Business FinancesQuestion 630 of 1605
Under California home improvement contract law, the down payment a contractor may collect from an owner before any work is done or materials are delivered is limited to:
a.10% of the contract price for any home improvement contract
b.$1,000 or 10% of the contract price, whichever is less (with no payment schedule allowing the contractor to be ahead of the value of work performed)
c.$5,000 or 25% of the contract price, whichever is less
d.20% of the contract price, with no dollar cap
Explanation
Bus. & Prof. Code §7159(d) caps the down payment on a home improvement contract at $1,000 or 10% of the contract price, whichever is LESS. In addition, subsequent payments under the schedule of payments may not exceed the value of work performed plus materials delivered. The other options either omit the dollar cap, invert the relationship, or use thresholds (20%, 25%) that apply to swimming-pool contracts under §7159.5 or to other states. This rule is heavily tested because it is one of the most common sources of consumer complaints and CSLB discipline.
Law Reference: Bus. & Prof. Code §7159Practice all 1605 questions free — no signup required.
Related questions on this topic
- A general contractor pays an unincorporated subcontractor $1,200 over the calendar year for services. For federal and California tax reporting, the contractor must issue which form to the subcontractor?
- In addition to the $25,000 Contractor License Bond, a contractor whose license has been suspended for failing to pay a final, unsatisfied construction-related judgment must post which additional security to be reinstated?
- The primary purpose of a bid bond on a California public works project is to:
- On a residential swimming pool contract, what is the maximum down payment a contractor may receive before work begins?
- A consumer wins a final judgment of $50,000 against a licensed contractor for fraudulent home improvement work. The CSLB license bond is $25,000. What is the most the claimant can recover from the bond itself?
- Under Bus. & Prof. Code §7071.11, when claims against a contractor's $25,000 license bond exceed the bond's penal sum, the bond proceeds are distributed in which order of priority?
Last reviewed: · editorial process
Sen Lin, PrepPass Founder · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)