Payment Rules and Liens

Why This Matters on the Exam

Payment disputes and mechanics liens are why contractors lose their licenses and their shirts. I've seen good plumbers get in trouble because they didn't understand the rules around payment, lien rights, and notices. The licensing board expects you to know this cold. Get it right and you protect your revenue. Get it wrong and you're broke and fighting with the board.

What You Must Know

California law strictly limits down payments on home improvement contracts to 10% of the total contract price or $1,000, whichever is less. Progress payments have to match actual work done, not some arbitrary schedule. Preliminary notice is the most powerful tool you've got: serve it right, and you preserve your right to file a mechanics lien if you don't get paid. A mechanics lien is a claim against the property itself—it's leverage that makes owners take you seriously when payment is late.

Here's what kills contractors: they don't understand the notice requirements, they miss filing deadlines, or they skip preliminary notice altogether. Then when they don't get paid, they've got nothing.