What a California home improvement contract must include

When does the law require a written contract?

The trigger is the size of the job. CSLB's consumer guide Terms of Agreement says the terms of every home improvement project over $500, counting material and labor together, must be in a contract that includes specific information about your rights.

"Home improvement" is broader than most people expect. The guide quotes Business and Professions Code section 7151: repairing, remodeling, altering, converting or adding to a home, and building or replacing driveways, pools and spas, patios, fences, porches, garages, landscaping, solar systems and similar work next to the house. A home improvement contract can be signed with a property owner or with a tenant, and it can be signed by a registered home improvement salesperson on the contractor's behalf (section 7151.2, as cited in the same guide).

So a bathroom refresh, a new fence or a garage conversion all count. If the price is over $500, ask for the paper.

The details the contract has to spell out

Think of the contract as the only record of what you agreed to. If something was promised out loud, CSLB's guide says to make sure it is also written in. Using CSLB's pages What Is a Contract? and Contracts and Binding Agreements, check for each of these:

• Who the contractor is: business name, business address, phone and contractor license number. Look the number up before signing; our guide to checking a contractor's license shows how.
• A detailed description of the work and how it will be done.
• The materials and equipment, as specific as possible: brand, model, style, color, size and quantity.
• The total price. CSLB's guide says the job must be completed for the agreed contract price.
• A written payment schedule tied to stages of the work.
• Who gets the building permits.
• Start and completion dates.
• Cleanup and debris removal, plus any special requests such as keeping old cabinets or saving lumber.
• Any warranty on labor or materials, in writing, with what it covers and for how long.
• The required notices: your right to cancel, the mechanics lien warning, and allowable delays.

Vague wording to send back

CSLB's guide gives a clear contrast. "Install kitchen cabinets" invites a dispute. "Install upper and lower maple cabinets, by a named maker, a stated model and color, with listed hinges and hardware, per the plan dimensions" does not. Apply the same test to every line of a kitchen remodel or a bathroom remodel: if two people could read a line two different ways, rewrite it before you sign.

How much can the down payment be?

If the contract asks for money before work starts, the down payment cannot be more than 10 percent of the contract price or $1,000, whichever is less, not counting finance charges. On a job priced above the point where 10 percent equals $1,000, the cap stays at $1,000 no matter how large the project is.

CSLB's contract page adds that there are no exceptions for special-order materials. A contractor who says the custom tile or the windows need a larger deposit is asking for more than the law allows. The one exception CSLB names is for a small number of licensees with a blanket performance and payment bond on file with CSLB.

Progress payments: never ahead of the work

After the down payment, money should follow the job, not lead it. CSLB's contract page states that payments to the contractor cannot exceed the value of the work performed. The Terms of Agreement guide adds that the schedule should show the amount of each payment and what work, materials or services it pays for. CSLB's homeowner checklist puts it plainly: pay only as work is completed, and not before.

A schedule that works in practice links each payment to a stage you can see. For a home addition, that might be foundation poured and inspected, framing done and inspected, rough plumbing and electrical passed, drywall up, and final inspection signed. Before each payment, walk the job and compare it with the schedule.

Salesperson commissions and finance charges

If part of the price is a salesperson's commission, CSLB's guide says it must be paid pro rata, in step with the payments to the contractor, not up front. Finance charges, when there are any, must be laid out in detail and kept separate from the contract amount. And a salesperson may sign the contract for the contractor only if they are a registered Home Improvement Salesperson.

Your right to cancel after signing

California gives you a short window to change your mind. CSLB's Contracts and Binding Agreements page says you may cancel within three days of signing, with the notice mailed before midnight of the third day. CSLB's Terms of Agreement guide describes it as three business days.

Five days if you are 65 or older

Buyers who are 65 or older get five days. CSLB's Warnings and Exceptions page says that, under AB 2471, people 65 and older have five days to cancel home solicitation, home improvement, PACE assessment, service and repair, and seminar sales contracts.

How to cancel, and when the right does not apply

To cancel, give the contractor written notice that you do not intend to be bound by the contract. There is no penalty. CSLB's guide says the contractor must then return any money you paid within 10 days of receiving the cancellation, and you return any materials that were delivered for the job.

