Home Improvement Contractor Deposit Cap & Unlicensed Work Audit Tool
Audit your contractor's contract against strict state Home Improvement laws (10% / $1,000 down-payment cap, unlicensed contractor disgorgement, and 3-day rescission).
1. Enter Your Case Details Runs in your browser
2. Your result Live Output
- Misdemeanor Violation of Bus. & Prof. § 7159(d): Contractor demanded an upfront down payment exceeding $1,000 or 10% of the contract price (whichever is LESS in California!) — In California, it is illegal for a home improvement contractor to take more than $1,000 or 10% upfront (whichever is less).
- 100% Disgorgement Right (Cal. Bus. & Prof. § 7031): Contractor was UNLICENSED (or license was suspended) during any part of the project (> $500 job) — Under Cal. Bus. & Prof. Code § 7031, an unlicensed contractor cannot sue to collect a penny AND you can sue to recover 100% of all money you already paid them!
- Illegal Front-Loaded Billing: Contractor demanded progress payments ahead of the actual value of work completed to date — Progress payments may never exceed the value of work actually performed and materials delivered.
- Continuing Right to Cancel: Written contract omitted the mandatory '3-Business-Day Right to Cancel' notice — Until the contractor provides the statutory 3-day cancellation notice, the homeowner's right to cancel continues.
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3. How the rule works
Who this is for
California homeowners in a dispute with a contractor over a down payment, unfinished work or a contractor who turns out to be unlicensed.
Other states have home improvement rules too, but the dollar limits here are California's.
What to have ready
- The written contract and any change orders.
- Records of every payment made.
- The contractor's license number.
- Photos of the work at each stage.
The rule
California Business and Professions Code § 7159 sets the rules for home improvement contracts over $500. The down payment may not exceed $1,000 or 10% of the contract price, whichever is less, and progress payments may not get ahead of the work actually done. The contract must include specific notices, including the buyer's right to cancel within three business days (five for buyers aged 65 or over) under Civil Code § 1689.5 and following. Licensed contractors must carry a $25,000 contractor's bond, which homeowners can claim against.
Under § 7031(b), a person who used an unlicensed contractor for work requiring a license can recover all compensation paid, and § 7031(a) bars the unlicensed contractor from suing to collect. Work is exempt from licensing only when the total job, including labor and materials, is below the minor-work threshold, which is $1,000 under § 7048, and the work needs no building permit.
Read the official text:
- California Business and Professions Code § 7159
- California Business and Professions Code § 7031
- CSLB license check
Worked example: a $40,000 kitchen remodel
A contractor asks for $8,000 upfront for a $40,000 kitchen remodel and then stops after demolition.
10% of contract = $4,000 Down payment limit = lesser of $1,000 or $4,000 = $1,000 Excess taken = $8,000 - $1,000 = $7,000 Work done = demolition, worth about $2,500 Paid ahead of work = $5,500 -> claim against the contractor and bond If unlicensed = § 7031(b) allows recovery of all $8,000 paid
Common mistakes
- Not checking the license before hiring. The CSLB website shows status, bond and workers' compensation.
- Paying ahead of the work to 'keep things moving'.
- Missing the bond claim. The bond is limited, and other claimants may draw on it first.
- Firing the contractor without written notice and documentation of what was done.
Limits of this tool
- Contractor rules vary by state; the $1,000 and 10% limits are California's.
- The $25,000 bond may not cover the whole loss.
- Disputes about workmanship quality usually need an expert opinion.
Sources were last checked in October 2026. Statutes are amended often; if the official text differs from this page, the official text controls.
4. Clear Next Steps & Statutory Action Plan
- Look up the contractor's license, bond and workers' compensation on the CSLB site.
- Compare payments made with the value of work completed.
- File a complaint with the CSLB and consider a bond claim or small claims case.
5. Frequently Asked Statutory Questions (Cal. Bus. & Prof. Code § 7159 (10% / $1,000 Down Payment Limit) & § 7031(b) (100% Refund from Unlicensed Contractor))
Can I get all my money back from an unlicensed contractor?
Under § 7031(b), a person who used an unlicensed contractor can sue to recover all compensation paid for work that required a license. Courts have applied this even where the work was finished.
What is the maximum down payment in California?
The lesser of $1,000 or 10% of the contract price, for home improvement contracts over $500, under § 7159.
Do I have a right to cancel?
Yes, generally three business days after signing a home improvement contract, or five if you are 65 or older.