performance and payment bond, or a bond equivalent or joint control approved by the CSLB registrar, covering full performance of the contract, and the contract has to say so.
Progress payments. If the contract calls for payments during the job, it must include a schedule that describes each phase of work and the dollar amount due for it, followed by another boldface statement: “IT IS AGAINST THE LAW FOR A CONTRACTOR TO COLLECT PAYMENT FOR WORK NOT YET COMPLETED, OR FOR MATERIALS NOT YET DELIVERED.” Section 7159.5 puts it the other way round: except for the down payment, a contractor “shall neither request nor accept payment that exceeds the value of the work performed or material delivered.” Materials count only once they are on your property, so a payment “for the cabinets” is legal when the cabinets are in your garage, not when they are ordered.
The penalty. Taking a down payment over the cap, or a payment ahead of the work, is a misdemeanor under section 7159.5, punishable by a fine of $100 to $5,000, up to a year in county jail, or both, on top of CSLB discipline against the licence. CSLB has issued industry bulletins and consumer alerts on exactly this point, including a 2024 alert about ADU deposits.
A payment schedule that follows the work
A legal schedule has three parts: the capped down payment, progress payments tied to phases you can see finished, and a final payment when the job is done. Here is what one looks like on a permitted kitchen remodel; the phases change with the project, and the dollar amount against each one is whatever that phase is worth in the contract price.
| Payment | Due when | What you should be able to verify before paying |
|---|---|---|
| Down payment | On signing | The amount is $1,000 or 10 percent, whichever is less |
| Progress payment 1 | Demolition complete and rough plumbing and electrical passed inspection | Inspection sign-off on the permit card |
| Progress payment 2 | Drywall, texture and paint complete | Rooms closed up and painted |
| Progress payment 3 | Cabinets delivered and installed | Cabinets on the wall |
| Progress payment 4 | Countertops, tile and fixtures installed | Working sink, cooktop and lights |
| Final payment | Final inspection passed, walkthrough and punch list complete, lien releases received | Signed final on the permit, your own walkthrough, unconditional final releases |
Two features make this schedule work. Each payment lands after something is finished that you can walk in and look at, and the phases line up with the building department’s inspections, so the inspector’s sign-off is your evidence that the work is really done. On an addition or an ADU the phases follow the structure: foundation, framing, rough trades, insulation and drywall, finishes, final. Our post on how to hire a general contractor without getting scammed describes the same structure: a legal deposit, progress payments tied to completed milestones, written confirmation before each payment, and a reasonable final balance held until the walkthrough and punch list are complete.
Retention and the final payment
Retention is money withheld from each progress payment, or held back at the end, until the work is complete and accepted; it appears on some larger residential contracts. California’s prompt-payment law for private work, Civil Code section 8812, requires an owner who has withheld retention to pay it within 45 days after completion of the work, and lets the owner hold back no more than 150 percent of any amount in a good-faith dispute. On most residential remodels there is no formal retention; the final payment is the holdback. Do not release it until the final inspection has passed, you have walked the job with the contractor and the punch list is done, and you have the lien releases described next.
Lien releases: conditional, unconditional, progress and final
Anyone who supplies labor or materials to your project and is not paid can record a mechanics lien against your house, even if you paid the general contractor in full. That is why section 7159 requires every home improvement contract to carry a “Mechanics Lien Warning” that explains preliminary notices (subcontractors and suppliers may send one within 20 days of starting) and how to protect yourself. The protection is the lien release, and California prescribes four statutory forms in Civil Code sections 8132 to 8138.
| Form | Civil Code section | When it is used |
|---|---|---|
| Conditional waiver and release on progress payment | 8132 | The contractor or sub has not yet been paid for this progress payment; the release takes effect only when the check clears |
| Unconditional waiver and release on progress payment | 8134 | The progress payment has already been received |
| Conditional waiver and release on final payment | 8136 | The final payment has not yet been paid; effective on receipt |
| Unconditional waiver and release on final payment | 8138 | The final payment has been received; all lien rights are waived |
These are typical Los Angeles budgeting estimates, not a price list or a quote. Your project can come in lower or higher depending on the house, the scope and the finishes; the only real number is a written proposal after a site visit.
The sequence that protects you is simple. Before each progress payment, collect a conditional release from the general contractor and from any subcontractor or supplier who sent a preliminary notice, then pay. After the payment clears, collect the unconditional version. At the end, the unconditional final release from everyone closes the door. A conditional release is binding only with evidence of payment, such as the endorsed check, so it costs the contractor nothing to sign one before the money moves; a contractor who refuses is telling you something. A release that does not follow the statutory form is unenforceable, and an unconditional release waives lien rights even if the signer has not actually been paid, which is why no one should sign one before the check clears. CSLB publishes all four forms.
Change orders
Section 7159 requires the contract to state that extra work and change orders become part of the contract once they are prepared in writing and signed by both parties before the work they cover begins. That sentence is the whole rule: no verbal “we found rot, that’s another $3,500,” no invoice at the end for work you did not agree to in writing. A proper change order states the scope, the price or credit, and the effect on the schedule, and payment for it follows the same law as everything else: due when the extra work is done, not when it is signed, except that custom-ordered material such as a special window is billable on delivery.
What a red flag looks like
- A deposit over $1,000. “Half down to order materials” is the most common illegal request in California remodeling. The contractor may need to buy cabinets; the law says they finance that, not you, unless they are bonded for it and the contract says so.