The right does not apply when the contract was negotiated at the contractor's place of business. It also ends early on a service and repair contract: an emergency or short-notice repair you asked for, below a small price limit for labor and materials set out on CSLB's Warnings and Exceptions page, where the right ends once you sign and work begins. The contract should say "service and repair" if that is what it is.

Change orders: every change in writing

Plans change once walls are open. California handles that with a written change order. CSLB's contract page says any change to the price or the scope must be written and signed by both you and the contractor before the change is made, and once signed, the change order becomes part of the contract.

A good change order says what is added or removed, what it costs or saves, and whether it moves the completion date. Keep every one with the original contract. A verbal "we'll sort it out at the end" is the most common start of a payment fight.

Mechanics liens and preliminary notices

This is the part of a project homeowners most often miss. A mechanics lien is a claim against your property, recorded with the county, by someone who helped improve it and was not paid. CSLB's homeowner's guide to preventing mechanics liens explains the risk: even if you pay the prime contractor in full, an unpaid subcontractor, supplier or worker may record a lien, and you could end up paying twice. That is why the contract must include a Mechanics Lien Warning (the Terms of Agreement guide points to Business and Professions Code section 7159(e)(4)).

What a preliminary notice means

A preliminary notice is not a lien. It tells you that a subcontractor or supplier is working on your project and could file a lien if they are not paid. They can send it before starting and up to 20 days after starting work or delivering materials; if it comes later, their lien rights shrink. Your prime contractor is not required to send you one, since the lien warning is already in your contract. Keep every notice you receive: together they are your list of who must be paid.

Three ways to protect yourself

• Ask for the list. Get the names of all subcontractors and suppliers and when each will work.
• Use joint checks. Make the payment out to both the contractor and the subcontractor or supplier, so both must endorse it.
• Collect lien releases. Before each payment, get a signed conditional release; after paying, get an unconditional release signed by each claimant paid. CSLB's guide says you may withhold the next payment until you receive the unconditional releases for the last one, and that the prime contractor must give you releases if you ask. CSLB publishes the release forms.

Permits belong in the contract too

Many projects need a permit from the local building department. CSLB's permit page notes that requirements vary between cities and counties, so the answer for your project comes from your own building department. The Terms of Agreement guide lists new construction, additions, major renovations, heating and air-conditioning repairs and water heater installs among the work that usually needs one, and warns that skipping a permit can lead to fines and even removal of work that does not meet code.

CSLB's homeowner checklist asks two questions to settle in the contract: does it require the contractor to get the permits before work starts, and are the permit fees included in the price? Write down the answers either way.

The rules on this page come from California law. If your project is in Dallas–Fort Worth, the city's own permit and contractor registration rules apply instead; our guide to checking a contractor in Texas links the Dallas and Fort Worth pages.

Final payment and closing out the job

The last payment is your strongest moment, so make it at the true end. Before you hand it over, walk the punch list, confirm the final inspection has passed when a permit was pulled, and collect unconditional lien releases from the contractor, subcontractors and suppliers who sent you preliminary notices.

Recording a Notice of Completion can shorten the lien window. CSLB's lien guide says the owner has 15 days from completion to record it with the county recorder. Once recorded, the prime contractor has 60 days to record a lien and a subcontractor or supplier has 30 days. Without it, a claimant generally has 90 days from completion, or from when you began using or accepted the work.

Insurance worth asking about before the end

Workers' compensation is required by law when the contractor has employees; you can see it on the license record. General liability insurance is not required, but CSLB's guide suggests asking about it in case your property is damaged, and checking with your own home insurer.

How we can help

Contractor Near Me is a free request service, not a contractor. We do not hold a license, write contracts or do the work, and we do not review contracts for you. When you send a request, we call or email you back to talk through the project and the questions to settle in writing. For legal advice on a specific contract, talk to an attorney.

Sources: CSLB, Terms of Agreement: A Consumer Guide to Home Improvement Contracts; CSLB, Contracts and Binding Agreements; CSLB, What Is a Contract?; CSLB, Warnings and Exceptions; CSLB, Homeowner Checklists; CSLB, A Homeowner's Guide to Preventing Mechanics Liens; CSLB, Do I Need a Building Permit?