Hiring a Contractor
Your contractor asked for 50% up front. Is that legal?
Short answer: no. And of every warning sign on a residential job, this is the one that costs homeowners the most money.
California law caps the deposit on a home improvement contract at $1,000. A contractor asking for 30%, 40% or half the contract price up front is asking for something the law does not allow, on a job of any size we would take.
What the law actually says
On a home improvement contract, the down payment may not exceed $1,000 or 10% of the contract price, whichever is less. On any project in our range, 10% is well above $1,000 — so the cap is $1,000, full stop. It does not matter whether the job is $30,000 or $350,000.
This is not a technicality or a rule nobody enforces. It exists because large up-front deposits are how homeowners lose money on residential construction: the deposit is collected, some work starts, and the contractor's incentive to finish quietly disappears once they are holding more of your money than the work is worth.
A bigger deposit would be better for our cash flow. We take $1,000 because that is the number, and because a builder who needs half your money before starting is telling you something about their finances that you should hear.
So how does a real payment schedule work?
After the deposit, payment moves in milestone draws — you pay for work as it is completed and verifiable, not in advance of it. The schedule is written into the contract before anything starts, so you always know what triggers the next payment.
The principle to hold onto: payment should trail completed work, never lead it. If you can walk the job and see what you are paying for, the schedule is structured correctly.
Where big deposits usually show up
| What you're asked for | What it usually means | What to do |
|---|---|---|
| $1,000 or less, with a written milestone schedule | Normal. This is what the law contemplates | Proceed |
| "I need a deposit for materials" | Sometimes legitimate on long-lead items — but it belongs in the contract as a scheduled draw against named materials, not as an up-front lump | Ask for it in writing, tied to specific items |
| 25–50% before work starts | Over the legal cap. Often a cash-flow problem on the contractor's side, being solved with your money | Don't sign |
| Cash only, or a check made out to a person rather than a company | No paper trail, and frequently no license or insurance behind it either | Walk away |
| Full payment before the final inspection passes | You lose your only remaining leverage at the exact moment you may need it | Hold the final draw until inspection clears |
The two-minute check before you sign anything
Verify the license is real and active
Look the contractor up on the CSLB license registry. You want an active status, the right classification for the work, and a bond in place. Ours is #1112902.
Confirm the classification matches the work
A license is not general permission. It is a specific classification. We hold a General B, which is why we will not quote you standalone roofing — that needs a C-39, and we don't have one. A contractor who takes work outside their classification is taking a risk with your permit, not just their own.
Ask for the certificate of insurance directly from the carrier
General liability and workers' compensation. If someone is hurt on your property and the contractor has no workers' comp, that exposure can land on you.
Read the payment schedule before the scope
It tells you more about how the job will actually go than the scope does.
Common questions
Is a 50% deposit ever legal on a home improvement job in California?
What if the contractor says the deposit is for materials?
What is a normal payment schedule for a remodel?
How do I check a California contractor's license?
Where to go next
Written by the team at Elusive Construction, a licensed California general contractor (B #1112902) building in Santa Clara and San Mateo counties. General information about how residential construction works — not legal advice. For your specific contract, talk to an attorney.
Have a project you want priced honestly?
Book a Project Discovery Call and we'll tell you what's realistic — scope, budget and timeline — whether or not we're the right builder for it.