- Cash only, or a discount for cash. A licensed, bonded contractor has no reason to avoid a paper trail, and cash leaves you without proof for a CSLB complaint.
- Payments on dates rather than milestones. “$10,000 every two weeks” is not a schedule of progress payments; it is a loan to the contractor.
- No written change-order process, or extras quoted verbally and billed on the spot.
- No lien release offered, or a refusal to sign a conditional release before payment.
- A licence number you have not checked. Look it up on the CSLB site; confirm the classification matches the work, the bond is active and workers’ compensation is on file. Our guide to verifying a contractor’s licence and certifications walks through it.
Our hiring post tells the story of what happens when all six line up. A homeowner chose a $28,000 kitchen bid over two at about $45,000, paid $16,800 up front “to order materials” (60 percent of the contract, against a legal cap of $1,000), then agreed verbally to $4,000 for a panel upgrade and $3,500 for subfloor rot. The contractor stopped showing up at about 60 percent complete with about $24,000 paid; the licence number belonged to an expired plumbing licence, and no electrical permit had been pulled. She paid a second contractor at market rate to finish, plus permit corrections.
Your right to cancel
A home improvement contract you sign at your home carries a right to cancel within three business days, in writing, with no penalty; the period is five business days if you are 65 or older, and seven for repairs after a declared disaster. The contract must carry the notice in boldface next to the signature line with a detachable cancellation form, and the contractor must refund any payment within ten days of a cancellation. The right does not apply to contracts signed at the contractor’s place of business.
How Green Design and Build structures payment
Our process starts with a site visit of about two hours, after which you receive a design direction and a clear, itemized proposal, usually within about 48 hours. The proposal lists the scope, the allowances for selections you have not made yet, and the payment schedule, so the money question is answered before you sign. The down payment is $1,000 or 10 percent, whichever is less. After that, payments follow the work in milestones you can see finished, and changes go through a written change order signed before the work begins. Small jobs that do not need a permit, such as painting or flooring, can usually be scheduled within a few days of signing; permitted projects start once the city issues the permit. Our labor is warranted for one year from completion, which our warranty page explains, and we offer financing through Synchrony, Service Finance and Home Run Financing, with terms set by the lender and your credit approval. Our post on why ADU quotes vary so much between contractors shows what an itemized proposal protects you from: a garage conversion quoted at about $85,000 that rose to about $130,000 as unpriced work surfaced.
Where we do this work
The payment rules in this guide are state law, so they are the same in every city we serve: the San Fernando Valley and the rest of Los Angeles County, Orange County, Ventura County, western Riverside County and western San Bernardino County. What changes from place to place is the inspection sequence the milestones follow, since LADBS, the county building divisions and each city’s building department run their own inspections, and the HOA sign-offs some Orange County and Inland Empire communities require before a final. Every city and county we serve is on our service areas page.
Contractor payment FAQs
How much deposit can a contractor ask for in California?
A contractor in California may not ask for a down payment of more than $1,000 or 10 percent of the contract price, whichever is less, on any home improvement contract over $500 (Business and Professions Code section 7159). On a $60,000 kitchen remodel the legal maximum is $1,000. The only exception is a contractor who furnishes a blanket performance and payment bond or a CSLB-approved equivalent, which the contract must state.
Is a 50 percent deposit legal for a remodel in California?
No. A 50 percent deposit on a home improvement contract is illegal in California unless the contractor furnishes a performance and payment bond or CSLB-approved bond equivalent covering the full contract. Requesting or accepting a down payment over the $1,000 or 10 percent cap is a misdemeanor under Business and Professions Code section 7159.5, with a fine of $100 to $5,000 and up to a year in jail, and grounds for CSLB discipline.
How do progress payments work on a construction contract?
Progress payments on a California home improvement contract are listed in a schedule that names each phase of work and the amount due when it is complete, and the law forbids a contractor from collecting for work not yet completed or materials not yet delivered to the site. A sound schedule ties each payment to a finished, visible milestone, usually one the building inspector has just signed off, and holds a final payment until the final inspection, the walkthrough and the punch list are done.
What is a conditional lien release?
A conditional lien release is a statutory California form (Civil Code section 8132 for a progress payment, 8136 for final payment) that a contractor, subcontractor or supplier signs before being paid; it waives their right to lien your property, but only takes effect once the payment is actually received. An unconditional release (sections 8134 and 8138) is signed after payment and waives lien rights outright. Collect conditional releases before each payment and unconditional ones after the check clears.
Can a contractor charge for a change order before doing the work?
A change order in California must be in writing and signed by both parties before the extra work begins, and it becomes part of the contract when it is. Payment for it follows the same rule as the rest of the contract: it is due when the extra work is performed or the material is delivered, not when the change order is signed, apart from custom-ordered items that are billable on delivery.
When should I make the final payment to a contractor?
Make the final payment on a California remodel after the final inspection has passed, you have walked the finished work with the contractor and the punch list is complete, and you hold unconditional final lien releases from the contractor and from every subcontractor or supplier who sent a preliminary notice. If the contract withheld a formal retention, the owner must pay it within 45 days of completion under Civil Code section 8812, less up to 150 percent of any amount in good-faith dispute.
Get a proposal with the payment schedule written into it
Tell us about your project and we will come out for a site visit of about two hours, then send an itemized proposal, usually within 48 hours, that lists the scope, the allowances, the milestones and a down payment of $1,000 or 10 percent, whichever is less. Read it at home; the three-day right to cancel is printed on it.