Contracts & ExecutionQuestion 656 of 1632

Bus. & Prof. Code §7159.5 limits progress payments on a home improvement contract such that, at any given time during the project, the amount paid by the owner may not exceed:

a.50% of the total contract price until the final inspection passes
b.The value of the work performed plus the materials delivered
c.10% of the contract price each month, whatever the progress made
d.The amount of the most recent invoice, with no cumulative limit

Explanation

B&P §7159.5(a)(5) says that except for a downpayment, the contractor shall neither request nor accept payment that exceeds the value of the work performed or material delivered - the 'no payment ahead of the work' rule. Its companion is §7159.5(a)(3): if a downpayment is charged it may not exceed $1,000 or 10 percent of the contract amount, whichever is less. A 50 percent milestone, a flat 10 percent a month and invoice-driven payments appear nowhere in the section; each would let the owner's money run ahead of the work, which is the precise harm the statute addresses, and a violation is a misdemeanour as well as grounds for discipline.

Law Reference: B&P Code §7159.5(a)(5); §7159.5(a)(3)

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