Know The California Contractor Payment Laws
Do you know California contractor payment laws? Except for a limited down payment, contractors are prohibited from collecting payment for work not yet completed or materials not yet delivered. This requirement applies to all home improvement projects, including accessory dwelling units (ADUs) and rebuilding or reconstruction in declared disaster areas.
DOWN PAYMENTS
Under California law, a contractor may request a down payment, but it must not exceed $1,000 or 10% of the contract price, whichever is less.
PROGRESS PAYMENTS
Contractors may request progress payments instead of one total payment upon completion. It is important that all progress payments adhere to the following requirements:
Payments must be itemized in dollars and cents.
Payments must not exceed the value of work completed or materials delivered.
The payment schedule must detail the specific work, materials, or equipment tied to each payment request.
BEST PRACTICES FOR COMPLIANCE
Plans and Permits: Do not request or accept any payment for plans or permits that exceeds the cost of the plans or permit fees. If you are charging for plans, the plans must be available to the consumer.
Align Payments with Work Completed:
Before requesting a progress payment, ensure the work or materials associated with that payment have been provided. This helps avoid disputes and ensure compliance.
WHAT HAPPENS IF YOU DON’T FOLLOW THE RULES?
If you request or accept payments that exceed the value of completed work or delivered materials, the homeowner may file a complaint with CSLB. Contractors found in violation could face disciplinary action and/or criminal prosecution. (Business and Professions Code 7159.5.)
By following the law, you can protect your business, maintain good standing with CSLB, and build trust with consumers.
We, at RMO Agency help all of our clients understand and stay compliant with state laws and CSLB regulations. We provides tools and are here to answer questions for all of our clients.
To stay informed, check out our monthly newsletter Here
Leave a Reply