How Much Is A Contractor Allowed To Ask For Upfront In California?

Ossiana Tepfenhart
by Ossiana Tepfenhart

Ah, the age-old tradition of hiring a contractor for your home. Fixing up your home is a pricey endeavor, and it’s actually one that carries a fair bit of risk. There are plenty of cases where contractors asked for large sums of money for a project upfront, only to bail mid-project. To ensure that you don’t get fleeced, contractors have a limit on how much they can ask for upfront in California. But, how much is it?

The contractors in California have a maximum upfront fee of $1,000 or 10 percent of the project’s full price. To determine which one your contractor’s maximum will be, choose the lesser value of the two. The upfront costs cannot have additional fees added to the maximum for materials, either.

There are a lot of protective laws that make hiring a contractor safer in the state of California. Before you call up the contractor, it’s a good idea to know what you should expect.

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Before You Begin: How Can You Tell If A California Contractor Is Legitimate?

Before you plunk down cash for a contracting job, it’s important to make sure that the contractor that you’re talking to is the real deal. If you choose a contractor that’s operating illegally, you will have no legal recourse if you give people your money. Prior to choosing a contractor, make sure you do the following:

  • Ask for contractor licensing. Contracting companies are required to be licensed by the state. California gives each licensed contracting salesperson a small card that shows that they are licensed. You can also search up their licensing number to verify it’s real. All contractors doing jobs worth more than $500 have to have one to be legally allowed to work in Cali.
  • Don’t just stick to a single company. It’s good to get at least three quotes before you pick one. After all, you don’t want to be overcharged, right?
  • Listen to your gut. Even if a company is great, you do need to feel good about who you hire. If it seems wrong or gives you a bad feeling, it’s time to look for another person to work for you.
  • Make sure to read reviews and testimonials before you sign anything. Not all legitimate companies are going to do a good job. Reading what others have to say will be a good way to get a better idea on what you can expect from them.

Understanding The Contractor’s Maximum Upfront Cost Law In California

Now that we got the basics out of the way, it’s important to remember that the upfront cost of contracting maxes out at $1000, no matter how big the project is. Most of the time, you will have to pay 10 percent of the total cost instead. So, if you have a $500 project, you’d pay $50 rather than all $500 upfront.

This law isn’t just for things like building a new shed or for staining a new deck, either. This applies to everything from adding a pool to fixing up your HVAC system. So, if you have a gig that’s over $500, then it should apply.

What Should You Do If Your Contractor Asks For More Money Upfront?

First off, do not pay them. In fact, it may be best to ask them to leave your home and not come back. What that contractor just did was illegal and suggests that they may not actually be on the up and up. Since they have already shown that they don’t care about local laws, there’s a good chance that you might get fleeced if you go ahead with them.

Additionally, you should probably report them to the California Contractors State License Board. This can help law enforcement find out if people have been defrauded by the business in question and prevent others from being harmed by their practices.

How Are You Supposed To Pay Your Contractors?

Great question! Most contractors will have a set schedule that they will need to be paid. This is usually done by work done as well as the timeframe required. The contractor will give you paperwork to sign that goes over the full specifics that you should expect, but most of the time, it’s fairly predictable.

You typically will have to pay a small upfront fee to lock in the contractors’ work. Then, you will have a set of scheduled payments, each with an even portion of the overall bill to pay. Once the work is finished, your final bill will be due. Since you will have a hard time getting money back for unfinished work, it’s best not to pay ahead of your schedule.

Find out if you should tell your contractor your budget.

How To Report Illegal Upfront Charges

Let’s say that you talked to a sketchy guy who asked for $1500 upfront, and had no referrals that you deem trustworthy. This would be a good time to report them. You can reach them by calling 1-800-321-CSLB, or by going on the CLSB’s website. They have a reporting tool that you can use there.

When reporting your potentially illegal contracting company (or scammer), it’s best to mention the following things as a part of your report:

  • The Overall Scenario. You want to mention how much extra they asked for, whether they had any other red flags, and if they got belligerent with you when you said no. If they did, explain how you handled the situation.
  • The Contractor’s Name. If they actually had a license, then you might want to look up their license number too. This will make tracing the company easier.
  • When It Happened. In an ideal world, this is something that you will do immediately after the incident. While you may wait as long as a week or two to report, it’s best to keep the timeframe as short as possible.

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Related Questions

Do Californian contractors need to have Workers Compensation Insurance, even if they’re sole operators?

Yes. If you work in construction or contracting, you are legally required to have Workers Compensation Insurance as a part of your kit. It’s a cornerstone of keeping your license in good standing. If you find a contractor who is not insured, then you should not hire them to work on your house. They may try to hold you liable for injuries they sustain in your home area as a way of recouping costs.

Can unlicensed contractors operate their own business in California?

Yes, but not easily. Unlicensed contractors are only allowed to do jobs under $500, and also have to place a disclaimer on ads saying that they are unlicensed. This can make it harder to actually earn a living as a contractor, and also limits what kind of projects they can work in.

Is it possible to be a contractor with a felony in California?

While this field has a reputation for hiring a lot of felons, the truth is that it’s not really doable in California. Since 2005, the state required all contractors to pass a criminal background check. If they fail the background check, they cannot get a license to do bigger jobs or act as a real contractor.With that said, unlicensed contractors do not have to pass a background check. So it is still possible, on a slight technicality, even though it’s a bit rare.

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Ossiana Tepfenhart
Ossiana Tepfenhart

Ossiana Tepfenhart is an expert writer, focusing on interior design and general home tips. Writing is her life, and it's what she does best. Her interests include art and real estate investments.

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