How much of a deposit can a contractor ask for before starting a rental repair?
It depends on your state and the type of work. In California, a home improvement contract's down payment may not exceed $1,000 or 10 percent of the contract price, whichever is less, and the contract must include a schedule of progress payments for each phase of work. A contractor in any state who asks for most of the money up front is a warning sign. Pay in steps tied to finished work.
California as a worked example
California Business and Professions Code section 7159 covers home improvement contracts. A home improvement contract is an agreement, written or oral, between a contractor and an owner or tenant. The page says the contract price must exceed $500 to count, and it refers to another section for the definition of home improvement, so ask your contractor whether your job falls under the rule.
- The contract must state that the down payment may not exceed $1,000 or 10 percent of the contract price, whichever is less.
- The contract and any changes must be in writing and signed before the work they cover begins.
- It must include a schedule of progress payments describing each phase of work.
- The contract must say it is against the law for a contractor to collect payment for work not yet completed, or for materials not yet delivered.
- The buyer has the right to cancel within three business days, with a notice in at least 12-point boldface type. Seniors get five days. There are exceptions, such as contracts negotiated at the contractor's place of business.
Other states have their own caps or none. Many states do not regulate a down payment on small repairs at all, and some require a license for work above a certain amount. Check yours before you sign.
What the down payment limit means in dollars
Example a made-up $8,000 bathroom repair in California. Ten percent is $800, which is less than $1,000, so the down payment is at most $800. A $15,000 job gives 10 percent of $1,500, which is more than $1,000, so the down payment is capped at $1,000. The remaining $14,000 is paid as phases finish, for example $4,000, $5,000 and $5,000.
A payment schedule you can use anywhere
| Milestone | Share of price | Pay when |
|---|---|---|
| Small start payment | No more than the law allows, often 10 percent | Contract signed, materials ordered |
| Rough work done | 30 to 40 percent | Demolition and rough plumbing or electrical done and inspected |
| Main work done | 30 to 40 percent | Fixtures or finishes installed |
| Final payment | The last 10 to 20 percent | Punch list finished, final waiver signed, permits closed |
The shares are common patterns, not legal limits. Adjust them to the job, and hold the last payment until the work passes your own walk-through and any city inspection.
Before you pay a first dollar
- Check the contractor's license and insurance with your state, and ask for a certificate of insurance.
- Collect a W-9 so you can report the payments at year end. See the 1099 post.
- Get a written quote that lists materials, labor and the schedule.
- Pay by a traceable method, never in cash.
- Ask for a lien waiver with each payment on larger jobs, as in the lien waiver post.
How DoorKeeping handles it
Keep the contract and each change order with the property's documents. When each invoice arrives, your Claude or ChatGPT, connected to DoorKeeping, can read it and compare it to the contract's schedule before you approve. Paying it waits for your one-tap approval.
Sources
Questions
- Does the California cap apply to small repairs?
- The page says it covers home improvement contracts above $500 between a contractor and an owner or tenant. Whether a particular job counts depends on the definition in another section, so check.
- Can I pay materials up front if the contractor needs to buy them?
- You can agree to pay the supplier directly or to reimburse against a receipt. That is safer than a large payment to the contractor.
- What if the contractor takes the deposit and disappears?
- Report it to your state's licensing board and, if your state has one, its consumer protection office, and keep every record. Prevention is cheaper than recovery.