CALIFORNIA · CONTRACT PAYMENTS
California contractor down payment limit
A contractor-focused explanation of California's general home improvement down-payment rule, how the cap is calculated, and the statutory exception contractors need to know about.
Last reviewed: September 26, 2026
The general rule
For a covered home improvement contract, if a down payment is charged, the ordinary cap is $1,000 or 10% of the contract amount, whichever is less. The contract states the actual down payment amount under a Downpayment heading (§7159(d)(8)).
For this purpose, §7159.5 defines the contract amount as the entire cost of the contract, including profit, labor and materials, but excluding finance charges. See the current text of B&P §7159 and B&P §7159.5.
What that looks like in practice
| Contract amount | 10% | Ordinary cap |
|---|---|---|
| $5,000 | $500 | $500 |
| $10,000 | $1,000 | $1,000 |
| $50,000 | $5,000 | $1,000 |
Illustrative arithmetic under the general rule — not a determination that the rule applies to a particular project.
Special-order materials do not raise the ordinary cap
CSLB's current guidance states that special-order materials are not an exception to the ordinary $1,000 or 10% down payment limit. Ordering custom items does not by itself allow a larger down payment. The separate statutory exception described below is a different matter.
The statutory exception
Under §7159.5(a)(8), a contractor who furnishes a performance and payment bond, lien and completion bond, bond equivalent, or joint control approved by the registrar, covering full performance and payment, is exempt from the restrictions in §7159.5(a)(3) through (a)(5). That can change the down payment and progress payment restrictions and allow payment before completion.
CSLB separately describes, in its consumer guidance, a blanket performance and payment bond situation and calls it rare. Whether an exception applies should be confirmed against current CSLB records and guidance and the legal requirements for the project.
Why this matters when building the contract
- State the actual down payment in dollars and cents.
- Keep the contract price and the treatment of any finance charges clear.
- Do not build a payment schedule that assumes an exception unless it actually applies.
- Keep current source links with the contract process.
How ContractBuilderAI fits
Software can help structure the down payment field and the payment workflow, but it does not decide whether a statutory exception applies.
ContractBuilderAI can organize the payment workflow; the contractor remains responsible for confirming the legal rule that applies to the project.
Primary sources
Building California contracts should not start from a blank page.
ContractBuilderAI is opening a California private beta on November 1, 2026 for licensed home improvement contractors.
Apply for the California beta →