Running the Business · Part 3
The deposit cap: $1,000 or 10 percent, whichever is less, and progress payments that cannot exceed the work. CSLB's most common citation
On a residential job, the most money you may take before doing any work is $1,000 or 10 percent of the contract price, whichever is less, and after that you may never hold more of the customer's money than the value of the work done and the materials delivered. Both rules are printed in 12-point boldface on the contract the state makes you use, both are misdemeanors, and the first is the violation CSLB cites most often because it is the easiest to prove: the check is the evidence. This lesson explains the two rules, the schedule of progress payments that makes a large job cash-flow lawfully, the lien release you owe with each payment, the bonded-contractor exemption, and the special rule for service calls, where no deposit at all is allowed.
What the full lesson covers
- Downpayment: not more than $1,000 or 10 percent of the contract price, whichever is less (B&P 7159.5(a)(3)). On a $2,575 water heater, $257.50. On a $40,000 repipe, $1,000. Never more.
- After the downpayment, you may not request or accept any payment that exceeds the value of work performed or materials delivered (7159.5(a)(5)). Materials delivered to the site count; materials ordered do not.
- A large job is financed by a Schedule of Progress Payments: each payment in dollars and cents tied to a described phase, collected when that phase is done. That is the lawful way to get paid as you go.
- When the customer pays for a portion of the work, you owe a full and unconditional release for that portion before any further payment (7159.5(a)(6), 7159(c)(4)); the Civil Code forms are in lesson 3.7.
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More lessons in Contracts and Getting Paid
- 1The home improvement contract (B&P 7159): every required element, the exact notices, and the three-day right to cancel
- 2The deposit cap: $1,000 or 10 percent, whichever is less, and progress payments that cannot exceed the work. CSLB's most common citationYou are here
- 3Service and repair contracts (B&P 7159.10): when the short form applies, what it must say, and how a service call falls out of it
- 4Subcontracts with GCs: the twelve clauses to read, what to strike, and what to negotiate
- 5